Australian Lefty on Politics, Governance, Science and Info Management

Road congestion charges, Stockholm puts a green twist

Posted by Dave Bath on 2007-07-28

Road congestion charges achieve a few good things, but from 2007-07-01 new Swedish road congestion charges in Stockholm will exclude "green cars", as well as the usual buses, emergency vehicles, vehicles used by the disabled, etc.

Electric (or part electric), non-LPG fuel-gas cars, and liquid fuels that are mainly ethanol will be exempt until 2012 (probably because lots of Swedes will have green cars by then).  Other congestion fees are mainly to reduce congestion, and Sweden has taken the best of the Singapore model (charging according to the time of day).

Can large Australian cities learn from another Swedish innovation?  Can we reap the considerable economic benefits?

Now car owners complain that they are already taxed enough, but they are ignoring some basic economic theories outlined in VoxEU’s "Congestion pricing: an idea that makes sense" (2007-07-25) by Georgina Santos:

Road users, quite naturally, only think of themselves when taking a trip.  Their extra trip, however, imposes extra delays on thousands of drivers.  The result is wasted time, wasted fuel, and unnecessary pollution, to say nothing of the other happiness-reducing aspects of traffic congestion – frayed nerves, road-rage, missed appointments, etc.

it is useful to think of traffic congestion as the outcome of a market – the market for road usage.  In most cities, the ‘price’ of road usage is just the private cost: the cost of your own time, vehicle, fuel and peace of mind.  If this price is too high, you may decide to take public transport, ride a bike, etc., but otherwise you drive.  Since road users are not ‘paying’ for the costs they impose on other road users, the natural result is over-usage, i.e. traffic congestion.  From one perspective, this lack of pricing is strange.

If electricity, water, telephone calls, trains and planes were free, no one would be surprised to see ‘’congestion’.  To prevent the resulting chaos, the ‘price’’ of these services includes a monetary fee as well as the usual private costs.  In fact, in most settings, these fees are higher during periods of peak demand.  Doing the same for road usage is a natural extension of this reasoning.

Santos goes on, and gives a detailed breakdown of costs and benefits in London, not just in revenue, but also the benefits of greater reliability, totalling well over 200 million pounds.

Other towns and cities around the world may want to consider the idea. The main piece of advice I would give any local authority is quite obvious: make sure there is an alternative uncharged mode of transport (such as buses), which is reliable, and be transparent with the use of revenues.

The use of revenues is where smarts come in.  While in Victoria, toll road fees go to the private consortia that built the roads, in Sweden it transparently goes to more infrastructure, but smartest of all is Norway: congestion tax in Norway goes 50% to new roads, 50% to public transport, which encourages even less use of private vehicles.  (Here, Victoria has been very stupid, and trains are now so full, they often can’t take on passengers from inner-urban stations in peak hour, and commonly are loaded above the legal limits.)

While unpopular with voters before introduction of congestion fees in a number of areas, they have not led against a backlash after introduction.  The message to politicians is get cracking and introduce congestion fees just after an election to allow the voters a year to recognize it as a good thing.

So, with a road congestion done cleverly, everybody actually wins.  It’s time to introduce one in Melbourne (and probably Sydney), including the temporary exemption for "green" cars and spending at least 50% of the revenue on rail.


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