Modal choice between air and rail: A social efficiency benchmarking analysis that considers CO₂ emissions

The problem of modal choice between rail and air arises as public awareness of carbon dioxide (CO₂) emissions by the transportation sector rises. In this paper, we answer this question quantitatively by performing an efficiency benchmarking analysis that takes into account life-cycle CO₂ emission due to transport service provision. The paper employs nonparametric efficiency estimation methods, namely a slacks-based inefficiency measure, as well as a more conventional directional distance function approach. We apply them to a panel data set for three major railway companies and the aviation sector in Japan for the period from 1999 to 2007. Results shows that, contrary to the common argument, air transport can still be more socially efficient than rail transport, even when the environmental load due to CO₂ emission is incorporated. This is due to the aviation sector's extremely low user cost, measured in terms of in-vehicle time. In other words, aviation is a necessary transportation mode for those with a very high willingness to pay for their time.