Monday, May 26, 2008

Congestion taxes to encourage selectivity in car use

In an interview I gave on Friday for the Today Tonight show on traffic congestion I was asked a very standard question. ‘Won’t congestion pricing have particularly adverse effects on low income travellers and mainly benefit the rich?’

I have been asked this question countless times over the years in relation to a various taxes - taxes on alcohol, cigarettes and gambling all hit low income earners rather heavily. The standard economic response to this question – and one that I endorse – is that one should not be overly concerned with the impact of taxes on the consumption of particular items but should look at the overall impact of taxes and transfers on welfare. Particular taxes may be regressive – impact primarily on poor people – but the overall taxes and welfare transfers should be designed to compensate for such regressivity if one wishes to avoid it.

While there is certainly an element of truth in this explanation with respect to congestion tolls there are even more important issues. These tolls should not discourage car ownership but should encourage more selective use of cars. The opposite has been the case over recent decades since we know that cars are used more intensively rather than less. Some households make virtually all journeys by car – going to work, taking the kids to school and sports events, visiting friends and, of course, doing the shopping.

In my view we should think of public transport alternatives or of walking or taking a bicycle for many routine journeys that we make each day where large amounts of materials need to be carried. Trips to work and school are often repetitive tasks that can often be programmed to be dealt with via public transport, walking or by ‘park-then-drive’ actions. Certain trips require use of a car either because they are unexpected – the need to pick up a sick child from school – or because they involve transport of a large quantity of goods – for example, the weekly shopping.

Good road pricing should encourage greater selectivity in car use with the largest possible car ownership to facilitate the accomplishment of journeys which require a car. Generally I am in favour of hefty congestion charges, and petrol charges that are large enough to encourage the substitution of alternative fuels, but low car ownership costs.

This will encourage the type of car usage discussed for the US by John Quiggin – less usage of cars partly as a response of fewer journeys taken and increased reliance on public transport but also because, as I have emphasised above, car users more stringently rationalise their use of cars across tasks .


conrad said...

I think you can argue black and blue with these quite reasonable suggestions. However, I'll just assume that the average Today Tonight viewer is not exactly the type that is likely to fairly evaluate them (I presume you were just there for punishment, oh, and publicity for La Trobe). Its a pitty really, as I imagine many of these things would make Melbourne a far better place.

Cross-culturally, I might note that once people get used to these tolls, they get accepted quite well -- people don't complain in countries like France where there are tolls left right and centre on roads. However, they do take public transport much more (which is however much better than here). There's a great place you can go to see this on the border of Germany and France -- there are two freeways that run basically parallel, one where you pay (France) and the other where you don't (Germany). Its funny watching people endlessly sitting in traffic on the German side, but having reasonable driving conditions on the French side.

derrida derider said...

I think its obvious that a congestion charge is a progressive tax. Have a look at the type of cars you see in the inner city and compare them with those you see in battler outer suburbs. There aint many 7-series BMWs in the battler suburbs.

In fact that's exactly one of the reasons "Red Ted" Livingstone was so keen on it for London.

hc said...

Derrida Derrida,

The standard story is that the wealthy have a high value of time and will pay the congestion tax. The 'poor' have a much lower value of time and are 'tolled off' - they suffer big deadweight losses since their behaviour changes a lot.

That said you might have a point. Maybe the wealthy will comprise most of the commuters into a CBD anyway - I'd like to see the facts on this. If it is true then to cut into congestion you would need a big toll.

Spiros said...

Harry, how much do you reckon that petrol at $1.60 per litre, and heading north, will solve the congestion problem?

I know the idea of congestion pricing is to discourage driving at particular times of the day, so high petrol prices are not the same thing, but even so, if enough people cut their driving by enough because of petrol prices then the congestion problem should get better, shouldn't it? Especially since driving in congested traffic uses more petrol per kilometre.

trs80 said...

I'd say jobs in the CBD are higher-paying than those in the suburbs, and most commuters into the CBD already face steep car parking prices, so yes, CBD car commuters are somewhat price-insensitive. Although I was talking to a few friends recently, and better, cheaper public transport would also help.

Francis Xavier Holden said...

I don't reckon the CBD in Melbourne is all that congested. There are other congested hotspots around the suburbs. Warrigal Road, Beach Road, Springvale Road, Whitehorse through Ringwood.

The congestion in Melb generally is in trying to bypass CBD or get across town suburbs to suburbs. Western Ring Road around Sydney Road is a mess in peak hours. Bell Street is a schemozzle. Punt Road almost any time. Toorak Road hopeless.

There seems to be an urban myth that most workers commute from outer suburbs into CBD. Not so - most people work within 10 - 15 ks of home and mostly commute across town rather than to a central hub.

Francis Xavier Holden said...

A 20c hike in fuel prices will only add another $200 to a typical 20,000ks a year fuel bill and given that say 10,000ks is non avoidable I can't see much sense in making big changes for a "saving" of $100.