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.).     

Green transportation taxes and fees: A survey of public preferences in California

This paper presents the results of a survey testing whether California residents would support the concept of “green” transportation taxes and fees. Green taxes and fees would be set at variable rates, with higher rates for more polluting vehicles and lower rates for those that pollute less. The results show that the concept of green transportation taxes and fees strongly appeals to Californians. The survey data were also analyzed to identify if sub-groups within the state were particularly likely to support or oppose green transportation taxes and fees. Support for the green taxes and fees held at 50% or higher across most population sub-groups. Bivariate analysis showed that demographic factors were generally poor predictors of support, but that some attitudinal and knowledge variables did correlate with increased support for the green taxes and fees. Multivariate analysis confirmed that pro-environment and pro-government attitudes are significant and strong predictors of support for increasing transportation revenues.     

A framework to evaluate policy options for supporting electric vehicles in urban freight transport

Electric vehicles (EVs) are considered as a feasible alternative to traditional vehicles. Few studies have addressed the impacts of policies supporting EVs in urban freight transport. To cast light on this topic, we established a framework combining an optimization model with economic analysis to determine the optimal behavior of an individual delivery service provider company and social impacts (e.g., externalities and welfare) in response to policies designed to support EVs, such as purchase subsidy, limited access (zone fee) to congestion/low-emission zones with exemptions for EVs, and vehicle taxes with exemptions for EVs. Numerical experiments showed that the zone fee can increase the company’s total logistics costs but improve the social welfare. It greatly reduced the external cost inside the congestion/low-emission zone with a high population, dense pollution, and heavy traffic. The vehicle taxes and subsidy were found to have the same influence on the company and society, although they have different effects with low tax/subsidy rates because their different effects on vehicle routing plans. Finally, we performed a sensitivity analysis. Local factors at the company and city levels (e.g., types of vehicle and transport network) are also important to designing efficient policies for urban logistics that support EVs.     

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.     

How will we fund our roads? A case of decreasing revenue from electric vehicles

Annual expenditures for transportation infrastructure have recently surpassed the funding available through tax and fee collection. One large source of revenue generation for transportation infrastructure is use fees that are charged through taxes on gasoline both on a federal and state level. A massive adoption of electric vehicles (EVs) in the United States would result in significantly lower gasoline consumption and thus reduce the revenue collected to maintain the U.S. transportation infrastructure. We investigate how different vehicles will change the annual fee collected on a marginal basis. In addition, we assess the effects of adoption of alternative vehicles on revenues using several projections of alternative vehicles adoption, both on a state-by-state basis and at the national level. We find that baseline midsize and compact vehicles such as the Toyota Camry and Honda Civic generate approximately $2500–$4000 in tax revenue over their lifetime. Under the current funding structure, battery-electric vehicles (BEVs) such as the Nissan Leaf generate substantially less at $400–$1300, while plug-in hybrid electric vehicles (PHEVs) such as the Chevrolet Volt generate $1500–$2700. Even in states with high lifetime fees due to fuel taxes, such as California, revenue generation can be upwards of 50% lower than in states with high registration fees such as Colorado. Total annual revenue generation decreases by about $200 million by 2025 as a result of EV adoption in our base case, but in projections with larger adoption of alternative vehicles could lead to revenue generation reductions as large as $900 million by 2025. Potential schemes that charge user fees on alternative fuel vehicles to overcome the decrease in revenue include a flat annual registration fee at 0.6% of the vehicle’s manufacturer suggested retail price (MSRP) or 2

per mile fee.     

Abatement cost functions for incentive-based policies in the automobile market

This paper compares the outcomes of policies that target vehicle holdings with those that target vehicle usage using data from the US Consumer Expenditure Survey. Results show that a higher price of gasoline shifts vehicle holdings towards more fuel efficient vehicles and reduces the annual demand for miles, whereas imposing a fee on vehicles or a feebate program only shifts vehicle holdings towards more fuel efficient vehicles and has little to no impact on the demand for miles. While it is relatively expensive to reduce CO₂ emission through incentive-based policies, achieving any abatement level is more expensive through imposing fees on vehicles than gasoline taxes. In addition, the maximum amount of abatement attainable by a feebate program is relatively small and the same amount could be achieved by imposing a $0.73 gasoline tax per gallon.     

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 tax treatment of company cars, commuting and optimal congestion taxes

In Europe, the preferential tax treatment of company cars implies that many employees receive a company car as part of their compensation package. In this paper, we consider a model in which wages and the decision whether or not to provide a company car are the result of direct negotiation between employer and employee. Using this framework, we theoretically and numerically study first- and second-best optimal tax policies on labour and transport markets, focusing on the role of the tax treatment of company cars. We obtain the following results. First, higher labour taxes and a more favourable tax treatment of company cars raise the fraction employees that receives a company car; congestion and congestion tolls reduce it. Second, in countries that provide large implicit subsidies to company cars, eliminating the preferential tax treatment of company cars may be an imperfect but quite effective substitute for currently unavailable congestion tolls. The numerical illustration, calibrated using Belgian data, suggests that it yields about half the welfare gain attainable through optimal congestion taxes. Third, the favourable tax treatment of company cars justifies large public transport subsidies; the numerical results are consistent with zero public transport fares. Finally, we find that earlier models that ignored the preferential tax treatment of company cars may have substantially underestimated optimal congestion tolls in Europe. The numerical illustration suggests that about one third of the optimal congestion toll we obtain can be attributed to the current tax treatment of company cars.     

Suburban attitudes toward policies aimed at reducing solo driving

Policies that are aimed at discouraging commuters from solo driving have become a part of overall efforts to improve air quality and reduce traffic congestion. Since driving alone is the overwhelming choice of employed residents in US metropolitan areas, the political acceptability of proposed policy changes plays a role in their success. The 1992 Orange County (CA) Annual Survey asked employed solo drivers to rate their likelihood of changing from solo driving in response to various fees and incentives. Fewer say they would be very likely to stop solo driving if they were charged a parking fee at work (20%), a smog fee (17%) or a congestion fee (16%), than if their employers paid them a cash bonus for stopping solo driving (28%), or if more public transit (33%) or more carpools at work (35%) were available. Young and lower-status solo drivers are more likely than others to say they would stop driving alone if there were fees or cash bonuses. Current non-solo drivers tend to be young and low income, providing a validity check on the demographic predictors of stated preferences. The findings are discussed in light of recent policy changes in Southern California.     

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.     

Factors driving public support for road congestion reduction policies: Congestion charging,free public transport and more roads in Stockholm,Helsinki and Lyon

Based on an across-the-board survey conducted among residents of Stockholm, Helsinki and Lyon, we explore the opinions on three policy measures to combat road congestion: congestion charging, free public transport and building more roads. The support for the two latter policies is substantially higher than the support for congestion charging, which is only supported by a majority in Stockholm. Self-interest is important for the formation of the opinion to all three policies. However, fundamental values and general political views, indicated by four attitudinal factors, are even more important in forming opinions towards the three transport policies. Of all attitudinal factors, the one indicating environmental concern most influences the support for all policies. Equity concerns, however, increase the support for free public transport and opposition to taxation increases the support for building more roads.Our results further suggest that the opinions towards free public transport and building more roads can be mapped along the left–right political axis, where Environment and Equity are to the left and Pricing and Taxation are to the right. However, the opinion towards congestion charging cuts right through the political spectrum. The impact of the fundamental values and self-interest variables are similar for Stockholm and Helsinki, indicating that even if experience increases the overall support for charging, it does not change the relative strength of different political arguments to any major extent.     

Nonlinear pricing on private roads with congestion and toll collection costs

Nonlinear pricing (a form of second-degree price discrimination) is widely used in transportation and other industries but it has been largely overlooked in the road-pricing literature. This paper explores the incentives for a profit-maximizing toll-road operator to adopt some simple nonlinear pricing schemes when there is congestion and collecting tolls is costly. Users are assumed to differ in their demands to use the road. Regardless of the severity of congestion, an access fee is always profitable to implement either as part of a two-part tariff or as an alternative to paying a toll. Use of access fees for profit maximization can increase or decrease welfare relative to usage-only pricing for profit maximization. Hence a ban on access fees could reduce welfare.     

A welfare cost assessment of various policy measures to reduce pollutant emissions from passenger road vehicles

Policy options to reduce passenger transport emissions in Europe are simulated with the EUCARS model. The EUCARS welfare analysis includes changes in consumer surplus, congestion and tax revenues. Simulations also address consumer myopia, i.e., the underestimation of fuel costs by car buyers. The best policy mix to reduce CO₂ consists of fuel taxes that are combined with differentiated purchase taxes to correct for the assumed myopia. This combination could reduce CO₂ emissions of over 25% without reducing contemporaneous well-being. For the reduction of conventional emissions, an equivalent best mix includes an emissions-based kilometre tax combined with a purchase feebate. This mix allows a 60% reduction in toxic emissions without any noticeable welfare reduction. The overall superiority of these two mixes compared to alternative choices is higher when the evaluation includes a broad group of externalities, a premium on public funds, and positive feedbacks across emissions categories. Local traffic management measures are important zero-cost complements for an overall emissions strategy.     

Factors influencing support for local transportation sales tax measures

Sales tax measures passed at the local level and dedicated to transportation projects have become increasingly popular in the United States. While revenues from fuel taxes stagnate, growth of local transportation sales taxes (LTSTs), most approved in local elections, has led to a gradual shift of the financial base for transportation projects away from user fees and toward broader-based taxes. In this study, the relationship between voter support and the social, political, and geographic characteristics of the voters is explored. Using precinct-level voting data and census demographic data for three local transportation sales tax elections in Sonoma County, in the San Francisco Metropolitan area of California, regression models were constructed to analyze this relationship. In addition, the relationship between the outcomes of the three measures was explored to better understand which transportation projects might have garnered more support for the successful measure. It was found that the closer voters lived to the transportation projects to be funded, the greater their support. Higher incomes were also positively related to support, controlling for other variables. Political leanings were found to affect support, with the direction of the effect dependent upon the project list in each measure’s expenditure plan. Finally, it appears that the latest measure, which passed successfully, benefited greatly from its multi-modal expenditure plan.     

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.     

TRESIS: A transportation,land use and environmental strategy impact simulator for urban areas

The Institute of Transport Studies has developed a Transportation and Environment Strategy Impact Simulator (TRESIS) as a decision support system to assist planners to predict the impact of transport strategies and to make recommendations based on those predictions. A key focus of the simulator is the richness of policy instruments such as new public transport, new toll roads, congestion pricing, gas guzzler taxes, changing residential densities, introducing designated bus lanes, implementing fare changes, altering parking policy, introducing more flexible work practices, and the introduction of more fuel efficient vehicles. The appropriateness of mixtures of policy instruments is gauged in terms of a series of performance indicators such as impacts on greenhouse gas emissions, accessibility, equity, air quality and household consumer surplus. In this paper we introduce TRESIS to the research community, focussing on the structure of the system and the diversity of applications. Applications are presented to illustrate the diversity and richness of TRESIS as a policy advisory tool.     

Modelling and simulation of transportation system effectiveness to reduce traffic congestion: a system dynamics framework

ABSTRACT

This paper is designed to evaluate and improve the effectiveness of transportation systems and reduce traffic congestion through the use of simulation models and scenario development. A system dynamics framework is used to test and evaluate the alternatives of future strategies for the city of Surabaya, Indonesia. Some factors affecting the effectiveness of transport systems include operational effectiveness and service effectiveness, as well as uncertainty. To improve the effectiveness of transportation systems, several strategies can be implemented, such as subsidizing public transportation, increasing the cost of private vehicle parking fees, raising taxes on private vehicles, and reducing delays in public transportation through scenario development. Scenario results show that, by pursuing these strategies, effectiveness could be improved by 80% as the impact of the increase in operational and service effectiveness, helping to mitigate traffic congestion. Congestion could be reduced to 70% (on average) due to the decrease in daily traffic.     

Six years of CO2-based tax incentives for new passenger cars in The Netherlands: Impacts on purchasing behavior trends and CO2 effectiveness

There is growing evidence that consumers respond more effectively to upfront price signals, such as vehicle purchase taxes and feebate policies, and to tax incentives that are more salient than others, such as company car taxes graded by CO₂ emissions. This paper examines tax changes in The Netherlands, which are among the most stringent and most salient in Europe, and assesses the ex-post purchasing impacts and CO₂ effectiveness of six years of CO₂-based tax incentives for low-carbon cars in The Netherlands. Dutch tax incentives resulted in 13 g/km, or 11% lower average CO₂ emissions in 2013. The Netherlands has moved from the 12th position before the tax changes in 2007 to become Europe’s number one in terms of the lowest average new car CO₂ emissions and highest share of electric vehicles in 2013. Tax incentives for new cars sold between 2008 and 2013 have resulted in 4.6 million tons of potential lifetime CO₂ abatement at the cost of a drop in tax revenues of 30–50%. However, when corrected for the Dutch policy-induced increasing real-world fuel-economy shortfall and leakage of carbon reduction potential through vehicle export of low-carbon cars, only 3.5 million tons or 75% of the CO₂ reduction remains. CO₂-based tax incentives for company cars seem to have contributed the most to the observed turnaround in purchasing behavior towards lower CO₂-emitting passenger cars.     

National policy towards cars: Singapore

Singapore has experienced rapid growth in car ownership, and private transport accounts for just under half of motorized trips in Singapore. Yet only since 1970 have determined efforts been made to curtail this increase. Simultaneously with this growth, Singapore's land‐use planners had called for the diversion of population growth into outlying residential estates while maintaining the central area's importance as an employment centre. The resulting anticipated concentration of commuter movement suggested a need for controls to restrain car ownership, reduce central‐area congestion and divert road users on to public transport. The policies followed are described. Those against ownership have included heavy road taxes and registration fees, with a system of discounts on the latter to discourage new purchasers except when replacing scrapped cars. Policies against car use include fuel taxes and the Area Licensing Scheme in the city centre, while parking space is also closely regulated. The measures adopted imply a goal of efficiency in promoting Singapore's planning objectives rather than environmental, safety or equity considerations, although the first two of these have lately received much more attention than formerly. The policies’ effect has been a temporary reversal in the growth of car ownership, but this growth has since resumed and recent further fee increases suggest a panic reaction rather than a coordinated strategy. Such coordination appears at present to be hampered by the fragmented administration of matters relating to transport. Other measures relating to car ownership and use in Singapore are also described.     

Accelerating the transformation to a low carbon passenger transport system: The role of car purchase taxes,feebates, road taxes and scrappage incentives in the UK

The transition to a low carbon transport world requires a host of demand and supply policies to be developed and deployed. Pricing and taxation of vehicle ownership plays a major role, as it affects purchasing behavior, overall ownership and use of vehicles. There is a lack in robust assessments of the life cycle energy and environmental effects of a number of key car pricing and taxation instruments, including graded purchase taxes, vehicle excise duties and vehicle scrappage incentives. This paper aims to fill this gap by exploring which type of vehicle taxation accelerates fuel, technology and purchasing behavioral transitions the fastest with (i) most tailpipe and life cycle greenhouse gas emissions savings, (ii) potential revenue neutrality for the Treasury and (iii) no adverse effects on car ownership and use.The UK Transport Carbon Model was developed further and used to assess long term scenarios of low carbon fiscal policies and their effects on transport demand, vehicle stock evolution, life cycle greenhouse gas emissions in the UK. The modeling results suggest that policy choice, design and timing can play crucial roles in meeting multiple policy goals. Both CO₂ grading and tightening of CO₂ limits over time are crucial in achieving the transition to low carbon mobility. Of the policy scenarios investigated here the more ambitious and complex car purchase tax and feebate policies are most effective in accelerating low carbon technology uptake, reducing life cycle greenhouse gas emissions and, if designed carefully, can avoid overburdening consumers with ever more taxation whilst ensuring revenue neutrality. Highly graduated road taxes (or VED) can also be successful in reducing emissions; but while they can provide handy revenue streams to governments that could be recycled in accompanying low carbon measures they are likely to face opposition by the driving population and car lobby groups. Scrappage schemes are found to save little carbon and may even increase emissions on a life cycle basis.The main policy implication of this work is that in order to reduce both direct and indirect greenhouse gas emissions from transport governments should focus on designing incentive schemes with strong up-front price signals that reward ‘low carbon’ and penalize ‘high carbon’. Policy instruments should also be subject to early scrutiny of the longer term impacts on government revenue and pay attention to the need for flanking policies to boost these revenues and maintain the marginal cost of driving.