Hazardous materials, transportation pricing

When shipments are priced in this way, manufacturers can make sensible decisions on the quantities of hazardous materials to be shipped and the location of manufacturing plants relative to where the users of the hazardous material are located. If a particularly hazardous material is charged a high price for transportation, then the manufacturer may decide to locate its manufacturing facilities close to the ultimate users of the product. 

Until the early 1990s most railroads did not have the information necessary to price in this way. There were a few exceptions. The Union Pacific Railroad had a crude system of risk-based pricing, and CSX Transportation had tried to enumerate the costs of cleanup and liability specific to particular commodities. But most railroads charged a standard price mark-up to reflect total accident costs incurred and the liability claims settled. Such a pricing scheme will result in the transportation of too much extremely-hazardous materials, and too little less-hazardous or non-hazardous materials. 

---