Environmental Defense

The Environment Defense site has a nice summary of Congestion Pricing. In fact, this whole page is informative and a delight to read. Best to enjoy that first, then come back…

This site describes four systems (London, Singapore, Stockholm, Norway) rather than the usual three (less Norway). I will use this to illustrate a gradient for congestion pricing.

First: a distinction between congestion pricing and road pricing is critical.

Congestion Pricing is charging for the use of a road in order to influence demand – hence Congestion Pricing is a “Transportation Demand Management” (TDM) tool. Ideally Congestion Pricing means you reduce peak hour demand by setting a price that encourages things like alternate travel modes, alternate times, carpooling, doubling of trip purposes, telework, even moving closer to a job. All of the money you pay to drive into London each day is congestion pricing.

Road Pricing is charging for the use of a road in order to recoup the money invested to build that road. The money you pay to use the Pennsylvania Turnpike is road pricing. Almost all of the money you pay to use Ontario’s 407 is road pricing.

Huh? 407? Congestion Pricing? Well, yes, but not really. The 407 has a base price for three classes of vehicles. For private passenger cars that price is currently $0.168 Canadian per km throughout the 24-hour day. For the morning and afternoon peak that is raised to $0.176 or a premium of 8/10^th of a cent per kilometer – a mere 4.8% premium. Technically, this tiny increment is a congestion price since it is levied during peak hours, but would be clearly ineffective as a TDM tool. For the typical rush-hour trip this would amount to an unnoticed few cents for each motorist, but a nice total incremental revenue to the toll operator. If you wanted to apply congestion pricing to this roadway one might consider $0.10 per kilometer raised to $0.25 during peak hours. Unfortunately, since that road is has a free parallel road (Highway #7) such a “proper” congestion price would drive traffic away defeating the congestion relief that the 407 provides. So this is a case of a revenue-grab pretending to be a congestion price.

So the fact is that while these two terms often get blurred in the press and in your pocket, the reasoning, design and purpose behind them is quite different. One produces revenue and may inadvertently signal that it is expensive to drive a car; the other signals that it is terribly expensive to drive in congested places and at busy times and also intentionally produces revenue that is ideally used to improve roads, transit, bike paths, and other mobility programs.

Let rank our four Environment Defense examples.

Of the four Singapore’s takes highest marks as a congestion price. Here is why:

Today, the system is a model of flexibility. Toll rates at different locations change over the course of the day, and are raised or lowered every three months to keep roadways operating with optimal traffic flow. After finding that roads in some locations were not congested on Saturdays, those tolls were eliminated.

Stockholm takes second place because it stepped prices in four stages for each of the morning and afternoon rush hours setting it low in between the two peak times and zero after the workday was complete. You can see that in the figure:

London and Norway tie for third place.

London qualifies because it has more than one level of price. Peak hour (all day) and not peak (all night). Because it is a flat all or none rate that never raises or lowers it does not distinguish between 8:00 AM and 2:00 PM, so it is a pretty crude price signal. But is certainly put a dent in congestion.

Two of the three Norwegian cities involved toll at a flat rate blunting their signal value, but the third (Tronheim) tolled variably, but had now been discontinued due to a political promise, showing that its initial intention was to raise revenue even though it operated as a TDM method while it lasted.

You can see how the need to finance infrastructure and the need to manage demand get completely intertwined. The reason this matters is that to many people it all just looks like taxes and its visibility gets diluted when road-user charging gets joined by fuel taxes and property taxes and other revenue sources needed to barely keep it working.

The sooner we switch from fuel-tax, plus property tax, plus any available tax, plus annoying tolls to pay-per-use everywhere, the sooner we’ll have clear pricing signals. The sooner we have clear pricing signals, (plus transit, plus bike paths, plus other things) the sooner we’ll have reliable networks.

But proper market pricing is the foundation.