| Summary: | Urban goods distribution has gained in importance in recent years since its optimization not only has the potential to increase productivity and operational efficiency but also to achieve broader goals related to the reduction of externalities including congestion, accidents, noise, air pollution and CO2 emissions. The focus of this paper is to explore the costs and benefits related to freight trams and appraise, by means of a cost benefit analysis a hypothetical freight tram scheme in the centre of Barcelona, to identify the factors that critically influence the potential success or failure of such schemes and to examine through sensitivity testing ways of improving performance. Thus, this paper aims to enhance our understanding of the potential for freight trams to contribute to mitigating a range of transport externalities. Two freight tram scenarios were developed for detailed investigation: the first for retail deliveries and the second for domestic waste collection. Cost benefit analysis (CBA) was carried out based on the best available public domain information and with clearly specified assumptions. The waste tram scenario yields a high Net Present Value (NPV) and rapid return on investment due to the low set up costs and significant operating cost savings. On the other hand, in the initial specification, the retail delivery tram has a very negative NPV due to high initial investment costs and annual costs exceeding annual benefits. Sensitivity tests indicate that both the initial infrastructure costs and the costs and efficiency levels of the consolidation centres are critical to the performance of a freight tram.
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