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What Are The Important Requirements Of Any Road Pricing Scheme?

Guiding principles

The economic and technical possibilities of road pricing were studied nearly 45 years ago in the Smeed Report (Ministry of Transport, 1964). The report listed nine design criteria considered as important, that are still worth looking at today:

1. Charges should be closely related to the amount of use made of the roads.
2. It should be possible to vary prices to some extent for different roads (or areas), at different times of day, week or year, and for different classes of vehicle.
3. Prices should be stable and readily ascertainable by road users before they embark upon a journey.
4. Payment in advance should be possible, although credit facilities may also be permissible under certain conditions.
5. The incidence of the system upon individual road users should be accepted as fair.
6. The method should be simple for road users to understand.
7. Any equipment used should possess a high degree of reliability.
8. The method should be reasonably free from possible fraud and evasion, both deliberate and unintentional.
9. The method should be capable of being applied, if necessary, to the whole country and to a vehicle population over 30 million.

A further eight more practical requirements considered to be desirable was also listed. Clearly, most of the Smeed criteria are still valid as an aid for today’s designers; the first one pointing at the principle of distance based charging, and the second one at congestion charging.

William Vickrey, by some considered the father of congestion pricing, first proposed in 1952, for the New York City subway system, that fares be increased in peak times and in high-traffic sections and be lowered in others. Later, he made a similar proposal for road pricing and in 1959 he presented to Congress a proposal to control the District of Colombia’s traffic congestion with electronically assessed user fees (http://www.vtpi.org/vickrey.htm).

Some of William Vickrey’s thoughts on how to implement efficient congestion pricing for roads and parking are published in Vickrey (1992). They included that charges should reflect as closely as possible the marginal social cost of each trip in terms of the impact on others, that charges should vary smoothly over time, and that all vehicles should be charged without exception. These are important requirements to have in mind, since they point towards the first best, or optimal, solution. For several reasons they would not be possible to implement fully in practice; demands on technology would be excessive and lead to high transaction costs, and users would not be able or willing to act in accordance with the complex pricing regimes (see Section 3.2.2). Fortunately, recent theoretical research has shown that second best solutions based on cordons can deliver net social benefits within the same order of magnitude as the first best solution (Sumalee et al, 2005).

Other requirements that have emerged include easy accommodation of occasional users and visitors, allowing users to check the validity of charges incurred, multi-lane operation and effective enforcement to be operable under all reasonable traffic, lighting and weather conditions.

How do people deal with scheme complexity?

The various scheme design elements once combined could lead to potentially very complex schemes. Some recent research carried out by Bonsall et al (2007) recognised the potential conflict between theoretical desirability of differentiation in charging systems and the ability of the travelling public to respond to them effectively. Using both surveys from a variety of transport sectors on pricing, and results from theoretical literature, they concluded that it might not be realistic to expect drivers to calculate the precise charges that they would incur for their trips. In particular, people might underestimate distance when distance pricing is used as they do not perceive distance as accurately as time.

Even under a simple charging scheme such as in Singapore, unless a driver is one who travels on a fixed route at a fixed time, he is unable to calculate the precise charges each day. The charges vary, and although they are advertised regularly in the newspapers and media, drivers do not keep a copy of the charge table in their vehicles.

Thus, there is a limit to how complex a scheme to design, for it to be comprehensible and acceptable to the general public. The question of complexity in scheme characteristics and links to acceptability is elaborated in Chapter 12.  More complex schemes are also likely to be more expensive both to implement and to operate, which will influence the business considerations addressed in Chapter 5.

Understanding the importance of stakeholder engagement and the political decision-making process

The decision-making process is treated more fully towards the end of this Report, in Chapter 14. Here the focus is on some general lessons to learn about stakeholder engagement and varying political preferences and compromises, and corresponding adjustments to scheme design. It is extracted from the history of the Trondheim toll ring. (The planning and decision-making story, starting in 1985, is outlined in Langmyhr and Sager(1997)).

A major planning challenge was to secure sufficient agreement on the toll ring through more than a decade of numerous minor decisions. The planners' abilities to gain continuing support rested on an understanding of the political climate, close co-operation with leading politicians and stakeholders, and responsiveness to public involvement. 

Three main "areas of preference" can be distilled from the public and political debate in Trondheim.  Since 1985, no single "interest coalition" was in the position to take a City Council majority for granted.  Thus, some sort of compromise had to be aimed for in planning and decision-making concerning the toll ring.  The preferences concerned both scheme design and the use of revenues. 

"The mobility interests" prefer to solve mobility problems by expanding the road capacity.  If road user charges are considered inevitable, the favourite solution is toll roads implying a close link between the charging and the benefit for road users.  The demand management effects of charging are largely considered adverse by-products.  Revenues should preferably be earmarked for road construction only.  In Trondheim the mobility interests included the Conservative Party, the Norwegian Automobile Federation and major commercial actors.  It is easier to gain support from these actors when the arrangement is limited in time, and when the local fund raising generates transfers from the State.

"The regulation interests" prefer a transportation system favouring the "green" modes.  Road building is tolerated as a necessary evil only where substantial environmental and safety improvements to dwelling areas or the city centre are expected.  Charges on the use of private cars are considered a feasible means to reduce traffic, and to provide revenue for public transport and environmental improvements.  A toll ring is an acceptable pricing system as long as the revenue spending is not too pro-car.  In Trondheim, this preference cluster included environmental interest groups and left wing City Council parties.  During an environmental phase, a major part of the Labour Party sympathised with the regulation interests. 

"The carrot and stick interests" house preferences revealing a belief in a transportation system which is both efficient and environmentally friendly.  Promoting public transport by improving its quality is preferred to severe restrictions on car use.  The demand management effects of the toll ring are nevertheless rated as positive.  The revenue spending called for is a "balanced" solution, allocating resources to road construction as well as public transport and environmental improvements.  In Trondheim, a couple of parties in the political centre, as well as a varying proportion of the Labour Party revealed "carrot and stick interests".

The 1991 single cordon system in Trondheim was developed during a six year long planning and decision-making process. During these years, several decisions were made concerning the principles of pricing, the design of the cordons and the charge structure, the use of revenues, and the division of responsibility between different institutional levels. The initial system was fully electronic with non-stop lanes from the start, and it had time-differentiated charges for tag holders.

Already in 1996, the City Council decided on a revised system that divided the city into six zones, and traffic crossing the boundaries was to be charged. Two main objectives motivated this change which came into operation in 1998: Firstly, more revenues were needed to fulfil the transport investment plans. Secondly, a more equitable scheme was called for (interpreted as a system charging a higher proportion of the motorists). This way of thinking was taken one step further in 2003, when an almost complete inner ring close to the city centre was added. This system was in operation until the end of charging on 30 December 2005.

Thus, the content of the city investment package and features of the scheme design changed in line with local stakeholder and political preferences, both before and after the scheme was implemented. An URUC scheme affects a number of political goals like congestion relief, mobility, environment, social equity and urban development. Overlaps of interest make coalitions possible, and this requires that the design process is iterative, since alliances may shift at consecutive stages of planning, implementation and operation.

In general, it is important to recognise that the planning and decision making process for any scheme may take considerable time, and that there is a need to be flexible and adjust to changing requirements during the implementation phase, and indeed after.

What are the key scheme design lessons from CUPID/ PRoGR€SS?

CUPID was a Thematic Network supported by DG TREN of the European Commission. An important part of CUPID was the liaison with eight demonstration cities constituting the PRoGR€SS project (Bristol, Copenhagen, Edinburgh, Genoa, Gothenburg, Helsinki, Rome and Trondheim). The Executive Summary of the CUPID Final Report (CUPID, 2005) answers the following key questions related to scheme design:

• Cycles, buses, emergency vehicles and disabled drivers should be exempted. Motor-cycles are often exempt for practical reasons.

• This was found to depend largely on urban form and the scheme objectives. If the main objective is to reduce congestion, then city centre or citywide, using either area licensing or cordon charges. If main objective is “mobility management”, then metropolitan area, using distance-based charging.

• In general Dedicated Short Range Communication (DSRC) solutions were preferred. Vehicle Position Systems (VPS) are envisaged to be a useful alternative in the future.

• Most cities felt that Automatic Number Plate Recognition (ANPR) technology was the optimal approach.

• Working weekdays, either “all day” or morning peak only. Charging in the evening depends on characteristics of evening traffic in the city concerned.

• €1-3 was suggested by cities with fixed priced schemes. Charges of between €0.01 and €0.6 per km were suggested for distance-based charging (when feasible), with the figure depending upon the size of the charging area.

• Revenues should be used within the transport system (i.e. “hypothecation”). There was widespread interest in investing revenue in public transport.

• All cities were concerned, but privacy did not appear to represent a fundamental barrier.

All cities recommended that it should be part of a package of measures, and most cities recommended that infrastructure investment should be included in the package.