• Traffic gridlock reflects an imbalance between road supply and road
• The reason for the imbalance is that most main roads are priced incorrectly. .
Unfortunately, the motorist knows nothing about the relative scarcity of
roadway space at certain times of day. The motorist perceives the cost of
road access to be "free.
• Because other motorists have similar perceptions, they logically converge on
roads at the same time. The result is traffic congestion.
METHODS IN HAND
• Road Tolls: Tolls are a common way to fund highway and bridge
improvements. Such tolls are a fee-for-service, with revenues dedicated to
roadway project costs.
• Cordon (Area) Tolls: Cordon tolls are fees paid by motorists to drive in a
particular area, usually a city centre. Some cordon tolls only apply during
peak periods, such as weekdays.
• Hot Lanes: High Occupancy Toll (HOT) lanes are high occupancy vehicle
(HOV) lanes that also allow use by a limited number of low occupancy
vehicles if they pay a toll.
• Vehicle Use Fees: Distance-based charges such as mileage fees can be
used to fund roadways or reduce traffic impacts, including congestion,
pollution and accident risk.
WHY CONGESTION CHARGING
• The net benefit to society, falls as congestion on the road increases.
• To capture this marginal cost, a congestion charge is applied. The diagram
shows below show an initial congestion charge is applied. However one can
see that this congestion charge does not meet the total cost. This is because
the total cost to society is €8, and the total cost to the driver is €5.
BENEFITS & COSTS
• Road Space Rationing: A variation of road pricing is to ration peak period
vehicle-trips or vehicle-miles using a revenue-neutral credit-based system. For
example, each resident in a region could receive credits for 100 peak-period
vehicle-miles each or $20 worth of congestion fees each month.
• For those who continue to drive after the tax has been imposed, they face a
lower travel time cost.
• For those who stop driving, they avoid the tax, but forgo the benefits
associated with driving.
• A key consideration when trying to ascertain if the benefits outweigh the
costs is how is the revenue from the tax redistributed to society.
BENEFITS & COSTS
• If the government were to put the revenue generated from the tax into any
of the following, it could be said that this would be a poor use of the
• Reductions in fuel taxes
• Improvements in roads
• A more equitable method of redistributing the revenues generated would
be to invest in some of the following:
• Improvements in public transport
• Improvements in walking and cycling facilities
• Carbon offsetting schemes
• In London the revenues from the congestion charge have been invested in
improvements in the public transport.
• Ensuring the maximum benefits is
achieved and the user pays all of
the costs involved it is essential that
road users pay the optimal toll.
Which is at point C, at flow Vb.
• At point C, the net loss to society
(ABC) is minimised, however not all
of the net loss can be eliminated.
This is seen in area ADC.
• The overall impact of the congestion
charge on traffic flows is that drivers
incur a higher cost, and there is a
reduction in flow, at equilibrium point
D and flow Vd below.
• Income Effect: One of the concerns about a congestion charge is that it is
regressive. This means that those on lower incomes may have to pay a
higher proportion of their income on this charge.
An example of this is the £25/€32 charge on 4X4 in London. To adjust for this change the
government could reduce another tax, this could have the desired redistribution effect.
Such an example would be issuing of permits or other financial incentives.
• Modal shift: A desired impact of introducing a congestion charge is that
those individuals that previously drove would change to a more sustainable
mode of transport.
• Travel time: A change in travel time, if the congestion charging period is
between 8.00 – 10.00 some commuters may leave home earlier to avoid the
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