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Transport - general

Sep 9, 2012

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The Chair of Infrastructure Australia, Sir Rod Eddington, called for a “mature and dispassionate” discussion about road pricing on Friday. Good, I wholeheartedly agree. This should be the number one issue for discussion nationally in planning the future of our cities.

Exhibit: Economic cost of traffic congestion, Sydney 1980-2020 (Source: Draft NSW Long Term Transport Master Plan)

Right now, governments around Australia are poised to spend billions constructing new urban freeways in an attempt to overcome traffic congestion. They don’t have to though.

If they started charging motorists to use road space they could immediately reduce demand, especially in the peak periods which drive the need for increased road capacity. They could instead spend a lot of those billions in other pressing areas, like public transport or education.

The problem with unpriced road space is it gets clogged in the peaks with too many low-value trips that contribute little to improving our economic and social wellbeing. Cheap road space also means travellers who have realistic alternative ways of getting to their destinations choose to drive instead.

Faced with a higher price, some travellers could shift to other modes like public transport and walking. Some could shift their time of travel from peak to non-peak periods.

Some could “chain” multiple single trips into one journey and many could shorten their travel distance by using closer destinations. Some trips could be replaced with electronic transactions and some very low value trips could be foregone entirely.

The consequences of under-pricing scarce resources are well known. In the Murray, for example, farmers were offered water so cheap it was common to flood-irrigate pasture for relatively low value uses like grazing, ultimately causing immense environmental and economic damage.

According to an investigation by Ellen Fanning for The Global Mail, the real cost of running a 2 kw split-system air conditioner for four hours on a very hot day can be as high as $200. The customer however only pays around $2.00. She quotes Energy Minister Martin Ferguson:

Every time someone in Australia installs a $1,500 air conditioning system, it costs $7,000 to upgrade the electricity network to make sure there’s enough capacity to run that system on the hottest summer day.

Pricing road space has other advantages besides obviating or delaying the need for new freeways. Depending on how it’s implemented, it can potentially reduce the economic burden of congestion by removing enough vehicles to keep traffic moving (albeit still below the maximum permitted speed).

It can also raise additional revenue for the construction of new infrastructure, especially if variable peak period (i.e. congestion) charging is supplemented by distance-based charges.

One of the most important potential benefits of road pricing is driving higher demand for public transport. As I discussed last time, it’s not enough to provide good public transport.

A significant shift toward more sustainable modes will only happen if car travel is simultaneously made more expensive. Congestion increases the cost of driving too, but charging is a more efficient and sustainable solution.

There are a number of ways to implement road pricing. Existing point-based methods of tolling freeways via gantries and in-car transponders could simply be extended to non-priced freeways.

Or a cordon might be run around a congested part of the city and vehicles charged as they cross the line, as happens in London. More ambitiously, every kilometre travelled by vehicles on the entire road system could be tracked by GPS technology and charged by distance and time of day.

The main criticism of road pricing is the claim it’s inequitable. Yes, higher income travellers will be better placed to deal with road pricing, just as they are with all other motoring-related costs.

However that issue has to be balanced against the economic and environmental damage done by excessive car use. There’s also an incorrect and somewhat patronising assumption that lower income travellers don’t make high-value or important trips.

We need to bear in mind that everyone regardless of income currently pays for necessities like food and rent according to the amount they consume. Everyone pays for essential services like water and power irrespective of their income. Everyone who uses public transport pays and the revenue is used to make public transport better.

As currently happens with essential services, those most at risk financially from road pricing should be compensated. That could possibly be done by way of a concessionary tariff or, preferably, by an income supplement.

The biggest obstacle to road pricing is political. People are inherently loss-averse and are likely to resent being charged for something that’s always been seen as “free”, or is assumed to have already been paid for through other taxes.

To its credit, the O’Farrell Government’s Draft NSW long term transport master plan released last week mentions road pricing as a potential option numerous times, albeit in careful terms. The emphasis is on distance-based charging, heavy vehicles and on pricing the existing freeway network, but it’s more forthright than other jurisdictions have managed.

Road pricing needs to be put centre stage in the national discussion about how we want our cities to develop. It’s fair to say it’s the number one issue. It’s politically fraught, but we’ve got to have that “mature and dispassionate” debate.

There’s another whole discussion to be had about how best to go about implementing road pricing to maximise public acceptance, but that’s a big topic I’ll leave for another day. In the meantime, here’s some aspects of that issue I’ve discussed before (here).

Alan Davies — Editor of The Urbanist

Alan Davies

Editor of The Urbanist

The Urbanist is edited by Dr Alan Davies, a principal of Melbourne-based economic and planning consultancy, Pollard Davies Consulting.

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46 thoughts on “Shouldn’t we talk about road pricing?

  1. michael r james

    Yes, IkaKink, most of us probably can agree with that.

    But just a little quibble. I think it would be inaccurate to assign Vancouver’s successful PT to dedicating a few freeway lanes to transit lanes, since they have in fact built much dedicated rail. (Oh, and they’re Canadians so “obviously” their quirky actions hold not lessons of value to the car crazed world like the US or Australia; for amusement take a gander at the Slate article this week on Why Are Americans Nuttier Than Canadians?)

    As to your claim about it being the only North American city where mode-share started shifting to PT, I suspect that cannot be true. Not just Portlandia (which demolished freeways) but even LA which has (re)built (painfully, expensively, slowly) its metro system and also has transit lanes on some of its major freeways (LA actually has a quite extensive and reasonably efficient PT system though mostly of the type I don’t like, buses), and hasn’t built a new freeway since forever (except the 1998 Century Freeway to the airport which includes an extension of the Green Line metro) so its PT modeshare simply must have increased?

  2. michael r james

    Actually David Hensher’s main point was the plea: “One of the important features of the proposed plan that seems to have been given inadequate praise by the critics is the need to secure metropolitan corridors for future transport options.”

    I agree with Dylan Nicholson’s complaint but also find this ostensibly sensible concept of securing corridors is actually not sensible at all, for the obvious reason that the space required for the different types of transport is so so different. It was amply illustrated by the pic the SMH ran with his article: one of those giant Sydney interchanges (possibly M7) that occupied space of about 50 football stadia–enough space for a considerable TOD town. The linear part of such motorways also occupy huge swathes.

    In fact this inconvenient reality about roads is why plans inevitably become so humungously expensive: lots of the road ends up in tunnels. And of course even the smallest road tunnel (generally two tunnels each with 2 lanes) occupies about 3-4x times the space of rail which can usually be put into a single tunnel with minimal clearances.

    It is a bit hard to tell what Hensher really wants as a solution. (He has the depressing title of professor of management!) As Dylan N says/implies but Hensher seems in denial of, European cities either have less congestion or can contemplate congestion pricing or other policies to deter drivers, solely because they already have a mass transit system (invariably rail because buses simply cannot do the heavy lifting) that–in great distinction to roads–can take up a huge increase in load without spending another dollar. Of course some cities (London) apply congestion pricing to PT as well–travel into London by train is much more expensive at peak hours.

    Hensher tries hard to play the cool, calm and rational master by saying the discussion “needs to be free of the emotion and ideology of ”train lovers”, ”bus lovers” and ”car lovers” but this is faintly ridiculous as elsewhere he admits that investment in these different options has wildly different long-term outcomes. Namely, what transport planners have known for nigh half a century at least, that if you build more roads or widen existing roads, they will quickly fill. And the most obvious: if your city has a deeply inadequate PT system then people will keep driving no matter what the policy is (or as in Sydney, move to Brisbane or Melbourne to escape).

    And incidentally, with reference to the quotation AD gave, the planners could be completely inactive on congestion pricing or equivalent policies and the congestion itself would do the job–but only if there is a reasonable PT alternative. And AD, your observation that most roads are not congested most of the time is either not true already, but as any analysis of other real-world examples shows, will not be.

    NSW and Qld are entering into a truly dark age of transport planning where multiple tens of billions of dollars will be committed to road projects and PT will be forever postponed. Yesterday Newman’s budget slashed various PT projects while still retaining massive road schemes. Examples of the jaw-dropping disparity: removed 100% of the $40M from School Transport Assistance while the RACQ fumes at the modest cut to the Safer Roads Program from $66M to $61.2M! Barely a word on the proposed Cross Rail project (but cutting $35M in its land acquisition program, which is sure to be a long-term money saver, not!), while renewing a $1.3 billion increase to roads (mostly for the Legacy Way road mega-tunnel). Beggars belief.

  3. Alan Davies

    Head of Sydney Uni’s Institute of Transport and Logistics Studies, David Hensher, in the SMH today on road pricing. The money quote:

    I believe in the adage ”to make public transport more attractive, we have to make the car less attractive, and that no amount of public transport investment that we can afford without reform road pricing will solve road congestion”.

  4. Dudley Horscroft

    Tony Ward is right that congestion pricing is good in principle, but I think he is wrong in suggesting “Australian CBDs have much less traffic, with many more entry points (with the possible exception of Sydney).” Melbourne has comparatively few entry points. I have just checked with my (old) Melway and find that there are only about 23 entry points into the “Golden Mile” area, while, due to the Yarra in the south, Merri Creek in the east, the old VR line between Park St and Brunswick St in the north and the Moonee Ponds Creek in the west, a much larger area could be covered by 50 toll points. Some of the smaller roads that cross the boundary could be closed to through traffic, or made one way out in the morning, in in the afternoon, or passable by residents only – see the barriers used at Melbourne University restricting entry/exit to authorised vehicles only.

    But more to the point is that roads are very expensive to provide. And there is no revenue from roads. Sure, there is revenue from excise on petrol, and fees from car and driving licences – but that is a sumptuary tax, and the fees relate to permission to take a lethal weapon (a vehicle) on the road.

    Consider here in Tweed Shire. A major road diversion has just been completed, at a cost of about $360M. No tolls on the vehicle drivers who use it – the money is taken out of the general taxpayer’s pocket. No matter whether he be rich or poor, the taxpayer pays. And he pays even if he never uses it. This and all other road improvements should be tolled. Rail users are tolled – fares for passengers and freight charges for goods, so should be road users. Roads pay no rates – road users should pay some charge for the roads they use to the value of the rates that should have been levied on the road. Our rates are paid on the undeveloped value of the land – that is exactly the same value as the road outside our houses, businesses, factories, etc. The capital spent on roads should provide a proper return on the asset – the $360M capital cost of the Sexton Hill diversion should bring in at least $18M per year as a reasonable return on capital employed.

    When you have sorted out these costs and made sure that road users pay for the roads they actually use, then think about charging extra for congestion costs they inflict on each other.

    You will then probably find that public transport is profitable and not in need of subsidy!

  5. Russ

    IkaInk, you are looking at the problem in absolute terms, when you should be looking at the margin. Congested traffic is in an equilibrium between desired trips and the time cost of completing them. Adding a monetary cost will shift some of the demand for the road at that time. Because time to travel on congested roads is an exponential, a small shift in demand can significantly increase speeds. Hence, of course Singapore’s drivers travel as far as Melbourne’s. When the aim is to increase travel speed – which will naturally shift the equilibrium towards longer travel distance – that is the point. Their total automobile travel is naturally much lower, for several reasons, mostly unrelated to congestion pricing.

    Where a road is either not congested, or so congested a charge merely shifts the type of demand (towards more time sensitive trips) there won’t be any noticeable shift in traffic patterns at all. But I don’t think anyone has ever advocated road-pricing as the silver bullet. I would however caution against requiring it to go fund alternatives, for two reasons: 1) money is fungible, so a fixed fund in one part of the budget for transport expenditure will merely allow the government to drain transport expenditure in another part of the budget, and 2) if the amount of money raised is large enough to force the government to spend money they otherwise wouldn’t, then there is a high probability it will go to projects of limited value. That said, promising a lot of extra public transport is probably part of the required political cost of its implementation.

  6. Dylan Nicholson

    Steve – that’s why I said PT needs to be reliable fast & comfortable. Time spent on PT needn’t be unproductive, frustrating or stressful – and personally, mostly isn’t as it is now. But driving through peak hour traffic will always be thus until driverless cars are the norm, which is still 20 or 30 years off at least.

    As far as the suburb design issue – I was actually riding through Craigieburn yesterday, and thinking it doesn’t really need much to make it a decent place, in fact it’s really quite pleasant to cycle through (but why was I the only one?). The main problem is, as you say, the average distance from house to shop/train-station/school/office. Realistically anyone living here has to commute quite a long way to get to work, but if it’s by park & ride that might not be so bad.
    Out of curiosity I placed two maps side of side of that area and my own at the same scale:

    The density of the residential streets isn’t radically different, so I doubt the density of the housing is either (and the average # of residents per house in Craigieburn is probably higher(, but the difference in # of train stations, shops, schools etc. are worlds apart (trying putting ‘shop’ in the search box once you bring up the map). Congestion pricing isn’t going to fix that…actually I wonder, is congestion even a particularly bad problem in such outer-suburban residential areas? It’s certainly pretty awful around my area.

  7. Steve777

    “There’s already a huge cost imposed on those who choose to drive in peak hour traffic – that of unproductive time/frustration/stress.” That also applies to public transport, except that the duration is longer. While it may not be enough to provide good public transport, it’s an essential precondition otherwise people won’t use it until driving takes longer and /or parking is prohibitively expensive (as is now the case with CBD workers).

    The availability of telecommuting has got to be part of the mix. Many people, especially those who have little need of face to face customer / client contact, could do most of their work from home, connected to their company’s network. Further, any need to occasionally attend the office could be organised so that commuting happens outside of peak hours.

    Another problem is the design of our newer suburbs, and that’s not going to change soon. Many of our outer suburbs could not exist without the car. Row upon row of houses in cul de sacs, miles from shops and other facilities with few nearby employment opportunities, served by an unreliable hourly bus service which runs nearly empty most of the time because everyone feels they have to drive. Maybe we could establish car parks at strategic sites in outer suburbs, for example lease hotel carparks (beer barns built in the 70’s before random breath testing) or build car parks in what is now agricultural land, with frequent bus services from the car parks into business hubs. Maybe that won’t work but it’s going to require some creative thinking to come up with solutions.

  8. IkaInk

    Road pricing as a method to help fund proper alternatives to reduce congestion makes a lot of sense. Road pricing as a means of directly controlling congestion makes very little sense.

    The problem with unpriced road space is it gets clogged in the peaks with too many low-value trips that contribute little to improving our economic and social wellbeing.

    Citation please! – Congestion deters low-value trips already. How often does anyone decide that 5.30pm peak hour traffic is a good time to tackle Bell Street to get to the nearest supermarket? Why will an additional few dollars of cost suddenly change the equation for all but a small minority?

    The two-major case studies that economists regularly cite for “proving” congestion pricing eases congestion are Singapore and London. With Singapore the economists have completely missed the mark, and it is instead the fact that the total number of cars on the roads themselves are severely limited that means congestion isn’t crippling that very dense city, and indeed Singaporean’s car owners drive their cars as far as Australian’s on a year to year basis (quite an achievement considering the vastly different urban environments), so it is clear that congestion pricing hasn’t deterred those that can afford to drive from doing so. In London, congestion pricing was introduced at a time when road space for private vehicles was greatly reduced, hundreds of extra bus services were introduced, transit lanes were expanded, bike lanes were expanded, etc, etc. These were the policies that made the real impact. Of course congestion pricing helped paid for these policies and continues to do so.

    In conclusion, congestion pricing should be considered in the Australian context, but only as a fundraising measure, not a means of reducing congestion in itself. If we get congestion pricing without the other important policies that are necessary for congestion pricing to work all we will have done is made road space less equitable.

  9. Dylan Nicholson

    Increasing the price of petrol (which I think should happen anyway) is unlikely to do much to reduce congestion, as it doesn’t target the ‘scarce’ resource – i.e. road-space in busy areas at peak times.
    There’s already a huge cost imposed on those who choose to drive in peak hour traffic – that of unproductive time/frustration/stress. But people still do it anyway. So I’m not entirely convinced that introducing congestion charging on its own is enough to get more than a small percentage of commuters out of their cars. The only way it would is if money was spent first to ensure that the alternatives to single-occupant driving are seen as decent alternatives – e.g. more programs to encourage car pooling, better biking infrastructure, and I think a big one is ensuring that P.T. is not just reliable/fast but also comfortable – at the moment in peak hour you have to be very lucky to get a seat on a train or even many trams, and that makes the travel time basically unproductive (in fact I now make a point of choosing non-express services that may be slower but at least give me the capacity to sit and work for most of the journey). Another area that I’d say hasn’t been explored enough is encouraging businesses to give their staff more flexible start/end times, and discouraging them from providing free parking, if they’re in an area where good P.T. is available (e.g. my company is moving right next to a train station next month, yet their main concern is having enough free parking space available).

  10. Krammer56

    The simplist (and cheapest) way to do this is to increase the taxes on fuel. We have pretty cheap petrol compared with most developed countries (see http://www.mytravelcost.com/petrol-prices/) – USA excluded of course!.

    While it doesn’t directly respond to congestion, fuel consumption is higher in congested traffic. Anyway, if you want to deal with congestion by pricing, you need to make sure it is paid for directly by the user rather than employers, otherwise the hip pocket doesn’t hurt enough to change behaviours.

    Of couse it won’t work here because the Nationals will go berserk because the “poor farmers will suffer”. Actually given the cost of building and maintaining a far flung road network to serve rural Australia, higher petrol prices all round would probably be the right answer. In counry areas the taxes could go to roads, and in urban areas mainly to alternatives.

    Julia got is so wrong excluding petrol from the carbon pricing scheme – it should have been included and the revenue turned to dealing with travel needs sensitively.

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