Good news everyone, road pricing is back on the agenda in New South Wales! The previous NSW administration passed a law that said that EVs will have to pay an odometer tax by 2027, or once they reach 30% market share of new vehicles, whichever comes first. This introduces road pricing one vehicle at a time.
Now the State has established a new toll road review:
- which will examine the patchwork of tolling rates on different tolled motorways.
- under different contracts (almost all between the same two parties, the State of New South Wales and TransUrban, the publicly-traded (which is to say private).
- corporation which manages toll roads on behalf of its owners, mostly superannuation.
- funds (including mine, full disclosure).
The inquiry has already ruled out a Congestion Charge (an extra charge for driving to or through the CBD on all roads, not just motorways), and presumably more general Road Pricing (charging for the use of all roads). It seems open to time-of-day pricing differences (or dynamic (congestion varying real-time pricing, though I am far less keen on that, as it reduces price reliability for travellers.)
So while it is unambitious from my perspective, it is better than the alternative of retaining the status quo. Nevertheless, if one opens up the can of worms, one doesn’t know where those worms will get to.
The argument for road pricing
Road pricing represents the single most significant step society could make towards a more efficient, sustainable, and accessible transport system. It is also one of the most challenging to implement politically. Charging a fee for the use of roads during peak hours has the potential to dramatically improve mobility and reliability and reduce congestion and pollution, benefiting both individual travelers and society as a whole.
Road pricing introduces a price signal that reflects the actual demand for road space. By doing so, it encourages drivers to shift their travel to off-peak hours, use alternative modes of travel (public transport, walk, bike), telecommute, shop online, or travel less altogether. This, in turn, leads to a more efficient and sustainable use of the road network, benefiting both individual travelers and society as a whole.
For example, if a driver travels during peak hours, they will pay a higher fee than if they were to travel during off-peak hours. This provides an incentive for drivers to adjust their travel patterns, reducing peak period congestion and improving mobility. Moreover, road pricing also provides a source of revenue that can be reinvested in transport infrastructure, maintenance, and public transport systems, further improving the overall accessibility and sustainability of the transport system.
Without effective demand management strategies, the deployment of electric and especially autonomous vehicles will lead to even more congestion and reduced mobility. EVs don’t pay fuel taxes. AVs won’t have to pay for parking, and in the worst of all possible world, in the absence of road charges, would just drive around the block empty waiting for their owner to finish their business.
By introducing a market-based solution to congestion, road pricing has the potential to ensure that the benefits of these new technologies are realized, and that the transport system remains accessible, efficient, and sustainable for all.
Road pricing as a policy has suffered failure to launch
Despite its potential benefits, road pricing has eluded most cities (or maybe most cities have eluded road pricing, depending on your point-of-view).
So, why hasn’t road pricing been widely adopted?
- Political opposition: Road pricing is a controversial topic, and many politicians are hesitant to implement it due to fears of backlash from voters. Politicians don’t stay politicians without having some sense of what is popular and what is unpopular. This is especially true in countries with low levels of public trust in government.
- Technical challenges: Implementing a road pricing system can be technically challenging, especially in cities with large numbers of cars and complex road networks. In addition, many people are concerned about privacy issues associated with tracking vehicles.
- Lack of public awareness: Many people are unaware of the potential benefits of road pricing, and may not understand why they would need to pay for something that has previously appeared “free”. This can make it difficult to build public support for road pricing.
- Equity concerns: Road pricing has the potential to disproportionately impact some people versus others. This has led to the expression of concerns about the equity of road pricing. While any change to tax basis will effects some people more than others, I personally believe most of these expressions of concern (and to be fair, most arguments about equity) are a political smokescreen, and very few advocates are also monks. My review paper on the Equity Effects of Road Pricing can be read here.
Where road pricing has been adopted, in little tiny steps
Congestion pricing has been adopted in several cities around the world, notably:
- Singapore was one of the first cities to implement road pricing in the form of an electronic road pricing (ERP) system. The ERP system, introduced in 1998, charges drivers for using certain roads during peak hours based on the time of day and vehicle type.
- London introduced a congestion charge in 2003, which charges drivers for entering the central city during peak hours. The charge has been credited with reducing traffic congestion and raising revenue for transport projects.
- Stockholm introduced a congestion tax on a trial basis in 2006, made permanent after a vote a year later, which charges drivers for entering the central city during peak hours. The tax has been credited with reducing traffic congestion, reducing air pollution, and raising revenue for transportation projects. Gothenburg, Sweden has a similar tax introduced in 2013.
- Milan introduced a congestion charge in 2008, which charges drivers for entering the central city during peak hours. The charge has been credited with reducing traffic congestion and raising revenue for transportation projects.
New York City has recently received environmental approvals to implement congestion pricing (why do they need environmental approvals? American exceptionalism at its finest). If nothing bad happens between now and April 2024, we may be able to add another city to our list.
Many cities, from my perspective notably Minneapolis, have High-Occupancy Toll lanes, allowing Single-occupant vehicles to pay a toll to use the otherwise High-Occupancy Vehicle lanes. These are fine if the HOV lanes are under-utilised. However dynamic pricing has surprising effects, as described in our paper with the sexy title: HOT or Not. [5]
Back to Sydney
Sydney, where I reside has one of the most comprehensive and most expensive toll regimes in the world. Most motorways are tolled, and most of those are owned in some form by TransUrban (the ownership structures are somewhat complex, TransUrban is just a shorthand really, though they do manage most of them) which acquired a few of those roads from bankruptcy [6 – This is a really good footnote]