Using the revenues from congestion pricing

The economic theory behind congestion pricing relies on using the revenues to help compensate highway users. But can practical methods of using revenues come close to achieving this compensation, and still have salient appeal to important political groups? This paper investigates the possibilities for designing a package of revenue uses that can achieve these twin goals. The suggested approach returns two-thirds of the revenues to travelers through travel allowances and tax reductions, and uses the rest to improve transportation throughout the area, including affected business centers. By replacing regressive sales and fuel taxes, this approach offsets the tendency of the prices alone to have a regressive distributional impact. By lowering taxes, funding new highways, improving transit, and upgrading business centers, the package provides inducements for support from several key interest groups. The potential amounts of money involved are discussed using nationwide data, and in more detail using a case study of ubiquitous facility pricing throughout the Los Angeles region. Illustrative calculations of the effects on various individuals confirm that such a package can create net benefits for a wide spectrum of people and interest groups.     

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.     

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.     

Anticipating new-highway impacts: Opportunities for welfare analysis and credit-based congestion pricing

Pricing of roadways opens doors for infrastructure financing, and congestion pricing seeks to address inefficiencies in roadway operations. This paper emphasizes the revenue-generation opportunities and welfare impacts of flat-tolling schemes, standard congestion pricing, and credit-based congestion pricing policies. While most roadway investment decisions focus on travel time savings for existing trips, this work turns to logsum differences (which quantify changes in consumer surplus) for nested logit specifications across two traveler types, two destinations, three modes and three times of day, in order to arrive at welfare- and revenue-maximizing solutions. This behavioral specification is quite flexible, and facilitates benefit-cost calculations (as well as equity analysis), as demonstrated in this paper.The various cases examined suggest significant opportunities for financing new roadway investment while addressing congestion and equity issues, with net gains for both traveler types. Application results illustrate how, even after roadway construction and maintenance costs are covered, receipts may remain to distribute to eligible travelers so that typical travelers can be made better off than if a new, non-tolled road had been constructed. Moreover, tolling both routes (new and old) results in substantially shorter payback periods (5 versus 20 years) and higher welfare outcomes (in the case of welfare-maximizing tolls with credit distributions to all travelers). The tools and techniques highlighted here illustrate practical methods for identifying welfare-enhancing and cost-recovering investment opportunities, while recognizing multiple user classes and appropriate demand elasticity across times of day, destinations, modes and routes.     

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.     

Surrogate‐based optimization of cordon toll levels in congested traffic networks

The benefit, in terms of social surplus, from introducing congestion charging schemes in urban networks is depending on the design of the charging scheme. The literature on optimal design of congestion pricing schemes is to a large extent based on static traffic assignment, which is known for its deficiency in correctly predict travel times in networks with severe congestion. Dynamic traffic assignment can better predict travel times in a road network, but are more computational expensive. Thus, previously developed methods for the static case cannot be applied straightforward. Surrogate‐based optimization is commonly used for optimization problems with expensive‐to‐evaluate objective functions. In this paper, we evaluate the performance of a surrogate‐based optimization method, when the number of pricing schemes, which we can afford to evaluate (because of the computational time), are limited to between 20 and 40. A static traffic assignment model of Stockholm is used for evaluating a large number of different configurations of the surrogate‐based optimization method. Final evaluation is performed with the dynamic traffic assignment tool VisumDUE, coupled with the demand model Regent, for a Stockholm network including 1240 demand zones and 17 000 links. Our results show that the surrogate‐based optimization method can indeed be used for designing a congestion charging scheme, which return a high social surplus. Copyright © 2016 John Wiley & Sons, Ltd.     

Peak period tolls: Precepts and prospects

This article presents the economic rationale for road pricing and provides some scale on the magnitude of peak period tolls that might be justified. It discusses the impacts of such tolls on congestion, air quality and economic development and suggests a long term strategy towards areawide implementation of peak period pricing. It discusses current trends which are increasing the likelihood for implementation of congestion pricing and toll roads in the future. In particular, it discusses some aspects of the 1991 Intermodal Surface Transportation Efficiency Act (ISTEA) which will eliminate some of the current restraints on congestion pricing and toll highways.Abbreviations ETC Electronic toll collection - FHWA Federal Highway Administration - HOV High occupancy vehicle - ISTEA Intermodal Surface Transportation Efficiency Act - LOS Level of service - TCM Transportation control measure - V/C Volume-to-capacity ratio - VMT Vehicle mile(s) of travel - vphpl Vehicles per hour per lane     

Overcoming public aversion to congestion pricing

We have completed a survey of Southern California residents designed to examine whether the details of policy design can make congestion pricing more attractive to the motoring public. A congestion fee proposal is often regarded as simply a tax increase; also, especially in the US, motorists apparently regard the use of congestion fees as coercive, in that they often have few if any practical alternatives to paying the fee. Unlike most opinion surveys on congestion pricing, our survey was quite explicit about the fate of the collected revenues. For example, we presented respondents with policies that returned a substantial portion of the revenues to the public, either in the form of cash (through reductions in sales taxes and vehicle registration fees or through income tax credits) or in the form of coupons to be used for vehicle emissions equipment repair, transit, and the like. In addition, we examined whether the typically intense opposition to congestion pricing if applied only to a part of a roadway, leaving the motorist free to choose between free lanes and toll lanes. We find that a promise to offset the imposition of congestion fees by other taxes can result in a 7% point increase in support for congestion pricing policies, and the restriction of congestion pricing to a single lane on a freeway attracts from 9% to 17% points of additional support.     

Distributional impacts of road pricing: The truth behind the myth

This paper shows that road pricing can be regressive, progressive or neutral, and refutes the generalised idea that road pricing is always regressive. The potential distributional impacts of a road pricing scheme are assessed in three English towns. It is found that impacts are town specific and depend on where people live, where people work and what mode of transport they use to go to work. Initial impacts may be progressive even before any compensation scheme for losers is taken into account. When the situation before the scheme is implemented is such that majority of drivers entering the area where the scheme would operate come from households with incomes above the average, it can be expected that, once the scheme is implemented, these drivers coming from rich households will continue to cross the cordon and will be prepared to pay the charge. In such a case the overall effect will be that on average, rich people will pay the toll and poor people will not.     

Existence of self-financing and Pareto-improving congestion pricing: Impact of value of time distribution

This paper considers a static congestion pricing model in which travelers select a mode from either, driving on highway or taking public transit, to minimize a combination of travel time, operating cost and toll. The focus is to examine how travelers’ value of time (VOT), which is continuously distributed in a population, affects the existence of a pricing-refunding scheme that is both self-financing (i.e. requiring no external subsidy) and Pareto-improving (i.e. reducing system travel time while making nobody worse off). A condition that insures the existence of a self-financing and Pareto-improving (SFPI) toll scheme is derived. Our derivation reveals that the toll authority can select a proper SFPI scheme to distribute the benefits from congestion pricing through a credit-based pricing scheme. Under mild assumptions, we prove that an SFPI toll always exists for concave VOT functions, of which the linear function corresponding to the uniform distribution is a special case. Existence conditions are also established for a class of rational functions. These results can be used to analyze more realistic VOT distributions such as log-normal distribution. A useful implication of our analysis is that the existence of an SFPI scheme is not guaranteed for general functional forms. Thus, external subsidies may be required to ensure Pareto-improving, even if policy-makers are willing to return all toll revenues to road users.     

Optimal toll locations and toll levels in congestion pricing schemes: a case study of Stockholm

As congestion pricing has moved from theoretical ideas in the literature to real-world implementation, the need for decision support when designing pricing schemes has become evident. This paper deals with the problem of finding optimal toll levels and locations in a road traffic network and presents a case study of Stockholm. The optimisation problem of finding optimal toll levels, given a predetermined cordon, and the problem of finding both optimal toll locations and levels are presented, and previously developed heuristics are used for solving these problems. For the Stockholm case study, the possible welfare gains of optimising toll levels in the current cordon and optimising both toll locations and their corresponding toll levels are evaluated. It is shown that by tuning the toll levels in the current congestion pricing cordon used in Stockholm, the welfare gain can be increased significantly, and furthermore improved by allowing a toll on a major bypass highway. It is also shown that, by optimising both toll locations and levels, a congestion pricing scheme with welfare gain close to what can be achieved by marginal social cost pricing can be designed with tolls being located on only a quarter of the tollable links.     

Why experience changes attitudes to congestion pricing: The case of Gothenburg

Many cities have seen public support for congestion charges increase substantially after charges have been introduced. Several alternative explanations of this phenomenon have been suggested, but so far little evidence has been available to assess the relative importance of these explanations. We study attitudes to congestion pricing in Gothenburg before and after congestion charges were introduced in January 2013. Attitudes to the charges did indeed become more positive after the introduction, just as in previous cities. Using a two-wave postal survey, we separate contributions to the attitude change from a number of sources: benefits and costs being different than anticipated, use of hypothecated revenues, reframing processes, and changes in related attitudes such as attitudes to environment, equity, taxation and pricing measures in general. We conclude that the dominant reason for the attitude change is status quo bias, rather than any substantial changes in beliefs or related attitudes, although some of these factors also contribute. Contrary to a common belief, nothing of the attitude change is due to benefits being larger than anticipated.     

A forecast air pollution model applied to a hypothetical urban road pricing scheme: An empirical study in Madrid

Reducing the air pollution from increases in traffic congestion in large cities and their surroundings is an important problem that requires changes in travel behavior. Road pricing is an effective tool for reducing air pollution, as reflected currently urban road pricing outcomes (Singapore, London, Stockholm and Milan). A survey was conducted based on establishing a hypothetical urban road pricing system in Madrid (a random sample size n = 1298). We developed a forecast air pollution model with time series analysis to evaluate the consequences of possible air pollution decreases in Madrid. Results reveal that the hypothetical road pricing for Madrid could have highly significant effects on decreasing air pollution outside of the city and in the inner city during the peak operating time periods of maximum congestion (morning peak hours from 7:00 to 10:00 and evening peak hours from 18:00 to 20:00). Furthermore, this system could have significant positive effects on a shift toward using public transport and non-motorized modes inside the hypothetical toll zone. This reveals that the system has a high capacity to motivate a decrease in air pollution and impose more sustainable behavior for public transport users.     

Rationing and pricing strategies for congestion mitigation: Behavioral theory,econometric model,and application in Beijing

Some travel demand management policies such as road pricing have been widely studied in literature. Rationing policies, including vehicle ownership quota and vehicle usage restrictions, have been implemented in several megaregions to address congestion and other negative transportation externalities, but not well explored in literature. Other strategies such as Vehicle Mileage Fee have not been well accepted by policy makers, but attract growing research interest. As policy makers face an increasing number of policy tools, a theoretical framework is needed to analyze these policies and provide a direct comparison of their welfare implications such as efficiency and equity. However, such a comprehensive framework does not exist in literature. To bridge this gap, this study develops an analytical framework for analyzing and comparing travel demand management policies, which consists of a mathematical model of joint household vehicle ownership and usage decisions and welfare analysis methods based on compensating variation and consumer surplus. Under the assumptions of homogenous users and single time period, this study finds that vehicle usage rationing performs better when relatively small percentages of users (i.e. low rationing ratio) are rationed off the roads and when induced demand elasticity resulting from congestion mitigation is low. When the amount of induced demand exceeds a certain level, it is shown analytically that vehicle usage restrictions will always cause welfare losses. When the policy goal is to reduce vehicle travel by a fixed portion, road pricing provides a larger welfare gain. The performance of different policies is influenced by network congestion and congestibility. This paper further generalizes the model to consider heterogenous users and demonstrates how it can be applied for policy analysis on a real network after careful calibration.     

The role of volume-delay functions in forecasting and evaluating congestion charging schemes: the Stockholm case

This paper uses observations from before and during the Stockkholm congestion charging trial in order to validate and improve a transportation model for Stockholm. The model overestimates the impact of the charges on traffic volumes while at the same time it substantially underestimates the impact on travel times. These forecast errors lead to considerable underestimation of economic benefits which are dominated by travel time savings. The source of error lies in the static assignment that is used in the model. Making the volume-delay functions (VDFs) steeper only marginally improves the quality of forecast but strongly impacts the result of benefit calculations. We therefore conclude that the dynamic assignment is crucial for an informed decision on introducing measures aimed at relieving congestion. However, in the absence of such a calibrated dynamic model for a city, we recommend that at least a sensitivity analysis with respect to the slope of VDFs is performed.     

A dynamic stochastic model for evaluating congestion and crowding effects in transit systems

One of the most common motivations for public transport investments is to reduce congestion and increase capacity. Public transport congestion leads to crowding discomfort, denied boardings and lower service reliability. However, transit assignment models and appraisal methodologies usually do not account for the dynamics of public transport congestion and crowding and thus potentially underestimate the related benefits.This study develops a method to capture the benefits of increased capacity by using a dynamic and stochastic transit assignment model. Using an agent-based public transport simulation model, we dynamically model the evolution of network reliability and on-board crowding. The model is embedded in a comprehensive framework for project appraisal.A case study of a metro extension that partially replaces an overloaded bus network in Stockholm demonstrates that congestion effects may account for a substantial share of the expected benefits. A cost-benefit analysis based on a conventional static model will miss more than a third of the benefits. This suggests that failure to represent dynamic congestion effects may substantially underestimate the benefits of projects, especially if they are primarily intended to increase capacity rather than to reduce travel times.     

Distributional effects of road pricing: Assessment of nine scenarios for Paris

The starting point of this paper is to consider that there is no general answer to the question of the equity of urban road pricing. We therefore simulate and compare the distributional effects on commuters of nine toll scenarios for Paris, assuming that utility is nonlinear in income. We show that the distributional pattern across income groups depends crucially on the level of traffic reduction induced by tolling. Stringent tolls are more favourable to low-income motorists. Equity effects also vary with toll design. Compared to a reference scenario which uniformly charges all motorists driving within Paris, an inbound cordon toll is detrimental to low-incomes. Conversely, granting a rebate to low CO₂ emission cars slightly improves their situation while an exemption for Paris residents is neutral. Surprisingly, it matters little for social equity whether toll revenues are allocated to all commuters or solely to public transport users.     

Congestion charges and retail revenues: Results from the Stockholm road pricing trial

This paper studies the impact of the Stockholm road pricing trial on retail revenues. The analysis is performed using revenue data from 14 shopping malls, 9 within the tool area and 5 outside the tool area. The data also include revenue data from a sample of retail stores located along the main shopping streets in Stockholm. The results show that the Stockholm road pricing trial did not negatively affect retail revenue, neither in shopping malls nor in the sample of retail stores.     

The Stockholm congestion – charging trial 2006: Overview of effects

The Stockholm congestion charging trial in 2006 demonstrated the effects of a full-scale time-differentiated urban road toll scheme. Improvements in travel times were large enough to be perceived by the general public. This was pivotal to the radical change of public attitudes that occurred during the trial and that resulted in a positive outcome of a subsequent referendum on a proposal for making the system permanent. This paper summarises the effects of the trial and analyses to what extent targets were met. Effects on congestion reduction were larger than anticipated, which also resulted in favourable economic and environmental effects. The trial showed that a single-cordon toll could affect traffic within a large area, i.e., not just close to the zone limits.     

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.