Is it better to price road space or promote traffic congestion?

There’s a consensus among urban policy analysts that road pricing should be introduced into our large cities as soon as possible, particularly at peak times. Yet some groups, like the Greens and the Public Transport Users Association, aren’t convinced it’s all good news.

Road pricing involves charging motorists for the use of road space. It’s usually thought of as a means of addressing traffic congestion, but in principle it can be applied at all times.

Although it depends on how it’s implemented (e.g. cordon or per km charge), the key areas where road pricing promises benefits are well established. It could potentially:

• Reduce the pollution, emissions, fuel use and disamenity associated with congested driving conditions
• Lower the economic cost of congestion – principally delays – which BITRE estimates will reach $20 billion p.a. nationally by 2020
• Give priority when roads are congested to high-value trips over those of marginal value
• Moderate popular demands to “build our way out of congestion”
• Lower the total level of off-peak car use by making drivers more conscious of the marginal cost of driving e.g. shifting some costs from standing charges to per km charges
• Generate surplus revenue that can be applied to other purposes e.g. public transport improvements
• Increase the demand for public transport by raising the relative cost of driving
• Enhance horizontal equity by requiring those who drive more to pay more.

But like everything in public policy, road pricing also has its downsides. One that looms large is it’s a hard sell politically.

The key criticism in policy terms is it’s vertically inequitable – those with fewer resources would pay a higher proportion of their income in charges.

That’s true, but it’s true for public transport and other basic services like electricity, gas and water too. In fact in these cases the marginal charge increases with consumption.

It’s not good policy to encourage excess consumption of a scarce resource in the name of a single objective. A better approach would be to compensate at-risk populations adversely affected by road pricing.

However there’s another objection that hasn’t gotten much attention. It’s most clearly articulated by Dr Paul Mees in his influential book, Transport for suburbia, and in this submission he made to Infrastructure Australia.

Dr Mees argues that congestion charging makes driving more attractive because it offers higher speeds. The inevitable consequence is that on average drivers will use the extra speed to make longer trips, using more fuel and generating more pollution and emissions in the process.

Rather than seeking to manage congestion, the alternative is to see it as a way of deterring driving and encouraging higher public transport use. In his book (p47), Dr Mees cites the experience of Vancouver, which “reduced journey times by promoting congestion.”

In its 1993 regional plan, Vancouver positively embraced congestion as “part of a package designed to promote self-containment and mode shift away from the car.” The pay-off was that despite rapid population growth over the same period:

Vancouver was the only Canadian urban region where the average time taken for the journey to work….declined, from 70 minutes in 1992 to 67 in 2005. By contrast times in Montreal jumped from 62 to 76 minutes.

I think it’s a plausible argument. Motorists would indeed be likely to drive further on average if speeds increased. That’s likely to happen whether the speed increase results from congestion pricing, road works, or some other change.

I’m not sure that it’s such a big problem, though. All the pricing proposals I’ve seen are aimed at increasing speeds enough to clear out logjams and get traffic moving at a modest speed that’s still well below the speed limit.

Moreover any increase in speeds needs to be interpreted in context. The extra travel might be offset in whole or in part by those marginal drivers discouraged by pricing.

And longer trips might also be offset by a fall in low value trips in the off-peak if the pricing regime extends beyond peak hours. Further, if levied on a per kilometre basis it could encourage shorter average trip lengths.

In any event, the benefits of longer trips have to be taken into account along with the costs. Having the choice to drive further could mean, for example, that a worker has the choice of a better job (more efficient labour and job matching).

The key benefit of road pricing relative to “promoting congestion” is it sorts the traffic according to value. Someone with an urgent business or personal meeting to get to, or a load of goods to deliver, will welcome the greater certainty provided by less congested conditions.

I don’t put a lot of store by the Vancouver numbers. Dr Mees elaborates on them further in this paper, but he doesn’t show a causal relationship. There might be other factors that explain the observed reduction in travel times.

I am in any event wary of relying on the experience of just one or two other cities to draw general conclusions, let alone ones that are applicable elsewhere. There’s immense variability between cities.

For example, this writer claims that the introduction of road pricing in Stockholm in 2006 had a similar outcome to that attributed to congestion in Vancouver. Commute times dropped and public transport use increased.

Yet even if it’s accepted that road pricing is as costly in terms of induced travel as Dr Mees implies, it’s not a “policy stopper”. Of course road pricing has negatives as well as positives – all policy initiatives do.

What matters is how those costs and benefits compare. On balance, I think it makes more sense to charge for road space than tolerate congestion, although it will depend ultimately on what sort of implementation is politically feasible.

It’s true congestion pricing won’t produce a wholesale reduction in car use – that’s not what it’s intended to do. It’s very likely that in some form or other cars will be with us for a long time yet so we need to find ways to manage them better. Road pricing should be one of those ways (more on road pricing here, here, here and here).