What’s More Cost-Effective: Building More Highways or Reducing Driving?

Chances are that demand management can deliver improvements more cheaply, more quickly, with greater benefits to society, and with much lower risk to taxpayers and the public than laying more asphalt.

Last week, the American Association of State Highway and Transportation Officials (AASHTO) released its latest report on the nation’s highway spending “needs,”[1] estimating that America must spend $120 billion or more each year to maintain and improve our roads and bridges.

Estimates like this are a staple of the transportation funding debate, and are produced regularly by entities ranging from the U.S. Department of Transportation to the American Society of Civil Engineers.

We and others have pointed out a fundamental problem with some of these assessments: their reliance on forecasts of future demand for driving that have, at least since the late 1990s, regularly overshot the mark.  If driving grows more slowly than expected, there is less wear and tear on roads and bridges, less “need” for more highway lanes, and, by extension, less need for more highway funding.

But there is another flaw in these assessments: their failure to consider whether approaches other than highway expansion could meet the same needs at lower costs or with greater benefits to the public.

For example, AASHTO estimates that if the number of vehicle-miles traveled (VMT) in the United States increases by 1.0% per year, America will need to spend an average of at least[2] $120.2 billion per year over the next 20 years on roads and bridges to maintain and improve the condition of the highway network. If VMT increases by 1.4% per year, however, the cost would balloon to $144.4 billion per year.

It is quite possible that we could spend that money more effectively, and achieve the same goal in terms of roadway performance, by taking common-sense steps to encourage people to drive less.

Let’s run the numbers: The difference in cost between those two scenarios of traffic growth is $24.2 billion per year. Over a 20-year timeframe, that adds up to a difference in spending of $484 billion.

The difference in the cumulative number of miles traveled over 20 years between the 1.0% and 1.4% annual VMT growth scenarios is 2.9 trillion miles. Every mile of driving avoided during that period, therefore, translates into 17 cents worth of road maintenance and expansion that taxpayers would not have to shoulder.

Transportation demand management programs are already reducing driving with less expenditure of public money. Washington State’s Commute Trip Reduction program – which encourages large employers to reduce the number of workers driving alone to work through efforts such as vanpools, carpool matching, and employer shuttles – reduces vehicle travel by approximately 37.7 million miles per year at a cost to the state of about $6 million annually – roughly 13 cents per avoided mile.

For the typical American commuter driving 13 miles to work each day, 17 cents a mile translates into more than $4 per day. That could be sufficient inducement for many Americans to carpool or take transit to work, or for employers to expand opportunities for telework – especially since reducing driving also saves money in other ways, such as by reducing expenditures for vehicle maintenance and fuel.

Reducing growth in driving is also a better deal for the rest of us than expanding highways. Reducing vehicle-miles traveled delivers co-benefits in the form of fewer emissions of carbon dioxide and health-threatening air pollutants, reduced property damage and injuries from crashes, and much more. (For a comprehensive list of potential benefits of transportation demand management, see the Victoria Transport Policy Institute’s Todd Litman here.)

The idea of solving infrastructure problems by managing demand is nothing new. The electric power industry has long recognized that it can be cheaper to reduce or shift demand at peak periods than to invest in expensive new power plants and transmission lines, and similar concepts for managing demand in transportation have been floated for a long time.

There are nearly infinite ways in which funds could be deployed to reduce travel demand. Workplace-based commute trip reduction programs could be expanded. Transit agencies could propose new services or service improvements on existing lines. Incentives for transit use or carpooling could be increased. One could even imagine creating a market in which private entrepreneurs would bid for contracts to implement VMT reduction programs, in much the same way that energy service companies compete to develop and implement cost-effective solutions to reduce energy use.

There is, of course, no guarantee that VMT will increase by even the 1.0% per year assumed by AASHTO, given the fact that we’re still driving only about as much as we did in 2005. It may also be that there are more pressing priorities for the investment of public money than to spend it all on slicing a few minutes off of drivers’ commutes.

But to the extent that America wishes to prioritize and invest in steps that reduce congestion, the nation is likely to be far better served by investing new resources in creative efforts to reduce growth in driving than into expanding existing highways or building new ones. Chances are that demand management can deliver improvements more cheaply, more quickly, with greater benefits to society, and with much lower risk to taxpayers and the public than laying more asphalt.

[1] AASHTO’s report bases its estimate of “needs” on a “maximum economic investment” scenario. Which basically means any investment that AASHTO defines as a “need” anything that the FHWA’s model suggests would yield a benefit-to-cost ratio of greater than 1.0.

[2] “At least” is important here. AASHTO acknowledges that many costs may be left out of its assessment, including costs to mitigate environmental and community damage, assure safety, and pay for operation, management and security of the highways … as well as the added costs of long-term maintenance of all the new stuff that is being built. Presumably, reducing the need for system expansion would reduce many of these costs as well, making a demand management approach even more cost-effective.


Tony Dutzik

Associate Director and Senior Policy Analyst, Frontier Group

Tony Dutzik is associate director and senior policy analyst with Frontier Group. His research and ideas on climate, energy and transportation policy have helped shape public policy debates across the U.S., and have earned coverage in media outlets from the New York Times to National Public Radio. A former journalist, Tony lives and works in Boston.