Road pricing

Road pricing (also road user charges) are direct charges levied for the use of roads, including road tolls, distance or time based fees, congestion charges and charges designed to discourage use of certain classes of vehicle, fuel sources or more polluting vehicles. These charges may be used primarily for revenue generation, usually for road infrastructure financing, or as a transportation demand management tool to reduce peak hour travel and the associated traffic congestion or other social and environmental negative externalities associated with road travel such as air pollution, greenhouse gas emissions, visual intrusion, noise and road accidents. In most countries toll roads, toll bridges and toll tunnels are often used primarily for revenue generation to repay for long-term debt issued to finance the toll facility, or to finance capacity expansion, operations and maintenance of the facility itself, or simply as general tax funds. Road congestion pricing for entering an urban area, or pollution charges levied on vehicles with higher tailpipe emissions are typical schemes implemented to price externalities. The application of congestion charges is currently limited to a small number of cities and urban roads, and the notable schemes include the Electronic Road Pricing in Singapore, the London congestion charge, the Stockholm congestion tax, the Milan Area C, and High-occupancy toll lanes in the United States. Examples of pollution pricing schemes include the London low emission zone and the discontinued Ecopass in Milan. In some European countries there is a period-based charge for the use of motorways and expressways, based on a vignette or sticker attached to a vehicle, and in a few countries vignettes are required for the use of any road. Mileage based usage fees (MBUF) or distance based charging has been implemented for heavy vehicles based on truck weight and distance traveled in New Zealand (called RUC), Switzerland (LSVA), Germany (LKW-Maut), Austria (Go-Maut), Czech Republic, Slovakia, Poland, and in four US states: Oregon, New York, Kentucky and New Mexico. Many recent road pricing schemes have proved controversial, with a number of high-profile schemes in the US and the UK being cancelled, delayed or scaled back in response to opposition and protest. Critics maintain that congestion pricing is not equitable, places an economic burden on neighboring communities, has a negative effect on retail businesses and on economic activity in general, and is just another tax. A 2006 survey of economic literature on the subject, however, finds that most economists agree that some form of road pricing to reduce congestion is economically viable, although there is disagreement on what form road pricing should take. Economists disagree over how to set tolls, how to cover common costs, what to do with any excess revenues, whether and how 'losers' from tolling previously free roads should be compensated, and whether to privatize highways. Road pricing is a general term that may be used for any system where the driver pays directly for use of a particular roadway or road network in a particular city, region or nation. Road pricing also includes congestion charging, which are charges levied on qualifying road users to reduce peak demand, and thereby reduce traffic congestion and also to place a charge on road users for other negative externalities, including traffic accidents, noise, air pollution, and greenhouse gas emissions. The first published reference to 'road pricing' was possibly in 1949 when the RAND Corporation proposed 'use of direct road pricing to make freight journeys more expensive on congested routes or to influence the time of day at which freight traffic operates'. Nobel-laureate William Vickrey then built on the ideas of the economist Arthur Pigou, outlining a theoretical case for road pricing in a major work on the subject of 1955 proposing in 1959 that drivers should be charged by electronic means for use of busy urban roads. Arthur Pigou had previously developed the concept of economic externalities in a publication of 1920 in which he proposed that what is now referred to as a Pigouvian tax equal to the negative externality should be used to bring the outcome within a market economy back to economic efficiency. In 1963 Vickery published a paper 'Pricing in urban and suburban transport’ in the American Economic Review and Gabriel Joseph Roth, John Michael Thomson of the Department of Applied Economics at the University of Cambridge published a short paper titled 'Road pricing, a cure for congestion?' The Smeed Report, 'Road Pricing: The Economic and Technical Possibilities', which had been commissioned in 1962 by the United Kingdom Ministry of Transport, was published in 1964. Road pricing was then developed by Maurice Allais and Gabriel Roth in a paper titled 'The Economics of Road User Charges' published by the World Bank in 1968. The first successful implementation of a congestion charge was with the Singapore Area Licensing Scheme in 1976. The Electronic Road Pricing (Hong Kong) scheme operated as a trial between 1983 and 1985 but was not continued permanently due to public opposition. A number of road tolling schemes were then introduced in Norway between 1986 and 1991 in Bergen, Oslo, and the Trondheim Toll Scheme. It was noticed that the Oslo scheme had the unintended effect of reducing traffic by around 5%. The Singapore scheme was expanded in 1995 and converted to use a new electronic tolling system in 1998 and renamed Electronic Road Pricing. The first use of a road toll for access by low-occupancy vehicles to high-occupancy vehicle lane was introduced in the U.S. on California State Route 91 in 1995. Since 2000, other schemes have been introduced, although the New York congestion pricing proposal and a number of UK proposals were not progressed due to public opposition. A study of congestion pricing in Stockholm between 2006–2010 found that in the absence of congestion pricing that Stockholm's 'air would have been five to ten percent more polluted between 2006 and 2010, and young children would have suffered 45 percent more asthma attacks'.