Environmental Impact

Most transportation projects generate environmental externalities. Roads, in particular, have sizable direct or indirect environmental impacts. These impacts may be particularly profound in the case of roads that penetrate virgin lands, and analysts need to take them into account to the extent possible in the calculation of the costs and benefits of transport projects.

New roads may have direct environmental impacts along the construction routes and indirect impacts through the improved access they provide. The indirect effects may be more serious than those directly related to the project, because access may encourage deforestation, result in the loss of fertile soil, and reduce the levels of plants and wildlife. Higher traffic volume also increases air pollution, noise, vibration, and construction of aesthetically displeasing structures.

Mitigating environmental impacts is costly, and environmental benefits do not have infinite value. Therefore, the costs and benefits of measures that reduce environmental impacts need to be assessed.

The Highway Development Model

As the preceding discussion indicates, selecting the optimal alternative in transportation projects can be a very complex task. The analysts must consider numerous options, namely,

          • The baseline data and projections of traffic flows with and without  the project

• The project’s impact on generated demand

• The project’s impact on existing services.

          Even in relatively straightforward projects, such as roads, they have a wide range of options to consider, including

          • The design of the road

— Whether or not to pave

— How thick the pavement should be

— How wide and how straight the road should be

• Limitations on vehicle size and weights

• Limitations on access.

Each of these factors affects vehicle operating costs, time savings, accident rates, environmental impacts, and, therefore, the costs and benefits of roads. Several computer models are available to help calculate road benefits under different conditions and savings resulting from road improvements. The Highway Design and Maintenance Standard Model III  is a computer program the World Bank developed to analyze the total transport costs of alternative road improvement and maintenance strategies. The program assesses the total annual costs of road construction, maintenance, vehicle operation, and travel time costs over the life of a project as a function of road design, maintenance standards, and other variables. The program compares the cost and benefit streams of alternative strategies, including different timing and staging options, and assesses the strategy that yields the highest net benefits to society, subject to a budget constraint.

Analysts can use the HDM III to compare the costs and benefits of different policies; estimate total costs for alternative project designs; and to test the sensitivity of the results to changes in the basic assumptions, including unit costs, traffic growth, and value of time. The model does not endogenously calculate accidents and environmental impacts, but these may be added exogenously. The model also does not incorporate demand reactions to changes in prices.

Gainers and Losers

A rural road may be intended to benefit producers, but the actual benefits may accrue to truckers, middlemen, or consumers; therefore, the analyst should carefully assess the distribution of benefits from transportation projects. Improving a port may reduce turnaround time for ships, but the distribution of the benefits will depend on the degree of competition in shipping and on the pricing policy of the port authority.