BTRE Transport Colloquium 14 & 15 June 2006 Lyn Martin …role for congestion charging? REDUCING URBAN CONGESTION

“Congestion is one of the single largest threats to our economic prosperity and way of life.” (Mineta 2006)

Standard options to reduce congestion improving public transportimproving public transport ‘reprogramming’ people‘reprogramming’ people high-occupancy vehicle laneshigh-occupancy vehicle lanes increased parking costsincreased parking costs enhancing network capacityenhancing network capacity

All fail in one respect Do not target the underlying cause... the congestion externality Induced traffic Hence, growing interest in congestion charging

Congestion charging has support from many quarters economistseconomists environmentalistsenvironmentalists public transport advocatespublic transport advocates road authorities around the worldroad authorities around the world

With such friends, why does it have enemies? Problems fall into two camps: A.efficiency B.equity Major tensions between these objectives

Problem A - an efficient congestion charging package would optimise congestionoptimise congestion produce a net gain to the communityproduce a net gain to the community involve no exemptionsinvolve no exemptions avoid earmarking of revenuesavoid earmarking of revenues provide signals for infrastructure expansionprovide signals for infrastructure expansion

Problem B - equity there will always be losersthere will always be losers exemptions not effective for pursuing equityexemptions not effective for pursuing equity whether the charges are progressive or regressive will vary case-by-casewhether the charges are progressive or regressive will vary case-by-case equity is subsumed by political acceptabilityequity is subsumed by political acceptability

Public acceptability congestion charging seen as an extra taxcongestion charging seen as an extra tax initially few winners and hence the use of revenue is criticalinitially few winners and hence the use of revenue is critical –often earmarked to fund public transport, although Goodwin’s ‘rule of three’ has widespread support viability of public transport will be improved by congestion chargingviability of public transport will be improved by congestion charging

How does London rank? Two popular criteria for success: public acceptance √ public acceptance √ less congestion √ less congestion √ But...

...it can profitable but still not be in the community interest (efficient) the revenue raised is a transferthe revenue raised is a transfer –conspicuous and concentrated the costs are realthe costs are real –some transparent, some dispersed and hidden

Net welfare gain in London? Source: derived from Prud’homme & Bocarejo (2005), Table 2 Costs Benefits ‘Yes – net economic gain of £50m’ (Transport for London) ‘No - costs far outweigh benefits’ (Prud’homme & Bocarejo) Value of time is a critical determinant

What is the problem? Revenue down, costs up 10-year old technology – ‘tried and tested’ but costly10-year old technology – ‘tried and tested’ but costly exemptions aboundexemptions abound Inevitable pattern?

Schemes are costly Stockholm €422mStockholm €422m Netherlands (scoped)Netherlands (scoped) –€2.2 - €4.1 billion (implementation) –€500 - €1100 million (operational) Netherlands ‘5% rule’, but is this possible?

Operational costs as share of revenue

Where does this leave us? is “there is no other long-term solution to congestion”?is “there is no other long-term solution to congestion”? costs of congestion charging schemes can be high and economics unpredictablecosts of congestion charging schemes can be high and economics unpredictable compromise between efficiency and equity likelycompromise between efficiency and equity likely challenge – ensure potential efficiency gains are not compromised awaychallenge – ensure potential efficiency gains are not compromised away

Is congestion ‘one of the greatest threats to our economic prosperity and way of life’? Or could it be congestion charging...