This points to a general problem with subsidies. Unlike price signals coming from markets, they usually distort rather than correct a sector of the economy.
Making public transport free or cheap, for example, boosts demand for it but doesn’t do anything to also increase the quantity or quality of supply. Operators of bus and rail lines, whether they’re in the private or public sector, can’t easily add capacity.
In Germany, too, many frustrated €9 passengers were left on the platforms as their overcrowded trains departed without them. Nor were people much better off who live in places where the bus comes once a week, if at all.
PROBLEM OF INEQUALITY, NOT JUST CLIMATE CHANGE
In reality, therefore, public transport subsidies are usually an answer to the problem of inequality, not climate change. The well-off keep driving, no matter how much gasoline costs.
And they pay more in taxes to enable the cash-strapped to ride at little or no charge. In this case, a lot more: Germany’s subsidy, just for these three summer months, is estimated to cost the federal government — and thus the taxpayer — €2.5 billion.
The €9 ticket, however, suggests that a well-designed subsidy could yet make more people leave their car at home at least some of the time, thereby mitigating greenhouse gas emissions as well as inequality. But for that, the subsidy would have to be combined with other policies.
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