Road Pricing

There is a growing recognition in many European cities that more fundamental economic adjustments will be necessary to affect change in the behavior of auto drivers and to cutback on the extent to which urban space is taken over by the car. Charging a financial premium for cars wishing to enter the city at particular times of the day—road pricing or congestion pricing—has been in use for a number of years in several European cities. Several other jurisdictions have recently instituted pilot projects or are otherwise looking seriously at this option.

The pioneers in road pricing have been the Norwegians, with pricing systems in place in several major cities, including Oslo, Trondheim, and Bergin. In Oslo, a system of electronic charges for cars crossing a ring into the center has been in place since the early 1990s. The toll, about US $1.70 per trip, is collected both electronically (through electronic tags) and manually at nineteen toll plazas. Each day, tolls are collected from about 230,000 vehicles, generating about 65 million pounds in revenue each year (Harper, 1998, Massie, 1998). Trondheim's system operates in a similar fashion, with twelve toll stations assessing highest fees in the morning and declining during the day until passage is free after 5:00 p.m. Drivers paying electronically—through smart cards—are assessed a reduced fee, compared with those paying by cash. The license plates of those attempting to escape without paying are photographed, and bills are sent through the mail. Toll plazas have been strategically sited to prevent diversion of traf fic onto other local roads. Road pricing in Trondheim has reportedly resulted in an 8 percent reduction in car traffic entering the cordoned zone and a 7 percent increase in usage of public transit (Johnstone, 1998).

The re po rted effects of Oslo's system on reducing traffic are more modest: a 2 to 5 percent reduction in traffic passing the toll points, but "not negligible when related to the general growth of car traffic" (Euronet, 1996). Similar positive impacts on public transit have also been noted: "There was an initial increase in the use of public transport during the first months after the i n t reduction of the system. Levels of public transport use have now stabilized which should be viewed as a positive outcome, considering the significant drop in public transport use that was evident before the system was introduced" (Euronet, 1996). Most of the toll system revenue has gone for road and highway improvements (about 25 percent for public transit, 5 percen t for bicycle paths), including a series of road underpasses, which supporters believe have reduced pollution and enhanced attractiveness of the city-center.

Road pricing has been widely endorsed in the United Kingdom and has emerged as a major plank in the Blair administration's policy. In December 1998, a national government consultation document ("Cutting Congestion—Improving the Environment") was unveiled. The British proposal would give local authorities the right to impose road pricing under the condition that the resulting funds generated be invested in public transit improvements. Especially in the U.K. context, there is a consensus that for road pricing to be at all effective requires concomitant improvements in public transit. A limited number of road pricing experiments have already been undertaken, and the next step in the U.K. strategy involves expanding and extending these trials. A nationwide road pricing network is envisioned for 2001 or 2002.

Estimates of the income to be generated by U.K. road pricing are considerable and could produce a significant injection of needed capital into transit systems. According to David Begg, who heads Edinburgh's Transport Committee, an annual income of £500 million (about US $800 million) would likely be generated, "enough to build the best transit system in Europe" (Johnstone 1998, p. 15). Major plans are under way to impose road pricing for the 4 million autos driving into or through London each day, creating badly needed funds for maintaining and improving London's city transit system, especially the underground Tube. Groups such as London First have conducted their own studies of road pricing and are lending political support.

A second major prong of the U.K. government's strategy involves taxing free company parking spaces in town centers. There are an estimated 600,000 such subsidized spaces in London, and a modest annual fee (£750 per year) is predicted to generate £300 million per year (or about US $500 million) (Williams, 1998).

Nevertheless, there has also been substantial political objection to road pricing and a spirited debate about its merits and likely efficacy. Conservative city councilors in cities considering road pricing, such as Edinburgh, have objected to it as a new "hidden tax" that will "devastate the economy of the city" (Scotsman Publications Ltd., 1998, p. 9). It has also been suggested that road pricing will induce companies to move out of cities or regions where it is utilized (The Economist, 1998).

Leicester, in the summer of 1998, completed one of the initial road pricing experiments, with results that have given hope that such economic instruments could indeed influence driving decisions. Experimenting with a group of 100 volunteer communities over a twelve-month period, the study results provide insights into what level of fee would be needed to change commuter behavior. Specifically, it was not until the road fees rose to £10 per trip (about US $16) that commuters began to change their behavior. At that point, some 40 percent of participants shifted to a park-and-ride lot or otherwise found another way to reach the city-center. The results, according to the city's transport special projects officer Eddie Tyrer, were very encouraging: "All our findings indicate that around 30 percent of commuter traffic—our target figure—would switch to another effective mode of transport if it was in place. We would need £250 million up front to implement our plans, which include another dedicated fast-track bus lane and a tram system into the city center" (Gill, 1998, p. 8).

The Dutch Ministry of Transport has been developing a road-pricing program since 1994, after having been specifically given this charge by Parliament. While a number of the specifics of the scheme have not been decided, many of its features have already been substantially developed. The essential idea behind the Dutch approach is that any automobile traffic entering any of the four major cities of the Randstad—Amsterdam, Utrecht, Den Haag, or Rotterdam—during the congested morning hours would be charged a fee. Under the current scheme, the charges would apply between 7:00 a.m. and 9:00 a.m., and would be 7 guilders (about US $3.50), or 5 guilders for those who pay electronically. Drivers would pay each time they entered the metropolitan area, so that if a particular person's commute took him through, for example, three of these cities, he would be assessed the fine three times (see Figure 5.3). The toll would only apply going into the city in the most congested corridors. There is also the expectation that some graduated fare system would be applied to the earlier and later hours of the morning, for example, a smaller fee charged between 6:00 a.m. and 7:00 a.m. and between 9:00 a.m. and 10:00 a.m., but nothing has yet been decided on this.

E a s y, electronic payment of charges is a key feature of the Dutch system. It is envisioned that most cars will be equipped with an electronic box that will allow the driver to insert a chip card. Chip cards, or smart cards, have

Figure 5.3. Dutch road-pricing scheme. Drawing showing zones around major cities of the Randstad_

An extensive road-pricing system is under development in the Netherlands. Drivers crossing perimeters around the four largest cities in the Randstad—Amsterdam, Den Haag, Rotterdam, and Utrecht—would be charged a user fee, which would automatically be deducted by way of an electronic scanning device.

Figure 5.3. Dutch road-pricing scheme. Drawing showing zones around major cities of the Randstad_

An extensive road-pricing system is under development in the Netherlands. Drivers crossing perimeters around the four largest cities in the Randstad—Amsterdam, Den Haag, Rotterdam, and Utrecht—would be charged a user fee, which would automatically be deducted by way of an electronic scanning device.

become very common in the Netherlands (indeed throughout Europe) and allow users to load them with money, which can then be used for a variety of functions, including making phone calls or paying for goods. The road-pricing system would work similarly. Drivers would insert the cards and the amount of the fare would be automatically deducted from the card as the cars pass under electronic scanning devices. The technology is appare n t l y v e ry reliable and the box would cost only about 100 guilders, suggesting that most users would find it cost-effective to purchase. For those without this equipment, the tolling stations would automatically videotape both f rent and rear license plates and the auto owners would receive a bill (at the end of each month) for the accumulated tolls. These systems work well even when cars are moving at high speeds (e.g., even at 200 kilometers/hour).

A unique feature of the Dutch system is that, in contrast to several of the N o rwegian cities, the sole purpose of the fee is to reduce congestion, not to raise money to pay for road or auto-related infrastructure. Indeed, how to handle the revenue generated from the system has been a significant point of debate. Many believe the funds should be re t u rned to car owners residing in the four cities, in the form of lowered car taxes. (This, by the way, is generally consistent with the Dutch government's push to move toward "variabi-lized" pricing for cars, giving breaks to those who drive their cars less fre quently or less distance.) Others argue that the funds should go toward public transit or improving nonautomobile mobility options for residents. Returning revenues to residents becomes problematic when considering those who live outside the cities but commute into them each day, as well as those auto owners who live in the cities and do not pay the commuting fee, thus reaping what to some would appear to be an unearned benefit.

The proposed system has not been without its controversies. Concerns have been expressed about privacy and about the impact of steering traffic onto secondary roads. The project director responds to the first concern by noting that the piecing together of the data collected in the process of electronically charging the fare would require the involvement of several different government agencies, making it difficult, he believes, to invade one's privacy. The process of reading license plates and sending bills in the mail raises perhaps the most serious concerns. It is relevant to note, though, that this technology has already been in use in the Netherlands for a number of years without much concern. There are automatic speed-ticketing devices (which identify a speeding car, take a photograph of the license plate, and already numerous automatically send the offending vehicle owner a fine in the mail) on the main intercity highways in the country.

C on c e rting the potential generation of traffic on secondary roads as drivers look for ways to avoid paying the toll, the system planners are working hard to position tolling locations on many of these key secondary roads. The current plan envisions 100 tolling locations spread across the four cities, with 70 percent of them on secondary roads. So, it may in the end be quite difficult to avoid paying the fees. Nevertheless, the project director related the story of a tunnel toll in Rotterdam, which suggests the lengths to which many Dutch drivers may go to avoid paying a fare. In this partic ul ar case, the toll was only 2 guilders (about US $1), yet apparently people dro v e many kilometers out of their way to avoid the fee. Ironically, the project d i rector notes that it may actually be this national character trait of fru g a l-ity that makes these kinds of road-pricing systems so appropriate there .

One other problem involves how to handle autos licensed outside the Netherlands. How does the Dutch system handle a car with a German license plate? Dutch planners expect to be able to work with the other European countries to send out bills (albeit more infrequently than every month; perhaps even once a year) to these car owners. Another concern is the impact such a pricing system might have on discouraging business and employment activity in the city-centers. Will such a system further push economic growth, as well as population and housing, to outer, peripheral locations and to cities and towns outside of these four urban areas? Economic analyses prepared by the Dutch transport ministry show such impacts are unlikely, however.

This bold Dutch scheme was to be fully functional by 2001, but because of opposition by road-user groups and national elections, momentum has slowed. Rather than full implementation of the scheme, it is now expected that road pricing will first be tried in only one city in the Randstad (yet to be chosen).

Many other cities (and national governments as well) believe that some form of road pricing will eventually be necessary to address the increases in traffic. Currently, few European cities are using it (e.g., Bergen and Oslo), but a number of cities are experimenting, or soon will be experimenting with this technology (e.g., Leicester and Amsterdam). The success and functioning of road pricing remain to be seen, but clearly it could help to reduce car traffic, especially during peak hours.

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