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Do public transport and road pricing go together?

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It surprises me who’s still lukewarm about congestion pricing of roads. I’d have thought the focus on the carbon tax over the last year would’ve heightened understanding of the role of the price mechanism in managing resources better. Obviously governments find it too hard politically but even organisations like The Greens and the Public Transport Users Association (PTUA) offer only heavily qualified support for congestion pricing.

The PTUA doesn’t support congestion pricing in the absence of alternatives, arguing that it would be unlikely to win community support and would be socially inequitable. It’s position is public transport must first be improved to a competitive level. The Greens take a similar view. Senator Scott Ludlum says the party believes a congestion tax “would be an unfair impost unless significant improvements to public transport and other non-driving modes of commuting, such as walking and cycling facilities, are made at the same time”.

What this means in practice is neither organisation has much to say in favour of congestion pricing – neither could be regarded as a staunch advocate of this potential reform. I think that’s a real pity because congestion pricing and improvements in public transport go hand-in-hand. They are the veritable horse and carriage – you won’t get one without the other.

Cars are a very attractive transport option, especially in our dispersed cities. But even the streets of a dense city like Manhattan are full of cars. We could wait generations in the hope that land use changes will make Melbourne so dense that cars will necessarily become a minority mode. Or we could ignore the probability that motorists will shift to more fuel-efficient vehicles or to ones powered by alternative fuels and instead bet that higher fuel prices will drive cars off  Melbourne’s roads.

But waiting and hoping aren’t a good basis for policy. Realistically, we can’t expect Australians will forego the private benefits of a car unless they’re forced to. The only reason most CBD workers don’t drive is because they can’t – traffic congestion and high parking charges rule driving out. Even so, around a quarter of CBD workers in Melbourne still drive and that proportion rises pretty rapidly to 50% and higher once you move even a few hundred metres away from the city rail loop. It would be a bit hard to argue they make this choice because public transport isn’t good enough.

Investing in public transport without simultaneously constraining the car will only achieve a modest increase in public transport’s existing 15% share of all motorised travel in Melbourne. Consider that Melbourne’s train, tram and bus system would cost an unthinkable amount if we had to build it from scratch today – hundreds of billions of dollars – yet 85% of motorised trips are still made by car. It should be obvious that simply providing the infrastructure isn’t enough.

Congestion pricing is the only way to reduce the considerable competitive advantage cars have over public transport (in most situations) within a reasonable time frame and at a reasonable cost. It’s therefore the only way to significantly increase public transport’s share of motorised trips. Of course good public transport has to be in place at the time congestion pricing is introduced. But what The Greens and the PTUA are missing is that you have to positively and enthusiastically embrace both.

The efficiency case for pricing is very strong and rejected by few. It’s the only practical way to manage traffic congestion. Its great virtue is that it prioritises travellers according to the value of their trip purpose. It also reduces accidents, as well as transport-related emissions and pollution.

The key concern of those with misgivings is the equity implications of congestion pricing. I don’t think it can be doubted that richer people will be better placed to buy road space. But I think there are a number of other issues that also need to be considered here.

First, it’s not clear that putting a price on road space would be significantly more inequitable than traffic congestion, although we know the latter is much less efficient. If they’re much the same on this criterion, then pricing should be preferred.

Second, travellers at all income levels make high value trips they are prepared to pay for. The factory worker running late to collect her children from child care is likely to value the option of paying a few dollars premium to avoid severe traffic congestion. There’s an analogy here with taxis – we know they’re cheaper in real terms for the rich but do we really imagine they are the only ones who use them? If we didn’t currently have them, would we bar their introduction on equity grounds?

Third, even if the rich benefit disproportionately, congestion pricing might still improve the position of lower income travellers in absolute terms. For example, they might be better off if it means funds otherwise devoted to road building are made available for public transport and schools; if the revenue from pricing is applied to public transport; or if there is less pollution from cars in their neighbourhood.

Finally, it is possible to make direct payments to those on lower incomes to compensate them for the higher out-of-pocket costs of congestion pricing. This is what we do with other scarce resources like water.

The biggest obstacle to congestion pricing is political. Governments charge us for virtually all other resources – even education includes supposedly voluntary “parent contributions” – but road space is a sacred cow. Hypothecating the revenue from pricing to fund public transport improvements is therefore vital, as is rolling fixed charges like rego and insurance into the variable price where possible. Another option is to implement pricing progressively, starting with discretionary HOT (High Occupancy and Tolled) freeway lanes.

But the key point I want to emphasise is that effective public transport promotion demands simultaneous advocacy of congestion pricing. They are opposite sides of the same coin, yin and yang, etc.

NOTE: My emphasis here is on congestion pricing, but I think more broadly we should be pricing road space to reflect its true social cost. That’s effectively provided by the $0.38 per litre excise tax on petrol, but it’s too low, isn’t indexed and of course doesn’t reflect prevailing road conditions e.g. presence of congestion.

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  • 1
    Posted September 6, 2011 at 10:37 pm | Permalink

    Great post. Also the fuel excise disadvantages people in country areas, under a user pays system, lower income user should not be worse off, the congestion tax should be scaled so that areas that are more congested are taxed at a higher rate, this is typically where higher income individuals live. Also the relative congestion tax in the country areas would be tiny, as there is very little congestion and there are no alternative transport options. There should also be higher tax paid for areas well served by public transport, once again inner city and inner east. The money saved from not having to tax everyone to build roads will then be passed on to all wage earners

    No one complains any more that the GST is unfair on lower income earners, but in order for it to get up (politically) there would need to be a same sort of argy bargy and complex financial modelling that was required to get the consumption tax up, and lets face it no in the house as stomach for this fight.

  • 2
    Posted September 6, 2011 at 10:45 pm | Permalink

    Alan, contemporary Australians do not pay per use for any government or social services. Despite the attempts by the various (who am I kidding – 2!) political parties at imposing economic rationalism, economic socialism and other isms on us all, we now pay levies, get subsidies, pay fees, enjoy discounts, etc that act as levers and buttons to stimulate or depress aspects of the economy.

    I happen to believe that citizens of a wealthy country should enjoy free use of the roads and other communications, and high standards of public transport, health care,and education – call me a pinko idealist, but that’s what I’d like to see.

    I also believe that in exchange for these things, all individuals should contribute what they can through their labours and taxes and for the benefit of everyone, including themselves. Those who think they are special and more important can choose to pay for better stuff, above the levels everyone else enjoys, but not at the expense of everyone else. Private car travel is one example where resources are displaced away from the common good; ditto for private health, education and communications.

    Our levers and buttons are all out of whack and reflect the compromises and deals struck by politicians since Federation and almost certainly do not reflect any real values of society, and especially not mine. Congestion pricing/excise seems to be another lever/button to stimulate/depress activity; another add-on for Bruce Petty to include in his commentary on our world.

  • 3
    Posted September 7, 2011 at 12:19 am | Permalink

    Congestion pricing is the only way to reduce the considerable competitive advantage cars have over public transport (in most situations) within a reasonable time frame and at a reasonable cost.

    To put it bluntly, crap. To be a bit of a smart-ass I’ll quote you with a few minor edits…

    Those reductions in negative externalities – principally lower car use – would in any event very likely be much lower than proponents of congestion charging assume. The key constraint on significantly increasing transit’s share of trips at the expense of cars isn’t the lack of road charges, but the greater speed and convenience of cars. Introducing road charges won’t substantially change that equation.

    There is one statement I certainly agree with in your above post: “Investing in public transport without simultaneously constraining the car will only achieve a modest increase in public transport’s existing 15% share of all motorised travel in Melbourne.“.

    The problem with congestion charging is that it doesn’t remove the cars competitive advantage. Slowing cars down and speeding public transport is the only way to do this. There are plenty of methods to do this without significant infrastructure investment:
    your proposal of a 30km/h speed limit in the CBD would be a good start;
    removing car lanes and replacing them with (strictly enforced) bus lanes will serve both purposes;
    likewise would introducing priority light measures for buses and trams;
    untangling bus routes so they travel more directly, primarily along arterial roads would shorten the distances they travel and increase the speed they travel at, meaning the same size fleet can provide a higher frequency of services;
    finally coordinated timetables could eliminate many long wait periods between transfers, greatly reducing the travel time when one or more transfers are required.

  • 4
    Posted September 7, 2011 at 9:54 am | Permalink

    I agree there’s a place for the sorts of road capacity reducing actions you advocate (and I’ve said so before) but in my view they’re complements to road pricing with the prime rationale being improvements to local amenity and road safety.

    Where the objective is to achieve a really significant shift in mode share, these sorts of supply-reducing actions will of course increase the price of car travel relative to PT, but it’s an inferior approach compared to road pricing. I would never say it’s crap, but I think of it as the Tony Abbott solution because it’s analogous to his direct action policy on climate change, versus the Government’s vastly more efficient pricing approach i.e. the carbon tax.

    Relative to road pricing, the key problems with reducing road capacity are: One, it’s inefficient – it doesn’t prioritise trips by value. Two, It does nothing about congestion – in fact it would very likely increase the number of roads (experiencing congestion)* and the duration of gridlock (albeit with fewer cars). Third, it would be even more difficult politically than road pricing (which would be hard enough!) – history shows taking something away from voters they like is very, very difficult.

    NOTE: *edited for clarification – see comment below

  • 5
    Kieran
    Posted September 7, 2011 at 1:46 pm | Permalink

    While I generally agree that we should pay what we can and recieve what we need as you say, I think there are two significant differences between road space and other public goods such as education, healthcare, public transport, and communications networks.

    Firstly, we all need a certain amound of school education and healthcare and, generally speaking, people get what they need and not more. With road-space, some people, such as those who choose to live in peri-urban regions and commute into the inner city area, consume vastly more than others, such as those do not own a car.

    Secondly, there are significant negative externalities of driving that other public goods do not have, or do not have to the same degree, so there are good reasons to limit driving.

    I’m happy that my taxes pay for schools, but road users should pay their own way.

  • 6
    Posted September 7, 2011 at 3:00 pm | Permalink

    I fail to see how reducing road capacity would result in more roads. Seems like a contradiction to me.

    I agree it wouldn’t reduce congestion, rather it would use congestion to price roads. Of course this would still prioritise trips by value. How often to you decide to drive to the shops to pick up a carton of milk through peak hour traffic, alternatively you will drive through peak hour traffic to get to work.

    Vancouver introduced its Liveable Regions Plan in 1993 that actively promoted congestion to lower the attractiveness of S.O.V. It was the only city in Canada that took this approach.

    15 years later, Vancouver was the only Canadian city that had shortened the average time for journeys to work. This was a result of people opting to take shorter journeys, and because public transport journeys had been sped up.

  • 7
    Posted September 7, 2011 at 3:05 pm | Permalink

    I should have also mentioned there was a considerable mode shift to public transport over this time as well.

  • 8
    Posted September 7, 2011 at 3:46 pm | Permalink

    Not well expressed. I mean “the number of roads experiencing congestion

  • 9
    Posted September 7, 2011 at 7:28 pm | Permalink

    Thanks Kieran,

    I agree that people should pay for car use and people who choose to use a private car instead of PT, walking or cycling should pay what it costs. But at this time, car users don’t pay what it costs – they are not paying fully for their pollution, the congestion they cause, the illnesses, injuries and deaths attributable to car use and the associated losses in productivity and community well-being..

    We have privatised the benefits of car use and socialised their costs. I don’t own a car, and seldom drive one, but my family and I still cop many of the costs and externalities of other people’s car use, for little or no benefit.

    I did say that roads should be free to use and we socialise both benefits and costs of good public roads (and education, health, public transport) because we all depend on them, whether as driver, cyclist, pedestrian or consumer.

    I fear, however that we will merely continue to massage the levers and buttons until we are forced to abandon our dependence on private car travel. I just hope there’s enough left in the kitty to look after the poor buggers that have been caught out – we’ll all have to pay for them as well.

  • 10
    Posted September 7, 2011 at 8:52 pm | Permalink

    No question that congestion will make cars less attractive relative to PT – after all, that’s a key reason why the CBD has such a favourable mode split, as I acknowledge above. The issue is whether congestion is the best means of raising PT’s mode share. I think not – but sounds like a topic for a future post.

  • 11
    Posted September 8, 2011 at 11:37 am | Permalink

    I fail to see how slowing car movement would be of net benefit to society, even if it increases public transport use. The beauty of congestion pricing is that, if introduced well, it turns the societal costs of congestion into financial costs, which are borne by those willing to incur them. If the funds raised by congestion pricing are invested in improved public transport services, everybody wins. Those made of money pay for road use with less congestion, and those with constrained budgets get a better public transport system that gets them there quicker and more often.

    The very idea that we would want to increase congestion further as a solution to our transport problems seems contradictory to me.

  • 12
    rohan
    Posted September 8, 2011 at 2:13 pm | Permalink

    All of this applies only to the CBD / inner city, which already has a high PT use, which will increase with better PT, and more congestion, best achieved by assisting PT (ie taking away traffic lanes for bus, tram and bike lanes). A charge as well? That would certainly help more, and perhaps help pay for the improvements, but they have to come together, with a charge being the less important component, unless it is absolutely necessary to pay for the improvements

    A CBD charge however doesnt deal at all with where most people drive, and where PT options are are pretty slim – in the burbs – my grand scheme is that ALL freeways should be tolled, whether they are ‘paid for’ or not, which would certainly be unpopular, though it could be a pretty small charge, say capped at $5 week max., – its a way to charge for expensive infrastructure, maybe reduce car use (not likely really) and keep on raising revenue that could be spent on PT, once the roads themselves are paid off.

  • 13
    Posted September 8, 2011 at 10:31 pm | Permalink

    I’d have thought the focus on the carbon tax over the last year would’ve heightened understanding of the role of the price mechanism in managing resources better.

    Methinks you haven’t been paying attention to the level of the ‘debate’.

  • 14
    Urt
    Posted September 11, 2011 at 1:53 pm | Permalink

    The equity angle is a killer. You have to be very intimate with economics to have a gut feel for the efficiency merits of road pricing. 99 per cent of people – including those like the ptua who should know better – go straight to the out of pocket effect and can’t get

  • 15
    Urt
    Posted September 11, 2011 at 2:00 pm | Permalink

    … Past it. Maybe if a survey showed 10 percent of cars in morning gridlock were just out for a leisure drive, it would be easier to convey the idea that some trips are low value and should be dissuaded/ delayed. ( Are they? I doubt it)
    For anyone doubting the relative rationing effect of a small cash charge versus spirit-crushing traffic jams I refer you to shareholders in any of the big toll road projects. The traffic on eastlink, for example, has been puny relative to projections.

  • 16
    Simon
    Posted September 12, 2011 at 4:22 pm | Permalink

    Converting general traffic lanes to bus-only lanes or cycleways doesn’t reduce road capacity – it increases it! And while it doesn’t reduce congestion in the remaining car lanes, it increases the proportion of the population who can use the roads without experiencing congestion.

    And it’s cheap to do, although there’s no extra tax revenue in it. And nobody will be “forced to pay for the roads”.

  • 17
    T
    Posted September 14, 2011 at 11:56 am | Permalink

    You make very good points regarding the benefits of congestion pricing. I think the point that PTUA and the like make is that no matter how high you price road use, if travellers have no alternative, what is it really going to achieve? The whole point of pricing road use is to try to force people to reduce their car use and move to alternative transport modes. But often no alternative exists, especially for people who live in outer suburbs where there is no reliable modes of PT and those who are not travelling to the CBD. The point you make here: “It would be a bit hard to argue they make this choice because public transport isn’t good enough” is not correct. I would say that is exactly what is happening. I worked in Carlton, which is so close to the CBD, but travelling on PT would DOUBLE my travel time from 30 minutes to 60 minutes. Driving took 15-20 minutes. There are many gaps in the PT system for the inner city suburbs. Traveling between inner city suburbs is often harder than travelling from outer suburbs to the CBD on PT. This is a big part of the problem.

    I definitely think there is merrit in congestion pricing, but I still think that the PT system is not coping under the current demand, could not handle a surge in demand, and is simply inadequate for most trips.

  • 18
    Posted September 14, 2011 at 12:33 pm | Permalink

    Your example shows that in most cases PT isn’t anywhere near as fast as a car. Impose road pricing and those who want the speed will pay for the 15-20 minute drive; those who prefer to keep the cash will take the 45 minute PT trip (I’m assuminng the revenue from congestion pricing, as well as resulting faster tram speeds, will improve the PT time somewhat!).

    Even a Manhattan-style PT system is going to be considerably slower than a car, except where a car’s advantages have been neutered by congestion or pricing. A PT system that’s close to a car’s speed in all situations is likely to start looking very much like….a car-based system.

  • 19
    Posted September 15, 2011 at 2:05 pm | Permalink

    It benefits society precisely because it gets people out of cars, or gets them to make shorter journeys. Cars are the only journey’s slowed down. In Vancouver’s example there was a three pronged method:

    * Reduce the number of lanes for single occupancy vehicles
    * Increase public transport priority, this means:
    * Increasing the amount of bus lanes
    * Traffic light priority systems
    * Introducing more car-pool lanes.

    As I said, the results speak for themselves, Vancouver was the only city in Canada that managed to reduce the average trip time to work.

    Increasing traffic speeds just encourages people to take more trips and for longer distances. It may seem contradictory, but that’s because everyone seems to think faster = quicker, which is only the case if trip distances don’t change, which of course they always do.

  • 20
    Posted September 26, 2011 at 10:05 am | Permalink

    I believe that something has to be done to effectively ration the finite resource of road space. Public policy makers usually have four levers available to influence behaviour. In the case of transport, these would play out as:
    1) Pricing – tolls, congestion charging, PT fares
    2) Regulation – planning to better integrate transport and land use
    3) Exhortation – public health initiatives for active transport, transport demand management schemes (i.e. TravelSmart)
    4) Direct delivery of service – in an Australian context, the provision of public transport services.
    Effectively, what’s being proposed by Alan above is combining the public policy levers of 1 & 4 together to realistically price road space and use the revenue to fund an alternative (i.e a good public transport service).
    Alan’s post is both useful and timely as the NTC have just released a discussion paper on funding transport systems in Australia based on surveys conducted earlier this year.

2 Trackbacks

  1. ...] 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). [...

  2. ...] goes directly to a key point I’ve made before. Achieving a really substantial mode shift requires that travel by car be made more expensive [...

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