|
...tool to alleviate traffic congestion, they confront drivers with the costs of road damage and emissions.
This Commentary lays out the merits of road pricing and discusses design considerations, describes the state of play in implementing road pricing worldwide, and makes the case for road pricing in Canada. Among key conclusions:
* Congestion is serious and growing problem in major Canadian cities as measured by the costs of travel delay, additional fuel consumption and greenhouse gas emissions. Canada's nine largest urban areas, by one estimate, face annual costs of $3 billion.
* Neither fuel taxes nor parking fees are effective in dealing with traffic congestion. Appropriately designed road-pricing schemes are the best instrument. Road-pricing's usefulness in charging for road damage, insurance, and so on are a bonus.
* Net revenues from road charges, after deducting operating costs, can be used for various purposes: to pay for road construction and maintenance, to support other modes of transport, or to reduce other distorting taxes; they can also enhance the public's acceptance of road pricing by compensating potential losers.
* Claims that road pricing hurts the poor are exaggerated. Poorer people travel less than richer people. They rely more on urban public transport, which would speed up if there were fewer cars on the road, and they would benefit if road-pricing revenues were used to enhance public transport service. Also, policymakers may choose to address equity concerns by offering discounts or exemptions.
Experience with road pricing generally--and congestion pricing specifically--is growing around the globe. Research and planning in Canada should begin now on road pricing for heavily congested urban highways and/or downtown areas.
The goal should not be to implement schemes that meet a theoretical ideal. Road-pricing programs should pass a cost-benefit test, be adaptable to changing circumstances, and not soon become technologically obsolete. Privately operated schemes have the potential to reduce implementation and operating costs and to accelerate development, and thus warrant serious consideration.
Highway 407 stretches across Toronto from Burlington to Pickering. When the first stage opened in 1997, Highway 407 became the world's first all-electronic, barrier-free toll highway. To travel its full length during the peak period, a motorist now pays C$18.87. (1) Off-peak rates are only slightly lower. Heavy single-unit vehicles pay twice as much per kilometre as cars, and heavy multiple-unit vehicles pay three times as much. Yet, on an average workday, more than 350,000 trips are made on Highway 407. The main attraction is that it offers a (usually) free-flowing alternative to surface streets and the very heavily congested Highway 401, which runs roughly in parallel a few kilometres away.
Highway 407 is the most prominent toll road in Canada and accounts for roughly half the total traffic on all national toll roads combined. Since 1999, Highway 407 has been owned and operated by a private entity, 407 ETR Concession Company Limited. The company is not subject to direct toll regulation, and (presumably) does not set tolls with the primary objective of relieving congestion. But a handful of congestion-pricing schemes are now operating in other countries, and the idea is attracting much attention from researchers, policymakers, and the public worldwide.
Several reasons exist for the growing enthusiasm for road pricing generally, and congestion pricing specifically. Electronic tolling technology has become cheaper, it is nearly 100 percent reliable, and drivers can pay without stopping. Congestion delays and uncertainty about travel times are mounting just when reliable transport is becoming more important--both to people with harried schedules and to freight shippers with just-in-time delivery deadlines. Stop-and-go traffic contributes to emissions of local pollutants and greenhouse gases. Traditional supply and travel demand management policies (2) are limited in effectiveness. And road transport infrastructure is aging. Existing funding mechanisms such as the fuel tax are unlikely to yield enough revenues to pay for future maintenance, rehabilitation, and new construction--at least without large and politically unpopular increases in tax rates.
As this list suggests, road pricing has been motivated not only as a tool to alleviate traffic congestion, but also as a way to face drivers with the costs they impose in road damage, emissions, and other traffic-generated externalities. Road pricing is also a source of revenue. Following an earlier paper of mine (Lindsey 2006, appendix A), I define road pricing to include any form of direct road user charge--highway tolls, cordon tolls, area charges, distance-based charges, and so on--imposed for any purpose. (4) I exclude indirect road charges--such as registration and licence fees, fuel taxes, and tire taxes--parking fees and parking fines, shadow tolls, and tradable driving permits, as well as charges on nonmotorized forms of transport. I consider, however, the virtues and limitations of fuel taxes and parking fees.
Quite a number of authoritative surveys and policy papers about road pricing have recently appeared. (5) It is impossible in this space to cover all the relevant ground, (6) so here I set myself three goals: to identify the merits of road pricing and discuss some of the design considerations, to describe the state of play in implementing road pricing worldwide, and to assess the case for road pricing in Canada. I concentrate on the potential for road pricing to alleviate traffic congestion, and consequently focus on urban rather than intercity road pricing.
I come out strongly in favour of road pricing for Canada. In brief, the main points in the argument are as follows:
* Congestion is a serious and growing problem in major Canadian cities. Selective construction and expansion of roads is warranted, but it is expensive and environmentally disruptive. Moreover, it encourages more driving as well as urban sprawl.
* As far as the price mechanism is concerned, fuel taxes are efficient as a tax on carbon-based fuel emissions. And parking fees that vary by location and time of day are the best tool for tackling congestion related to parking. But neither fuel taxes nor parking fees are effective in dealing with traffic congestion. Appropriately designed road-pricing schemes are the best instrument. Any uses of road pricing to charge for road damage, insurance, and so on are a bonus.
* Net revenues from road pricing after deducting system operating costs can be used for various purposes: to pay for road construction and maintenance, to support other modes of transport, or to reduce other distorting taxes; they can also be used to enhance the public acceptability of road pricing by compensating potential losers.
* Claims that road pricing hurts the poor are exaggerated. Poorer people travel less than richer people. And they rely more on urban public transport, which would speed up if there were fewer cars on the road, and they would benefit further if road-pricing revenues were used to enhance public transport service. Poorer people can continue to drive without paying tolls as long as toll-free alternative routes exist. Furthermore, rich and poor alike value the option to use congestion-free and reliable toll roads when they are especially pressed for time. Finally, equity concerns can be addressed by offering discounts or exemptions to certain groups.
* Experience with road pricing generally--and congestion pricing specifically--is growing around the globe. Research in Canada should begin now on road pricing for heavily congested urban highways and/or downtown areas. The goal should not be to implement schemes that meet the theoretical ideal, but schemes that pass a cost-benefit test, are adaptable to changing circumstances, and will not soon become technologically obsolete.
* Privately operated schemes have the potential to reduce implementation and operating costs and to accelerate development; they thus warrant serious consideration.
Congestion Costs and the Merits of Road Pricing
The Costs of Congestion
Congestion delays are generally considered to be the largest external cost of road traffic, (7) and congestion relief is widely viewed to be the greatest potential benefit from road pricing. It is therefore not surprising that estimates of the economywide costs of traffic congestion appear frequently in the literature. The most widely quoted are the Texas Transportation Institute's annual estimates for major US cities. According to the 2005 Mobility Report (Texas Transportation Institute 2005), in 2005 congestion created 3.7 billion hours of travel delay and 2.3 billion gallons of wasted fuel that cost the US economy more than US$63 billion. Estimates of the annual costs for Europe include US$38 billion for the United Kingdom and US$800 million to $1 billion for Stockholm in lost rime, traffic accidents and deaths, and worsened environmental conditions (Economist Intelligence Unit 2006). (8) And according to the TD Bank Financial Group, the loss from congestion and shipment delays in the Greater Toronto Area (GTA) is some C$2 billion annually (Soberman et al. 2006). (9)
Such statistics should be treated with caution, however, for several reasons. First, the Texas Transportation Institute's calculations and some others entail comparisons of actual traffic conditions with hypothetical free-flow conditions that would be uneconomical, if not impossible, to achieve. Second, the cost of delays is often determined using a single unit value for travel time delay that ignores substantial variations across individuals, as well as possible dependency on trip duration, the severity of the congestion encountered, and whether the congestion is anticipated or not. Third, the estimates exclude the costs people incur when they avoid congestion by travelling off peak, not travelling, and so on. Fourth, the costs of congestion are borne by drivers collectively, and only a portion of the congestion cost created by a trip is external to the driver.
These reservations notwithstanding, congestion-cost statistics are useful for measuring constituent components of the full cost of congestion and for establishing upper or lower bounds on these costs. (10) Transport Canada recently compiled the first set of statistics for Canada that quantify the costs of travel delay, additional fuel consumption, and greenhouse gas emissions for the nine largest urban areas (see Table 1). (11) Rather than taking free-flow conditions as the baseline against which to measure travel delays, the study adopts a percentage of the speed limit as a threshold below which congestion could be considered "unacceptable." Since this threshold varies across municipalities and road networks, the study undertakes calculations with thresholds of 50 percent, 60 percent, and 70 percent.
The cost of congestion for the nine urban areas computed with the 60 percent threshold is about C$3 billion. (12) Montreal and Toronto account for 70 percent of the total. In per capita terms, the annual cost ranges from C$17 for Hamilton to C$270 for Toronto. These costs might not seem very large--in the case of Hamilton, the cost is relatively trivial--but the figures exclude the costs of accidents, noise, local emissions, road damage, and behavioural adaptations to congestion. Moreover, the travel delay cost accounts for recurrent congestion but not nonrecurrent congestion. Given these omissions, the data in Table 1 are likely to underestimate the true cost, possibly by a considerable amount. Naturally, the cost of congestion is higher for individuals who travel extensively and for those who commute by car.
Limitations of Traditional Policy Measures to Address Congestion
During much of the 20th century, the stock response to incipient congestion was to build new roads or expand existing ones. Such a "predict-and-provide" strategy is almost universally discounted as a panacea now, although selective investments might still be worthwhile (see Eddington 2006). (13) The Achilles' heel of expanding capacity is that it makes driving more attractive, and therefore encourages more of it. Latent demand for the new capacity emerges as drivers shift from travelling on other routes and at off-peak times of day, switch from other modes of transport, and so on. Indeed, road investments can increase congestion costs. Spending on local roads, for example, might encourage residential development that creates more traffic, not only on the new roads, but also elsewhere on the road network.
Investing in public transport systems is another supply-side approach that has had limited success in North America. Traditional rail transit systems operate on a hub-and-spoke network. When cities were more compact and jobs were concentrated in the Central Business District (CBD), such networks served them well. But networks are ill-suited to the dispersed pattern of trips that prevails today. Rail transit and bus usage can be encouraged with low fares, but since fare elasticities of demand are typically small, cutting fares boosts ridership only modestly and it increases operating deficits. (14)
Travel demand management measures, such as bans on heavy vehicles and ridesharing, naturally have a role to play in managing traffic. But these measures also induce latent demand if they make driving easier for some groups. One policy--extensively used in the United States but to a lesser extent in Canada--is to designate High-Occupancy Vehicle (HOV) lanes. HOV lanes are effective in increasing hourly throughput measured in people only when congestion is severe and when the initial modal share of carpools is appreciable. Carpooling is relatively unattractive to most commuters because of the difficulty in finding people with compatible work schedules and the time required to collect and distribute passengers. As a result, HOV lanes have been falling out of favour. As discussed in the next section, however, HOV lanes have been reinvigorated in the United States by allowing single-occupant vehicles to use them for atoll.
Fuel taxes are less vulnerable to latent demand than are command-and-control measures. And fuel taxes are (nearly) a perfect instrument for internalizing global warming costs caused by combustion of carbon-based fuels. But fuel taxes are a very blunt instrument for targeting congestion and other...
NOTE: All illustrations and photos
have been removed from this article.
Looking for additional articles?
Search our database of over 3 million articles.
Looking for more in-depth information on this industry?
Search our complete database of Industry & Market reports by text, subject, publication
name or publication date.
About Goliath
Whether you're looking for sales prospects, competitive information, company
analysis or best practices in managing your organization,
Goliath can help you meet your business needs.
Our extensive business information databases empower business
professionals with both the breadth and depth of credible,
authoritative information they need to support their business
goals. Whether it be strategic planning, sales prospecting,
company research or defining management best practices -
Goliath is your leading source for accurate information.
|
