Chapter 18: Transport Investment Appraisal and the Environment

Investment appraisal is an important issue in transport planning and policy. The investments are usually long lasted, practically irreversible, and costly, and may at the same time have a great impact on people’s lives and the development of communities and regions. Investment decisions should therefore be well thought through, and various alternatives should be compared carefully before making a final choice. The most widely applied appraisal technique in transport is cost–benefit analysis (CBA). CBA essentially compares the projected future stream of benefits from a project with its initial and future costs. It thus allows a ranking of several competing projects or project variants, or a decision not to undertake any of these. Investment decisions on transport investment are usually made by public authorities, often motivated by infrastructure’s (sometimes merely perceived) “public good” character^a. Besides, uncertainty in future patronage and relatively high fixed costs make private parties only rarely interested in investing in transport infrastructure. Consequently, the central criterion employed in practical transport investment appraisal is often related to the project’s contribution to social welfare – often operationalized as social surplus – rather than the more narrow criterion of profits that a private enterprise would use.