Marginal cost-pricing in the Swedish transport sector – An efficient and sustainable way of funding local and regional public transport in the future?

Document Type

Journal Article

Publication Date


Subject Area

place - europe, place - rural, place - urban, mode - bus, economics - subsidy, economics - pricing, policy - congestion, policy - sustainable, policy - environment


Marginal cost, External effects, Internalisation, Optimal public transport, Bus, Funding


Traffic results in negative external effects such as emissions, noise, congestion and infrastructural wear and tear. Public transport on the other hand, generates in many cases substantially larger positive system- and scale effects compared to its vehicle external marginal costs. This paper investigates actual external marginal costs of transport in Sweden for all modes of passenger transport in urban and rural areas and compare it to the level of positive system- and scale effects in local and regional public transport. The study is based on marginal costs of traffic in Sweden as reported in Transport Analysis yearly report to the government and on research on optimal public transport pricing. The numerical examples exemplify the situation in Sweden for a rural area (Jämtland County) and a larger urban area (Stockholm County). It is highlighted that taxes and fees in level with marginal costs can cover the existing financial deficit for public transport and an optimal subsidy in both the urban county and the rural county. However, among other things it is necessary to handle the legal aspects of such a funding of public transport before it could be used in the reality. Public transport are financed at county level, while the taxes and charges from traffic are an income on a national level.


Permission to publish the abstract has been given by Elsevier, copyright remains with them.


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