Pricing Overland Freight Transport to Account for External Costs

In US overland freight transport, external costs per ton-mile are around eight times higher for trucks than for rail, and average around 20 per cent and 11 per cent of shipping costs for the respective modes. Internalising those costs via a tax on payload weight, distance, and fuel would have induced, in 2007 data, a 3.1 per cent shift of ton-miles from truck to rail and a 0.7 per cent decrease in total tons shipped, reducing external costs by more than $2 billion annually. A simpler tax on distance alone would have achieved similar outcomes at a much lower cost.