Road transport infrastructure funding

This chapter focuses on road transport infrastructure funding. Governments throughout the world are strapped for cash and struggle to find the resources required to satisfy competing demands from the different sectors they need to fund, such as education, health, defence and transport. One way of funding roads is by getting the private sector on-board, via Private Public Partnerships (PPPs). This is typically done on a case-by-case basis but does not guarantee a steady flow of revenues for road investment. A brief overview of what these PPPs entail is presented in the chapter. In addition, two possible ways in which funding of transport infrastructure can be stabilised and guaranteed to some extent is to set up a dedicated Road Fund or to earmark road user taxes (fuel duties, vehicle annual taxes, etc.) and charges (such as congestion and other charges). Earmarking of taxes has advantages and disadvantages, both of which are discussed in the chapter. Regardless of whether governments set a Road Fund or earmark taxes, an essential question is how to guarantee that those funds (which are revenues collected from taxes and/or charges) are enough to cover investment and maintenance costs and this, in turn, is linked to optimal capacity. Building roads to satisfy increasing demand is important, especially when the network capacity is not enough to hold the traffic flows required for an economy to grow, but at the same time increasing capacity can eventually cause an increase in congestion and welfare costs, due to what has been now widely recognised as induced demand. Determining optimal infrastructure capacity and ensuring there are enough resources to fund it are economic problems.