Friday, July 04, 2008

Fuel price surrogates for congestion pricing

New York politics failed to agree to introduce congestion taxes to deal with traffic congestion. But higher fuel prices are delivering desired outcomes anyway. This is true in New York and, of course, in all major cities along the eastern seaboard of Australia. Fuel tax increases to deal with congestion are generally ill-advised because they lead to drivers being penalised when they take non-congesting trips. But when urban dwellers take fewer private car journeys because of high fuel prices there is no such distortion.

It seems to me there are few downsides on the fuel-priced-induced traffic slowdown. And it does mean that with lower congestion, congestion tolls where they are levied, can be lower than they would otherwise be even if travel costs overall are not reduced. With private operators of facilities such as CityLink and EastLink in Melbourne this will not occur - charging here is based on cost-recovery not on ensuring travel efficiency. This is another reason for leaving the management of tolls in public hands and for redesigning the contracts State governments have with private operators. .


conrad said...

Just out of interest (if the answer is quick) -- how strong does the relationship between cost recovery vs. travel efficiency tend to be?

What I mean by this is that, excluding when roads are deliberately blocked off to force certain travel patterns etc., surely the cost recovery model must end up a lot like an efficiency model in that people will only start paying once cheaper routes become inefficient (i.e., clogged with traffic).

Also, I think the obvious downside of fuel price induced traffic slowdowns is that it reduces traffic everywhere (including poor outer suburbs), and not just the places you really need to. In this respect, it isn't as efficient as just trying to restrict it where necessary and potentially hurts poorer users more than richer ones.

rog said...

I think you are being a bit selective Harry, 'most people' dont drive to the CBD, 'most people' are virtually invisible and the rise in fuel is another cost to silently pay.

hc said...

The efficiency properties of cost recovery are lousy Conrad. If you price at average cost you discourage travel even when there vis zero congestion. That's the problem with CityLink.

You are right that people travel less in the suburbs too - but they should. The cost of fuel has risen.

Christian said...

You discourage travel on Citylink, but you don't discourage travel in general because you can just take other untolled roads instead when there is little or no congestion.

I think using the private sector to build roads is a good idea, I am very impressed with how fast Eastlink was built by the private sector and I don't think any State Government (of any political persuasion) would build them that fast (they would do it bit by bit because they would be cautious about spending so much money in one go). And it's a political reality that State Governments just don't want, and politically can't have, that much debt on their books.

I think there is an argument though about how the toll road agreements could be better structured, to allow for off-peak tolling whilst retaining the private sector ownership and management.

hc said...


As I have said many times.

I have no opposition to private groups planning and building tollways - indeed how velse could they be constructed? - but do have opposition to them setting tolls and managing the tollways.

Tollways need to address congestion not cost recovery.

Christian said...

Well, they could be constructed and managed by the government (or at least owned and managed by the government and contructed by somebody else who is paid by the government)...

I don't see how toll roads can actually address congestion in a city. I mean, tolls could manage congestion on a particular road that is tolled, but as long as other roads are untolled there are always substitutes that you can use instead like Dandenong Road instead of Citylink.

Unless you have cordon pricing or a city/nation wide road pricing system (something which I recall Rod Eddington discussing for the whole of the UK in his report for the UK Government), then I don't see how tolling particular roads tackles congestion.

Perhaps off peak tolls, in the case of Citylink, could have some economic benefit in that if less cars use Dandenong Rd during off peak times and instead use Citylink, there will be less accidents (because there are generally fewer accidents on freeways).