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Ride-Hailing, What is it Good For?

A significant new study has shown that on average the total external costs accrued from ride-hailing services like Uber and Lyft are 35 cents more than driving in private vehicles, while reducing emissions by up to 60%.

As Laura Bliss points out in her recent article on Bloomberg CityLab this is a surprising result given that ride-hailing companies have been promising a greener and less congested future. The study shows that this is not the case when it comes to congestion, and only mildly so when it comes to emissions. Congestion is one part of the total external cost, or externalities, that were looked at in the study.

“In economic terms, ‘externalities’ are the costs or benefits of a particular good that are borne by others, rather than by the individual making or purchasing it, and which are generally not accounted for in the price of the good.”

So what is included in the calculation behind the ride-hailing trip being 35 cents (2019 USD) more costly in terms of externalities than driving a private vehicle? That includes such things as crashes, air pollutants, greenhouse gasses, and noise pollution. When you jump in a ride-hailing service and pay to go from point A to point B these costs are excluded from your bill, but they add up for society nonetheless. The promise from ride-hailing companies is that wide adoption will decrease these externalities as well as increasing convenience for customers.

The 35 cents figure was found by simulating the replacement of 100,000 vehicles across six US cities. The major contribution to this increase in externalities is deadheading, which is the time spent driving from the drop-off of one passenger to the pickup of the next. This increased distance leads to greater congestion, higher risk of accidents, more noise, and greater greenhouse gas emissions, and a decrease in pollutants. The decrease in pollutants derives mainly from much more efficient way engines burn fuel when they are running at optimum temperature.

The study points out two ways to lower this difference: electrification and ride pooling. However, even if both are taken into account the increase in congestion and accidents means the external costs only dip slightly lower than personal vehicles, and public transport remains far and away the most effective in lowering costs overall.

Personal Comment:

This study is important. As cities continue to grapple with increasing populations, congestion, and pollution they must find ways to respond. For the individual who quickly needs to get from A to B ride-hailing is quick, effective, and relatively cheap. It appears to be a mistake, however, to think that it can remain so at scale. This doesn’t mean that ride-hailing is all bad, but only that it isn’t, on its own, a solution to the congestion and pollution problems that we have in our major cities.

A further complication, briefly mentioned in the study, is that the calculations change dramatically depending on who uses the service. The study replaced 100,000 personal vehicles with ride-hailing services, but the external costs are much higher (three times higher in fact) if the person that catches an Uber or Lyft would have instead taken a bus, bike, or simply walked. If ride-hailing takes people off busses, bikes, and their own feet it adds far more strain on the system than if it replaces another vehicle that would have been on the streets.

One question that was not addressed in the study, but is relevant, is how these numbers would work out in a rural setting. Cities, of course, are the focus of ride-hailing companies, and struggle the most with issues such as pollutants and congestion, but the suburban and rural context may be an interesting use case for ride-hailing, especially of the robotaxi variety. Furthermore, the study results are from simulations of six US cities. Given how different city layouts and transport networks are around the world, how generalisable could the findings be for a European setting?

So what is ride-hailing good for? It is unclear. The one clear thing it does not appear to be good for is congestion, and that is a significant problem. At the same time, it does reduce emissions, especially with electrification and ride pooling. Transportation is a complex system, so regardless of what we do it probably won’t respond as we expect, but studies like this help us as governments, companies, and individuals make as informed decisions as possible.

Written by Joshua Bronson,
RISE Mobility & Systems (Människa-autonomi)