Mobility in the Netherlands faces challenging choices. With increasing pressure on the environment and the need for sustainable development, true pricing offers a way to identify the true costs and benefits of mobility and better manage for broad prosperity. A report by Deloitte explores the possibilities.
The Dutch like to be on the move, essential for work, social contacts and participation in society. The government supports this mobility by building infrastructure and subsidizing public transportation. However, this mobility also has negative effects on the environment, living environment and safety. In order to make responsible choices, both by the government and individuals, true pricing offers a valuable tool. This tool can help clarify the true costs and benefits of mobility options, including the hidden effects.
External effects on pricing
Mobility requires choices: do we invest in rail networks or road safety? Do we guarantee a minimum of mobility for all, or do we base our choices on utility? The complexity of these issues is increased by the need to take into account effects on nature, environment and health. True pricing offers a solution by integrating externalities into pricing and policy implementation. This ensures that users consider both direct and indirect costs in their mobility choices.
What is True Pricing?
True pricing is the calculation of the true costs and benefits of a product or service, including all direct, indirect and hidden effects. This concept, proposed by economists more than a hundred years ago, focuses on balancing consumption, externalities and social welfare. For mobility, this means internalizing external and infrastructure costs, which not only contributes to broader welfare, but can sometimes even reduce government spending.
Insight and analysis
Within the framework of broad welfare, we see true pricing as a tool to make welfare indicators measurable, insightful and comparable. It helps to effectively design pricing instruments or other policies. Research on infrastructure costs and external costs of different transport modes has already provided valuable insights, although gaps still exist, especially for shorter, domestic trips in the Netherlands.
Challenges
Calculating externalities presents methodological challenges. For example, vehicle production and scrapping are often not included in calculations. Assumptions about vehicle types and fuel efficiency make the results vulnerable to criticism. Moreover, many key figures are outdated, and the current CO2 price is based on ambitious climate targets that have recently been tightened.
Comparability
The diversity in visualization of true pricing results shows that this field is evolving. The need for standardization is increasing so that results from different choices and scenarios can be compared. International initiatives such as the Value Balancing Alliance are working on methods to make the value of corporate contributions to society, the economy and the environment measurable and comparable. This will also become increasingly relevant for governments.
Active support needed
True pricing does not automatically solve all problems. It sometimes leads to defection to alternatives without true pricing. Therefore, the instrument deserves support and active embrace by governments. It is also important to keep responding to new developments, such as new fuels and technologies.
Future steps
The Netherlands is a frontrunner in quantifying externalities but can still better steer desirable policies. Three pieces of advice for the next steps:
- Provide more quantified data to gain valuable insights.
- Make the list of costs and benefits to be quantified as completely as possible.
- Accept that estimates and assumptions are unavoidable, and work with ranges where necessary.
Changing behavior
True pricing can influence behavior through pricing measures, but this requires public support. For example, a CO2 cap can help achieve an absolute goal, while rewards for less mobile behavior can help reduce rush-hour traffic. Prioritization of investments and a conscious balance between urban densification and livability are also crucial.
True pricing helps determine what we really value by making costs and benefits visible. Although not everything can be expressed in financial terms, the tool provides a framework for effective policymaking. The Netherlands can remain an example by actively contributing to the development and application of true pricing.
True pricing offers an innovative way to make mobility more sustainable and equitable, which is crucial for the future broad prosperity of the Netherlands.
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