Pros and cons of roadway congestion pricing

Public Policy

Variable Pricing as a Means for Controlling Urban Congestion: An Analysis of Data from London, Stockholm, and New York City

The Problem of Congestion

The myriad negative effects of persistent congestion

Pollution

Fuel waste

Increased transit times

Added costs to goods and services

Why congestion continues despite increased expenditures on highway infrastructure

Traditional mitigation schemes are ineffective

More infrastructure will not alleviate congestion

Variable congestion pricing as a viable solution

Congestion pricing is technically feasible

Congestion pricing is economically viable

Congestion pricing faces political and public resistance

Case Studies of Existing and Proposed Variable Pricing Schemes to Alleviate the Problem of Urban Congestion

London: a system at work

Not a true variable pricing plan, but still functional

The effects of London system

The public's reaction to the pricing schedule

Stockholm: a seven-month experiment ready for implementation

The sophisticated system for controlling congestion

The public's mixed reaction

An experiment becomes the law of the land

New York City: public and political resistance

The potential benefits of a congestion pricing scheme

The perceived problems with such a system

The possibility of a pricing scheme in NYC

Analysis and Conclusions on the Pros and Cons of Pricing Schemes for Controlling Roadway Congestion

Analysis of the Costs and Benefits

The public and private costs of roadway pricing

The benefits to the public

Conclusions

There is still significant public resistance to these kind of pricing schemes

However, congestion continues to increase and pricing strategies offers a viable hope for control

Abstract

Roadway congestion is a significant problem for nations with an active motorist population, especially in urban areas. Traditional efforts to combat congestion have typically focused on increasing capacity through increases in roadway infrastructure. Research has shown, however, that these methods are ultimately ineffective for controlling congestion and its associated ills. Economists have long seen the value in associating usage costs with roadways in order to control congestion and encourage more efficient resource use. With technology finally catching up to this ideal, roadway-pricing schemes are becoming more popular in cities throughout the world. A consideration of the pros and cons of pricing strategies implemented in London and Stockholm, and proposed in New York City, reveals that while there is still significant political and public resistance, the strategies are effective at achieving their stated goals.

Introduction: Why Congestion Exists Despite Highway Expansions

Congestion, both in urban centers and on connecting highways, has become a major problem for the transportation networks of cities throughout the world. In the world's major metropolises, the issue has become particularly acute, with congestion having profound negative effects on air quality, travel time, the cost of goods and services, and the general livability of cities. Congestion problems are literally becoming a liability for these cities. As the pressure of congestion increases, the capacity of a given city to function effectively is greatly diminished, resulting in hidden and overt costs for individuals, businesses, and public resources. The net effect, then, of congestion has been consistently deleterious.

In particular, congestion has been associated with a number of costs. These include reduced traveling speed, increased traveling time, less transportation reliability, increased fuel consumption, increased vehicle wear, increased air pollution, and general inconvenience. The costs of increased travel time and increased fuel consumption alone has been estimated to run in the hundreds of dollars per capita per year in the United States (Lindsey and Verhoef 1). For urban planners and transportation departments in the United States and in the world, congestion is a significant issue that has a direct impact on the lives and livelihoods of all residents.

Congestion has been traditionally treated as an issue of capacity. In other words, if congestion is too high the reason must be that the existing road infrastructure is not large enough to meet demand. While this is true to some extent, the end result of this attitude is induced demand. The perception that building more or better roadways can lessen congestion only leads to a still greater increase in congestion. Improved roads quickly translate into more traveling, diversion of vehicles from parallel routes, and similar effects. Empirical research on the subject reveals that induced demand actually nullifies any benefit that is initially attained through roadway investment. In the short-term infrastructure investments will lead to behavioral changes: people will shift from less used routes to new or improved routes and will increase time spent traveling. Over the long-term, infrastructure investments will cause structural changes such as population increases, business expansions or relocations, and general growth along the improved roadways (Cervaro 145-146). Efforts to alleviate congestion through investment to roadway infrastructure will ultimately backfire or, in a best-case scenario, produce no net gain.

As a solution to this significant issue, some policy-makers are turning to the possibility of variable roadway pricing to mitigate the negative effects of congestion. Roadway pricing is based on a simple economic principle that is already at work in a number of other industries. Consumers should pay directly for costs they impose on an existing system as an incentive for more efficient use of limited resources (Litman 1). This explanation sounds much more complicated than it actually is. Consider how variable pricing is used in other industries like airlines or hotels. Anyone would expect to pay more for a plane ticket or a hotel room around the holidays. Businesses deal with this increased strain on their limited resources by increasing prices so that consumers will make more efficient choices instead of simply flooding the system all at once. In roadway situations, it is no different. Space on roads is limited; therefore, associated usage with a variable price schedule would help decrease usage -- and congestion -- during peak demand periods.

Unfortunately, this simple economic principle has been difficult to implement in the past for two reasons. First, it hasn't been until recently that the available technology has made variable roadway pricing strategies a viable option. Only in the last few years has the array of available technology become sophisticated enough to make these economic strategies more than just academic. Second, public and political resistance to roadway pricing schemes, of any kind, has been high. Concerns regarding privacy, access, freedom, and unwillingness to pay have motivated the public to keep politicians from even entertaining such ideas. However, in recent years, congestion has become a large enough problem -- negatively affecting the livability of many cities -- that there has been increased public and political pressure to develop solutions. With the technology available for implementation, this change in political current means that variable pricing roadway strategies are likely to become more common (Hensher and Puckett 615-616).

The purpose of this study is to examine in some greater depth the dominant costs and benefits associated with roadway pricing strategies designed to alleviate congestion and mitigate the major negative effects of congestion. In order to do this, three situations will be evaluated: a functioning, if non-variable, program in London, an experiment in variable pricing in Stockholm, and a current debate in New York City. In each of these cases, the details of the proposed programs will be laid out, as well as the specific costs and benefits that can be directly associated with the programs. Ultimately, it will be clear that the economic and social benefits of these strategies are undeniable and the technology, while costly, is effective. The only major stumbling block is winning over public support for roadway pricing strategies.

Variable Pricing at Work in London, England

On February 17, 2003, the London Congestion Charging Scheme was enacted for a zone the encompassed the central London area. The initial charge to individuals was five pounds, or about $8, for the right to drive or park in the central London zone. Since the initial rollout, the price for a base license has been increased to eight pounds for that same right. Purchasing a license entitles an individual to park or drive through the central London area during the hours of 7AM until 6:30PM, Monday through Friday (Santos and Shaffer 164-5; Litman 2). During other times, off-peak periods, driving and parking in the central London zone is entirely free. While this is not a full variable pricing scheme -- which would correct for different congestion areas, for different times of the day, and for distances traveled -- the London plan does have the benefit of simplicity and relative ease of implementation.

London city officials decided to use middle-of-the-road technology to enforce this pricing scheme, known as automatic number plate recognition (ANPR). This technology visibly checks the license plates of cars passing into and out of specific tolling points that surround the central London zone. A computer records this number and then checks it against all payments made to the system during that day. Individuals who travel into London are required to pay without prompting the same day or in advance for the use of the roads in central London. Failure to do so will result in a fine being automatically issued to the individual who owns the car attached to the recorded license plate number. Some small discounts in pricing is applied to anyone who purchases these day passes in advance, in bulk, but by and large users pay as they enter and use the roadways in central London (Santos and Shaffer 166-169; Litman 2).

Within the first year, there were already impressive effects in London. Travel speeds were measured to be 21% faster than before the pricing scheme was implemented. Congestion was reduced by 30%, the volume of traffic decreased by 15%, and there was a total reduction in travel times by 15% (Santos and Shaffer 169). Factoring in the rather significant startup and maintenance costs for the first year -- in excess of five hundred million pounds -- the pricing scheme still had a net profit of fifty million pounds, which was shunted back into improvements for mass transit (Santos and Shaffer 177).

These benefits are significant, especially since such dramatic gains were made within the first year of implementation. However, there are some characteristics of the London system that are considered suboptimal. As mentioned, this is not a variable pricing scheme, and thus cannot take into account distances traveled, different times of the day, or factor in different congestion levels in different parts of the city. Overhead for the technology required was also high, and London's public transit network was not equipped to meet the increased demand that resulted from the program (Litman 4).

Despite these deficiencies, the success of London's system has been impressive. Though the program was widely criticized before implementation, the public has since widely accepted it and the benefits it affords the public. The system's feasibility, simplicity, and transparency all come together to reduce public backlash (Santos and Shaffer 179). Overall, the London program, though not a fully functional variable program, has been an important success in its ability to reduce congestion levels and win public support in the process.

Experiments with the Public in Stockholm, Sweden

Unlike London, Stockholm chose a more sophisticated system to monitor roadway usage and limit congestion. Whereas London planner favored a more simplistic, one-size-fits-all approach, Stockholm designers embraced the capacity of technology to produce a truly variable pricing system. Using transponder boxes, laser detectors, and a network of cameras at twenty-three tolling points, cars are instantly identified and billed based on their specific location and the time of day (Abboud and Clevstrom B1). The Swedes began their congestion control program as a seven-month trial starting in January 2006 at a cost of $500 million. Drivers entering the city between 6:30AM and 6:29PM were charged between $1.25 and $2.50 each time they entered or exited, with a max charge of $7.50 for a day. Charges were automatically deducted from the bank accounts of individuals who used transponders to monitor their movements, while others could pay on a day-to-day basis. People who tried to evade payment had their bills forwarded to the Swedish tax authority (Heshner and Puckett 617-618; Abboud and Clevstrom B1).

The benefits to the city of Stockholm were as immediate as they were in London. There was an increase of public transportation use by 6%, reduced traffic volumes by 22%, and a 14% decrease in exhaust pollution (Abboud and Clevstrom B1). Public support, which was lackluster before the program began, increased somewhat during the experiment but only to between 50% and 60%. However, this slim degree of public support was enough for legislators to pass a bill that will make the variable roadway-pricing scheme a permanent reality in Stockholm starting in August of 2007. Some changes will be made to the prices incurred, the penalities for nonpayment, and the types of vehicles that will be given exemptions ("Stockholm Congestion"). However, for the most part, the new pricing scheme will be based on the seven-month experiment that was a technical, if not political, success. Only time will illustrate whether or not public resistance to the variable pricing scheme will increase to the point that the program is fully rescinded.

Plans for the Future in New York City, USA

In New York City, finding a way to implement congestion pricing has been called the "holy grail" of urban planning (Neuman B1). Congestion has become a major problem in Manhattan and finding an effective means to control it has been the focus of a number of groups and individuals. The success of London's weekday pricing scheme has been hailed as proof that a similar system could be implemented successfully in New York City. Interest in a congestion pricing scheme that would charge the most trafficked areas at the busiest hours has increased significantly with demonstrations in London and Stockholm that such plans are technically and politically feasible (Schaller; Chan).

In New York City, advocates of congestion pricing have point out clogged streets are costing the city as a whole an estimated $12 to $15 billion every year. That is in addition to environmental costs like increased pollution, as well as the economic problems already mentioned as problems for all congested cities (Neuman B1). The obvious benefits of a pricing scheme would be smoother traffic flows, reduced delays, reduced pollution, and increased bus speeds. One leading proposal is quite similar to the system in place in London. The 840,000 cars entering New York City south of 60th Street everyday would be subject to a $7 weekday charge via ANPR technology, with some variability and exemptions. The money raised by this effort would be funneled back into the public transportation system (Chan).