Transportation in the Balance: A Comparative Analysis of Costs, User Revenues, and Subsidies for Highway, Air, and High Speed Rail Systems

The State of California will face an important transportation investment decision during the coming decade. With ever increasing demands for intercity travel in the entire corridor between Sacramento and San Diego, the State will need to consider the options available for expanding the capacity of the Corridor’s transportation system. One major decision is whether to invest in a high speed rail system or whether the resources are better spent on expanding highway and air transportation capacity. Many studies, including the recent ITS study by Levinson et. al. (1996), suggest that high speed rail (HSR) is the costliest among the intercity modes. However, the question remains whether such a system can be justified on the basis of its lower external costs - primarily the social costs of air pollution and noise. A related question is whether the direct and indirect subsidies given to alternative modes, often in the form of uncompensated external costs, but also including unrecovered infrastructure costs, should be considered when making comparative evaluations. If these subsidies were taken into account, the relative advantage of each intercity mode would be affected. Given the presumed lower external costs of HSR, such a full-cost and revenue accounting would improve the relative feasibility of this technology.