Road Pricing and TrafficCongestion
AS Economics
Introduction to road pricing
•Road pricing is a market-based approach toreducing the scale of urban traffic congestion atpeak times.
•To achieve a more efficient allocation of a scarceresource (road space) - by making motorists paysfor some of the external costs they create.
•To achieve a modal shift towards mass passengertransport
•To bring about a reduction in demand for roadspace and consequent fall in traffic congestion atpeak times
Introduction to road pricing (2)
•To promote a reduction of fuel consumptionand pollution emissions
•Pricing raises revenue that can beearmarked for investment in mass transportinfrastructure and services
•Curb the long term need for extra roadspace – bringing environmental benefits
The Economics of Road Pricing
Road pricing is a term invented by economists with the theory thatthe price of using a road should be equal to the cost of using theroad. Not a new concept…
What Are the Advantages of RoadPricing?
•Obvious de-congestion effects.
•BUT – other advantages…
•Congested roads can lead to negativeexternalities.
•This means that the social cost ofconsumption exceeds the private cost.
•By reducing congestion, road pricing can‘internalise’ these externalities.
What Are These NegativeExternalities?
•These major negative externalities figureprominently in transportation economics.They include:
–Air pollution;
–Lack of traffic safety;
–Waste (of petrol);
–The potential for global warming is anothermajor externality which is more difficult tomonetize.
What Are These NegativeExternalities?
•Other negative externalities include:
–Health effects – NHS costs etc;
–Opportunity cost of sitting in traffic jams;
–Costs to employers;
–Costs of policing.
Examples of Modern RoadPricing Schemes in Operation
•Traditional methods include the use of tollbooths and toll roads in countries such asFrance and Italy;
Current congestion charge zone
Durham Congestion Charge
Case for a congestion charge
Congestion
Charging
Reduced
traffic
delays
Revenue
For
Public
Transport
Pollution
Emissions
Business
Delivery
Times
Reliability of
Public
Transport
Exemptions
&
Discounts
What are the Aims of Road Pricing?
•Discouraging Driving: Making journeys lesspolluting and more efficient;
•Management: Congestion pricing/valuepricing. Controlling when and where peopledrive, e.g. London charge, peak/off-peakcharges;
•Encouraging use of public transport as agreener way of getting around.
•Financing: raising money to pay back theconstruction of the road, or to build newfacilities for the public.
Disadvantages of Road Pricing
•Perceptions of fairness: is charging for aonce “free” good unfair?
•Burden falls more heavily on the poordrivers than the rich – regressive taxation.
•New toll roads in a largely free system maybe seen as unjust.
•Revenue use – can consumers be sure thattheir money is being well spent?
Focus on London Congestion Charge
•London was not thefirst city to adoptcongestioncharging.
•The stated aim ofthe scheme is toencourage travellersto use greenermodes of transport
Information Failure
•Market failure due to information failure?
•Information failure occurs when peoplehave inaccurate, incomplete, uncertain ormisunderstood data, and so makepotentially “wrong” choices…
•Misunderstanding the true benefits of publictransport;
•Uncertainty about the true social costs ofdriving
Congestion Charge – A Success?
•Despite dire predictions for the scheme before itslaunch, the toll has improved the problem ofcongestion in London:
–By 2004, a year after the launch of the scheme, traffichad been cut by 18%, and delays were down 30%.
–London’s bus service had improved dramatically:29,000 more people were using the service.
–Trains/tubes had seen a 10% increase in passengers.
–Quality of life in the city had been improved.
–75% of Londoners now support the scheme.
•Some of the previously-stated aims of road pricingand the London CC have been achieved.
Congestion Charge – A Failure?
•The congestion charge in London, while it mayhave reduced road congestion, has now made thepublic transport system ‘unbearable’ according tosome Londoners.
•The consumer surplus has been reduced.
•Many under-estimated the enormous cost ofimplementing the Congestion Charge (i.e. camerasetc.).
•Businesses and shops in London have complainedof a reduction in sales and a change in consumertastes and preferences.
•The scheme has not raised as much funds (forinvestment into public transport) as was hoped.£68m as opposed to £200m.
Possible Alternatives?
•Electronic monitoring system (ERP): driversare charged for how much they use theircars.
•Rationing road use:
–Using registration numbers to allow/forbiddrivers to use roads at certain times (odd/evennumbers?);
–Toll-roads.
•Raising the driving age.
•Increasing price of fuel.
Electronic Road Pricing
•Cons:
–Full communicationwith satellite is notalways maintained.
–Big Brother?
•Pros:
–Easy to implement:Galileo infrastructurealready in place.
–No need for tollbooths/collectingmachines – reducescosts.
–Convenient pay-as-you-drive method fordrivers.
Rationing Road Use
•Pros:
–Rationing roads foreven/odd numberswould be simple andeffective.
–Toll roads: drivershave to pay there andthen: no externalcosts.
•Cons:
–Very inconvenient forpeople in arush/emergencies.
–Costly to set upinfrastructure of tollbooths/machines
–Inconvenient payingmethod for drivers.
Raising the Driving Age
•Pros:
–Simple to do.
–No particular internalcosts.
–Easy tocontrol/monitor.
•Cons:
–Possible loss ofrevenue?
–Inequitable – punishingpeople who are notresponsible forcongestion.
–Misses the point ofroad pricing.
Increasing the Price of Fuel
•Pros:
–Making the polluterpay directly.
–Easy to implement.
–Generates morerevenue for govt. tospend elsewhere.
–Disincentive to drive,so effective in reducingpollution.
•Cons:
–The price of fuel isalready very high.
–Regressive.
Summary of alternatives
•Parking restrictions and higher parking charges. InPerth (Australia), a free city centre bus service isfunded by the revenue from a workplace parkinglevy
•Traffic management e.g. dedicated lanes for highoccupancy vehicles
•Improvements of existing roads including variablespeed limits and road widening
•Park & ride facilities located near motorway / mainroad nodes and express ways for bus transport
•Improving public transport e.g. greater inter-modality at railway stations (e.g. express buses)
Summary of alternatives
•Changes in the fares of public transport e.g. tax relief on railand bus season tickets; changes to subsidies offered toprivate sector bus and rail operators.
•Tighter planning regulations on new home-building in urbanareas which creates extra traffic
•Encouraging home working and promoting greater use offlexible hours working
•Ramp metering - using traffic signals, similar to traffic lights,to control the rate at which vehicles join a motorway from aslip road.
•Hard Shoulder Running involves temporarily opening the hardshoulder on motorways to traffic during peak periods.
•Dynamic Lanes use lights similar to cats’ eyes set in thesurface of the road to alter the number and width of lanes ona motorway, usually in order to increase the capacity of theroad.
Transport 2000
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