3.2 - Method of evaluation

Consumer surplus based evaluation

All TDM programmes have the objective of changing travel or transport behaviour. Therefore, TDM evaluation needs to use values that are perceived by users (rather than just the national resource costs from volume 1). This requires a consumer surplus based evaluation, which is a method of measuring the value that consumers place on a change in the price or quality of the goods they consume (in this case travel is considered a 'good').

The basic technique for evaluating consumer impacts of price changes is to use the incremental cost to consumers who don't change their travel, plus half the change in price times the number of trips that increase or decrease. This is known as the 'rule of half', which represents the midpoint between the old price and the new price.

For example, if a $1 highway toll increase causes annual vehicle trips to decline from 3 million to 2 million, the reduction in consumer surplus (the total net cost to consumers) is $2,500,000 ($1 x 2 million for existing trips, plus $1 x 1 million x ½ for vehicle trips foregone). Similarly, if a 50¢ per trip public transport fare reduction results in an increase from 10 million to 12 million annual public transport trips, this can be considered to provide $6 million in consumer surplus benefits (50¢ x 10 million for existing trips, plus 50¢ x 2,000,000 x ½ for added trips).

The rule of half assumes that a new user who was just discouraged from using a service before the service change (or implementation of a new service) will receive the full benefit of the service change or introduction and a user who is just marginal after the service change will receive nearly zero benefits. Hence, on average, new users receive half the unit benefits.

Consumer surplus impacts of transport changes that do not involve pricing can be evaluated using market surveys and other techniques that reveal consumer perceived costs - known as willingness-to-pay (WTP).

For purposes of economic evaluation, corrections are often required to the perceived benefit values derived from WTP surveys because some values (eg private vehicle operating costs and parking costs) tend to be mis-perceived.

TDM packages

The procedure for evaluating packages in section 3 of volume 1, involving analysis of the timing of individual components, is not appropriate to TDM packages unless the package contains substantial infrastructure or passenger transport components.

If a TDM package contains substantial infrastructure or passenger transport components then a composite evaluation is necessary. Road infrastructure components of a package should be evaluated using the procedures in volume 1 and the passenger transport and other TDM components evaluated using relevant procedures in this volume, and then aggregating the results, taking care to avoid double counting of benefits.

A composite evaluation is required for a package of measures involving travel behaviour change initiatives if the cost of supporting infrastructure components (such as walk/cycle paths or minor road improvements) or passenger transport components are over $150,000. A composite evaluation is optional if the cost of supporting infrastructure or passenger transport improvement components are under $150,000. This supersedes the advice given in the Land Transport New Zealand/EECA Travel behaviour change guidance handbook (2004).