Congestion charges: we have the tech, we have the proof

Dr Patrick Carvalho
28 January, 2020

Chronic road congestion is a global epidemic, plaguing poor and rich countries alike. In dozens of cities around the world, from Bogota to Rome, from Moscow to Boston, from Toronto to Dhaka, from Sydney and Melbourne to Auckland and Wellington, the average motorist wastes more than a hundred hours every year idling behind the wheels in overcrowded routes.

Traffic congestion is more than just an annoyance for drivers trapped in gridlocks on their way to work or the shops. It is a serious problem for the economy too. By some estimates, congestion costs the world as much as a trillion dollars every year.

In response, an increasing number of cities have implemented congestion pricing schemes to harness the power of markets to fix road overcrowding.

By letting drivers face the costs of adding a vehicle on clogged roads, congestion charges encourage commuters to find trip alternatives such as other travel times, routes and transport modes. That reduces the overuse of road services at peak times, providing several benefits to the community beyond saving travel time, including reduced carbon pollution and increased business productivity.

Singapore was the first country to try out the new system when in 1975 it started charging drivers entering downtown during morning rush hours. This first congestion charging system had to rely on “paper decal” technology – i.e. paper permits displayed on the car windshield with wardens at strategic check-points inspecting passing vehicles.

Notwithstanding the rudimentary operation system, the Singaporean scheme was a great success: an immediate 73 percent decline in the use of private cars, a 30 percent increase in carpools, and a doubling of buses’ share of work traffic. That translated to a 13 percent congestion reduction and a 22 percent average speed increase.

As technology advanced, this manual road pricing scheme evolved towards a fully automated charging system in 1998 using dedicated short-range communication (DSRC) technology and Automatic Number Plate Recognition (ANPR) cameras for enforcement. In 2020, the island nation of six million people and approximately the size of Auckland is expected to launch its new satellite-based congestion pricing technology.

Following the successful Singaporean experience, other cities followed suit: Durham (2002), London (2003), Dubai (2007), Valletta (2007), Stockholm (2007), Milan (2012), and Gothenburg (2013). More recently, New York City became the latest addition to road pricing schemes worldwide, preparing for congestion charge implementation as soon as next year.

Congestion pricing schemes worldwide

figure 2

Source: Patrick Carvalho (2020), Pricing Out Congestion: Experiences from abroad.

Lessons from abroad
For New Zealand, these international experiences represent a resourceful and insightful pool of policy lessons.

The first takeaway is that congestion charging rates do not need to be high to produce effective results. This is partially due to the non-linear relationship between travel demand and travel time. By removing a fraction (even as small as 5 percent) of the vehicles from a congested roadway, pricing enables the system to flow much more efficiently, allowing more cars to move through the same physical space.

A prime example is the Singaporean scheme with collection points charging from as little as NZ$0.51 to a maximum of NZ$4.05, ensuring a steady flow of vehicles even during rush hour. In Stockholm, another good example of best practice, congestion charges vary between NZ$1.79 and NZ$5.68, depending on time of day and route.

Another promising lesson is that technology is on our side. Recent advances in geolocation technology have reduced the barriers of costly congestion pricing infrastructure. In New Zealand, for instance, the same technology already being used to collect electronic road user charges on diesel-powered vehicles could be easily converted to charge for time and location (i.e. effectively implementing congestion pricing).

Each congestion pricing scheme is unique and there are plenty of past mistakes we can learn from too. Firstly, although a convoluted scheme is always a hard sell, simplicity cannot compromise the overall efficacy of a good congestion pricing system.

The London experience is a case in point. A flat daily fee in a poorly designed charging zone means the congestion pricing area is too small to have a meaningful impact on the city’s road traffic problem. Besides, a long list of fee exemptions and discounts (including for taxis and private hire services) means half the fleet circulating in its congestion charging zone is estimated to benefit from charging loopholes. As a result, Greater London is now one of the most congested cities in the world, with the average driver wasting more than 227 hours per year on overcrowded roads.

Another common mistake is to put revenue raising at the centre of the scheme’s goal (another unwelcome feature of London’s congestion charging zone). At the heart of the general public’s suspicion against congestion pricing is that it becomes just another money-grabbing tax. Failed proposals in Oslo, Manchester, Edinburgh and Copenhagen are further testament that voters will not easily back the development of revenue-based schemes.

If anything, the experience abroad highlights the importance of public support. Ultimately, every congestion pricing scheme must win public approval to become a sustainable and legitimate option. In particular, without a political champion, no scheme should go forward.

For New Zealand to successfully implement a congestion-beating scheme, politicians must win the hearts and minds of the public by clearly communicating to them a well-designed plan — which includes weathering the initial dip in public support around the implementation phase.

Done well, a congestion pricing scheme generally ends up earning public approval after a brief period of public suspicion. In Stockholm, for instance, public support jumped from 21 percent right before implementation to 67 percent a few years later.

The price is right
New Zealand has much to benefit from implementing the right congestion pricing scheme.

Moreover, as an island economy with a unitary government, we do not face the regulatory hurdles of other jurisdictions such as in the United States and the European Union.

As our Minister of Transport puts it, “Mobility is the lifeblood of commerce and community. It is the key to unlocking not only productivity and business growth, but strengthening our social and cultural connections within and between our regions, towns and cities.”  Therefore, it is paramount to have a road transport system that is free from chronic, high congestion levels.

So in light of international experience, when the price is right, a proven solution to chronic road congestion is ours for the taking.

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