This research was conducted to evaluate the economic merits of investing in an electricity-run automated guideway transit system (AGT) within the Baguio Central Business District (CBD) in order to reduce air pollution. The proposed AGT will replace the diesel-powered public utility jeepneys that ply the CBD route. The benefits of operating an AGT public transport system within the Baguio CBD were found to be significant. The class of benefits valued were (1) avoided cost of premature mortality due to air pollution-related illnesses, (2) avoided direct costs due to the treatment of air pollution-related illnesses, (3) value of work days lost due to air pollution-related illnesses, (4) revenue from AGT operation; (5) shorter travel time, and (6) residual value of the train coaches after 10 years of service. On a base case scenario (includes only the monetized benefits and costs and using a discount rate of 12%), the investment in the proposed AGT and its operation over a 10-year period would generate an NPV of PHP 250 million and IRR of 19%. Various sensitivity analyses performed yielded NPV and IRR estimates that were robust to certain adverse changes in revenues and costs in operating the AGT but sensitive in others.

Policy Brief
Clean Air In, Bad Fumes Out: Benefits and Costs of an Alternative Mode of Public Transportation System in the Baguio City CBD, Philippines