Option and non-use values and rail project appraisal

TLDR: In this article, the role of option and non-use values in rail project appraisal is reviewed and international evidence on their scale and through the use of case studies, the authors identify the impact that option and NU values may have on a schemes appraisal as well as to set out the difficulties associated with including them within an appraisal.

Abstract: Option and non-use values have received a significant amount of attentionin the field of environmental economics, but to date their application within the transport economics field, and transport appraisal in particular,has been scarce. In fact to date we are unaware of a transport appraisal that included monetised option and non-use values. Advocates of public transport argue that this exclusion biases the appraisal process against public transport provision whether that is introducing evening bus services oropening or closing a rail line. The purpose of this paper therefore is toreview the role of option and non-use values in rail project appraisal, review international evidence on their scale and through the use of case studies identify the impact that option and non-use values may have on a schemes appraisal as well as to set out the difficulties associated with including them within an appraisal. Finally, future research needs are identified. Option and non-use values exist because under certain conditions the value individuals and businesses place upon the availability of a transport service exceeds the benefit that they expect to receive from using it. Option values reflect the additional amount people may be willing to pay toreduce the risk that there is no service available when they need it. Theservice may hold a stand-by value for when their main mode of transport is suddenly unavailable or if they were forced to seek work in a nearby town or city, to which they cannot easily commute by another mode. Economic theory indicates that option values are always additional to the economic benefits included in a cost benefit analysis. Individuals may hold non-use values for a number of reasons - the benefit of other people using the service to visit them, reduced congestion and environmental costs, increased house prices. Non-use values may - depending on the motive giving rise to the value double count elements of benefit already included in the appraisal. Indirect evidence for the existence of such values may be given by a willingness of people to vote for local taxes for the provision of public transport, or to pay more for housing close to public transport, if these values exceed expected use values. Direct evidence on option and non use values is restricted to six exploratory studies, five in Europe and one in the US. These studies identify a very substantial range of values from US$56 to 190 per household per annum. However, once the studies are adjusted to a common price base the range narrows. Additionally, the range can be qualitatively rationalised in terms of mode of transport, transport quality,whether the values represent household or individual valuations and whether the values are incremental values against other services or are absolute values. The different studies therefore give each other a degree of qualified support and lend some confidence in determining the likely range in which option and non-use values lie. Three case studies of changes in local rail services in the UK and the Netherlands will be presented. The case studies clearly identify the necessary assumptions regarding population affected, incremental values between different packages of public transport and treatment of growth over time. The contribution of option and non-use values to the present value of benefits over the lifetime of the project is very sensitive to these assumptions and also to the split between optionand non-use values. The main contribution of the case studies, however, is to illustrate the relevance of including option and non-use values in practical appraisal, including the types of schemes for which they form a significant element of the benefits/costs. For the covering abstract see ITRD E137145.