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Transport - general

Sep 9, 2012

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).

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