Road Pricing Discounts

RUC discounting schemes have political acceptability as their core motivator, but location-based discounting can be complex, unfair and counterproductive. This article proposes an alternative that is simpler and fairer – one that addresses political acceptability while multiplying the pricing signals that motivate congestion-mitigation programming.

Some RUC (road-use-charging) cordon-based scheme designs provide discounts for those that live within a pricing cordon. This can be done intentionally, as is the case in London, or in the original New York City proposal. It can also happen by default with any scheme that only charges for cordon entry, since residents that travel locally or only re-enter after-hours will avoid the charge by fortune of geography and schedule.

In the face of unsustainable fuel taxes and contemplating more and larger charging schemes, up to and including continent-wide time-distance-and-place (TDP) charges, the question arises: “Can we provide a discount to motorists driving near their homes when we use a satellite-based, RUC system?”

Granting a “discount radius” to each motorist could accomplish this, but that increases the expense of the TDP charging computation. A slightly less expensive way is to assign discounts based on charging districts. However, I am generally against such discounts because I believe everyone should pay for what they consume. In an urban community we generally pay the same for utilities such as electricity or water regardless of our location and I think that should apply to mobility, as well.

Considering that discounts encourage consumption and tend to generate cross-subsidies, a more direct question to ask is: “Should we provide discounts for motoring?” or if we must discount, “Should we provide motoring discounts by geography, since that encourages automotive use in specific geographies, harming other residents sharing those locales?”

Geographic discounts say to motorists: “It is fine to drive as long as you are from here, but we’re going to charge visitors, since they contribute to congestion and to air-quality problems”. Such discounts can be seen as cynical, telling the local motorist: “We value your vote more than accessibility – or more than air quality.” Or “It’s not your car, it’s theirs.” Geographic discounts signal entitlement rather than conservation or increasing choices for mobility.

To the first question: “Should we provide TDP RUC discounts?”, there are at least two critical reasons to say yes:
  1. It is politically easier to sell: “we will charge a very modest fee, perhaps only nominal, to those motorists who are rate payers here, who work, go to school and church here, who are part of our local commercial and social community; and we will charge a market rate to visitors, motorists in transit, and commuters who do not live here.”

    Since the essential hurdle to universal, fair market pricing for roads is political, this reason alone is sufficient to argue for discounts. But is geographic discounting the only political lever to get RUC programs in place?

  2. Poorer motorists tend to drive fewer miles and closer to home. RUC fees, since they can compound the effect of increasing fuel prices, can serve to further exaggerate the have/have-not forces that constrain the mobility of poorer motorists). Hence a close-to-home RUC discount is biased in favor of poorer drivers and this is fair in that regard.

    This social reason is, in my opinion, sufficient on its own to force us to address discounting in some way.
Hence, I believe there are political and social reasons that make RUC discounting a critical conversation that we need to engage in now. Unfortunately, assigning discount by geography is expensive, unfair and counterproductive.
  1. Expensive. Granting a discount radius from a point (e.g. your home) or assigning discounts by district would be administratively expensive.

  2. Unfair. Person A and B are neighbors and live near the edge of a discounting “district”. Both live 5 miles from their respective jobs. Both drive the same type of car and both work the same shifts but A works inside the assigned district while B works in the adjacent district. This unfairness to B could be solved by the more complex and expensive radius approach.

  3. Counterproductive. Assigning discounts to short journeys has the undesired effect of discouraging cycling, doubling, moving, pooling, transit-use, trip avoidance, waiting and walking. This problem is worse than the issue of high administration expense that could be seen as a job generator (a benefit).
Mobility credits

There is another solution that is very inexpensive to operate, fair to all regardless of geographic happenstance and encourages cycling, doubling, moving, pooling, transit use, trip avoidance, waiting and walking. Furthermore, this alternate solution compounds pricing signals, and diminishes entitlement signals.

We have a hint about this solution from the Puget Sound Regional Council (Washington State, U.S.) trials:

If you give people money that they can spend on
RUC fees or keep, they attempt to keep some.

I propose providing mobility credits. These could most easily be distributed on a monthly or annual basis to the user of a pay-for-what-you-drive road-use meter and could be managed by a billing services operator. An annual allotment is preferred so that a motorist is not pressured to “use up” credits before month-end. An annual allotment could be used up well in advance or could even be carried over in the event that a motorist managed to avoid driving during chargeable times or on chargeable roads.

A credit distribution associated directly with the meter ensures that the metering device holds attraction for the motorist. For example, if such a meter was charging 5 to 50 cents per mile (depending on time and place) and was the only access to mobility credits, then a $250 annual credit against a $10 per month device usage fee, makes the meter an investment rather than an expense. Note that such credits would be easy for a government-operated tolling scheme to justify since most government schemes already provide free access to most roads.

Assume a vehicle-attached meter (i.e., a telematics sensor) operating as an electronic license plate and producing an anonymous, evidentiary record of road use from which can be generated a billing feed (our firm makes one such system, as an example). Grant each motorist mobility credits (for example, $20 per month – enough to travel 40 to 400 miles depending on time and place charge rates). In this way, a simple per-device accounting credit provides:
  1. discounted or free trips for a motorist who drives to shop, to church or to drop kids at school;

  2. an incentive for other motorists, including poorer motorists, who would like to conserve these credits for longer trips or trips that must be made in an automobile and to otherwise avoid, cycle, double, move, pool, take transit, wait or walk.
As we engage in the shift from paying based on fuel consumption to paying based on TDP metering, the question will arise whether meters should be paid for by the motorist, by the government, upfront or over-time. If they are distributed at no charge, mobility credits would make it especially attractive to road users to participate in the system, but the meter itself might not be valued, unless credits continued to be provided. If the meters are to be paid for, mobility credits should cover more than just meter costs to provide a net credit. I believe meters should be paid for over time, as are mobility handhelds, now in order to ease the expense. Such as arrangement would make the system easy for motorists to purchase: they would pay gradually for the meters, while receiving a net credit for their participation. It also makes it easy for a meter operator to finance millions of meters, since there is a guaranteed source of revenue to secure the loan.

Transferable Credits

But why stop at credits just to motorists who use the meter? What granting credits to transit users and cyclists? In the economic-fairness spirit of parking cash-outs that provide an equivalent transportation incentive to employees who do not use free employee parking, mobility credits could be provided to all people of driving age. These could be sold or given to others, creating a market analogous to that for carbon credits. Such an approach provides two valuable signals:
  1. the motorist who buys such credits is directly subsidizing some other person to use a non-automotive alternative – or at least to use their automobile on uncongested roads and at uncongested times;

  2. the value of not driving is now rewarded, as opposed to only having the act of driving taxed.

Creating a system on the internet for such an exchange is not terribly difficult. True, not all people have internet access, but most libraries provide access and most people have a friend who could help. What is needed is a unique mobility identifier for each person over driving age. In the extreme, an exchange office could be set up for handling this by mail, but it would be best to avoid such an expense and invest in ensuring that libraries have access and staff who can help new users. This has additional side benefits.

Mobility for all

Is it fair to provide mobility credits only for those over 16? Consider that parents of three- and nine-year-olds likely need to travel additional miles for schools, doctors, sports and the like. Consider also that many families have an older person or a disabled person who does not drive, rather depending on others in that family to drive for them. Mobility credits for every person would send even more cycling/walking/transit signals to a family with a couple of young children, especially if they could sell such credits to other motorists. Similarly, relieving the additional expense burden of transporting an aging family member to medical appointments promotes a greater sense of fairness.

In the balance between road-use charges and credits is the combined opportunity for addressing congestion, emissions and funding issues all while keeping an eye on fairness and political acceptance. Credits say: “we understand you require reasonable access”, while pricing says: “Please take treat that access like the precious resource it is.” Done right, the shift from fuel tax to pay-per-use can provide immediate solutions as well as additional health, lifestyle and urban quality benefits.

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