EFFECTIVENESS AND WELFARE IMPACTS OF ALTERNATIVE POLICIES TO ADDRESS ATMOSPHERIC POLLUTION IN URBAN ROAD TRANSPORT PRELIMINARY VERSION – PLEASE DO NOT QUOTE WITHOUT AUTHORS ’ PERMISSION

Urban transport is characterised by simultaneous externalities: air pollution, accidents, noise and congestion. In this paper we compare the effectiveness and welfare effects of alternative transport, fuel efficiency and environmental policies. The urban transport activities are represented as a set of interrelated markets, one for each mode of transport and type of vehicle. For each market, four different marginal external costs are computed at the present equilibrium. The gap between marginal social costs and prices shows that congestion and unpaid parking are the dominant sources of inefficiencies. Air pollution costs are significant as well. The effect of three alternative transport policies (full external cost pricing, cordon pricing, parking charges) is compared with the effects of a typical air quality policy (regulation of emission technology) and two typical fuel based policies (minimum fuel efficiency policy and fuel taxes). Regulation of emission technology and of fuel efficiency do not lead to welfare gains, whereas pricing policies yield substantial gains. JEL CLASSIFICATIO