The economic cost of a 130 kph speed limit in Germany

Abstract

Germany remains the only large country in the world without a general speed limit on highways. One of the main arguments for this policy is that lower speeds represent a travel time cost that is not outweighed by benefits, such as a reduction in greenhouse gas emissions. As transport decision making in the European Union is based on cost-benefit analysis (CBA), this paper compares the value of travel time, fuel consumption, infrastructure, crashes, carbon dioxide (CO₂), and air pollution. Results suggests that, at the low end of the estimate, a 130 kph speed limit will generate welfare gains in the order of 950 million Euro per year. The ‘no speed limit’ policy consequently represents a subsidy forwarded to fast drivers. The paper also discusses the views of the public vis-à-vis automobile lobbies, and the relevance of Germany's climate change mitigation law, mandating that transport systems be decarbonized. The CBA suggests that a 130 kph speed limit is a policy field where environmental concerns, positive economic effects, and public opinion can be aligned.