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Should your buses, trams and trains be free?

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Like everyone I know in Germany, I bought the so-called 9 euro ticket this summer. Three, in fact – one for June, July and August. I put the QR codes in my mobile phone’s digital wallet and was free to hop on and off all buses, trams, local and regional trains in the country. In a country that specializes in the complexity of things, getting around was suddenly simple.

This all-you-can-eat ticket – for around $9 – was a huge experiment worth watching from other countries looking for climate change policies. The impetus has been the surge in inflation this year and, in particular, the energy shock. In response, the German government adopted a series of measures intended to lessen the blow to the population’s finances. The 9 euro note was one.

The most popular, in fact. The deal expired last week, and everyone is already talking about how and when to bring him back. The question – for Germany and other countries – is therefore whether and under what circumstances it is a good idea to subsidize public transport enough to make it extremely cheap or even free.

The numbers are intriguing. People bought some 52 million tickets at 9 euros, and another 10 million who had previously bought an annual subscription automatically bought them. I almost wonder about the Germans who didn’t take advantage of the offer. Presumably they include babies and people living in deep forests with no bus stops.

If the first estimates turn out to be correct, moreover, around 10% of purchasers have used the ticket to give up at least one of their daily car journeys. It saved them a bunch of gas expenses. It also kept large clouds of carbon dioxide out of the atmosphere – about 1.8 million metric tons. That – after just three months – is equivalent to the emissions generated by powering 350,000 homes for an entire year, or the savings that can be expected in a year if Germany introduces a speed limit on its motorways.

It comes as a shock. Cities from Santiago, Chile, to Salt Lake City, Utah, and Tallinn, Estonia, have also experimented with free public transport. The same goes for the whole small nation of Luxembourg. But they all found that their subsidies did not significantly reduce car journeys – either because the people who took more trams, buses and trains were too poor to own cars and would otherwise have walked or cycled; or because public transport was still too inconvenient compared to driving for the price to make much of a difference.

This highlights a general problem with subsidies. Unlike price signals from markets, they generally distort rather than correct a sector of the economy. Making public transport free or cheap, for example, stimulates demand but does nothing to also increase the quantity or quality of supply.

Bus and rail operators, whether private or public, cannot easily add capacity. In Germany, too, many frustrated €9 passengers were left on the platforms as their overloaded trains departed without them. People who live in places where the bus goes once a week, if at all, weren’t much better off either.

In reality, therefore, public transport subsidies are usually a response to the problem of inequality, not climate change. The affluent continue to drive, regardless of the price of gas. And they pay more taxes to allow cash-strapped people to ride at little or no cost. In this case, much more: the subsidy from Germany, just for these three summer months, is estimated to cost the federal government – ​​and therefore the taxpayer – 2.5 billion euros.

The €9 note, however, suggests that a well-designed subsidy could still encourage more people to leave their cars at home at least part of the time, thereby mitigating greenhouse gas emissions as well as inequality. But for this, the subsidy should be combined with other policies.

First, governments must also provide more alternatives to driving, rather than just cheaper ones, or design incentives for companies to do so. It’s devilishly difficult. Even in Germany, where the mainstream policy is supposedly “pro-rail”, trains are best known for running late or not running at all. And every time someone tries to build a shiny new station, locals (including those who call themselves “green”) protest.

Second, governments must deliberately make driving less and less affordable. The cost of petrol or diesel must remain uncomfortably high well beyond the current energy crisis – in fact, forever. And the best way to do that is to put a high and rising price on carbon, as cap and trade regimes seek to do.

That’s why demands by Poland and other countries to abandon the European Union’s emissions trading system, the world’s largest cap-and-trade market, are misguided. Instead of sacrificing the ETS to temporarily cushion energy prices, Europe should instead strengthen and expand the system, and other countries should follow.

For now, even mainstream liberals like me have to admit that transportation is an area of ​​the economy that is blocked by market failures and is largely responsible for climate change. This suggests that the government should step in with better policies. The 9 euro note does not offer the whole answer, but a first glimpse.

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This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Andreas Kluth is a Bloomberg Opinion columnist covering European politics. A former editor of Handelsblatt Global and a writer for The Economist, he is the author of “Hannibal and Me”.

More stories like this are available at bloomberg.com/opinion

Mary Cashion

The author Mary Cashion