Reducing private vehicles on the road : insights from a contingent valuation analysis in the Maltese context

Abstract

Traffic in Malta has increased drastically over the years, leading to considerable environmental costs being incurred annually in the shape of climatic emissions, air pollution and congestion among others. This study examines the potential of reducing traffic by actively retracting licenses for private vehicles. It employs the Contingent Valuation Method to assess both private citizens’ willingness to accept (WTA) compensation for the license and willingness to pay (WTP) should the licenses be re issued by auction. Using randomized treatments, it further tests the potential for bias in such values when respondents are presented with the WTA scenario before the WTP one, which leads to a higher overall stated WTA and WTP values. The study then proceeds to analyse the determinants of both WTP and WTA using regression analysis underpinned by a conceptual model based on the theory of demand. In line with expectations we find that WTA is higher than WTP. Indeed, while the weighted average WTA is in the range of €5,938, average WTP is in the range of €1,665. Scaling up would suggest that buying up 182k licenses - to keep total number of licenses at 200k - would cost in the range of 1.08 billion euro, while auctioning would generate in the region of 330 million euro for the same number of plates. Moreover, a sensitivity analysis of the highest total cost and highest total revenue resulting from both measures was also analysed. The adoption of such measures entails that no new license plates are to be issued thereafter. Our regression analysis suggests that WTP responds to the gender, age and the randomisation option while WTA responds to distance to work, trust in Government, and the age, use and cost of the oldest car in the household. Moreover, the WTA variable without the selling price of the car (NEWWTA), responds to the distance to work, education, trust in Government, gender and the use of the oldest car. This study provides important implications for policy, namely through different costed options and also in better understanding the factors that are deemed as important by individuals in order to reduce cars from the road.