Is congestion charging a good idea?

Every time Governments contemplate massive investments in urban road infrastructure, it’s instructive to bear in mind there’s a much better alternative. Instead of building something gargantuan like a road tunnel, they could instead elect to implement congestion charging across the metropolitan area.

This involves charging motorists for the use of road space. Ideally, the charge will vary with demand, rising to whatever level is necessary to keep traffic flowing at some minimum speed (which would in most cases still be well below the maximum permitted).

Congestion pricing has been introduced successfully in some cities e.g. Singapore, London, Stockholm. These implementations use simple cordon systems but the technology exists to implement far more sophisticated forms of pricing e.g. using transponder and GPS technologies.

Here are ten reasons why charging motorists to use congested roads would be a good idea – it would potentially:

1. Mitigate congestion and the associated costs of time lost, emissions and pollution
2. Delay or possibly even eliminate the need to build major new freeways or widen existing ones
3. Reduce aggregate kilometres of travel
4. Enhance horizontal equity by enabling high-value trips to take priority over low-value trips
5. Shift some travellers from cars to public transport
6. Provide a source of revenue for funding public transport improvements
7. Increase the speed of on-road public transport modes like buses and trams
8. Increase on-road speeds for business travel and freight, thereby increasing productivity
9. Shift some demand to the shoulder and thereby help make non-peak public transport more sustainable and financially viable
10. Give residents an incentive to live at higher densities in more central locations.

These are potential benefits. Whether all of them could be achieved in practice – and to what extent – would depend on how the pricing regime was designed and implemented and how forcefully it was administered.

The key objection to road pricing is it’s vertically inequitable – those on higher incomes pay a lower proportion of their income in charges than those with more modest resources. However the option exists to compensate those on low incomes as we do with other essential services like electricity, gas and water (usually in the latter cases via tariff concessions).

The vertical equity implications also needs to be balanced against the benefits for lower income groups of spending the proceeds on improved public transport (I’ve discussed this aspect at greater length before – see here).

Some also argue that congestion pricing could increase aggregate kilometres of travel by enabling those who pay the charge to travel faster and further. This directly contradicts my point 3. Even if the critics of pricing are right on this particular point, no change is without some negatives – the key issue is that the overall benefits should clearly exceed the costs.

Congestion pricing is politically fraught in Australia, but is recognised as the obvious policy in most quarters (although not all – in Victoria, it is opposed by the PTUA and the Greens). It’s possible the rate of increase in congestion in Australia’s capitals might be slowing in some relationship with the fall in per capita passenger travel, but even so congestion is still a big and expensive drain on the efficiency of our cities. And it’s still creating pressure for big new road projects.

It’s important to understand, though, that congestion pricing is not “the solution” to all transport and land use issues. Cars still need to be made more sustainable and their negative impact on the amenity of cities reduced. Other sources of funds would still be needed to fund expansion of public transport.