Basic economic principles of road pricing: From theory to applications

This paper presents, a non-technical introduction to the economic principles relevant for transport pricing design and analysis. We provide the basic rationale behind pricing of externalities, discuss why simple Pigouvian tax rules that equate charges to marginal external costs are not optimal in ‘second-best’ settings, and discuss the conceptual link between congestion pricing and road capacity. The final part of the paper is devoted to implementation paths for transport pricing policies. A simple numerical model demonstrates how different time patterns of constraints on pricing and capacity policy instruments may lead to different time patterns of efficiency along those implementation paths.     

Congestion management and electronic road pricing in Singapore

Government and policy makers today face the pressing problem of managing road congestion in urban areas. This paper details the experience of Singapore and the effort made to curb vehicular increase on the roads using a state-of-the-art regulated Electronic Road Pricing (ERP) scheme. Specifically, the paper looks at the public policy effort to forge ahead with road pricing, prepare the island for extensive congestion management, and cap the on-road vehicular population to ensure a smoother flow of commercial transport and distribution.     

Policy transfer and the introduction of road pricing in Valletta,Malta

Charging motorists to pay for driving at times and/or in places where there is insufficient capacity to meet the level of demand has long been recognised by transport economists as an efficient way to address traffic congestion. However, only a few locations have actually decided to use this mechanism, with Valletta one of the more recent cities to introduce such a scheme. This paper aims to present a case study of road pricing in Valletta and the role played by policy transfer in its introduction. To do this, it applies data gathered from existing literature, in-depth interviews and direct observation with those involved in the policy development. Experience of road pricing was gained from London, Durham, Edinburgh and Stockholm. One of the major barriers to policy transfer was felt to be the unique geography of the island however international events, local conditions and a political champion driving change were critical factors to the successful implementation of the road pricing scheme. Policy transfer was deemed useful in terms of policy development, relations with stakeholders, scheme design and administrative approaches. This paper concludes by identifying the contributions of the case study of Valletta to the policy transfer literature.     

Local authority and academic attitudes to urban road pricing: a UK perspective

Urban road pricing as an instrument of traffic management has generated a great deal of interest in the UK in recent years. Whilst this is the case there is still no urban road pricing scheme in operation in the UK. The reason for this is primarily one of ‘acceptability.’ This paper, through the use of a national survey, examines the attitudes of key stakeholder groups with respect to urban road pricing. How serious is traffic congestion and traffic related pollution perceived to be by Local Authority Councillors, Officials and the Academic community in the UK? How is urban road pricing viewed by this sub-group of the population in terms of its effectiveness and public acceptance when compared to other policy options? and how could the saleability of urban road pricing be improved? This raises issues in terms of how the revenue raised from urban road pricing should be utilised, the use of urban road pricing as part of a package of measures, the concerns expressed by the stakeholders with respect to urban road pricing, such as the invasion of road users’ privacy, and the type of technology which should be considered. Overall, the paper aims to further the debate among policy makers.     

How large is the gap between present and efficient transport prices in Europe?

In this paper, we analyse the gap between present transport prices and efficient transport prices. Efficient transport prices are those prices that maximise economic welfare, including external costs (congestion, air pollution, accidents). The methodology is applied to six urban and interregional case studies using one common optimal pricing model. The case studies cover passenger as well as freight transport and cover all modes. We find that prices need to be raised most for peak urban passenger car transport and to a lesser extent for interregional road transport. Optimal pricing results for public transport are more mixed. We show that current external costs on congested roads are a bad guide for optimal taxes and tolls: the optimal toll that takes into account the reaction of demand is often less than one third of the present marginal external cost.     

Willingness to spend and road pricing rates

Using a theoretical model of urban transport system the paper examines the influence of distribution of willingness to spend within the urban population on road pricing rates. It shows that the rates that must be imposed in an urban area in order to maintain pollutant concentration and congestion due to traffic within acceptable levels is heavily dependent on the distribution of the urban population’s willingness to spend. This fact severely limits the reliability of any method for calculating road pricing rates based on theoretical analysis, so that an experimental approach seems necessary. The paper shows that a relation exists between the toll rate per kilometer of trip and the average traffic congestion, which is typical of each urban area and can be determined experimentally by successively imposing three different rates and measuring the corresponding congestion levels. The relation can then be used to determine the pricing scheme when the purpose of road pricing is to maintain both the congestion and the environmental effects due to urban traffic below acceptable thresholds. An example shows how the model can help policymakers in decision-making processes.     

A socio-economic assessment of proposed road user charging schemes in Copenhagen

Road pricing, congestion charging, toll-systems and other road charging instruments are intensively discussed in many countries. Although many partial analyses of the consequences have been published, few overall socio-economic analyses have been carried out. The article presents such a socio-economic analysis of four different proposed road pricing schemes for the Copenhagen area. The purpose was to assess all benefits and costs involved, including impacts on traffic and environment, maintenance and financing costs as well as tax distortion effects. It was concluded that the socio-economic surplus of the projects depends crucially on the congestion level. With the current traffic level, road pricing will not yet be socially expedient in Copenhagen. However, if the opening year is postponed to 2015, the two most favourable schemes will turn positive. The analyses also showed that the magnitude of demand response by introducing road pricing is likely to have significant impact on the project surplus. This is an important observation because most short-term driven traffic models will then underestimate the projected surplus. Finally, it was found that the degree to which benefits outweigh costs depends considerably on the use of revenue. Although it may contribute to decreasing road congestion, recycling all of the revenue back to the transport sector turned out to be inefficient and costly.     

Achieving genuinely dynamic road user charging: issues with a GNSS-based approach

A variety of approaches to road user charging (RUC) for reducing congestion and raising revenue to maintain and improve transport infrastructure is in place in many countries; examples of such RUC include: an Electronic Fee Collection System in Singapore, Cordon Pricing in Oslo City in Norway, Zoned Based Pricing in London and Distance-Based Pricing (also called Pay-As-You-Drive) in Germany and Switzerland. With the development of satellite technologies, the introduction of dynamic pricing becomes possible, affording an opportunity for RUC to fully reflect the ‘Polluter Pays Principle’. This paper provides critical and comparative assessments of existing road user charging (RUC) systems with reference to technological limitations and public and political acceptability. The paper then goes on to demonstrate a system architecture for a Global Navigation Satellite System (GNSS) based dynamic road user charging system capable of considering dynamic variables. Finally we consider the feasibility of the proposed system in relation to technology readiness and public acceptability. We then consider some potential wider benefits from the introduction of a comprehensive system that could be highlighted to justify the cost of development and implementation as well as to improve public and political acceptability. The paper ends with conclusions and future research directions.     

New York City’s congestion pricing experience and implications for road pricing acceptance in the United States

Public acceptance is widely recognized as a major barrier to widespread adoption of road pricing in the United States and internationally. Using New York City as a case study, this paper analyzes how Mayor Michael Bloomberg’s 2007 congestion pricing proposal gained widespread public support but was ultimately blocked in the State Legislature. The paper assesses the implications of New York’s experience for pursuing congestion pricing and mileage-based taxes in the United States. A central conclusion from this analysis is that gaining approval of pricing will require changing how motorists view the effect of pricing on them personally. Given the power of even small groups of auto users to block pricing through the political process, pricing proposals need to be perceived as benefiting drivers individually and not simply society at large. The paper discusses approaches to road pricing in light of New York City’s experience.     

Research challenges in modelling urban road pricing: An overview

This article introduces the contributions of this special issue on modelling of urban road pricing and its implementation. The issue focuses on the design of urban road pricing schemes, and their spatial and temporal impacts, using quantitative transport (and land use) models. The policy implications of road pricing, including welfare and equity aspects, are studied for Paris, Brussels and Oslo using state of the art planning models. The issue is completed with a study of public acceptability and the upcoming road-pricing trial in Stockholm, and a review paper on the history of thought and future prospects of road pricing.     

Congestion pricing,transit subsidies and dedicated bus lanes: Efficient and practical solutions to congestion

We analyze urban congestion management policies through numerical analysis of a simple model that: allows users to choose between car, bus or an outside option (biking); consider congestion interactions between cars and buses; and allow for optimization of frequency, vehicle size, spacing between stops and percentage of capacity to be dedicated to bus lanes. We compare resulting service levels, social welfare and consumer surplus for a number of different policies and find that: (i) dedicated bus lanes is a better stand-alone policy than transit subsidization or congestion pricing. The latter is marginally better than subsidization but has a negative impact in consumer surplus. (ii) Efficient transit subsidies are quite large since in many cases first-best transit price is negative; establishing dedicated bus lanes or implementing congestion pricing render subsidies unnecessary for high demand levels. (iii) Both subsidization and dedicated bus lanes would count with public support while congestion pricing would probably encounter opposition. (iv) Transit subsidies and/or congestion pricing do not induce large changes on optimal bus size, frequency, circulation speeds and spacing between stops in mixed-traffic conditions: dedicated bus lanes do. (v) In all cases analyzed, revenues from congestion pricing are enough to cover transit subsidies; the optimal percentage of capacity that should be devoted for bus traffic is around one third.     

Selecting tram links for priority treatments - The Lorenz Curve approach

Road and public transport authorities often have a difficult task in deciding which road links to select for investment in preferential traffic and public transport measures to improve public transport service performance. This paper presents a new approach which adopts the economic concept of the Lorenz Curve to compare link performance in terms of transit operations as well as weighted passenger volume of travel. The paper explores if, and how, these metrics can be re-interpreted to help with targeting improvements for on-road public transport and priority mitigations. The approach collates operational performance data, in this case link speed and also link public transport travel volume to plot the cumulative distribution of link speed/ridership performance as a curve. Two sets of test applications are presented; on a route level basis and secondly a network level analysis. The network level results present the most powerful results with the Lorenz Curve analysis able to quickly identify links that justify greater attention for preferential treatments since they have the worst 20th percentile of operational performance but the highest 40th percentile of relative link ridership. Mapping shows the problem links to be busy routes leading into the central city. Implications for wider application of these methods are discussed.     

Road pricing in National Parks: a case study in the Yorkshire Dales National Park

Road user charging is typically associated with urban contexts, however, congestion at rural attractions is of increasing concern and road user charging may be considered as a suitable policy instrument. This paper investigates the issue of rural road pricing and presents the results of a survey of car-based visitors to Upper Wharfedale in the Yorkshire Dales National Park, which explores the potential impacts on mode and destination choice of a road user charging scheme, combined with a park and ride alternative. The scheme was found to be acceptable to 68% of the respondents, with nearly half opting to park and ride. The results are of particular interest in the light of the 1998 Transport White Paper that encourages pilot road user charging schemes in rural areas.     

Built environment and potential job accessibility effects of road pricing: A spatial econometric perspective

This paper analyzes the impacts of the built environment (BE) as it relates to the potential job accessibility (PJA) effects of road pricing. The relationships between the BE elements and PJA under a road charging policy are established using a spatial econometric approach, which uses an integrated land use and transportation model (TRANUS model) and a spatial lag model (SLM). With the intent of further analyzing the differences in the PJA effects of road pricing on traffic analysis zones (TAZs) that contain different combinations of BE elements, a quantitative classification method combining factor and cluster analysis is applied. This will quantitatively categorize TAZs inside and outside the tolled areas. In exploring the relationship between changes in PJA and the road pricing policy, we found the spatial autocorrelation coefficient to be negative. This result suggests that we are unable to increase the PJA of all the regions through road pricing, but rather affect a redistribution of PJA between different regions. Results also indicate that the impacts of road charging on PJA are associated with urban BE elements. Moreover, such effects are the common result of specific characteristics of the BE. The higher the number of jobs, the better the public transportation conditions, and the better the street design (high densities of street and intersections), the less the region will be negatively influenced by a road charging policy, and vice versa. To avoid the negative effects of road pricing on PJA prior to the launch of such a policy, cities should improve public transportation networks and enhance the street design of the road pricing policy areas, especially the toll ring periphery area.     

Socioeconomic differences in public acceptability and car use adaptation towards urban road pricing

Urban road pricing is regarded as an effective instrument to reduce traffic congestion and environmental-related problems in metropolitan areas. Whereas the overall impact of urban road pricing on car use adaptation and public acceptability is known, there are only inconsistent results concerning the socioeconomic differences in the response towards road pricing. However, this knowledge is necessary for the development of urban road pricing packages. This paper uses a segmentation approach to identify groups of car users with a similar background in relevant socioeconomic variables and compares their responses towards road pricing. Three groups are identified: young families, suburban families, and singles and couples. These groups indeed differ in their car use adaptation towards urban road pricing as well as in their preferred revenues use. While all three groups significantly reduced their private car use, the young families reduced their car use most, followed by the group of singles and couples. Complementary measures are discussed that are believed to facilitate car use adaptation of each group in response towards urban road pricing.     

Making urban road pricing acceptable and effective: searching for quality and equity in urban mobility

Urban Road Pricing has been proposed many times as a powerful instrument to fight congestion in urban traffic, but has systematically faced a hostile political envirionment, due to lack of confidence on its promised (traffic) results and fear of its political consequences. Lack of action in this front is contributing to stable or even growing congestion problems in most large cities.This paper tries to address the problem with a fresh look at the objectives of road pricing and at the reasons for that political hostility. For managing and developing the urban mobility system, efficiency and equity are normally taken as the basic economic objectives. Sustainability objectives may be integrated in the efficiency objective if we are able to represent adequately the costs of the resources consumed in the process. Political hostility is normally based on having to pay for what was freely available, and on the risk of exclusion for those with little revenue available for the extra cost of driving into the city.Pursuit of efficency leads to suggestion of marginal social cost pricing but this is hard to explain to the public and application of this principle is fraught with pitfalls since some components of that cost get smaller as traffic grows (noise related costs for example). Pricing is still a good option but the objective has to be something easier to understand and to serve as a target for mobility managers. That “new” objective is quality of the mobility system, with a meaning similar to that of “level of service” in traffic engineering, and prices should be managed to across space, time and transport modes in such a way that provision of service is made with good quality in all components.Pursuit of equity leads to some form of rationing, which has often been associated with high transaction costs and abuse by the administrators. But the use of electronic road pricing should allow easy ways to address the rationing process without such high costs. The basic proposition is that all local taxpayers receive as a direct restitution of their tax contribution a certain amount of “mobility rights”, which can be used both for private car driving in the tolled areas and for riding public transport.These principles are easily applicable with a variety of technical solutions for road pricing, from the simplest cordon pricing to the more sophisticated “pay-as-you-go” schemes. The paper addresses this question of implementation and argues for increasingly sophisticated schemes, as people get accustomed to the principles and finer targeting of demand segments may be needed.     

The politics of congestion mitigation

Most research on congestion overlooks the political context of traffic congestion and congestion mitigation policies. While failed congestion policies around the globe are products of misguided premises and flawed analyses, they are also the products of political processes that emphasize highly visible congestion relief projects and programs over actually relieving congestion. Accordingly, this paper makes and defends four propositions. First, that public officials tend to exaggerate the consequences of (widely unpopular) metropolitan traffic congestion for political gain. Second, that (widely popular) public transit investments are unlikely to meaningfully reduce congestion. Third, that public officials can cynically use congestion as a rationale for funding for high-profile, politically-popular transportation (and, increasingly, public transit) projects. And fourth, that the experience to date suggests that various forms of transport and parking pricing offer the best hope for meaningfully reducing congestion in the coming years.     

Extreme weather,public transport ridership and moderating effect of bus stop shelters

This paper examines how extreme weather conditions influence urban public transport ridership with a particular focus on the role of bus stop shelters. Using bus ridership data from the Salt Lake City metropolitan area, we find that extreme weather such as very high and low temperatures, and heavy rainfall reduces public transport ridership, while bus stop shelters have a modest effect on mitigating ridership losses resulting from these adverse weather conditions. The moderating effect of shelters is more pronounced on weekdays, and for bus stops with lower service frequency and fewer transfers. Our research also shows that the installation of bus shelters correlates with a variety of factors including service frequency, land use types, and local socioeconomic and demographic characteristics. Overall, our findings suggest that public transport amenities with weather-proof attributes have the potential to retain and attract more ridership on extreme weather days.     

Planning for an unpredictable future: Transport in Great Britain in 2030

This paper describes a research study, which explores alternative future scenarios for Great Britain in the year 2030 and the implications these have for travel demand and transport provision. Five alternative future scenarios are represented in the GB national transport model and forecasts are obtained for trip making, traffic levels, congestion and emissions in 2030. For all scenarios it is expected that there will be significant traffic growth. Traffic growth is restricted most in scenarios including distance-based road charging on motorways and trunk roads. However, congestion and carbon dioxide emissions are most effectively limited in scenarios with congestion-based road charging, major improvements to urban public transport and investment in new fuel technologies and in improving engine efficiency.     

Assessing policy measures for the stimulation of intermodal transport: a GIS-based policy analysis

Intermodal transport is the combination and integration of several transport modes (such as rail, inland waterways with road transport). In order to make the transhipment easy and efficient standard loading units are used, such as containers or swap-bodies. As for the main haul, more environmental friendly modes are used (rail and inland waterways) and a modal shift towards these modes can help in reducing the congestion. Therefore several policies are directed to stimulate the intermodal transport market.In this paper, a location analysis model for Belgian intermodal terminals (LAMBIT) is developed and used to assess different policy measures in Belgium. The simulations show that the different policy measures oriented towards the rail/road and inland waterways/road combinations should be incorporated in a coherent, integrated vision, in order to not create a modal shift between the different intermodal transport options. The methodology can easily be extended towards a European scale.