Ever been late for work and blamed the traffic? The likelihood is (assuming the excuse is true) that you were in fact causing the traffic, too. After all, your car forms part of a line and is holding up the car behind. So by definition, we do not just get stuck in traffic, we produce it.
Traffic congestion comes in all shapes and sizes, usually in towns and cities, but not always: the longest traffic jam ever recorded occurred not in New York or Tokyo or Mexico City, but on the French motorway between Lyon and Paris on 16 February 1980. It tailed back for 176 km (109 miles).
Congestion is inefficient, polluting and dangerous. So why not reduce it? Removing just 5% of traffic at peak times could substantially reduce or even eliminate rush hour congestion from many cities. One approach that is beginning to stoke interest among municipal leaders, even in large metropolitan capitals like Paris and London, is road pricing. The theory seems sound enough: introduce a price on bringing cars into congested areas that incite drivers either not to travel unnecessarily or to vary their times of travel or, indeed, to try public transport, walking or cycling. With the right approach, drivers who incur higher prices during rush hour periods would benefit from reduced congestion and travel time, while non-essential travel would take place at less congested and cheaper times.
Could road pricing work? Contrary to some sceptical voices in the car lobby, road pricing is not an attack on car use, but rather a way of enhancing it. If there is an enemy of the car industry, it is inefficient congestion. Road pricing could ultimately be welcomed by car users and producers alike.
Road pricing has been debated in policy circles for many years. In bygone days, technology was a problem: how do you tag cars? Do you set up road tolls? These problems no longer exist, and advances in electronic devices have made sophisticated road pricing schemes more feasible. Yet, few examples of road pricing schemes exist. Several pilot schemes for urban transport pricing are underway in the OECD area, in places like Bristol and Cambridge (UK), Orange County, California (US), Copenhagen (Denmark), Edinburgh (UK), Genoa (Italy), Gothenburg (Sweden), Helsinki (Finland), Rome (Italy) and Trondheim (Norway).
But for the most part, there is hesitancy. The political will is often lacking, perhaps because of uncertainty about voter reaction. Road authorities tend to try other ways of reducing congestion problems arising from peak demand, whether by road widening, various traffic management techniques like bus lanes, co-ordinated traffic signalling systems and so on. But these non-price options are not that popular, which would not be such a problem if they achieved a balance between the supply of infrastructure and demand for road space that might reduce congestion. The trouble is, they don’t.
What's the price?
Understanding the meaning of a road price presents its own difficulties. Confusion still reigns over “price” and “tax”, for instance. What is being priced and at what cost? The user? The road space? The pollution emitted? And should the price be fixed, or allowed to fluctuate?
In economic terms, price should reflect the demand for a good relative to its supply: so, as more motorists want to drive on a limited road space, the price of using it will rise. However, in practice, when it comes to transport, most road authorities supply roads to “meet” the demand for road space. Users are not really faced with the actual price of using that road. Rather, motorists see road infrastructure as a public good, whose provision is financed from taxation.
Supply is theoretically open-ended: as roads become congested, more roads are built, which then become congested, and so on. In practice, public budgets are a constraint, of course, as are land expropriation costs. But when new roads are built or widened, the extra capacity simply leads to new road users and still more demand. Good news for car sales, perhaps, but hardly for the environment, or indeed the taxpayer. But there is an important difference between the sunk capital cost of a road and the extra costs imposed on society by each additional road user. Road pricing would try to reflect the latter – this is the so-called marginal cost of using road space. In other words, at a certain price, only those users who deem it necessary to travel will do so, and the extra, unnecessary drivers will either abstain, take another route or travel at another time.
To price anything, we need to have an idea of cost. Deterioration of the road surface and a vehicle’s own operating costs are direct costs that are fairly straightforward to work out, though these are part of those sunk capital expenditures. Not so for indirect costs for society overall, whether it be from road crashes, pollution, noise or congestion. Attempts have been made though. The Texas Transport Institute estimated in 1999 that the cost of congestion (lost time, wasted fuel, increased vehicle operating costs) for US drivers was US$72 billion in 1997, or 3.7% of GDP.
Other estimates from European sources put congestion costs in the same ballpark. These figures do not take global warming into account, either. Transport sources generate approximately 28% of total OECD emissions of CO2, one of the principal gases responsible for the greenhouse effect. Of this figure, road-based transport accounts for approximately 80% of greenhouse gas emissions from transport. Everyone needs transport as a basic requirement, to shop or to get to work, but should this mean that the burden of external costs is shared equally? Some would say yes. To them, road pricing would be unfair since motorists already pay fuel tax. Not only do these revenues contribute to road construction and maintenance, but they should inhibit congestion too, since the more time people spend in traffic, the more fuel they use and the heavier their expenditures.
However, fuel taxes are not a balancing mechanism: the level of tax per litre of fuel consumed is fixed and bears no relationship to supply and demand of road space. The same goes for vehicle registration charges. These are a charge on access to the road network. In some countries, access charges contribute to administration and maintenance costs, too. But while access charges may vary according to vehicle type (e.g., gross vehicle mass), they do not discriminate according to usage. In fact, the more the car is used, the less the vehicle charge per kilometre travelled.
Road tolls are another charge often cited as a form of road pricing, but again, these are generally aimed at paying for the cost of building and maintaining roads, whether public or private. And they are not aimed at controlling congestion, as anyone using the Blackwall Tunnel in London at peak times will know. Sometimes the toll may be varied according to traffic volume to encourage users to travel during periods of low demand. This is the case on some approach roads to Paris. Several toll operators, such as on the Bergen Ring Road in Norway, have introduced electronic toll collection technology to improve traffic throughflow, paving the way for the broader implementation of electronic pricing technology. In Singapore, an Electronic Road Pricing (ERP) system has been in place since 1998, based on automatic fee collection when vehicles pass one of the ERP gantries (or check points). The rates vary with time of day and can be adjusted to achieve optimal traffic flow.
Opportunity cost, opportunity lost
It is hard to say how effective road pricing can be. Whether people will respond by simply absorbing the price and then taking a business-as-usual approach is uncertain. After all, when the price of a bus ticket rises it does not always lead to less crowded buses, although peak-time pricing on public transport can influence passenger decisions about when to travel. Also, there are questions of policing, as well as defining acceptable congestion, all of which may vary from country to country. Nonetheless, the social costs of inaction are large, and pricing is certainly worth a try.
To be successful, road pricing would have to have several basic elements. First, prices should be allowed to vary according to the level of demand – as traffic volume increases, price increases. And when congestion falls, so should the price, even to zero when possible, as that would maintain public support. In particular, road prices should not be allowed to become “just another municipal tax”.
Second, a balance between affordability and congestion objectives is important; some people (and not always high earners) have to travel at peak times and may require help from their employers who will benefit anyway from less congestion.
Third, revenues should be spent on improving public transport, parking facilities, cycle lanes, etc.
A fourth condition would be to ensure that the price is indeed aimed at reducing congestion, particularly as road toll operators might not mind congestion as they may legitimately think it maximises peak time revenue. Hence the need for proper public regulation, possibly even management.
Of course, road pricing alone will not solve every urban environmental problem and should be viewed as part of a broad suite of measures designed to achieve a sustainable transport system. Research and development on solutions to reduce transport emissions, like developing clean technology, would be part of that suite, as might other innovations, such as a greater effort to achieve more flexible work times.
But pricing could be the trick to remove that 5-10% of traffic that causes congestion in peak periods in our cities. If that means picking up the children on time and being able to drive into city centres to shop, then surely that would be a price worth paying, even if it means having to find a new excuse for being late to work.
• “Influencing Road Travel Demand: You Can’t Reach Kyoto by Car”, OECD, 2001.
• “1999 Urban Mobility Study”, Texas Transport Institute, Texas A&M University, Texas, 1999.
©OECD Observer No 230, January 2002