GLOBAL CHALLENGES

The Psycho/Econo/Politics of Road Pricing

John Jainschigg | Date: 06-09-09 | Comments

Road pricing�charging variable tolls that increase relative to demand for access�is proving to be a successful strategy for decreasing traffic congestion and improving air quality.

Anyone who's tried driving into Manhattan at 8:15 a.m. on a weekday knows that man is not a rational animal. Road pricing�also called congestion charging�is a way of putting some rationality back in the mix. The theory: By charging variable tolls that increase relative to demand for access to thoroughfares or downtowns at different times of day, you can offset the tragedy of the commons that ensues when gas is cheap, cars are affordable, and the open road is wild and free. In response to increased cost of travel at peak hours, people will choose to carpool, use public transportation, or adjust delivery and work schedules toward less-costly timeframes, reducing traffic burden.

Does it work? So far, congestion-pricing schemes implemented in urban and peri-urban regions of Denmark, Norway, U.K., Belgium, Sweden, Japan and a few other countries seem to be working very well, clocking reductions in daily peak-hour traffic up to 25 percent, while markedly improving air quality.

The "discovery" that road pricing could be used for beneficial social engineering came mostly as a side effect of implementing this policy as a revenue-generating scheme. Toll roads, of course, are an old concept. In the mid-'80s and early '90s, several urban regions in Scandinavia, notably Oslo, began installing toll-rings around city centers�raising revenues that were then shunted toward improving public transportation.

The marked success of these projects in generating tax revenue by equitable means, while also (to use econo-speak) internalizing externalities such as overall traffic burden and CO2 emissions, kicked off a debate among economists that continues to the present day about the optimal mechanics of using road pricing in combination with other taxes and policies to create a virtuous cycle of increasing availability of capital for improving transportation and access, reducing CO2 emissions, and improving quality of life�doing so without creating uncompensated inequities: e.g., placing unfair burdens on the poor, on specific industries, etc., and offsetting the need to impose distortionary taxes on income.

This has proved to be a technically illuminating field of study, the current line of which is well-summarized in a recent book, Road Pricing: The Economy and the Environment, edited by the late Professor Chris Jensen-Butler of the University of St. Andrews and colleagues. Among the most fascinating insights of research into existing road-pricing schemes�if one can draw out top-level take-aways from such austere and hype-free documents�is that their beneficial effects seem to emerge as a function of the clear understanding, by individuals, of the purpose of charging and the intent to disburse revenue in perceptibly beneficial and equitable ways (e.g., to improve public transportation). Where such understanding exists (and where the government's expressed intent is given credence, as one study explored), the cost of changing behavior is much less.

Another key insight: Models and empirical data both suggest that congestion pricing is far more efficient than passive schemes that simply increase the frequency of public transportation or reduce speed limits on contended roads, suggesting that there is something truly critical about the power of these (conceptually) simple schemes to engage a population in deliberate choice about how to optimize their position: a daily, binary decision whether to accept a toll or change behavior to avoid it.

Conceptually simple though they may appear, making these systems operational, especially across broad areas of roadbed and multiple centers of activity, is a fairly tall order. Solutions typically incorporate RFID or similar car-based, scannable token technologies as a putative end solution, but must also stopgap with laser- and similar high-resolution/high-speed photographic license-plate scanning and similar technologies until RFID tokens can be distributed widely, placing an immediate (though presumably declining) burden on computing and network infrastructure for high real-time performance. IBM is fast emerging as a major implementation partner for road-pricing schemes. In recent years, the company has developed bespoke solutions for Sweden, U.K. and Japan.