MBA: Congestion Pricing
In the fifth chapter of "Moving Beyond the Automobile," we demystify the concept of congestion pricing in just five short minutes. Here you'll learn why putting a price on scarce road space makes economic sense and how it benefits many different modes of surface transportation.
In London, which successfully implemented congestion pricing in 2003, drivers now get to their jobs faster, transit users have improved service, cyclists have better infrastructure, and pedestrians have more public space. More people have access to the central city, and when they get there, the streets are safer and more enjoyable. While the politics of implementing congestion pricing are difficult, cities looking to tame traffic and compete in the 21st century can't afford to ignore a transportation solution that addresses so many problems at once.
Streetfilms would like to thank The Fund for the Environment & Urban Life for making this series possible.
“Gridlock Sam” Schwartz: [00:13] Congestion pricing was invented here in New York City. William Vickery in the 1950’s, an economics professor who later went on to win the Nobel Prize for economics, came up with this concept that one of the most precious resources in a city is space, and that space needs to be priced, just like we price theatre tickets, we price the airlines during the holiday season or hotel rooms, the same we should price Fifth Avenue’s space. So congestion pricing is a way of setting a price so that we can achieve a level of service. Stockholm has congestion pricing. Guttenberg is about to do it in 2013. Singapore has been doing it for over 35 years now. We go to London and we see that they’ve introduced congestion pricing.
Lucinda Turner: [01:02] The main purpose of congestion charging is to reduce traffic and congestion. So in cities like London, road space is a really scarce resource and we’ve got lots of competing demands for that space, we’ve got cars, freight, buses, taxis, pedestrians, cyclists. We also want to use space for public squares, street cafés, things like that. So congestion charging is a means of allocating that limited space whereby motorists who want to drive on the roads within the zone pay a charge. Everyday if they want to drive in the zone they pay £8 and it applies Monday to Friday, 7am to 6pm. Since the introduction of congestion charging we’ve seen traffic in the zone reduce by about 20%. In practice, that means about 90,000 fewer vehicles in the zone everyday. In 2008/9 there was about £150 million in net revenue the charging scheme raised. By law we have to use that money to put back into the transport system. And that was used for investment in buses, in cycling facilities, in walking, in maintenance.
“Gridlock Sam” Schwartz: [02:06] The people that are in their cars are moving faster, and the people that are in the subways are getting some kind of revenue stream that assists them in getting to their destinations faster. We’re using less of the planet, lower carbon footprints, the air quality is better. We’re all better off.
Tom Vanderbilt: [02:24] An economist would say you have a certain amount of a good, how are you going to distribute that good? You can ration it by price or by queue. If you sort of under price something, you’re going to have a queue. When a store like Costco has these sort of like Thanksgiving flat TV specials where there’s a flat TV for $200, what happens? You have a line of people at the door in the morning because it’s under priced TV’s. I think roads are sort of the same way. We give away road space for essentially nothing in this country. We have some of the lowest fuel taxes in the world, they don’t pay for themselves. And it’s no surprise that the result of that is our queues. We could choose to distribute that space differently through pricing. You wouldn’t expect to fly home at Christmas and pay the same for flying in the middle of sort of September. When there’s peak demand in other areas of life, you pay more. The roads we sort of just give it all away and then we’re surprised.
Lucinda Turner: [03:15] Congestion charging helps to encourage people out of their cars and onto other modes of transport such as public transport or cycling. And our monitoring shows that about 70% of people are affected by the charge have actually switched to other modes. When charging was introduced, we saw an increase of about a third in the numbers of people coming into Central London by bus during charging hours. About half of this is directly attributable to congestion charging.
Anne Korin: [03:41] At the end of the day it’s about the value of your time, your time has a value. If it’s leisure time, if it’s work time, and being able to pay to get home faster, pay to get to work faster, pay to meet your friends faster, whatever it is that you’re going to do we should have the ability to do that. So road pricing let’s us do that. First of all we have an infrastructure problem in this country. Secondly we have a deficit problem. Third, oil prices are going up. So this is kind of a perfect storm of concern. I think on the left and on the right there’s starting to be a realisation that we need to find solutions that make sense to fiscal conservatives, to environmentalists, to security folks, to people that are looking at this from a transportation angle or an energy angle, and it really can move us forward in terms of opening a more competitive market among transportation modes.
“Gridlock Sam” Schwartz:
[04:28] Let’s face it, the supply and demand curve for gasoline has
always been related to the size of the middle class. Well folks,
we’re going to see a quintupling of the middle class with the Chinese
middle class coming online, the Russian and Eastern Bloc countries coming
online, that supply/demand curve means that that demand is growing.
Any world city that wants to compete in the 21st and is thinking
about the 22nd Century needs to think about congestion pricing.
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