Lecture 4 - Congestion Charging

7/31/2019 Lecture 4 - Congestion Charging

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Congestion Charging


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Congestion charging

Congestion charging is a policy where by the marginal cost of travelling by car ischarged to the user.

Policies of congestion charging have become popular in major cities as this policy isseen as one of the most appropriate methods of reducing congestion.

Congestion charging has become popular for several reasons:

-Increasing urban congestion

-Escalating car ownership

-Environmental concerns

-Proven success in cities such as London


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London Congestion charging

The congestion charge in London is a cordon based system. This means that ascars enter the restricted area they are charged.

The charge is 8/11 and operates from 7am 6.30pm

The cordon is based around the CBD in London.

The charge is enforced by using a large network of licence plate cameras.


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Traffic entering the original charging zone reduced by 21 per cent

An increase in cycling within the zone of 43 per cent

Reductions in accidents and key traffic pollutants

Public transport successfully accommodating displaced car users

Retail footfall now outperforming the rest of the UK and returning to a pattern of

year-on-year growth

No effect on property prices

123/166 million being raised, in the financial year 2006/07, to invest back into

improving transport in London


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In comparison with 2002 conditions, congestion in 2006 was 8 per cent lower, butthis is misleading about the scheme's performance.

When compared to conditions without charging, Congestion Charging is continuing to

deliver congestion relief that is broadly in line with the 30 per cent reduction achievedin the first year of the scheme

Initial results from the monitoring of the western extension suggest that traffic andcongestion have both reduced in line with expectations

exemptions for some cars such as the Prius

In October 2008 cars with emissions of >200kg/perkm will have to pay 25/34


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The Singapore Experience

Singapore was the first city to introduce road user charging back in 1975Initially the system was paper based but in 1998 advanced ITS technologies wereused to apply the system.

The charging system is a variable charge which varies from $0.5 to $3.50 pervehicle. This charge varies according to congestion rates, so in times of heavycongestion the charges are higher.


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The Swedish Experience

Stockholm is a city with about 770,000 inhabitants. The surrounding area hasapproximately 1.9 million inhabitants.

In 2006 a congestion charging trial was launched. The trial ran from January toJuly 2006. The goals of this trial were as follows:

-Reduce traffic volumes by 10-15% on the most congested roads

-Increase the average speed

-Reduce emissions of pollutants harmful to human health and of carbon dioxide

-Improve the urban environment as perceived by Stockholm residents

Before the scheme was launched improvements were made in the public transportsystem and several park & ride sites were introduced to the city.


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Before the scheme was launched improvements were made in the public transportsystem and several park & ride sites were introduced to the city.

The improvements included

-14 new express bus lines-18 bus lines with extended service-197 new buses-Improvements of rail-bound lines-1800 new park-and-ride places

-New bus lanes, bus stops


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The charges applied were

2 during the morning and evening peaks1.5 during the semi peak periods (just before the morning and just after theevening peak)

1- during the low demand daysNo charges during the weekend and public holidays

Changes achieved


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Methods of road user charging

-Cordon based congestion charge

-Distance based road user charge

-Time of day charging


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Why Charge?

To understand why you would adopt a policy of congestion charging it is importantto understand two aspects of traffic engineering and transport economics.

The first is the speed flow diagram. This shows that as flow on a particular roadincreases towards capacity the speed will fall.

This is shown in the following figure. As flow increases towards Y, the speed willfall from W.


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So as each additional car enters this link it will incur two costs, the average costand the marginal cost.

The Average cost is the cost of using the road and the marginal cost is the costincurred by a reduction in speed due to the other vehicles on the road. It is thismarginal cost which it is deemed necessary to add to drivers in the form of acongestion charge.


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To place these concepts in the form of market equilibrium, in the following diagramwhen demand and supply equal at point J, the costs of using the road are said to

equal the benefits of using the road.


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The cost of travel is assumed to be composed of AC and MC, and the differencebetween the two is the marginal cost of congestion.

Consider the following diagram. Initially the road is capable of a flow Va,equilibrium is at point A and the cost is C.

When the marginal cost is taken into account the cost increases to C1, this resultsin a fall in demand from, and flow drops to Vb, equilibrium moves to C, and thecost is at C2.


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The net benefit to society, at the original flow level is shown below.


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The net benefit to society, falls as congestion on the road increases.


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To try and capture an element of the marginal cost or the externality generated bycongestion a congestion charge can be applied. The area ABC is the area which is

said to be the externality (see the diagram below).


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To capture this marginal cost, a congestion charge is applied. The diagram showsbelow show an initial congestion charge is applied. However one can see that this

congestion charge does not meet the total cost. This is because the total cost tosociety is 8, and the total cost to the driver is 5.


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To capture the total cost of this marginal cost (externality) an optimal toll should beapplied. This is toll is decided upon by fining the point where MC intersects

demand at point C.


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At point C, the total cost of driving is covered as the marginal cost is = AC.

If you assume that the revenue generated from the congestion charge isredistributed to society, then this approach is an equitable method of road usercharging.


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Congestion Charging and Dublin

The information in this section was taken from the Dublin Transportation Office,Greater Dublin Travel Demand Management Study.

This study was commissioned in 2005 to ascertain the impacts of introducing acongestion charge in Dublin.

This study examined several other travel demand management (TDM) strategiessuch as work placed parking, and work place travel plans.

In relation to examining the impact of a congestion charge the DTO SATURN

model was used to examine what impact a congestion charge would have.

The area under the congestion charge was assumed to be the canal cordon.


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Congestion Charging and Dublin

The analysis conducted examined the application of a 5 and a 10 congestioncharge. The charging was assumed to be applied from 8am 9am.

The results of this modelling shown in the following two tables show a reductionin traffic within the charging zone.

This reduction would result in an improvement in the performance of publictransport operations. It would also result in an increase in cycling and walkingwith in the congestion charging zone.


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Justification of congestion charging/road pricing

Revenue generation

Generates funds

Rates set to maximise revenues or recover specific costs

Revenue often dedicated to roadway projects

Shifts to other routes and modes not desired

Congestion Management

Reduces peak-period vehicle traffic

Is a TDM strategy

Revenue not dedicated to roadway projects

Requires variable rates (higher during congested periods)

Travel shifts to other modes and times considered desirable


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Methods of Road user charging

-Road TollsTolls are a common way to fund highway and bridge improvements. Such tolls area fee-for-service, with revenues dedicated to roadway project costs. This isconsidered more equitable and economically efficient than other roadwayimprovement funding options which cause non-users to help pay for

improvements.

This is often system often applied during public private partnerships, e.g. M50,M1and other tolled schemes in Ireland.

-Congestion PricingCongestion Pricing refers to variable road tolls (higher prices under congestedconditions and lower prices at less congested times and locations) intended toreduce peak-period traffic volumes to optimal levels.

Tolls can vary based on a fixed schedule, or they can be dynamic, meaning thatrates change depending on the level of congestion that exists at a particular time.


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-Cordon (Area) Tolls

Cordon tolls are fees paid by motorists to drive in a particular area, usually a citycentre.

Some cordon tolls only apply during peak periods, such as weekdays. Thiscan be done by simply requiring vehicles driven within the area to display a pass,

or by tolling at each entrance to the area. An example of this is in London.

-HOT LanesHigh Occupancy Toll (HOT) lanes are high occupancy vehicle (HOV) lanes that

also allow use by a limited number of low occupancy vehicles if they pay a toll.

This allows more vehicles to use HOV lanes while maintaining an incentive formode shifting, and raises revenue. HOT lanes are often proposed as acompromise between HOV lanes and Road Pricing.


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-Vehicle Use Fees

Distance-based charges such as mileage fees can be used to fund roadways orreduce traffic impacts, including congestion, pollution and accident risk.

This is a proposal which is currently under review in the UK for a nationwide

distance-based road user charging.

-Road Space RationingA variation of road pricing is to ration peak period vehicle-trips or vehicle-miles

using a revenue-neutral credit-based system. For example, each resident in aregion could receive credits for 100 peak-period vehicle-miles each or $20 worthof congestion fees each month.

Residents can use the credits themselves, or trade or sell them to somebody else.

The result is a form of congestion pricing in which the benefits are captured byresidents rather than road owners or governments.


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Benefits and Costs of congestion Taxes

In general the benefits and costs when implementing a congestion charge.At the individual traveller level:

1. for those who continue to drive after the tax has been imposed, theyface a lower travel time cost.

2. for those who stop driving, they avoid the tax, but forgo the benefitsassociated with driving.

A key consideration when trying to ascertain if the benefits outweigh the costs is

how is the revenue from the tax redistributed to society.

If the government were to put the revenue generated from the tax into any of thefollowing, it could be said that this would be a poor use of the revenues:

-Reductions in fuel taxes

-Improvements in roads

A more equitable method of redistributing the revenues generated would be to


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A more equitable method of redistributing the revenues generated would be toinvest in some of the following:

-Improvements in public transport

-Improvements in walking and cycling facilities

-Carbon offsetting schemes

In London the revenues from the congestion charge have been invested inimprovements in the public transport.

Ensuring the maximum benefits is achieved and the user pays all of the costs


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Ensuring the maximum benefits is achieved and the user pays all of the costsinvolved it is essential that road users pay the optimal toll. Which is at point C, at

flow Vb.

At point C the net loss to society (ABC) is minimised however not all of the net


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At point C, the net loss to society (ABC) is minimised, however not all of the netloss can be eliminated. This is seen in area ADC.

The overall impact of the congestion charge on traffic flows is that drivers incur a


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The overall impact of the congestion charge on traffic flows is that drivers incur ahigher cost, and there is a reduction in flow, at equilibrium point D and flow Vdbelow.

FDG is equal to the net benefit to society accruing from the introduction of the


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FDG is equal to the net benefit to society accruing from the introduction of thecongestion charge.

Implementing the congestion charge


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Implementing the congestion charge

-Income effectOne of the concerns about a congestion charge is that it is regressive. Thismeans that those on lower incomes may have to pay a higher proportion of theirincome on this charge.

An example of this is the 25/32 charge on 4X4 in London.To adjust for this change the government could reduce another tax, this couldhave the desired redistribution effect. Such an example would be issuing ofpermits or other financial incentives.

-Modal shiftA desired impact of introducing a congestion charge is that those individuals thatpreviously drove would change to a more sustainable mode of transport.

-Travel timeA change in travel time, if the congestion charging period is between 8.00 10.00some commuters may leave home earlier to avoid the charge.

Alternatives to congestion charging


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g g g

-Fuel taxBy increasing the VAT on fuel, this will make all trips taken more expensive.The benefits of this approach is that it would be that it could be introduced in acost effective manner.

This approach may also fall into the category of being an regressive tax, as it maynegatively impact on those with lower incomes.

-Parking tax


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g

As all travel is assumed to be comprised of a generalised cost. As given in theexpression below.

Generalised Cost

Cost may be considered in terms of distance, time, money or a combination ofthese. The generalised cost is typically a linear function

Includes weighted coefficients

These coefficients attempt to present their relative importance as perceived

by the traveller

One typical representation of this could be for mode k

-Parking tax


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g

If one applies a charge on the parking in a similar way as was seen in thecongestion charge. The average cost of travel will increase due to the increasedparking cost as seen below.

The benefits of this approach are:


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-Easy to implement

-No significant start up costs

-Encourages modal shift

-Encourages travel time shifts

The disadvantages are:

-It does not encourage changes in travel distances

-Politically very hard to set up

Analysis of work place parking charges in Dublin


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The results presented here were taken from the DTO, TDM study.

-75% of those who drive to work in the GDA have free parking

-As with the congestion charging study this study utilised the DTO SATURNmodel

- The results which follow are based upon a parking levy being applied

-the results show a 4% reduction in vehicle KM and a 9% reduction in vehiclehours

- these results compare with a 12-20% reduction in vehicle KM with a congestioncharge, and 19-30% reduction in vehicle hours

-The cost of setting up a congestion charging scheme was estimated to be 50m,whereas the parking levy was estimated to be 1m


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2008 Exam

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Lecture 4 - Congestion Charging