How and why road-pricing will happen – As ride-sharing and electric cars take off, governments are seeking new ways to make drivers pay.
In 1868 the world’s first traffic light was installed outside the Houses of Parliament. The gaslit signal controlled the flow of London carriages—at least for a few weeks. For, soon enough, the gas ignited. The resulting explosion knocked the helmet off a policeman’s head, and left him badly burned.
Efforts to ease congestion no longer literally blow up in your face, but recent schemes have run into trouble, too. In 2003 Ken Livingstone, then London’s mayor, introduced a congestion-charging zone (CCZ). Motorists pay up to £11.50 a day ($15.20) to drive into the centre of the city. Since 2000 the number of cars entering central London has fallen by nearly a quarter. But congestion is rising again (see chart 1), a result of vans and taxis clocking up more miles within the zone, as well as new lanes for buses and Lycra-clad commuters that have reduced the road space for cars. More minutes are lost to delays than before the CCZ. The average vehicle speed has fallen from 19.9 miles (32.0km) per hour in 2013 to 17.7mph (28.5kph) in 2016.
In response, London, like other heaving parts of the world, is looking at a more radical approach to reduce congestion. In January the London Assembly, the elected body that oversees the mayor, published a report calling for the city to develop a system of road-pricing that varies by when, how much and where drivers use the roads. Singapore, which already has the world’s most comprehensive road-pricing system, is introducing a new one in 2020 that uses cars’ global positioning systems (GPS) to charge motorists more precisely. Other schemes are being tried out in American states such as California and Oregon.
All of which pleases economists. Using prices to ration a scarce resource, such as space on busy roads at busy times, makes sense. Those who consume a good should pay for it. Road-pricing is also more efficient than the typical ways drivers are charged for imposing costs on others: taxes on fuel and on car ownership. Neither penalises driving in congested conditions, which causes extra pollution and crimps productivity by delaying workers and deliveries, and disrupting supply chains. And although congestion zones help, they are blunt instruments; ideally, road pricing would adjust to traffic flows in real time.