CONGESTION KSG HUT251/GSD 5302 Transportation Policy and Planning, Gomez-Ibanez OUTLINE OF CLASS: 1.NATURE AND SEVERITY 2.MENU OF REMEDIES 3.ENGINEER’S vs. ECONOMIST’S SOLUTIONS  Should congested facilities be priced higher? 4.OBSTACLES TO CONGESTION PRICING  Technology or politics? 5.CONGESTION AND INVESTMENT  Does congestion signal the need for extra capacity?  Should congestion tolls be dedicated to facility expansion?

NATURE OF PROBLEM AS EXTERNALITY EXCLUSIVE INFRASTRUCTURE: NO (US freight railroads) SHARED INFRASTRUCTURE: YES (EU and Australian railroads, most highways ports, airports) DEMAND GROWTH INCOME ELASTICITIES: pkm  1, freight less? TRANSITIONS: Animal power  Motorized public  Motorized private

SHANGHAI URBAN TRANSPORT Pkm 2000 actual Pkm 2020 forecast Pass/ Vehicle PCEs/ Vehicle PCEs/ Passenger Walk7%3%0+ Bicycle27%9%10.2 Bus39%21%27 (50)1.5 (2) 0.05 (0.04) Metro0% (?)16%0 Moped12%13% Car, taxi15%48%2 (1.2)10.5 (0.83)

MENU OF REMEDIES  SHIFT TO LESS CONGESTED TIMES AND O & Ds  DECENTRALIZE EMPLOYMENT  STAGGER WORK HOURS  EXPAND TRANSPORTATION CAPACITY  BUILD MOPRE HIGHWAYS  SHIFT TRAVELLERS TO NON-HIGHWAY MODES  USE EXISTING CAPACITY MORE EFFICIENTLY  Meter expressway ramps  Priority for high-occupancy vehicles (HOVs)  Congestion pricing  High-occupancy toll lanes (HOT lanes)

ENGINEER’S PERSPECTIVE SPEED-VOLUME CURVE A BC D E SPEEDLEVELS OF SERVICE F VOLUME2,200 CARS PER EXPRESSWAY LANE HOUR SOLUTIONS PHYSICAL METERING PRIORITY FOR HIGH-OCCUPANCY VEHICLES

ECONOMIST’S PERSPECTIVE TRANSLATE SPEED-VOLUME CURVE INTO USER COST CURVEAVG. SPEEDUSER COST (TIME)VOLUME

ECONOMIST’S PERSPECTIVE PROBLEM: USE PRICED AT AC, NOT MC MC USER AC COST (excluding road user charges) D peak D off peak VOLUME V off peak V peak

ECONOMIST’S PERSPECTIVE CONGESTION EXTERNALITY WITHOUT TOLL MC USER AC COST (excluding road user charges) D peak D off peak VOLUME V off peak V peak

ECONOMIST’S PERSPECTIVE OPTIMAL CONGESTION TOLL AND VOLUME MC USER AC COST (excluding road user charges) D peak D off peak VOLUME V off peak V peak

ECONOMIST’S PERSPECTIVE MOTOR FUEL TAXES MC AC plus tax USER AC COST (excluding road user charges) D peak D off peak VOLUME V off peak V peak

ENGINEERS vs. ECONOMISTS PRO ENG. (ANTI ECON.) PRO ECON. (ANTI ENG.)ANTI BOTH

ENGINEERS vs. ECONOMISTS PRO ENG. (ANTI ECON.) PRO ECON. (ANTI ENG.)ANTI BOTH  LESS BURDEN ON POOR (RATIONS BY WILLINGNESS TO WAIT NOT TO PAY)  USERS WILLING TO PAY MOST MAY BE DISCOURAGED  CONGESTION MAY SPREAD TO OTHER AREAS  AVOIDS TOLL COLLECTION COSTS  AVOIDS COSTS OF RAMPS AND METERS  TIME SPENT IN QUEUE IS WASTED  NO INCENTIVES FOR POOLING

CONGESTION PRICING TECHNOLOGY PAPER LICENSES: Singapore VIDEO: Norway 1980s, London 2003 ELECTRONIC: Singapore 1998 GPS: German trucks on autobahn 2007?

CONGESTION PRICING POLITICS THE TOLLED SOV DRIVERS OR TRUCKERS WHO DRIVE ANYWAY AND HAVE HIGH VALUE OF TIME SOV DRIVERS OR TRUCKERS WHO DRIVE ANYWAY AND HAVE LOW VALUE OF TIME USERS OF BUS OR HOV BEFORE AND AFTER TOLL THE TOLLED OFF MOTORISTS WHO SHIFT TO COMPETING UNTOLLED ROUTES MOTORISTS WHO SHIFT TO BUS OR HOV MOTORISTS WHO DECIDE NOT TO MAKE THE TRIP THE UNTOLLED USERS OF COMPETING UNTOLLED ROUTES BEFORE RECIPIENTS OF TOLL REVENUES

CONGESTION PRICING POLITICS THE TOLLED SOV DRIVERS AND TRUCKERS WHO DRIVE ANYWAY AND HAVE HIGH VALUE OF TIME SOV DRIVERS AND TRUCKERS WHO DRIVE ANYWAY AND HAVE LOW VALUE OF TIME USERS OF BUS OR HOV BEFORE AND AFTER TOLL THE TOLLED OFF MOTORISTS WHO SHIFT TO COMPETING UNTOLLED ROUTES MOTORISTS WHO SHIFT TO BUS OR HOV MOTORISTS WHO DECIDE NOT TO MAKE THE TRIP THE UNTOLLED USERS OF COMPETING UNTOLLED ROUTES BEFORE RECIPIENTS OF TOLL REVENUES

CONGESTION TOLLS AS AN INVESTMENT SIGNAL SHORT RUNLONG RUN METHOD OF INCREASING CAPCITY TOLERATE ADDITIONAL CONGESTION INVEST IN FACILITY IMPROVEMENTS MARGINAL COST TO SOCIETY OF ACCOMODATING ONE MORE USER CONGESTION TOLL AMORTIZED COST OF NECESSARY FACILITY IMPROVEMENTS MARGINAL BENEFIT TO SOCIETY OF ACCOMODATING ONE MORE USER CONGESTION TOLL CONGESTION TOLL

CONGESTION TOLLS AS AN INVESTMENT SIGNAL  DEFINITIONS SHORT-RUN COSTS: when some input fixed LONG-RUN COSTS: when all inputs variable  EXAMPLE: with CRS in long-run costs SRAC 1 SRAC 2 SRAC 3 SRAC 4 LRAC = LRMC SRMC 1 SRMC 2 SRMC 3 SRMC 4

CONGESTION TOLLS AS AN INVESTMENT SIGNAL  LRMC  SRMC MEANS PLANT NOT OPTIMAL FOR CURRENT OUTPUT LRMC = SRMC  plant just right LRMC < SRMC  plant too small LRMC > SRMC  plant too big SRAC LRAC = LRMC SRMC

CONGESTION TOLLS AS AN INVESTMENT SIGNAL  WHEN DO CONGESTION TOLL REVENUES EQUAL INVESTMENT PLUS OPERATING COSTS?

CONCLUSIONS 1.NO SINGLE SOLUTION TO CONGESTION 2.WHERE HEAVY CONGESTION, EITHER TOLLING OR METERING PROBABLY ADVISABLE 3.THE CHOICE BETWEEN TOLLING AND METERING DEPENDS ON THE PARTICULAR CIRCUMSTANCES 4.HEAVY CONGESTION ALSO SUGGESTS THAT CAPACITY EXPANSION ADVISABLE 5.BUT THE OPTIMAL LEVEL OF CONGESTION DEPENDS ON THE COSTS OF INVESTING IN FACILITY EXPANSION 6.AND TOLL RECIEPTS ONLY EQUAL OPTIMAL INVESTMENT EXPENDITURES IF CONSTANT RETURNS TO DENSITY IN FACILITY CAPACITY