Microsoft PowerPoint - Congestion Charging by mifei

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

Policies of congestion charging have become popular in major cities as this policy is
seen 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
London Congestion charging

The congestion charge in London is a cordon based system. This means that as
cars 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.
London Congestion charging

• 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
London Congestion charging

• In comparison with 2002 conditions, congestion in 2006 was 8 per cent lower, but
this 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 achieved
in the first year of the scheme

• Initial results from the monitoring of the western extension suggest that traffic and
congestion 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
The Singapore Experience

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

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

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

In 2006 a congestion charging trial was launched. The trial ran from January to
July 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 transport
system and several park & ride sites were introduced to the city.
The Swedish Experience

Before the scheme was launched improvements were made in the public transport
system 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
The Swedish Experience

The charges applied were

€2 – during the morning and evening peaks
€1.5 – during the semi peak periods (just before the morning and just after the
evening peak)
€1- during the low demand days
No charges during the weekend and public holidays

         Changes achieved
Methods of road user charging

-Cordon based congestion charge

-Distance based road user charge

-Time of day charging
Why Charge?

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

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

This is shown in the following figure. As flow increases towards Y, the speed will
fall from W.
So as each additional car enters this link it will incur two costs, the average cost
and the marginal cost.

The Average cost is the cost of using the road and the marginal cost is the cost
incurred by a reduction in speed due to the other vehicles on the road. It is this
marginal cost which it is deemed necessary to add to drivers in the form of a
congestion charge.
To place these concepts in the form of market equilibrium, in the following diagram
when demand and supply equal at point J, the costs of using the road are said to
equal the benefits of using the road.
The cost of travel is assumed to be composed of AC and MC, and the difference
between 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 results
in a fall in demand from, and flow drops to Vb, equilibrium moves to C, and the
cost is at C2.
The net benefit to society, at the original flow level is shown below.
The net benefit to society, falls as congestion on the road increases.
To try and capture an element of the marginal cost or the externality generated by
congestion a congestion charge can be applied. The area ABC is the area which is
said to be the externality (see the diagram below).
To capture this marginal cost, a congestion charge is applied. The diagram shows
below 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 to
society is €8, and the total cost to the driver is €5.
To capture the total cost of this marginal cost (externality) an optimal toll should be
applied. This is toll is decided upon by fining the point where MC intersects
demand at point C.
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 is
redistributed to society, then this approach is an equitable method of road user
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 a
congestion charge in Dublin.

This study examined several other travel demand management (TDM) strategies
such 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.
Congestion Charging and Dublin

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

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

This reduction would result in an improvement in the performance of public
transport operations. It would also result in an increase in cycling and walking
with in the congestion charging zone.
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
Methods of Road user charging

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

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

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

Tolls can vary based on a fixed schedule, or they can be dynamic, meaning that
rates change depending on the level of congestion that exists at a particular time.
-Cordon (Area) Tolls

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

Some cordon tolls only apply during peak periods, such as weekdays. This
can 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 Lanes
High 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 for
mode shifting, and raises revenue. HOT lanes are often proposed as a
compromise between HOV lanes and Road Pricing.
-Vehicle Use Fees

Distance-based charges such as mileage fees can be used to fund roadways or
reduce 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 Rationing
A 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 a
region could receive credits for 100 peak-period vehicle-miles each or $20 worth
of 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 by
residents rather than road owners or governments.
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, they
face a lower travel time cost.

2. for those who stop driving, they avoid the tax, but forgo the benefits
associated 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 the
following, 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
invest 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 in
improvements in the public transport.
Ensuring the maximum benefits is achieved and the user pays all of the costs
involved 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
loss can be eliminated. This is seen in area ADC.
The overall impact of the congestion charge on traffic flows is that drivers incur a
higher cost, and there is a reduction in flow, at equilibrium point D and flow Vd
FDG is equal to the net benefit to society accruing from the introduction of the
congestion charge.
Implementing the congestion charge

-Income effect
One of the concerns about a congestion charge is that it is regressive. This
means that those on lower incomes may have to pay a higher proportion of their
income 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 could
have the desired redistribution effect. Such an example would be issuing of
permits or other financial incentives.

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

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

-Fuel tax
By 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 a
cost effective manner.

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

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

Generalised Cost
Cost may be considered in terms of distance, time, money or a combination of
these. 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

If one applies a charge on the parking in a similar way as was seen in the
congestion charge. The average cost of travel will increase due to the increased
parking cost as seen below.
The benefits of this approach are:

-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

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 SATURN

- 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 vehicle

- these results compare with a 12-20% reduction in vehicle KM with a congestion
charge, 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
2008 Exam

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