Lessons Learned From International Experience in Congestion Pricing
Executive Summary
Overview
Large road pricing projects have been implemented in U.K., France, Norway, Sweden, Germany, Switzerland, Singapore and Australia over the past three decades. Additionally, congestion pricing has been analyzed and evaluated through numerous studies in nearly all EU member countries, in Southeast Asia, Canada, Australia and New Zealand.
To further understanding of international pricing, “Lessons Learned from International Experience in Congestion Pricing” provides a summary of selected operational areawide congestion pricing projects outside of the U.S. The report draws lessons from a sample of projects with the richest and most relevant experience, focusing on three comprehensive area wide projects: Singapore, London and Stockholm. Each received in depth attention during planning, design, implementation and operational phases and have been monitored and evaluated carefully. These projects should be of particular interest now that several U.S. cities are beginning to examine similar area wide pricing strategies to address congestion, environmental, energy and funding problems in heavily congested downtown areas.
In addition to the lessons derived from the three key projects, this report includes a summary of available overseas literature on more than the three specific projects, including attention to equity, economic impacts and the acceptability of congestion pricing. Research on acceptability is especially detailed in Europe and United Kingdom and provides valuable lessons for U.S. cities interested in pursuing such policies. The report concludes with overall findings and lessons related to travel, costs and revenues, equity and economic impacts, environmental impacts; and public acceptance.
Findings & Conclusions
Mobility: Without exception, areawide pricing strategies implemented abroad have met their principal objective of reducing congestion and sustaining the relief over long periods. Areawide pricing in Singapore, London and Stockholm resulted in 10 to 30 percent or greater reduction in traffic in the priced zone and has sustained the reductions over time. The speeds increased significantly within the zone as well as outside along approach roads. Ten to thirty percent increase in speed has been realized. Buses in Singapore and London have particularly benefited from speed increases. In the three areawide pricing programs described in Section 2, up to 50 percent of those foregoing car travel to the priced zone shifted to public transportation. In London and Stockholm, the greatest shift was to public transportation while in Singapore it was to 4+ carpools and to the shoulder time just before the start of pricing. The traffic reductions in priced zones have been sustained over thirty years in Singapore and five years in London.
Revenues/Costs: The significant revenues generated by pricing have been seen as an important source of benefits in all three projects reviewed in this report. Project revenues in London and Stockholm (as well as in toll cordon projects in Norwegian cities) have been used to cover operating and enforcement costs first and remaining revenues have funded improvements to bus and rail services. In London and Stockholm, the desire and ability to use pricing program revenues for public transportation was a major objective and “selling” point. In Singapore, while the revenues are not directly earmarked for public transportation, the availability of these funds probably has allowed the government more easily to pursue ambitious public transportation programs. Also, areawide pricing projects are generating revenues far in excess of costs. In Singapore’s Area Licensing Program, revenues were more than ten times the operating costs. The revenues under the central area cordon pricing are nearly 14 times the operating costs. If capital costs are included, the revenues are still 2.5 times the costs. For the London charging program, the revenues have been a little over twice the operating costs. Inclusion of capital costs brings this ratio down only marginally.
Economy and Business: Areawide congestion pricing applications likely have realized societal economic benefits in excess of costs. Singapore’s 1975 program is estimated to have achieved a rate of return on investment of at least 15%, even without inclusion of realized savings other than the value of time savings. The London scheme is estimated to have generated a B/C ratio of 1.4. Regarding business impacts, in Singapore, surveys suggested that the pricing did not change business conditions or location patterns. Overall, the business community responded positively to the program. Analysis indicates pricing in London has neutral regional economic impacts, though annual surveys suggest businesses in the priced zone have outperformed those outside. A majority of businesses continue to support the charging scheme, provided investments in public transportation are continued. In Stockholm surveys, albeit over a very short time span of trial, no identifiable impacts on retail business or household purchasing power were identified. The long term study of overseas congestion pricing conduced by CURACAO finds “generally low level of measured impact” on regional economies While the result may be partly attributable to the unique economic vitality and strength of the cities in which pricing occurs, there is no evidence of economic damage.
Environment: Better environment has been one of the primary objectives of the Stockholm areawide program, though not a major objective behind London and Singapore pricing programs. However, all three have made attempts at monitoring and measuring air quality implications of changing operating speeds, number and timing of trips or the mode on which trips are taken. Evaluators in Singapore concluded that the tailpipe emissions most likely declined in the priced zone because there was such a large reduction in automobile travel. Regarding smoke and haze, measurements showed declines, but they could not be unambiguously attributed to the pricing. Analysis in London shows changes in air quality within and alongside the Inner Ring Road boundary of the zone. Levels of NOX fell by 13.4% between 2002 & 2003, CO2 by 15%, and particulates (PM10) by 7%. More recent analysis confirms the trend. Some of these reductions are attributed to the effects of reduced levels of traffic flowing more smoothly, but the majority due to improved vehicle technology. Generally, it appears areawide pricing has had a role in reducing pollution. As well, public transportation expansion, made possible by the congestion charge revenues, has the potential to reduce pollutants and sustain reductions over time.
Equity: Equity impacts have received general analytic attention but little project level evaluation. The focus has been on varying concepts of equity, modeling of impacts and pricing designs to address income equity issues. At the level of projects or proposed projects, Singapore has examined equity impacts; Edinburgh has grappled with equity and general fairness considerations and several toll rings in Norway have designed schemes with equity in mind but not done detailed equity evaluations after project implementation. Regarding specific cities reviewed for pricing activity, the perception that congestion pricing is “unfair” to low income drivers has not been a major concern in Singapore, London and Stockholm after implementation. Findings from Singapore are most in depth, though experience in the proposed Edinburgh program also is instructive. In Singapore, the results of modeling analysis based on before and after user survey data suggested that gainers outnumbered losers 52 to 48%. Attitudinal surveys carried out after program implementation show pedestrians, taxi riders and residents outside the priced zone found the impact as neutral or negative while cyclists, bus passengers and residents within the zone judged pricing as favorable. Car drivers and passengers judged the program as mildly unfavorable. Travel evaluations and stakeholder surveys found increases in transit were fairly uniform for low, medium and high income peak period travelers. The evaluators concluded that, overall, there were only small differences among income groups in modal response. There was also no evidence that trip times increased or decreased more for any particular income group. In Edinburgh, issues of revenue distribution and transit improvements were vital to geographic equity considerations. Non-city residents viewed revenue distribution plans as unfair since they would pay the charge but not get any direct benefit. A key institutional issue appears to be neighboring authorities had no legal grounds to support public transport improvements which might have appealed to non-city residents. City residents would also have benefited disproportionately more from the public transport improvements. In short, Edinburgh shows geographic equity and improvement plans can make or break pricing plans. A CURACAO publication reviewing equity issues across programs urges attention to the design of pricing programs, including location, time of day and level of charge; the use of exemptions and rebates; provision of travel alternatives and use of surplus revenues to moderate perceived equity issues.
Acceptability: Based on project experience and public opinion studies on pricing, certain key factors emerge as potential determinants of public acceptance:
The problem addressed resonates. Whatever the mix of problems addressed by pricing proposals, whether congestion, pollution or some combination, acceptability is enhanced where the problem is clear and severe to affected parties. Congestion may or may not be the most central candidate problem for pricing; pollution may be more resonant. Pricing plans enhance implementation prospects when they home in on the most resonant problem or problems.
Pricing Is Convincingly Effective: Acceptability studies suggest the public or decision makers may be skeptical about the effectiveness of pricing in reducing congestion or pollution. The implication is proposals will have better prospects where they can demonstrate effectiveness, perhaps by reference to like projects or through well evaluated test programs or both.
Program Design Meets Program Concerns: Acceptability of pricing is enhanced where pricing program parameters are in line with public and decision maker concerns. Top concerns will vary by area, but planners increase the odds of acceptance by determining the concerns and structuring the program accordingly. Some top concerns may be about “free riders” and enforcement; others may be about complexity of technology; others about specific groups facing hardship or adverse boundary effects. Implementation prospects improve with full attention to specific concerns.
Revenue Distribution Follows Preferences: Gearing revenues toward most favored purposes is important to acceptability. Research shows revenues directed toward transit and/or road improvements may garner support in some locations, but may compete with other preferences elsewhere, including possible tax reductions.
Fairness Is Broadly Addressed: Equity across income groups subject to pricing often leads equity discussions among analysts of road pricing. However, research shows acceptability does not vary greatly across income groups and equity defined more broadly may dominate and deserve more attention. Specifically, these fairness perspectives may be key: fairness of outcomes, i.e. assurance some are not evading the pricing scheme who should be paying; “procedural” fairness, i.e. people feeling full opportunity to participate in developing pricing plans; fairness to special groups, e.g. handicapped or emergency workers; use and spatial fairness where occasional payers reap the same benefit from new roads and transit as frequent users; and ways to moderate different treatment of travelers within or to/from a cordon scheme.
Government Planners Are Open, Responsive, Resourceful Solution Partners: Numerous findings suggest how government pricing planners are perceived may be as important to acceptance as the nature of their pricing proposal(s). It seems if government has at least some favorable image coping with bottlenecks, improving transit, improving traffic management, acceptability of pricing proposals is enhanced – and visa versa. Likewise important is sensitivity to governmental image as a taxing entity with already sufficient resources to deal with congestion. Transparency in pricing planning and decision making also will enhance acceptability, including the degree to which non-pricing options have been examined; and the extent of reference to pricing experience elsewhere. Finally, government as resourceful partner in the solution is important to acceptance, suggesting state and national governmental agreements and matching funds may be a necessary step.
Pricing Schemes Operate Over Time: A consistent finding is acceptance tends to grow the longer pricing programs are in existence. The exact reasons for growing acceptance are not well explored. It may have to do with experiencing demonstrating no harm to business, absence of feared queues at tollgates and the visible, proven link between revenues and transportation improvements. In any case, growing familiarity with successful operations seems to enhance acceptability over time.
In terms of implementing pricing programs, a few key points emerge from overseas experience:
Areawide pricing often requires new policy and institutional arrangements. Major national level legislative initiatives were enacted before areawide pricing could be implemented in London and Stockholm. The experience shows that formal agreements may be needed for: power to impose and collect charges; use of selected technology to administer and enforce charges; to cite violators and collect fines; make modifications to the pricing scheme; and for the use of revenues from the charges. Experience also shows that policy and institutional arrangements and agreements have profound impact on public and political acceptability of areawide pricing proposals and operational success. Acceptability research shows stakeholder involvement and funding across government levels also are important.
Successful projects depend on effective outreach and sensitivity to public acceptability. All of the projects overseas have paid considerable attention to measuring public attitudes and reaching out to the public, stakeholders, and elected officials to further understanding of pricing and assess reactions. Outreach efforts as part of initial feasibility studies often find neutral or skeptical opinions, or outright resistance, which is often followed by acceptance as projects get underway. The support of a key stakeholder and/or a senior politician who is able to influence public opinion also seems crucial to furthering implementation prospects. While businesses have not been obstacles to implementation and are generally accepting of pricing, continued support at least in London appears to hinge on continued investment in public transport.
Effective, reliable and acceptable pricing and enforcement technologies are key to implementation. Technology is important to the success of most pricing concepts, and the technology has been generally up to the task. Various technologies for pricing and enforcement, both low and high end, generally are proving reliable and effective. The Singapore windshield license and manual enforcement system worked well in early stages and the electronic successor using in-vehicle transponders with stored value “Smart Card” technologies is working well. London’s license plate recognition system has been effective, though plans are underway to move to an electronic system to reduce administrative costs and allowing variable pricing schedules.
A Look to The Future
Much has been learned about the promise and potential of areawide pricing over the last several years, but much more remains to be learned. Long-run impacts on land use, auto ownership, business and productivity need to be monitored over time. Continued progress in implementing acceptable, effective and informative pricing programs has required careful planning, coalition building, public education and participation, and sufficient time and resources for the development of well designed and locally acceptable project plans. Given the overseas track record to date, more successful implementations can be expected and these will provide much needed long term lessons.
Areawide pricing holds the promise of reducing congestion, enhancing mobility and economic productivity, reducing environmental and energy costs, and providing new sources of funding for transportation investments. Despite this potential, the concept of congestion pricing remains controversial in many potential applications. It involves a new approach to dealing with congestion problems and charging for road use. Nevertheless, the overseas programs demonstrate favorable outcomes are possible with careful and inclusive planning and outreach and, as the acceptability literature suggests, each new program enhances the prospects for further applications.
The overseas experience provides a valuable guide to planners in exploring the feasibility of future pricing applications and identifying projects for implementation. A particularly important consideration in U.S. cities considering areawide pricing is the use of revenues generated by pricing to address and mitigate equity issues of the most concern within specific area studies. At the same time, operating pricing programs abroad have demonstrated the wisdom of a abroad definition of and attention to fairness versus simple income equity. Extensive findings summarized here point to the link between fairness and acceptability.
Finally, overseas experience suggests the need for focusing more on the potential environmental and energy benefits of pricing. Overseas analysts have made limited but important preliminary findings about air quality impacts, and more work can be expected. While the air quality and energy conservation benefits of small-scale U.S. pricing projects implemented to date may have modest effects on overall regional environmental quality, areawide projects beginning to receive attention in the U.S. may have more potential benefit. Planners will do well to pay continued attention to environmental results and evaluation methods from overseas.
