The Economist

Jam today, road pricing tomorrow

6-Dec-97

FEW affairs have been more passionate in the 20th century than that between man and his motor car. The car has allowed millions to travel where they will, in comfort and security, at a time of their own choosing—truly, it has revolutionised people’s lives. The car is not just an aspect of modernity, it is a precondition for it. Owning a car remains a goal for millions of poor people in every part of the world—and therefore, ideally, the affair should have continued for decades undisturbed. Unfortunately, it is not to be.

For years people have understood that the car was a cherished but dangerous thing. As one British inquiry put it in the 1960s, "We are nourishing at immense cost a monster of great potential destructiveness." The truth of that warning is all too apparent in the horribly polluted and congested streets of European, American and Asian cities.

Road transport accounts for about a quarter of the man-made gases that may be contributing to global warming, about which hands are being wrung in Kyoto this week. Actually, the role cars play in global warming is not the pressing question. More important, and more certain, is the enormous local damage (in terms of pollution, noise, ugliness and wasted time) caused by traffic congestion—and the great cost of the orthodox solution to that problem, which has been to keep on building roads.

Queue or pay

Cars in America may be 90% cleaner than they were a generation ago, but this improvement has been largely wiped out by growth. More and more rural areas are being buried under concrete in a vain attempt to tackle congestion on motorways and other major routes. Matters will deteriorate because the demand for travel is nowhere near to being sated. As economies grow, so does traffic. Governments understand this, and know that building roads is unpopular and offers no solution in congested areas. What then are they to do?

The underlying problem is clear enough: cheap car-travel has been based on an illusion. Only by making drivers pay for the costs they impose on society can the demand for motoring be brought into line with restricted supply. The choice for drivers is simple: queue or pay.

If roads continue to be operated as one of the last relics of a Soviet-style command economy, then the consequence will be worsening traffic jams and eventual Bangkok-style gridlock. If, on the other hand, roads were priced like any other scarce commodity, better use would be made of existing space and the revenues raised could be used to improve public transport. The mere fact of making motorists pay their way would free capacity to such an extent that bus travel would become easier and faster, and subsidies could be reduced.

Politicians have long shied away from this approach because it is difficult to persuade voters to pay for something that has long been free. But some governments are starting to accept that there may be no alternative. Charging for ownership rather than use, as most tax systems do, makes little sense. Heavy fixed costs, including vehicle duties, insurance and depreciation, merely encourage drivers to use their cars more because the perceived marginal costs of motoring are so small. The way forward must be to make cars more expensive to use.

Higher fuel duties are often suggested as a way of doing this. But increasing the price of petrol and diesel for all motorists is very crude. It makes no sense to penalise a rural motorist driving along empty country roads when the problem lies in cities and on congested motorways. Road pricing, adjusted for place and time, can, by contrast, be fixed precisely to reduce congestion. Motorists driving through city rush-hour traffic would see on their in-car meters that they were being charged peak rates. The same journey made during the early hours of the morning in uncongested streets would attract a much smaller charge or perhaps no charge at all.

Improving public transport is another frequently proposed alternative to road pricing. If only the buses, underground systems and railways worked cheaply and efficiently, then motorists would leave their cars at home. All the evidence, sadly, suggests otherwise. One European study found that halving bus fares would reduce car use by less than 1%. Drivers are so wedded to their cars that they will be deterred only by higher motoring costs or regulation.

Critics claim that road pricing would merely displace traffic on to side roads, and that it would infringe privacy (because drivers’ movements are recorded). New forms of charging provide answers. Technology makes it possible to track vehicles via satellite to make sure that rat-runners do not escape charges. Even without that innovation, if charges merely diffused congestion by spreading traffic-peaks through time, the resulting "displacement" would be a good thing. Minor roads can meanwhile be protected by regulation. As for privacy, only charge-evaders need have a picture of their license plate taken as they pass by.

Politics, not technology, remains the real barrier to the widespread introduction of charging. Some countries have made a start (see). In others, politicians are still terrified that their car-owning voters will savage any government that tries to introduce direct measures of restraint. But where pricing has been introduced, as in Scandinavia, it has proved effective and popular. Those who argue that road pricing (p.16) is unfair because it discriminates against the poor ignore the fact that people too poor to own a vehicle, together with the young and the very old, suffer the ill-effects of congestion without the benefits of personal mobility. Moreover, if the revenues were used to improve public transport, the poor would benefit disproportionately.

If road pricing is to be made politically acceptable, both the methods of charging and the use of the revenues must be easily understood and made totally transparent. Borrowing against future streams of charging revenues will allow much-needed improvements in public transport to be brought forward. So long as road pricing is introduced as part of a package of other measures, then it should be possible to persuade drivers that paying is better than being stuck in ever-worsening jams. All that is needed is a commodity that often seems as scarce as space on the roads—political leadership.

LIVING WITH THE CAR (p. 21)

No room, no room 

There is no space, no money and no appetite for endless road-building. That is why road pricing is coming. SINGAPORE invented it. Norway copied it. Stockholm spent 20 years and $1 billion before thinking again. Hong Kong retreated at the last moment in the face of a popular revolt. Politicians are terrified of road pricing. How can you get people to pay for something that has always been free? Yet governments all around the world, faced by worsening traffic congestion and pollution, are steeling their nerves and forcing motorists to pay for road space. Tolling technology is advancing so fast that $3 billion-worth of electronic charging systems have already been installed worldwide. From Bergen and Bilbao to Paris and New York, motorists are learning that road space does not come free.

The motives for charging vary. Many countries, notably Spain, France, Italy and Japan, and several American states have long collected tolls as a way of financing the building of new motorways. In New Zealand, road users pay directly for roads through vehicle-licence fees, a levy on gasoline and weight-distance charges for heavy goods vehicles. The latest automated tolling equipment, which deducts charges from electronically tagged vehicles (travelling at speeds of up to 100mph) is being installed in more than 20 countries around the world. The tags are linked to in-car meters which can be loaded either with a preset credit or used to log travel for billing later. Charging, aimed at deterring excess traffic from entering cities, is more controversial but is gaining acceptance.

It is no surprise that Singapore, with its own peculiar brand of democracy (selling bubble-gum is illegal), has been the first to attempt to use road pricing to limit the growth of urban traffic. After 22 years’ experience (see), its planners are convinced that road pricing is the key to solving the city’s traffic problems. New technology to be introduced next year will enable its current relatively crude system of area-access charges, based on paper licences, to be replaced by electronic tolls that vary according to time of day.

In Europe, road-pricing schemes have been successfully operated for more than five years in Trondheim, Bergen and Oslo. Trondheim, Norway’s third-largest city desperately needed a ring-road to stop huge flows of traffic coming through the centre of town. After much debate, the local council hit upon the idea of charging for access to the city centre, by putting up a ring of 12 toll stations, and using the revenues to pay for the construction of the new road. A high tariff applies from 6am till 10am, a lower one from then till 5pm. After that, travel is free until next morning. There is also a discount for cars with an electronic tag which allows them to go through tolls without stopping, thereby reducing the congestion caused by toll queues.

In Oslo, motorists pay a toll of about $1.70 every time they enter the cordon ring. The pricing scheme has proved so successful in financing much-needed transport developments that the city authority is now considering whether it should be extended.

The Netherlands has a more ambitious plan to introduce road pricing, covering the densely populated Randstad area of the four main towns—Amsterdam, Rotterdam, Utrecht and the Hague. It is due to come into effect in 2001.

Cars will have to carry a smart card containing cash credits that can be used for other transactions. The charge for driving into each of the four cities will be set high, at about 15 ecus ($17), between 6am and 10am, but the price will fall to 3 ecus at other times. Non-payers will be caught on video cameras and sent a bill by the tax office, using the registration details culled from the number plate. Toll plazas are being placed to prevent drivers diverting on to lesser roads; it will be impossible to enter the centre without passing a toll point. There is still some debate about whether the proceeds should be returned to the public in lower taxes or whether they should all be spent on public transport.

Even in France, where a former president, Georges Pompidou, once justified the construction of a disfiguring urban motorway along the banks of the Seine with the quip that "les Francais aiment leurs bagnoles" (the French love their cars), there is now a change of heart. Last August the environment minister was scorched by the press when pollution in cities such as Paris, Lyons and Strasbourg rose to the so-called third level, at which it is generally considered dangerous to many frail people and damaging to the lungs of the population at large. By September, when fine weather produced more smog, the government banned cars from entering Paris on alternate days, according to whether they had odd-or (p. 22) even-numbered licence plates, and made public transport free.

It has the powers for such draconian action under a clean-air law passed 18 months ago by the previous administration. One French motorway company, which runs the A1 north of Paris towards Lille, introduced variable pricing, putting up the rate by 25% on Sunday afternoons to reduce the jam of weekenders returning to Paris. The result was a reduction of 15% in traffic with a consequential speeding up of journeys and reduction of jams. Motorway users either changed the time of their travel or changed their route or just travelled less.

Britain and Germany are much less advanced, but both have conducted trials of urban and motorway road pricing. Field trials in Leicester and Stuttgart have sought to establish how high charges must be before motorists are persuaded to leave their car behind and switch to other forms of transport. The Stuttgart trial, involving 400 drivers, yielded promising results, contradicting the view that car travel is relatively immune to price. If that were the case, very high charges would be needed to deter traffic, but the evidence from the preliminary trials is that a charge of DM15 ($8) would be sufficient to deter significant numbers of drivers from entering inner cities.

Motorway tolling using automated collection techniques has proved easier to sell to voters than urban congestion pricing. By 2000 at least half the users of Portugal’s *national toll-motorway network are expected to be using a tag-based, non-stop electronic tolling system.

In America, an element of pricing is being introduced to lanes reserved for commuters who share cars. The federal government is spending $14m to encourage such experiments. In California, a private company has built two express lanes in the central reservation strip along Route 91 near San Diego. Drivers pay to use this, at a cost of 50 cents off-peak, rising to $2.75 in the rush-hour. Cars carrying more than three people pay nothing. Cars are identified by electronic tags passing roadside transponders. Rule-breakers receive an automatic $15 fine. Users enjoy a saving of 40 minutes compared with driving in the normal lanes along this ten-mile stretch of busy highway. Opinion polls before and after the introduction of the scheme showed public acceptance rising from only 40% beforehand to 70% after variable congestion pricing was introduced.

It is no surprise that much of the pressure for urban road pricing has come in crowded city states in Asia. Europe, with a population density four times that of the United States, is also a prime candidate. In one-third of all European cities, the average speed at peak times is 15 kilometres an hour or less. Over 60m Europeans suffer from traffic noise above the level where speech is intelligible and where stress is created by the persistent background roar. In most European cities, the air quality is very poor for at least 20 days a year. Cars stuck in traffic pollute three times as much as those purring along motorways, negating the effect of ever-cleaner exhaust emissions brought about by better catalytic converters and cleaner-burning engines.

Estimates of the costs of increasing congestion must be treated with caution. The European Commission, however, has calculated that the external costs of road transport in terms of accidents, infrastructure, environmental pollution and congestion, are 250 billion ecus ($308 billion) a year, which is equivalent to 4% of the EU ’s GDP. By external costs, it means the costs not directly borne by those incurring them. Half of this 250 billion ecus, says the commission, (p. 23) can be blamed on congested roads.

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BOX INSET (p. 22)

Singapore's plan 
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6-Dec-97

WITH incomes per head of $23,000, a population of 3m, and an area of just 650 square kilometres, Singapore is a very rich, very small country. People want to cruise around in style. Their 370,000 cars (plus 310,000 buses, lorries, vans and motorbikes) translate into 220 vehicles per road-kilometre, one of the highest densities in the world. If nothing were done, the result would be endless jams

To curb growth in car ownership, Singapore has for many years slapped high customs duties on imported cars and set stiff registration fees and road tax. In addition, anybody buying a new car must get a permit; 40,000 new permits are issued each year. At today’s rates they cost between $27,000 and $49,000.

As well as discouraging car ownership, the authorities have also restricted car use. For the past 20 years, to enter the central restricted zone, covering about 7 square kilometres, drivers have had to display a licence; a similar licence must be shown on the windscreen on the island’s three expressways. In each case the tariff is now $2 in the morning peak hour, falling to $1.30 at off-peak times. In 1989 the peak surcharge was extended to the evening rush-hour. That reduced afternoon traffic sharply and raised average speeds inside the restricted zone by a fifth. Some drivers have switched to off-peak travel or now take buses or trains; through-traffic has declined.

From March next year the licence system will be automated with stored-value smart cards. With a built-in microprocessor chip, these can be preloaded to carry credit of up to $150, and can be used for transactions other than traffic tolls. Unlike at traditional pay-as-you-go toll plazas, the charging will be done automatically by means of microwave communication between an electronic device in the car (where the smart card is inserted) and an overhead gantry, while traffic moves at speed.

Apart from that advantage, the main difference is that motorists will be charged more precisely for their actual contribution to traffic congestion. To avoid congestion surges at the end of expensive peak hours, the authorities may introduce a so-called shoulder pricing system, with a tariff of $2 at 6pm, $1.50 at 7pm and $1 at 8pm. Those who pass a gantry without a valid charge card will have their number plates snapped by video cameras and be fined.

Will this be the complete answer to Singapore’s traffic problems? The planners think not. They once considered a plan to build a network of roads underground, but in the end it was the plan that was buried. Now they have shifted their attention to building a world-class public-transport system.

http://powerlab.fsb.hr/OsnoveEnergetike/transport/economist_singaporeroadpricingplan.html

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Congestion and its associated problems are going to get much worse unless something changes. Over the next 13 years, the commission thinks road-freight traffic will grow by 37%, passenger cars by 58%. Most of Europe’s people live and work in a densely populated area roughly bounded by London, Paris, Frankfurt and Amsterdam. This is where traffic problems are at their worst.

In the United States, where half the traffic on freeways crawls twice a day during rush-hour, the Transportation Research Board and the Federal Highways Administration estimate that, by 2010, traffic congestion on freeways will have quadrupled, making the peaks longer and longer. The time spent in jams will increase by 5.6 billion hours and the cost of delay will increase by $41 billion. One example of the looming chaos: if present trends continued, a one-way 30-minute early-morning commute along Route 1 from New Brunswick, New Jersey, to Trenton, might turn into a five-hour crawl. Long before this, of course, many drivers would turn in despair to alternative forms of transport or simply avoid this journey.

Down with roads 

Until the beginning of the 1990s, the solution to rising congestion was seen as simple: predict the growth in traffic and provide extra roads to carry it. Several things have undermined that approach.

First, road construction has become increasingly unpopular with voters, particularly those who live near the path of planned new routes. In Britain, spectacular protests against by-pass highways, led by green activists but supported by tweedy, conservative country-dwellers, forced the government to scrap a huge road-building programme. In Japan, Tokyo residents succeeded in blocking a noisy new by-pass several years ago, and they won the right for noise pollution to be considered when building new roads—for instance, in Kobe, to replace the multi-level structures wrecked in the earthquake two years ago.

Second, economic growth in the 1980s and in the past few years has meant that new roads only briefly relieve congestion. Such is the level of suppressed demand that new roads attract even more traffic. It is now widely accepted that pouring concrete over large areas of the countryside in densely populated countries such as Britain and the Netherlands makes little sense. Professor Phil Goodwin, a transport economist at University College, London, and an adviser to the British government, recently pointed out that lack of space (rather than air pollution, greenhouse gases or the cost of road accidents) means that traffic will have to be limited.

True, other measures short of road pricing could limit traffic after a fashion. Regulation has been used widely. Many European cities ban cars from their central areas, turning them over to pedestrians. Others such as Berlin and Bremen promote car-pooling clubs, so that people have access to cars when they really need them but otherwise tend to use public transport. Some 200,000 Germans now belong to such clubs in over 20 cities. Edinburgh city council is trying to import this idea into Britain, and it is also planning a car-free suburb, where residents can move in only if they agree not to have their own car.

Finally there is the burgeoning industry of transport "telematics"—beloved of the car industry because it puts fancy gadgets in cars. The ultimate in road telematics is the automated highway that was demonstrated near San Diego in California this summer. Platoons of cars are linked electronically; transponders in the vehicles talk to beacons by the road which keep them all in lane and properly spaced, allowing the driver to read a book or watch the scenery. A more modest version is being tried out in Europe by Mercedes-Benz. This links several lorries together with an electronic tow-bar so that they can travel closer together at higher speeds, using less road—all under the control of the front lorry’s driver.

Until such science-fiction stuff becomes a reality, the real benefit of telematics is that its technologies offer a way to implement differential road pricing. At most, the future use of telematics could increase road capacity by little more than 10%, and even then the costs involved for highway authorities and for individuals may not be worth it. In the end telematics may prove better suited to reducing accidents than to squeezing more traffic on to the roads. 

All other forms of traffic demand-management amount to variations on command-and-control policies. Raising fuel duties is a blunt weapon which unfairly discriminates against rural motorists. Road pricing is the only method that can replace rationing-by-queueing with precisely directed charges. Even the most modest form of road pricing, tolls used for financing the construction of roads, can help provide extra road space. Once the infrastructure of toll stations is in place, raising charges at peak periods, as the French have done on the A1, could be done more widely.

Now sell it

Persuading motorists that road pricing is good for them is a task that politicians around the world are only just beginning to take up. The use to which revenues are put is crucial in convincing voters that road pricing makes sense. Borrowing against future revenues allows spending on better public transport to be brought forward so as to coincide with the introduction of road pricing. The success of Norway’s city charging schemes shows that it is possible to persuade voters of the merits if they approve of the way the revenues are spent.

Most of the other obstacles to road pricing have been solved by technology, or soon will be. Privacy, the issue which forced the cancellation of Hong Kong’s road-pricing scheme, is not a problem if drivers use pre-paid smart cards to pay tolls. Such cards are already in use in 15 countries around the world, including Austria, France and Spain. The latest tolling equipment can charge vehicles on multi-lane motorways, even if they switch lanes at high speed. Recording of licence plates on camera is required only for vehicles which fail to carry a valid card. Vehicles diverting away from tolled routes on to minor roads are a more difficult problem. But the use of global positioning satellites, combined with in-car receivers and digital maps, allows vehicles to be charged wherever they are at rates varying according to the time of day and degree of congestion.

From now on politics, not technology, will dictate the pace of change. Governments around the world are still nervous about the impact of road pricing. But as more and more charging schemes are implemented and the benefits of less congested, unpolluted roads are felt, attitudes will change. In 20 years’ time, when paying for road space will be regarded as the norm, people will look back and wonder why they were ever prepared to put up with the pollution, noise and paralysis of today’s cities.

http://www.econ.ucsb.edu/~tedb/Courses/UCSBpf/readings/jamtoday.html