The economic folly of free buses

Meaning:To proffer something is to hold it out and offer it — originally a hand, a gift, a cup — and in formal writing it nearly always means offering an idea, an argument, or a piece of evidence for other people to take or refuse. It carries a faint shrug that plain offer doesn't: what is proffered has been put on the table, not proved. That shrug is doing quiet work here, because the three arguments supporters of free transport proffer are exactly the three the rest of the article takes apart one by one.

Meaning:Something patchy exists in patches — there in one spot, missing in the next: patchy fog, patchy phone reception, a patchy game that is brilliant after half-time and sleepy before it. Said of evidence or research, which is how you will meet the word most often in serious journalism, it means the studies exist but do not line up: a few find an effect, a few find almost none, and some places have never been studied at all. That is the article's verdict on whether free transport actually gets people out of their cars — not that the answer is no, but that the findings are too scattered to support a confident yes.

Meaning:A bane is the thing that ruins or spoils something — a lasting source of trouble rather than a passing annoyance. The word is old and once meant an actual poison, which is why it still lands harder than nuisance and why the poisonous plant wolfsbane is named that way; today you meet it most often in the set phrase the bane of someone's life. Here it is deliberately paired with its opposite, a boon — a benefit, a gift — to make one balanced point: free transport got Chileans walking more, while in Estonia and Germany it did the reverse, pulling people off their own feet and bicycles and onto buses and trains.

Tallinn made its buses and trams free — not cheaper, free — and the number of trips rose by just over 1%. Cutting a price all the way to zero and getting almost nothing back is odd enough that economics keeps a name for it: price elasticity of demand, the measure of how much the quantity people buy responds when the price moves.

Take the name apart. Demand is how much of something people actually buy. Elasticity is how stretchy that amount is when you pull on the price — an elastic waistband gives a lot, a leather belt barely moves. So demand is elastic when a small price cut brings a big jump in sales, and inelastic when you can slash the price and people buy about what they bought before. The number behind it is a simple division: the percentage change in how much is bought, divided by the percentage change in price. Drop the price by 100% and get 1% more trips, and the answer sits a hair above zero — about as inelastic as a market gets.

Think about one bus ride. Whether you take it is hardly settled by the fare; it is settled by whether a bus goes where you are going, how long you will stand at the stop, and whether a car or a lift is available instead. The fare is one cost among several, and for most riders it is the small one — the waiting is the big one. That is why the price can fall to nothing and the crowd barely changes, and it is why the article keeps arguing that the same money buys more when it pays for more buses rather than cheaper ones: extra frequency cuts the cost that was actually stopping people.

The habit generalises far beyond buses. Whenever anyone proposes moving a price — a tax on sugary drinks, a tariff, a minimum wage, a concert ticket — the first question is not whether the new price is fairer but how much the quantity will really move. Cigarettes and insulin barely budge; one brand of cereal with five rivals on the same shelf budges enormously.

Two numbers in this article do all the damage: €6,140 and €85. Both are prices for exactly the same thing — keeping one tonne of carbon dioxide out of the air — and Germany's cheap-ticket scheme paid about 72 times the going rate.

The machinery behind that comparison belongs to environmental economics, and it starts with weighing the gas. Carbon dioxide is counted in tonnes: burn a bit over 400 litres of petrol and you have put roughly one tonne of it into the atmosphere. In the European Union a power station, steel mill or airline cannot simply release that tonne. For every tonne it emits it must hand over one permit, and the EU issues only a capped number of permits each year, shrinking the cap over time. A firm that can cut its emissions cheaply cuts them and sells the permits it no longer needs; a firm facing expensive cuts buys permits instead. Whatever one permit changes hands for — lately about €85 — is the carbon price, and that is the entire purpose of an emissions-trading scheme: it attaches real money to a tonne of CO₂, so the cheapest cuts get made first.

That price then doubles as a ruler. Any climate policy — free buses, insulating houses, subsidising heat pumps — can be divided out as what it cost over tonnes it kept out of the air, which gives a cost per tonne you can lay beside any other policy. Germany's €9 ticket came out at about €6,140 per tonne avoided, because the money went to millions of people who were going to take the train anyway and shifted only a sliver of car traffic. The same euros spent buying permits on the EU market and cancelling them, so that nobody could ever use them, would have kept roughly 72 times as much carbon out of the air.

So when a policy is sold as green, the question worth asking is not whether it cuts emissions at all, but what each tonne cost — and what the same money would have bought somewhere else.