Governments can’t toll roads

We cannot solve the social and political barriers to nationwide road tolling using the kind of thinking common to Departments of Transportation over the past decade.

The progress of long-sought nation-wide tolling programs is abysmal. Austria, Switzerland, Germany, and Slovakia have achieved this for heavy-goods vehicles only and generally only on highways. This meager outcome – about one every two years – after a decade of planning and development has been made possible for a combination of reasons: commercial operators can arrange a measure of financial recovery, a modicum of trust in the reasonable argument that this must be done to fund roads, technocratic vision, and political will.

Even for these four countries, specific circumstances made it easier than for many others who wished to do this.  Size: three of the four countries are relatively small and culturally homogeneous. Foreign hauliers: all four are heavily traversed by foreign vehicles making cost recovery more urgent. Familiarity: some already had numerous tolled road segments. Industry and Trade: Germany saw that the technology selected for the task might revive its moribund high-tech export industry. No single reason would have sufficed in any of these cases, so hard is the political argument for nation-wide tolling.

Success with wide area urban tolling has been limited to a half-dozen instances: Bergen, London, Milan, Singapore, Stockholm, and Valletta.  Here, too, a number of factors were at play – different in each case. Some combination of bold leadership, political fortune, geo-morphology, severity of congestion, and trust in persuasive reasoning helped put these programs in place.

The good news is that systems such as these ten have been successful in achieving their goals. It is true that the London system – in hind-sight perhaps the least-well executed – has experienced a slide back to earlier congestion levels. But the reasons are understandable and the argument that London would be still worse off without it is worthy.

The bad news is that the expected domino effect of nationwide and urban tolling everywhere shows every sign of late arrival. The UK’s lorry road user charging system and it nationwide road-tolling system has been withdrawn or hobbled – even the majority of its congestion-related transportation innovation fund has been withdrawn, and the new Coalition government has recently provided only a timid promise to “work toward” tolling heavy goods vehicles. Programs from The Netherlands, Sweden, and several other states have been postponed, slowed down or iced.  Maybe the Czechs, French, Poles or Slovenes will pull something off in 2011 or 2012 to keep up our limp, one-every-two-years performance.

A program as difficult and complex as nationwide road user charging requires many circumstances to line up to be put into play. To have sufficient buy-in, you need things such as an affordable and reliable way to measure and collect fees for use, a trusted government, a way to guarantee privacy, a way (and the will) to educate drivers about the problem, politicians that can understand the need (and who are willing to speak out for it), and a set of social policies to address things such as revenue allocation and people made worse off by the change.

Instead of these things, any particular country is more likely to have circumstances such as drivers and journalists being fixated on misinterpreted constructs of entitlement and privacy, a history of government non-transparency re earmarks for fuel-tax revenues that make promises of correct revenue allocation hard to believe, politicians taking a position against to garner votes and a general lack of understanding of road funding and transport economics.

No driver is eager to pay for road-use – including those of us who understand the need for it and the ways to make it respect privacy – and only a minority of people understand that paying by time and place of use rather than with fuel or property taxes sets up pricing signals that can reduce congestion. Fewer still are aware that one dollar of road tolls has the congestion abatement effect of three dollars in fuel taxes – implying that fuel taxes are three times harder on lower income earners than are road tolls, and making transparent road tolls a social improvement over relatively hidden fuel taxes.

In spite of the hurdles, every year hundreds of transport economists study and write about the need for road-pricing and congestion pricing, often without paying tribute to the breadth of these social and political problems much less suggesting how we will overcome barriers to deployment. In the US, since the National Surface Transportation Infrastructure Finance Commission released its report in February 2009, the note of urgency has sharpened, but the discussion in the inner circles has generally been about what kind of trials, or what kind of technology or who among the state DOTs or the Federal government should lead system set up.

Shift in thinking
The cumulative weight of social, political and system complexity is dawning on the community that must solve the combined sustainable mobility problems of road funding, traffic congestion, vehicular emissions and national security (oil independence).  An increasing number of us are seeing that we have no choice but to address this from the driver’s perspective: “what’s in it for me?”

In other words, a direct focus on how to technically and programmatically shift from fuel tax to road-use charging is migrating toward a more nuanced focus on (1) how to gain acceptance and increase the desirability of autonomous telemetrics for fee collection, (2) how to compound the price signals possible from pay-by-use, (3) how to increase government confidence in the reliability, security, and privacy of telematics technology, (4) how enforce the use of such systems cost effectively and while respecting privacy, and (5) how to lower the capital and operational costs of such systems.

This new focus, should it take hold, means that we would consider user-focused market approaches rather than government tax-mandate approaches – at least in the near- to mid-term. Specifically, we would be designing programs for parking payments, pay-as-you-drive insurance, parking finders, green discounts, intelligent safety, navigation and other traveler services to which motorists would voluntarily subscribe in significant numbers because of convenience, savings and rewards. Systems on which road-tolling can depend later.

If this sounds more suited to the consumer design sensibilities of commercial telematics innovators than to tax programming schematics of National Governments or their Departments of Transportation, then how can we best tap into these? After all, there are not yet massive ten-million-subscriber markets for financial transactions for automotive use such as telematics-based parking and insurance payments. If this were to change, then cheap, autonomous road-tolling programs could hitch a ride on the same wireless infrastructure.

Governments could encourage parking reform by eradicating underpriced or free parking in urban areas. National governments could incent regional or urban governments to do this. National, State or Provincial governments could encourage insurance companies to switch to PAYD using a combination of incentives and regulatory change. The creation of markets attracts innovation, investment, and new tax-bases. Such innovation can easily be directed toward telematics-based financial systems for anonymous, autonomous metering systems for parking, insurance and road-use payment systems. Furthermore, such platforms also support safety, navigation and traveler services – things that have been shown to have an attraction for 40-60% of drivers in the EU.  These same systems can accelerate safety and congestion management in the immediate timeframe, all while paving the way to earlier tolling of congestion in urban areas or of certain classes of vehicles such as all electric cars. The bonus is that this approach minimizes the political fallout compared to massive nationwide tolling programming.

If these new markets were liberated and correctly regulated (privacy, fairness, interoperability, transparency, accessibility, etc), a metering and collection system for road-use charging could be built with private money in exact analogy to the way private money developed the current fuel distribution systems on which governments currently depend to collect fuel taxes.

Such programs as I describe may appear circuitous to advocates of the switch from fuel taxes to road use charging.  They are.  But all the evidence to date says that governments cannot go about universal road tolling directly. They need industry help.  But today industry waits for government tenders for trials or for massive tolling systems like the singularities in Germany or Stockholm. Transport ministers complain that driver populations grant no permission for an economic solution to the road funding and traffic congestion problem, but it is also the case that government behaviour in the form of parking and insurance regulation grants no markets to incent solutions.

How long will our transportation ministers and secretaries continue to beat their heads against the road-tolling wall?  How much longer until the lessons of markets and driver services will be used to ease the road to fuel taxation reform?


UK’s New Coalition and Lorry Tolling

The new UK Government published "The Coalition: our programme for government" containing at section 30 twelve points "to improve the well-being and quality of life" and ' to make the transport sector greener and more sustainable".

A handsome list until you study the language. Eleven of the 12 points use eleven assertive verbs: mandate, grant, reform, make, establish, support, turn, support, commit, stop and tackle. Unfortunately the only point that requires any political courage uses the much safer verb phrase "work towards".  Specifically, "we will work towards the introduction of a new system of HGV road user charging to ensure a fairer arrangement for UK hauliers."

What this means is that they will talk about this with their tails well tucked-in.

Any tolling system costs money to set up and to operate. The history to date is that these systems variously absorb from 20-40% of gross revenues. Since foreign hauliers comprise a slim minority of UK HGVs, they can hardly refund patriated vehicles while charging only foreign vehicles, as is often dangled. With political expediency begging for revenue neutrality, a costly system to collect what is effectively seen as a tax will be unacceptable. The argument that government needs money militates against revenue neutrality and an expensive collection system will destroy any residual appeal.

The Department for Transport, as everyone knows, has been running a set of trials for the past two years that have shown a high degree of both technical and commercial promise for autonomous tolling telematics. As is also becoming increasingly apparent there is no reason for a government to mandate and purchase a dedicated tolling system. Proven telematics technology now permits inexpensive (under £100) units to perform dozens of safety, navigation, parking, traveler and insurance services in addition to tolling management. That makes if possible to have private companies operate profitable services while providing tolling services with little or no capital or operational expense to the taxpayer.

In this circumstance, to deploy a paper vignette system would be absurd and installing a large numbers of DSRC gantries, virtually immoral. The way to do this using private risk capital and 2010 engineering innovation is to set up two to four tolling licenses for the UK and let those for ten-year increments to two to four commercial operators. These operators would be offered a small percentage (3-5%) of tolls collected and left to their own devices to determine competitive services, under reasonable regulations, and to earn a profit.

May the smartest companies do well.


Leapfrog, Anyone?

It is commonly thought by road-pricing pundits of the nation-wide tolling persuasion that the United States is a decade behind the European Union in readiness to execute. That’s certainly what I thought in 2003, when Minister Alastair Darling was pitching a national road-pricing system in Britain and the London Congestion Charge was still flush with early success.  I no longer think this is true.

Of all the changes since EU optimism has dampened, two stand out.  The EU has canceled, delayed, curtailed or diminished more road-pricing systems and proposals than it has sustained, and the focus has shifted from environmental sustainability (congestion, emissions, livability) to funding.

This sea-change from the benevolent chirps of EU congestion pricing to the grizzly roar of a starving US Highway Trust Fund is decisive. Money speaks louder than livability (even as BP pours oil into the Gulf, anti-tolling newspaper comments from people who can’t make the connection continue apace in Toronto).

This has a couple of implications. The first is that the US is getting serious about national road-pricing and balanced against the EU's halting accomplishments, this has closed the execution gap to 3 or 4 years. I split this shrinkage evenly between the EU's faltering progress and the recent American awakening. While that hardly predicts when a full shift will occur, it says the US may close the gap completely in the next two years.

The second is that a panic-based focus on funding sustainability engenders poor system designs. A "money-now, demand-management-later" criteria leads to solutions that serve to rob us of demand-management tools that transport economists have demanded for 55 years. Every dollar sunk into wrong-focused solutions will cost us ten dollars to undo, later.

As an example, a draft US study in progress currently lists eight charging solutions but only one provides the full tool-set needed to address congestion, funding and emissions, while promoting a shift to EVs. While the well-respected team working on this understands the risks, cash-starved decision-makers acting on the final report may not. We run the risk of politicians selecting an expedient pathway to money, say by reading odometers or tolling only limited access highways that will heavily mortgage our future ability to manage demand. It may even force us into the long-discredited view that we should try to build our way out of congestion.

We should think harder about why and where we are about to leap.