On road pricing


in Economics, Politics, The environment

Over the next couple of decades, many people expect road pricing to evolve from its present state – focused on highway tolls and city centre congestion charges – to a model in which all road use is taxed. In such a system, all movement of automobiles would be tracked and taxed on a per-kilometre basis, subject to secondary considerations like vehicle fuel efficiency and level of road congestion. Singapore, London, Oslo, and Dubai have all introduced charges intended to reduce congestion and pollution in their city centres. Expanding such systems to cover all roads would involve some considerable benefits, though there are also problems that would likely arise.


National systems of road pricing would have a number of benefits:

  • The high cost of building and maintaining roads could be more accurately directed at those who use them.
  • Externalities relating to CO2 emissions from automobile use can likewise be dealt with.
  • By charging more to drive on congested roads, people can be encouraged to avoid traffic jams. This helps people who need to use the road avoid wasting time. It also saves on the amount of fuel being wasted by hundreds of idling engines.
  • Some of the funds raised could be directed towards the improvement of public transport options.
  • The use of more efficient vehicles could be encouraged through variable pricing.
  • The use of vehicles that do less damage to road surfaces (that is to say, those other than heavy trucks with bad shock absorbing systems) could likewise be encouraged.

The benefits are thus split into two big categories: those concerning a fairer allocation of costs to those benefitting from publicly provided roads, and those serving to internalize the previously ignored social and environmental costs of driving. If one considers the geopolitical costs of oil dependence, the latter looks even more justified than if one concentrates on particulate emissions and climate change only.


Naturally, there are a number of significant problems associated with such systems. One is equity. Road pricing may impose high burdens upon individuals with low incomes. For instance, those who cannot afford to live near where they work. Solutions to this could include the provision of some set level of free usage, over and above which people start getting charged. Better options include encouraging the development of efficient and popular public transport systems, as well as reduced charges for light and energy efficient vehicles. Zero-emission vehicles (such as electric cars charged on nuclear or renewable power) could likewise be taxed at a lower rate.

More serious are the privacy implications. I think it would be naive to imagine that the tracking information generated by such systems will not be retained by the state and used, for good or ill, without a great deal of public accountability. This is part of the much broader problem of how to manage data control and privacy protection in an age where surveillance is increasingly ubiquitous and data storage is ever cheaper. In recent years, there have been many cases of government employees found using access to such databases in improper ways. Doubtless, the vast majority of such inappropriate use is never discovered. Further to that, there is good reason to believe that access to such databases will be gained by outsiders through flaws in internal security protocols. The creation of systems for oversight would therefore be essential, and it seems wise to have a general policy of deleting stored data after a set amount of time has elapsed, with exceptions granted only through an explicit process of approval subject to external scrutiny.

An appeal for bike subsidies

One suggestion I would make to improve this system would be to include an optional component for cyclists. Those willing to cycle around with a transponder would be credited at a modest rate for distance traveled. This would be in recognition of the non-market advantages of cycling, such as the value of physical fitness as a component in preventative medicine. In 1998, Health Canada estimated the total cost of cardiovascular diseases on the health sector of the Canadian economy to be $18,472.9 million (11.6% of the total cost of all illnesses). Cardiovascular disease is also responsible for 36% of deaths. As such, a subsidy of a few cents a kilometre makes economic sense, as well as potentially generating some good publicity for a system that is likely to be highly unpopular with commuters.

There are also network benefits to be had from increasing the number of cyclists. The emergence of suburbs was made possible by automobiles, at the same time as such urban trends made them increasingly necessary. A more positive version of such feedback effects can be brought about for cycling: as higher numbers justify a more cycle friendly infrastructure which, in turn, encourages more people to cycle. In particular, the creation of designated bike lanes and routes, the provision of cycle parking facilities, and integration of bike carrying capabilities into public transport seem sensible.

{ 15 comments… read them below or add one }

Richard Pore May 20, 2007 at 11:39 pm

A “green” reactor has been designed that may produce energy as cheaply as 1/3 cents per kWh. The national average cost of electricity is 10 cents per kWh. Maybe these new nukes could finance a viable national health care program as well as fund public education and teachers’ salaries.

R.K. May 20, 2007 at 9:20 pm

Regarding your bike plan, the easiest way to do it would probably be based around web-enabled cell phones. They could serve to track location and upload the information to whatever central processing system is established.

There could be systems to check that the speeds given are consistent with cycling. Possibly, there could be cameras in various places that checked that the vehicle is actually of the type identified to the tracking system.

Gary May 27, 2007 at 2:57 pm

I’d just like to add that alot of people are missing the point of road pricing. The need to cut congestion is not the real issue, or at least the reason why the government wants to introduce it.

The government is pushing the car industry and its customers (us) hard in the direction of low emmissions high mpg (miles per gallon) cars. In a matter of 10-20 years most of us will be driving either highly efficent, low fuel consumption, combustion engined cars; or hybrids/electric cars. This will mean a massive decrease in the demand for fuel, which is a major source of tax income for the government.

This will mean less money for public spending, which under the Labour government will make them look bad. They know they cant just increase road tax in the obvious way because people wont like that, they may loose support. So the issue of congestion is a neat way of increaseing the tax we pay with out an obvious tax increase.

The simple fact is everyone will pay more for transport if this goes ahead. Even the supporters who dont drive will have to pay extra, throught their taxi fairs. And do you think the train/bus companies wont see the opportunity and increse prices, when they realise people are increasingly turning to the trains/busses?

Anon October 19, 2007 at 3:47 pm

Wheels of fortune
Bikeways pay for themselves
Posted by Alan Durning at 3:04 PM on 19 Oct 2007

A decade ago, we wrote that the bicycle is one of the world’s seven everyday wonders because it’s so simple, effective, affordable, and pollution-free. To that list, we might have added “enriching.”

Bicycling for transportation pumps money into local economies. Bikes are wheels of fortune. (Thanks to Flickr photographer hanbyholems for the picture to the right.) If your community spends money building bikeways, you and your neighbors will cycle more. Your cycling will put extra money in the local economy. (I’ll explain how in a moment.) The extra money will make the community rich enough to pay for more bikeways. More bikeways will induce more cycling, and the virtuous circle will continue.

. December 16, 2007 at 1:13 pm

Drivers stage fuel price protests


Farmers and lorry drivers are taking part in protests across the UK against the rising cost of fuel.

. January 3, 2008 at 10:36 am

Milan introduces traffic charge

The Italian city of Milan has imposed a charge of up to 10 euros (£7.50) on vehicles entering the city.

The “eco-pass” is being policed by cameras at 43 electric gates around an 8-sq-km (three-square-mile) inner area.

The mayor of Milan, Letizia Moratti, launched the charge predicting a 30% cut in pollution levels and a 10% reduction in traffic.

Electric and hybrid cars are allowed to enter the congestion charge zone without payment.

. May 28, 2008 at 11:11 am

Fuel protests herald grim times for European green policy


From Wednesday’s Globe and Mail

May 28, 2008 at 2:06 AM EDT

LONDON — After hundreds of angry drivers shut down highways in England Tuesday in protest against green automobile taxes, and drivers and fishermen in France and Spain paralyzed their ports and roads in a fuel-tax protest, politicians began to signal Europe’s ambitious emission-control policies may soon have to be abandoned.

. July 17, 2008 at 3:30 pm

Road damage is roughly proportional to the fourth power of the axle load. A 20,000 lb axle causes 16 times as much damage as a 10,000 axle, and 160,000 times as much damage as a 1,000 lb axle (wider tires mitigate the effect slightly). The net result is that 99% of the traffic damage to roads and highways comes from trucks and buses and far exceeds any fuel taxes paid. Removing as many trucks as possible (and shifting to Urban Rail with smaller feeder buses) is the best hope for keeping road maintenance affordable.

. August 25, 2008 at 3:55 pm

At this point in my calculations, I Googled to find out the average speed of bicycles, and I discovered, serendipitously, that I’m not the first person to try to do this math. What’s more, I’m not even the first person to invoke Thoreau and Illich while doing so; someone named Brad Morgan invoked them in 1991. And a fellow named Ken Kifer has made a much more thorough assessment of the costs of driving. Kifer has also assessed the costs and the Thoreau speed of bicycles, into the bargain. He estimates the Thoreau speed of cars as between 4.8 and 14.4 miles per hour, and the Thoreau speed of bicycles as between 8.9 and 14.8 miles per hour. Though beaten to the punch, I’m posting anyway, because my sources and method are different yet I end up confirming Kifer’s conclusion: When costs are factored in, cars are not faster than bikes and only twice as fast as walking.

. April 2, 2009 at 10:35 am

Tax a mile in another man’s shoes
Oregon’s successful mileage tax experiment worked smoothly — and helped curb congestion
Posted by Adam Stein

Recently I’ve been flogging the concept of a mileage tax, a system of per-mile road usage fees that over time can replace our dysfunctional gasoline tax as a way of funding transportation infrastructure. Although people have raised a lot of interesting objections, I’d like for now to skip ahead and simply describe Oregon’s successful experiment with a mileage tax. A single real-world example can be a lot more illuminating than an entire internet’s worth of abstract debate.

. May 26, 2009 at 6:03 pm

A fair and simple method for handling congestion-charging

I learnt a brilliant way to automate congestion-charging from Stephen Salter. A simple daily congestion charge, as levied in London, sends only a crude signal to drivers; once a car-owner has decided to pay the day’s charge and drive into a congestion zone, he has no incentive to drive little in the zone. Nor is he rewarded with any rebate if he carefully chooses routes in the zone that are not congested.

Instead of having a centralized authority that decides in advance when and where the congestion-charge zones are, with expensive and intrusive monitoring and recording of vehicle movements into and within all those zones, Salter has a simpler, decentralized, anonymous method of charging drivers for driving in heavy, slow traffic, wherever and whenever it actually exists. The system would operate nationwide. Here’s how it works. We want a device that answers the question “how congested is the traffic I am driving in?” A good measure of congestion is “how many other active vehicles are close to mine?” In fast-moving traffic, the spacing between vehicles is larger than slow-moving traffic. Traffic that’s trundling in tedious queues is the most densely packed. The number of nearby vehicles that are active can be sensed anonymously by fitting in every vehicle a radio transmitter/receiver (like a very cheap mobile phone) that transmits little radio-bleeps at a steady rate whenever the engine is running, and that counts the number of bleeps it hears from other vehicles. The congestion charge would be proportional to the number of bleeps received; this charge could be paid at refuelling stations whenever the vehicle is refuelled. The radio transmitter/receiver would replace the current UK road tax disc.

. November 16, 2009 at 11:46 am

Dutch pursue idea of cross-country road pricing

Scrap all road taxes. Scrap all vehicle taxes. Instead, charge people for every kilometre they drive, when the drive, and where they drive. That’s what the Dutch are promising to have in place by 2012. Of course, the idea of road tolling and congestion charging isn’t entirely new. We’ve seen it on a smaller scale in cities such as London and Stockholm, and in smaller countries such as Singapore. But the Netherlands, if it follows through, would be the first nation to develop a system that spread across the entire country.

. November 15, 2010 at 1:25 pm

In transport the equivalent of a smart meter is a vehicle’s on-board unit. That used to be a simple device, working like a radio-frequency identification tag when it passes under a gantry on a toll road, but it is also getting smarter. Germany’s Toll Collect system, which ensures that lorry drivers pay for using the country’s crowded motorways, relies on gadgets that are in some ways as clever as a smartphone. Among other things, they keep track of their position with the help of GPS, the satellite-based global positioning system.

Such toll systems are multiplying, particularly in big congested cities, including London and Stockholm. But it is Singapore that leads the pack. The city-state not only charges drivers for using much-travelled roads (driving on an expressway can be S$6, or $4.60); it also adjusts traffic lights to suit the flow of vehicles, uses data collected by taxis to measure average speed and is developing a parking-guidance system, noting that cars looking for somewhere to park are now a big cause of congestion.

Singapore may also become the first city to introduce real-time dynamic pricing on its roads. In 2006 the Land Transport Authority tested a traffic-prediction system built by IBM to set the tolls. And next year it plans to test a satellite-based system that does not require gantries and can charge according to how congested a road is at that particular time.

. May 14, 2011 at 1:47 pm

Other rich nations avoid these problems. The cost of car ownership in Germany is 50% higher than it is in America, thanks to higher taxes on cars and petrol and higher fees on drivers’ licences. The result is a more sustainably funded transport system. In 2006 German road fees brought in 2.6 times the money spent building and maintaining roads. American road taxes collected at the federal, state and local level covered just 72% of the money spent on highways that year, according to the Brookings Institution, a think-tank.

The federal government is responsible for only a quarter of total transport spending, but the way it allocates funding shapes the way things are done at the state and local levels. Unfortunately, it tends not to reward the prudent, thanks to formulas that govern over 70% of federal investment. Petrol-tax revenues, for instance, are returned to the states according to the miles of highway they contain, the distances their residents drive, and the fuel they burn. The system is awash with perverse incentives. A state using road-pricing to limit travel and congestion would be punished for its efforts with reduced funding, whereas one that built highways it could not afford to maintain would receive a larger allocation.

. August 22, 2017 at 5:30 pm

In response, London, like other heaving parts of the world, is looking at a more radical approach to reduce congestion. In January the London Assembly, the elected body that oversees the mayor, published a report calling for the city to develop a system of road-pricing that varies by when, how much and where drivers use the roads. Singapore, which already has the world’s most comprehensive road-pricing system, is introducing a new one in 2020 that uses cars’ global positioning systems (GPS) to charge motorists more precisely. Other schemes are being tried out in American states such as California and Oregon.

Yet economists are not normal people. Most voters hate taxes on driving. Even if they grudgingly accept existing ones, they squeal about any increases. In Britain, which Margaret Thatcher called a “great car-owning democracy”, duties on fuel have been frozen since 2011 following pressure from drivers’ groups. Nineteen American states have not raised their “gas taxes” in at least a decade; Oklahoma’s levy has been frozen for 30 years.

Many drivers would rather “pay” by queuing than through road-pricing. The Netherlands hoped to run a 60,000-vehicle trial of road-pricing in 2011, on the way to a nationwide scheme. But opposition politicians and motoring organisations fought so hard that the plans were dropped.

Governments will nevertheless soon have to find new ways of making drivers pay. That is not because congestion will worsen otherwise—though it will. Rather, tax revenue from motoring is drying up.

For Mr Raccuja, a fair and radical way to pay for the costs of car use would be to scrap duties on fuel and ownership, and replace them with a “road tax”. His new levy would be a per-mile charge that varied depending on a car’s weight and emissions, thereby making drivers with road-crushing and air-polluting vehicles pay more. Mr Raccuja notes that the charge could also be higher in more congested places.

Such schemes will doubtless infuriate motorists. But there are reasons to believe that a shift toward road-pricing is not just increasingly urgent, but also more plausible. London’s CCZ was brought in against stiff opposition. Today just one-fifth of Londoners oppose the idea of a more sophisticated road-pricing scheme, according to the London Assembly. After a seven-month trial in 2006, Stockholm residents voted narrowly by 53% to 47% to make the city’s congestion zone permanent. But by 2011 polls showed that about 70% of residents backed the scheme.

Technology will also make it easier to try road-pricing, including in poorer cities like Jakarta and Bangkok, where traffic is horrific. In the past, schemes might have relied on cameras to recognise number plates. Today transponders can ping a radio signal used to track a car’s movement. But even that gizmo will soon be obsolete. Many premium vehicles are already connected to the internet using mobile-phone networks. By 2020 most new cars will come with these connections as standard. Together with GPS technology that means it will become easier to track the use of vehicles wherever they are.

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