Electronic road pricing: An idea whose time may never come

Hong Kong's experiment with electronic road pricing showed that the technology was completely feasible. However, the government was unable to implement the scheme due to strong opposition from a public that perceived it as an invasion of privacy and a tax increase. This outcome was partly a result of forces unique to Hong Kong's political culture as well as both strategic and tactical errors made by the Hong Kong government in presenting its proposal. However, the Hong Kong experience also raises serious questions about whether a sophisticated road pricing scheme will ever be acceptable in a democratic urban polity.     

Equity effects of congestion pricing: Quantitative methodology and a case study for Stockholm

It is widely recognised that congestion pricing could be an effective measure to solve environmental and congestion problems in urban areas—a reform that normally also would generate a net welfare surplus. Despite this the implementation of congestion pricing has been very slow. One reason for a low public and political acceptance could be that equity impacts have not been given enough concern. In studies of distributional impacts of congestion pricing it has often been claimed that the reform is regressive rather than progressive even if there are studies claiming the opposite. We develop a method for detailed, quantitative assessment of equity effects of road pricing and apply it to a real-world example, namely a proposed congestion-charging scheme for Stockholm. The method simultaneously takes into account differences in travel behaviour, in preferences (such as values of time) and in supply of travel possibilities (car ownership, public transport level-of-service etc.). We conclude that the two most important factors for the net impact of congestion pricing are the initial travel patterns and how revenues are used. Differences in these respects dwarf differences in other factors such as values of time. This is accentuated by the fact that the total collected charges are more than three times as large as the net benefits. With respect to different groups, we find that men, high-income groups and residents in the central parts of the city will be affected the most. If revenues are used for improving public transport, this will benefit women and low-income groups the most. If revenues are used for tax cuts, the net benefits will be about equal for men and women on the average, while it naturally will benefit high-income groups. Given that it is likely that the revenues will be used to some extent to improve the public transport system, we conclude that the proposed congestion-charging scheme for Stockholm is progressive rather than regressive.     

The Gothenburg congestion charge. Effects,design and politics

This paper summarizes the traffic effects of the Gothenburg congestion charges introduced in 2013. The system is similar to the system introduced in Stockholm in 2006; both are designed as time-of-day dependent cordon pricing systems. We find that many effects and adaptation strategies are similar to those found in Stockholm, indicating a high transferability between smaller and larger cities with substantial differences in public transport use. However, there are also important differences regarding some of the effects, the accuracy of the model forecasts and public support arising from different topologies, public transport use, congestion levels and main objectives communicated to the public. Finally, the Gothenburg case suggests that whether congestion charges are introduced or not depends on the support among the political parties, and that this is determined primarily by the prevailing institutional setting and power over revenues, and to a lower extent by the public support, and benefits from congestion reduction.     

Revenue management in the parking industry: a multiple garage intelligent reservation model

This paper explores how advanced reservations, coupled with dynamic pricing (based on booking limits) can be used to maximize parking revenue. An integer programing formulation that maximizes parking revenue over a system of garages is presented. Furthermore, an intelligent parking reservation model is developed that uses an artificial neural network procedure for online reservation decision-making. Finally, the paper provides some strategic and managerial implications of multi-garage revenue management systems, and discusses techniques for identifying and implementing micro-market segmentation in the parking industry.     

Electronic toll collection

Electronic toll collection (ETC) offers the opportunity for toll facility operators to supply a substantially greater amount of traffic capacity than any other currently available form of toll collection. The current interest in ETC derives from the proposals in a number of countries to introduce urban tollways, using the net toll receipts to recover the cost of the capital investment plus an acceptable profit margin for those taking the financial risk. This paper outlines the main economic, technical, and administrative features of ETC in the context of toll charges that are determined by the rules of capital cost recovery. Electronic road pricing (ERP) as a mechanism for implementing full road user charging (in line with economic principles of efficient use of road space) is not the topic of this paper, given the predominantly financial basis of setting tolls for private roads. The underlying rationale for toolroads in the political climate of most nations is not suggestive of any plan to revise the pricing regime in line with ERP upon reversion of the infrastructure to the public sector when the capital costs are repaid. It is assumed that the tollroads will revert to free roads in line with the existing road system, and that road users will continue to contribute towards the costs of maintaining the road system by the traditional pricing mechanisms (i.e. fuel taxes, vehicle registration, fees, etc.).     

Optimal congestion taxes in a time allocation model

The purpose of this paper is to study optimal congestion taxes in a time-allocation framework. This makes it possible to distinguish taxes on inputs in the production of car trips and taxes on transport as an activity. Moreover, the model allows us to consider the implications of treating transport as a demand, derived from other activities. We extend several well known tax rules from the public finance literature and carefully interpret the implications for the optimal tax treatment of passenger transport services. The main findings of the paper are the following. First, if governments are limited to taxing market inputs into transport trip production, the time-allocation framework: (i) provides an argument for taxing congestion below marginal external cost, (ii) implies a favourable tax treatment for time-saving devices such as GPS, and (iii) provides a previously unnoticed argument for public transport subsidies. Second, if the government has access to perfect road pricing that directly taxes transport as an activity, all previous results disappear. Third, in the absence of perfect road pricing, the activity-specific congestion attracted by employment centres, by shopping centres or by large sports and cultural events should be corrected via higher taxes on market inputs in these activities (e.g., entry tickets, parking fees, etc.).     

Credible commitment and congestion pricing

Transportation analysts frequently assert that congestion pricing’s political obstacles can be overcome through astute use of the toll revenue pricing generates. Such “revenue recycling,” however, implies that the collectors of the toll revenue will not be its final recipients, meaning that any revenue recipient must believe that the revenue collector will honor promises to deliver the money. This raises the potential for credible commitment problems. Promises to spend revenue can solve one political problem, because revenue is an easy benefit to understand, but create another one, because revenue is easy to divert. Revenue recycling may therefore not be a promising way to build political support for congestion pricing. We highlight the role commitment problems have played efforts to implement congestion pricing, using examples from around the world and then focusing on California. Because congestion reduction is a more certain benefit than any particular use of the toll revenue, demonstration projects, rather than revenue promises, will be key to pricing’s political success.     

Social welfare analysis of investment public–private partnership approaches for transportation projects

This paper has two objectives: (i) to introduce a new approach in order to gain widespread support for road pricing; and (ii) to develop a detailed social welfare analysis for road pricing schemes. We first describe our novel approach that stimulates public support for road pricing, which we refer to as an investment public–private partnership, or IP3. This approach returns a significant portion of the economic value created by road pricing back to the citizens who own the newly priced facility. We then present a social welfare framework that estimates the benefits and costs of using the IP3 approach on an urban transportation network. A P3 project’s impact on overall social welfare provides a more comprehensive evaluation criterion than the often-used Value for Money (VfM) analysis. Apart from several theoretical studies, a detailed social welfare analysis that includes all major P3 project stakeholders is absent from the literature. We use Fresno, California as our case study in order to conduct a welfare analysis on IP3s. Our results show that system-optimal tolling favors average users, but that government—and consequently taxpayers—should pay for costly tolling systems (negative profits). In contrast, unlimited profit-maximizing tolls raise substantial profits for government, for the infrastructure’s citizen-owners, and for the private sector, but the average user is worse off. From a social-welfare perspective, one should search for a Pareto improvement under which all major stakeholders are better off. Our estimates indicate that a mixed public and private tolling scheme offers such an improvement.     

What type of road pricing scheme might appeal to politicians? Viewpoints on the challenge in gaining the citizen and public servant vote by staging reform

The greatest hurdle facing road pricing reform is political commitment. With rare exception, efforts to introduce significant reform in road pricing, aimed at raising sufficient revenue to ensure that road investment and ongoing maintenance is secured, without an additional impost to users above current outlays, while at the same time reducing traffic congestion, has fallen largely on politically non-supportive ears. The big challenge is to convince politicians (and their advisers) that it is possible to reform road pricing so that users are made better off (at least the great majority) in terms of time spent travelling and monies outlaid, and that government secures growing levels of revenue, but with at least some funds being used to improve public transport and the existing road network. This paper identifies the major issues that make much of the academic research into road pricing somewhat limited in terms of achieving real change. Staging reform is an appealing way forward, but ensuring the order and timing of events to secure progress is the big challenge. We offer some suggestions, including some ideas on new language designed to increase the level of buy in, and recognise that progress through action will require compromises in respect of an ‘ideal’ economically efficient pricing reform agenda.     

Fleet purchase behavior: decision processes and implications for new vehicle technologies and fuels

Vehicle fleets are a poorly understood part of the economy. They are important, though, in that they purchase a large share of light-duty vehicles and are often targeted by governments as agents of change. We investigate fleet purchase behavior, using focus groups, interviews, and mail and telephone surveys. We categorize fleets into four different decision-making structures (autocratic, bureaucratic, hierarchic, and democratic), determine what share of the market sector each represents, describe salient features of each behavioral model, and explore implications of that behavior for industry investment and public policy.     

Towards marginal cost pricing: A comparison of alternative pricing systems

European urban areas are marred by the problems of congestion and environmental degradation due to the prevailing levels of car use. Strong arguments have thus been put forward in support of a policy based on marginal cost pricing (European Commission 1996). Such policy measures – which would force private consumers to pay for a public service that was previously provided "for free" – are, however, notoriously unpopular with the general public and hence also with their elected representatives – the politicians. There is thus an obvious tension between economic theory, which suggests that marginal cost pricing is the welfare maximising solution to urban transport problems, and practical experience, which suggests that such pricing measures are unwanted by the affected population and hence hard to implement through democratic processes. The AFFORD Project for the European Commission has aimed to investigate this paradox and its possible solutions, through a combination of economic analysis, predictive modelling, attitudinal surveys, and an assessment of fiscal and financial measures within a number of case study cities in Europe. In this paper the methodology and results obtained for the Edinburgh case study are reported in detail. The study analyses alternative road pricing instruments and compares their performance against the theoretical first best situation. It discusses the effect of coverage, location, charging mechanism and interaction with other instruments. The paper shows that limited coverage in one mode may lead to a deviation from the user pays principle in other modes, that location is as important as charge levels and that assumptions about the use of revenues are critical in determining the effect on equity and acceptability. Finally the results show that a relatively simple smart card system can come close to providing the economic first best solution, but that this result should be viewed in the context of the model assumptions.     

Time-dependent area-based pricing for multimodal systems with heterogeneous users in an agent-based environment

In this paper, we investigate an area-based pricing scheme for congested multimodal urban networks with the consideration of user heterogeneity. We propose a time-dependent pricing scheme where the tolls are iteratively adjusted through a Proportional–Integral type feedback controller, based on the level of vehicular traffic congestion and traveler’s behavioral adaptation to the cost of pricing. The level of congestion is described at the network level by a Macroscopic Fundamental Diagram, which has been recently applied to develop network-level traffic management strategies. Within this dynamic congestion pricing scheme, we differentiate two groups of users with respect to their value-of-time (which related to income levels). We then integrate incentives, such as improving public transport services or return part of the toll to some users, to motivate mode shift and increase the efficiency of pricing and to attain equitable savings for all users. A case study of a medium size network is carried out using an agent-based simulator. The developed pricing scheme demonstrates high efficiency in congestion reduction. Comparing to pricing schemes that utilize similar control mechanisms in literature which do not treat the adaptivity of users, the proposed pricing scheme shows higher flexibility in toll adjustment and a smooth behavioral stabilization in long-term operation. Significant differences in behavioral responses are found between the two user groups, highlighting the importance of equity treatment in the design of congestion pricing schemes. By integrating incentive programs for public transport using the collected toll revenue, more efficient pricing strategies can be developed where savings in travel time outweigh the cost of pricing, achieving substantial welfare gain.     

Congestion and variable user charging as an effective travel demand management instrument

Interest at the political level in congestion charging is gaining pace as cities struggle with ways to reduce the effects of growing traffic congestion on the liveability of cities. Despite a long history of promotion of a wide array of travel demand management (TDM) initiatives, very few have had a noticeable impact on the levels of traffic on the road networks of metropolitan areas. TDM success in this context has almost become ‘band-aid’ in the absence of a pricing strategy that not only promotes efficient use of the system but also hypothecates revenues to support essential complementary infrastructure and services such as public transport. This paper takes a look at the stream of pricing consciousness that is surfacing around the world. Although very few jurisdictions have implemented congestion charging, or any form of efficient variable car and truck user charging, the winds of change are well in place. The adage “it is not a matter of if but of when” seems to be the prevailing view. Our overview of global trends in positioning the debate and hopefully follow-through commitment to implementation provides a backdrop to papers submitted for this special issue on travel demand management. The predominance of papers on pricing is indicative of the priority that must be given to efficient charging and revenue disbursement.     

Distinguishing the land use effects of road pricing based on the urban form attributes

This paper studies the effects of road pricing on land use under different development scenarios (business as usual scenario and transit oriented development scenario) by a quantitative method, which combines the integrated land use and transport interaction model (TRANUS model) with the scenario-planning techniques. Moreover, in order to further analyze the differences of the land use effects of road pricing on traffic analysis zones (TAZs) with different urban form attributes, a quantitative classification method combining factor analysis and cluster analysis is then used to quantitatively classify TAZs. The results demonstrate that the effects of road pricing on the land use of a specific region depend on the urban form attributes of the region. The higher the densities of employments and population, and better street design (high densities of street and intersections) and public transportation condition, the less the region is negatively affected by road pricing, and vice versa. More importantly, rail transit can alleviate the negative impact of road pricing on commercial development and population concentration of the region. Therefore, before introducing a road pricing policy, it is necessary to develop public transport system, especially rail transit.     

The role of attitude structures,direct experience and reframing for the success of congestion pricing

Congestion pricing was introduced in Stockholm in 2006, first as a trial followed by a referendum, and permanently from 2007. Public attitudes to the charges became more negative during the period from the decision to the start of the system. Once the trial started, public attitudes became dramatically more positive over the following years, going from 2/3 against the charges to more than 2/3 in favor of the charges. Self-reported changes in behavior and attitudes considerably underestimate actual changes: about 3/4 of the decrease in car trips and more than half of the change in attitudes seem to have gone unnoticed by respondents, ex post. Self-interest and belief in the charges’ effectiveness strongly affect attitudes at any given point in time, but can only explain a minor part of the change in attitudes. I suggest that the debate and the shift in attitudes can be understood as a public and political reframing of the congestion charges over time.     

Road pricing: some further comments

This paper extends the discussion of certain problems associated with road pricing raised in an earlier contribution to this journal. Firstly it is shown that where the value of time varies between different groups of traffic using the same congested road, optimal road pricing requires price discrimination between the groups such that those with the lowest value of time pay the highest charge and suffer the greatest losses. However, a uniform price based on an “equity” value of time would reduce the relative distributional effects. Secondly the paper takes up the suggestion that queueing (and by extension congestion) may be positively helpful in the allocation of resources and shows that this is not in general correct although there are situations in which the use of queueing alongside conventional pricing may have a role to play. Finally it is argued that governments’ apparent lack of enthusiasm for road pricing stems as much from political considerations as the more technical problems of applying it.     

The acceptability of road pricing in Vienna: the preference patterns of car drivers

The acceptability of road pricing has attracted considerable attention among researchers over the last decade, as is evident in the amount of literature about transport and environmental economics. The general conclusion from these studies has been that there is low acceptability for road pricing among car users. In this paper, we add more knowledge to the existing literature by conducting an acceptability study of road pricing in Vienna, where such a study has never been conducted before. We used a replication study approach where a previous approach used in the EU research project AFFORD (acceptability of fiscal and financial measures and organisational requirements for demand management) was replicated for Vienna and further supplemented with a conjoint analysis. In order to examining whether the Vienna study confirms previous findings. We investigated the acceptability of two concrete policy packages factors influencing this acceptability, and preference patterns that can be used in designing a road pricing policy for Vienna. The survey reveals a higher acceptability if road pricing schemes lead to perceived personal benefits. According to the multivariate analyses, the “personal outcome expectations”, “social norm” and “perceived effectiveness” variables account for more than 50 % of the criterion variance and therefore these are the most influential factors. Road pricing schemes can be an effective transport management instrument for a city particularly if they are associated with direct investment in public transport and public infrastructure. Thus, personal benefits can be perceived more easily and direct effects can be expected.     

Road pricing: An international perspective

This paper reviews experience with road pricing in Europe and Asia. It considers the objectives of road pricing, and demonstrates that differences in objectives lead to differences in scheme design and performance. It reviews the criteria for design of road pricing systems, and the development of charging structures and technologies to meet those criteria. In particular it discusses the relative merits of pre-determined and congestion-dependent charging structures, and of off-vehicle and on-vehicle charging systems. It assesses the performance of road pricing systems to date, discusses objections to road pricing and demonstrates that the role of road pricing within a wider transport strategy and the use made of the revenue generated, will be important determinants of public acceptability. Finally it assesses the relative merits of alternative approaches to implementation and argues that these will need to pay as much regard to public acceptability as to technical performance.     

The socio-cognitive links between road pricing acceptability and changes in travel-behavior

The objective of this study is to examine the effect of road pricing on people’s tendency to adapt their current travel behavior. To this end, the relationship between changes in activity-travel behavior on the one hand and public acceptability and its most important determinants on the other are investigated by means of a stated adaptation experiment. Using a two-stage hierarchical model, it was found that behavioral changes themselves are not dependent on the perceived acceptability of road pricing itself, and that only a small amount of the variability in the behavioral changes were explained by socio-cognitive factors. The lesson for policy makers is that road pricing charges must surpass a minimum threshold in order to entice changes in activity-travel behavior and that the benefits of road pricing should be clearly communicated, taking into account the needs and abilities of different types of travelers. Secondly, earlier findings concerning the acceptability of push measures were validated, supporting transferability of results. In line with other studies, effectiveness, fairness and personal norm all had a significant direct impact on perceived acceptability. Finally, the relevance of using latent factors rather than aggregate indicators was underlined.     

Man and his transport behaviour Part 4a. User response to price changes: application of the ‘threshold’ concept

Summary

(1) The response of an individual consumer to change in such characteristics as price will be to change behaviour at a critical point, a ‘threshold’ at which a change of behaviour is perceived to be beneficial.

(2) Most choices can be viewed as binary, for example, between pairs of transport modes. A cumulative normal distribution of responses will give an S‐shaped curve, the mid‐point being at the average threshold value.

(3) An aggregate demand curve should show the response of a given group of people to a range of price changes at one point in time. Most curves derived from revealed behaviour do not permit this. To some extent, a demand curve must be derived from interviews and other tests, giving hypothetical behaviour. Such methods are used in non‐transport consumer tests, and work by Brög et al. gives a similar picture for transport users, supporting the concept of the S‐shaped curve.

(4) Allowance for frequency of trip‐making modifies this picture, suggesting that a smoother curve may be appropriate for some conditions, such as non‐work trips. These approaches may be combined by use of catastrophe theory, with two control factors. The hysteresis effect is found around the threshold where repeated changes in the basic stimulus produce successively smaller responses.

(5) There is some evidence of symmetrical response by public transport users to real increases and reductions in cash‐paid graduated fares, but this is not the case where different forms of pricing are involved.

(6) An example of threshold effects in private transport may be found in the monitoring of tolls on the Itchen Bridge by Atkins. Demand became particularly sensitive to price in a certain range.

(7) In the public transport field, there is similar evidence from the experience of introducing flat or zonal fares where graduated fares previously applied. Where travelcards are sold, the effect is much greater, and cases such as the West Midlands show little if any effect on sales despite real price increases. Here, trips are about 7% higher than would have been expected for the same revenue target, had graduated fares been retained. However, it may well be possible to exceed the threshold, especially where fares simplification and increases are combined, as the Trondheim experience suggests.