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Driving changeHow policymakers are using road charging to tackle congestion A report from the Economist Intelligence UnitSponsored by IBM

© The Economist Intelligence Unit 2006 1

Driving change How policymakers are using road pricing to tackle congestion

Driving change: How policymakers are using road charging to tackle congestion is an Economist Intelligence Unit white paper, sponsored by IBM. The report is intended to foster debate and raise awareness around road user charging issues among central European policymakers. The Economist Intelligence Unit bears sole responsibility for this report.

Our editorial team conducted the interviews and wrote the report. The findings and views expressed in this report do not necessarily reflect the views of the sponsors.

The research for this paper was conducted in October 2006. The authors of the report were Matthew Shinkman and Malcolm Buchanan, and the editor was Matthew Shinkman. Mike Kenny was responsible for design and layout. Our thanks are due to all interviewees for their time and insights.

Preface

2 © The Economist Intelligence Unit 2006


Traffic congestion in urban areas is a massive problem in Europe—and it is set to get worse before it gets better. Car ownership has grown

ten times more quickly than the population over the past 15 years in the EU, and experts expect it to rise even more rapidly in the coming 15 years.

Policymakers have a large arsenal of tools at their disposal to keep cars on the move, but in recent years interest has risen in the use of road user charging to tackle congestion. This solution elegantly matches the real cost of congestion to society and the actual cost of driving for the user. More importantly, it appears to work more effectively, more efficiently and more quickly than many other options available to policymakers.

In the fast-growing cities of central and eastern Europe, specific problems—infrastructure weaknesses, enforcement problems and demographic shifts—have made congestion a major problem and a constraint on growth. Could road pricing work in these cities–or is it unrealistic to expect payment when even collecting parking fines is a problem?

Many cities across Europe suffer from these problems—what are the lessons to be learned from those urban centres around Europe that have implemented road pricing? Simply put, the system put in place must work well, and it must be made acceptable to the public.

Making it work

● Establish a clear objective, and design to meet that objective: In London and Stockholm, the clearly focused objectives of the schemes made it easier to design systems that would achieve those objectives. In Edinburgh, the lack of a clear objective weakened the hand of municipal officials trying to sell the idea to the electorate.

● Get the technology right: The technology must be robust, as early failures will doom road pricing projects that are already likely to be controversial. In Stockholm, intentionally overlapping functionality kept the system running 99.9% of the time.

● Manage costs: It costs some 20 cents to collect one euro in Stockholm, and as much as 60 cents in London. System complexity drives cost, but legal frameworks and procurement processes also have the potential to add unforeseen costs down the road.

● Understand the legal framework: In most cases road user charging systems will require changes in the legal framework with respect to how, when and by whom people can be charged to drive.

Executive summary



Making it acceptable

● Identify a visible problem: Authorities must be clear that congestion is a real problem for day-to-day car users, and must be able to show that they have tried other, less radical approaches first.

● Sell the benefits: Clear and ongoing communication of the benefits of the programme is essential to maintain public support. Even cities that have had schemes in place for years, such as Trondheim, find that support falls over time if this is not done right.

● Get the timing right: Going to the voters too early can be disastrous, as in the failed attempt to introduce road pricing in Edinburgh. It is very difficult to convince voters to pay for a scheme before they’ve seen the benefits, but support tends to rise after the scheme’s implementation, making a later vote more likely to succeed.

● Keep it fair: The system must be fair, and must be perceived as fair by users. This means making sure cheats are caught and that elements must be included which will soften the blow for vulnerable segments of society, but also means users must be convinced that it is more than just a money-making scheme for the government.

● Sweeten the pill: To convince voters of this, it is crucial to clearly earmark the revenue from the scheme. In London revenue goes to the bus system, while in Oslo it is used to build more roads. But a failure to assign revenue clearly opens officials up to the charge that the scheme isn’t really about reducing congestion.

● Lead from the front: Most successful European road user charging schemes have benefited from high-profile political leadership. In London this came from the city’s mayor, Ken Livingstone, who has made the congestion charge one of his top priorities since taking office.



Urban areas across Europe are suffering from chronic and increasing traffic congestion. From the largest metropolitan areas to the

smallest towns, the problem of congestion has become a near-universal one. It affects not only cities with modest public transport systems, but even those with first-rate alternatives to car use, such as Paris. It affects rich and poor cities alike, and is prevalent in both new towns designed specifically to facilitate car

use and historic walled towns built long before the car was invented.

The scale of the problem is immense, and growing fast. Between 1990 and 2004 the number of cars in the 25 EU member states rose by almost 40% (while total population rose by just 4%). The increase in the number of cars on the road during this period was particularly acute in the fast-growing new EU member states and candidate countries. In Poland car ownership rose by 128%, in the Czech Republic by 58% and in Latvia and Lithuania by 142% and 167% respectively.1 These figures mask even more rapid growth in urban areas and capital cities—in Prague, for example, there is one car for every two residents, a higher level of ownership than in 80% of European cities. In Bucharest the authorities estimate that car ownership has tripled in the past 15 years. One-quarter of EU households now own two or more cars.2 All of this has taken place at a time of slowing growth in traffic capacity: the total length of motorways in the EU15 rose by some 28% between 1990 and 1998, but has been roughly stagnant since then.3

All of this means that road traffic—especially in urban areas—is moving more slowly than ever. In a 2005 study of traffic conditions in some 30 large European cities, the average peak-hour speed of cars and motorcycles was below 30 km/h, and average speeds were as low as 23 km/h in Athens and Madrid, 20 km/h in Warsaw and just 15 km/h in central London.4 Peak-hour speeds for buses were even lower on average. What is more, things look set to get worse before they get better: the EU estimates that 3m new cars are put on the road every year, and the OECD countries are expected to see ownership of light vehicles rise by 73% by 2030—twice as fast as the increase in the past 15 years.5

I. Introduction and context

Car ownership growth 1990–2004 (% increase)

Lithuania

Latvia

Portugal

Poland

Greece

Ireland

Spain

Czech Republic

Slovenia

Hungary

EU25

Slovakia

Germany

France

Norway

Denmark

Sweden

167

142

135

128

121

99

63

58

58

45

38

36

27

26

23

20

14

Source: Eurostat



The economic costs of traffic congestion are difficult to assess, but there is general consensus that congestion represents a significant drain on economic activity in Europe’s urban areas. Before road charging was introduced in Stockholm, city planners estimated that congestion cost the city some €600m-800m (US$800m-1bn) per year in lost time, traffic accidents and deaths, and worsened environmental conditions. In 2006 the UK Treasury estimated that congestion was costing the country’s economy some £20bn (US$38bn) per year.

What’s driving it?The increase in traffic congestion in European cities is the result of both economic trends affecting demand for road usage, and policy trends that have constrained a supply response.

On the demand side, several factors have driven up road usage in Europe, particularly in the fast-growing countries of central Europe. Growth of real GDP and household income in the EU newcomers has been several percentage points faster per year than in the established EU member states over the past decade, driving increased demand (and ability to pay) for cars.

At the same time, public investment in infrastructure expanded strongly in most countries of central Europe in the 1990s, meaning that more and better road space became available for drivers’ use. Technological advances have made cars more reliable, while globalisation and increased trade flows have provided consumers with access to a widening array of vehicles at ever lower prices.

Another key driver of demand for road usage has been shifts in demographics toward urban areas, especially in central Europe. This means more cars in already very densely populated areas. At the same time, rising incomes in central Europe have seen a rapid rise in near-urban populations around the largest cities in the region, with more families moving away from the centre and building homes in the outskirts. This has increased demand for morning and evening commutes to city centres, which still tend to house the bulk of businesses and economic activity in these markets. Exacerbating the problem is the fact that in many cases local authorities have been very keen to stimulate the growth of near-urban mass retail centres—so-called “big box stores” such as the Swedish furniture giant, IKEA—which have

Average peak-hour speed of cars and motorcycles, 2005 (km/h)

Mal

mo

Hel

sink

i

Buch

ares

t

Cope

nhag

en

Barc

elon

a

Brus

sels

Athe

ns

Mad

rid

Buda

pest

Vien

na

War

saw

Lond

on

Bris

tol

37.4

36.0

32.6

28.0

25.0

24.0

23.0

22.8

22.3

22.0

20.0

15.0

14.5

Source: Urban Transport Benchmarking Initiative

1. Eurostat .

2. www.mobilityweek-europe.org

3. Eurostat.

4. www.transportbench marks.org

5. OECD.



put tremendous additional strain on surrounding roads and consequently on routes in and out of city centres. Such suburban retail growth in the Cerny Most neighbourhood of Prague, on the eastern edge of the city, has created significant congestion, which

the authorities are now trying to address via the introduction of park-and-ride schemes, bicycle paths and footpaths.

However, on the supply side, other trends have placed limits on what policymakers can do to increase capacity. Governments in western Europe are facing increased resistance to the building of new roads, on environmental and land use grounds. At the same time, a number of European countries are under pressure to reduce their fiscal deficits, meaning that resources to support big infrastructure projects are scarce. The increasing number of shaky governments in central Europe—Poland, Hungary, Slovakia and the Czech Republic have all seen political instability rise in recent months—has also meant that these governments are heavily constrained in their ability to push through new taxes to pay for the upgrading of infrastructure.

Factors creating congestion

Source: IBM Corporation

Economic trends

In

ef

fi

ci

en

cy

Policy trends

GROWTH INROAD USAGE

TECHNOLOGICALAND INDUSTRIAL

EVOLUTION URBANISATION

INFRASTRUCTUREGROWTH

LIMITATIONS

ENVIRONMENTALPRESSURE

LANDEXPLOITATION

RESISTANCE

STATIC TAXGLOBALISATION ECONOMICGROWTH



Traffic congestion is in essence an economic problem, meaning that policymakers have, broadly speaking, two options for tackling it—

increasing or adjusting supply of road space to meet demand, or managing down demand to fit within the available supply.

The supply sideThe most obvious answer to traffic congestion is simply to build more roads. Although in the emerging European economies there is still a heavy policy emphasis on upgrading infrastructure, even in these markets there are clear limits—physical, financial and social—to what can be achieved by adding lanes to existing roads or building new ones. More broadly, insofar as widening roads or junctions may increase capacity and reduce congestion, it is always likely that the new roads will attract more traffic, and particularly cars, unless demand is limited by other measures.

Given the difficulties surrounding the introduction of new capacity, policymakers have also looked at ways of managing how and when the current supply is made available to users. Traffic management techniques include things like adjusting signal timing and duration, the banning of particular turns or entry into defined areas, and the use of intelligent traffic-control systems. Authorities have also resorted in some cases to the conversion of large areas of city centres, such as in Amsterdam and Munich, to full pedestrianisation.

Parking policy is another area in which authorities have attempted to expand supply within the constraints of existing infrastructure. In city centre areas with uncontrolled or poorly controlled parking, especially those in which the bulk of morning traffic consists of inward commuters who leave their cars

unattended all day, this can mean the loss of an entire lane’s worth of capacity on major arteries. The construction of underground parking garages, or parking facilities dotted around the most congested entrances to the city centre, is a first order of business for freeing up blocked capacity in city centre areas. In Warsaw, a new park and ride system will be completed in early 2007 (at a cost of around US$6.7m) that will include two car parks on the northern and southern ends of the city’s metro system. However, especially in crowded city centres, the protracted and messy nature of the work involved in building large new facilities can actually make congestion much worse in the short term.

Intelligent transport systems are also playing an important role in modifying traffic flow to free up capacity in urban areas in Europe. Variable message signs and traffic and incident detection systems are helping to guide road users to less congested areas, and rapid advances in wireless technology have brought closer to reality the provision and extraction of information directly to and from individual car users in central areas.

The demand sideIn addition to congestion-fighting measures to adjust the supply of road space, municipal authorities have a range of tools to influence demand for road usage. These fall broadly into two categories: “pull” and “push”. “Pull” measures focus on providing motorists with alternatives to using their cars, primarily by increasing the attractiveness of public transport. “Push” measures seek to increase the cost or difficulty of using a car to reach a specific area, by reducing available parking or increasing its cost (or both), or by raising the cost of car ownership and use. The basic

II. Public responses to congestion



tension between the two types of measures consists of the need to balance the political sensitivity of “push” measures—towards which voters tend to be very sceptical—and the often high cost of “pull” measures, given that they frequently entail heavy spending on new infrastructure and public transport assets.

For municipal governments in central Europe, the balance tends to tip towards the “pull” side, not least because many face glaring infrastructure weaknesses that must be addressed in any case. In Bucharest, Florin Dragomir of RATB, a public transport company, points out that in eastern parts of the city tram rails have reached a “dangerous” point of stress owing to heavy use and to technical weaknesses at the time

of construction. The first priority in most central European capitals, then, is to get the infrastructure up to scratch. However, in a number of cities across the region, including Bucharest, authorities are implementing Global Positioning System (GPS)-based public transport management systems, which can provide users with real-time information about the location of buses and trams and expected waiting times.

Reducing fares, introducing new routes and increasing the frequency of departures can all boost the attractiveness of public transport relative to cars. Buses and trams however, are also dependent on the free flow of traffic to provide an adequate service,

European support for road pricing initiatives

The role of the EU in supporting road user charging has primarily been focused on providing advocacy, sharing information and developing standards, rather than offering up hard cash to support the sig-nificant capital investment required to get road user charging off the ground in European cities. The European Commission has overseen a fleet of colourfully named projects—CUPID, DESIRE and PRoGRESS, to name a few—aiming to foster debate, disseminate information and build politi-cal support at local levels for road pricing schemes. These projects have assessed the viability of various road pricing schemes in the EU context, highlighted conditions in which road pricing appears relevant and

provided recommendations. When it comes to funding capital

investment projects, the EU has of course been very active in supporting wider transport improvements. The municipal authorities in Prague are applying for some €5m, or one-half of the total cost, in EU funds to support the development of a mass-transport hub in the eastern suburbs of the city. In Katowice, Poland, EU funds have been crucial in getting the construction of a ring road off the ground. Nonetheless, while financial support for road user charging per se has so far been limited, there is no doubt that the links between road pricing and improvements in the environment and in urban quality of life makes such projects ideal candidates for EU funds in the future.

The European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) are also looking into road user charging projects. “The huge

amounts of grant money available to the new member states in the 2007-13 financial perspective offer a one-off opportunity in this area,” says Neil Valentine, a transport sector specialist at the EIB. “However, they’ll need to get their act together, as funding is dependent on getting statutory approvals for their projects and subject to strict EC rules.” Do the countries of central Europe look like unlikely targets for complex congestion-charging schemes? “Not necessarily. Those new member states with capital cities that benefit from significant autonomy and political power—like London—could find this type of project easier to implement than some of their EU15 counterparts.”

Jamie Houghton, a partner at IBM, agrees. “For municipalities looking to simultaneously increase income and improve infrastructure, road user charging is an ideal approach.”



and they themselves contribute to congestion. Furthermore, changing deeply rooted individual behaviour patterns is difficult, and motorists often prove insensitive to public transport improvements.

On the “push” side, Singapore’s transport policy stands out as a radical solution. Singapore’s road pricing scheme operates in parallel with a massive tax—over 100%—on new car purchases (which itself represents a reduction from the 200% rate before electronic road pricing, or ERP, was introduced) and a quota system, which together keep growth in the number of cars in the country very low. However, the very high cost of buying a car does provide a strong incentive to use it. According to Tony May, professor of transport engineering at the UK’s Institute for Transport Studies (ITS), annual car mileage in Singapore is higher than in the US.6 In any case, the likelihood of gaining public acceptance for such a solution in central Europe—where ownership taxes are usually much lower and taxes are already very high as

a percentage of GDP—is remote.With all of these policy options in their collective

arsenal, why have Europe’s municipalities not been better able to tackle traffic congestion? Gunnar Johansson, a traffic management expert at IBM, suggests that the standard approaches just aren’t enough. “Traditional policies to limit demand or increase capacity can certainly help, but given how fast car ownership is rising, especially in central Europe, congestion in city centres simply can’t be beaten without the introduction of a pricing mechanism to harmonise the cost of driving to the car owner and its cost to society as a whole.” Until fairly recently, this approach was understood by economists, but was considered too politically risky or complicated by politicians. However, the successful introduction of several road user charging schemes in urban areas has local authorities across Europe watching closely and beginning to think about implementing similar schemes.

6. Anthony May, Transport Reviews January 2004



III. The road pricing option

The concept of road user charging is simple. The aim is to introduce a marginal financial cost to road use in order to reflect more accurately

the external costs of congestion and provide a disincentive to using roads at busy times. This charge can ideally be set at a level where congestion would be reduced and most road users would be better off. The components of a road pricing or congestion-charging scheme are relatively straightforward:

● A boundary, area or set of points around or within which charges apply: “cordon-based” schemes charge for individual or daily trips into and/or out of a specific area; “area-based” schemes introduce charges for simply being within a defined area at a given time; and “point-based” systems charge users for driving along particular roads.

● A price or set of prices: depending on the scheme’s objective and design, this may be fixed on a daily basis, as in London, or vary by location, time of day or week, direction of travel and the like, as in Stockholm and Singapore.

● A technological method for identifying and charging users: the two leading technologies for identification and charging are automatic number-plate reading (ANPR) and dedicated short-range communication (DSRC). The former relies on cameras to read number plates either manually or digitally, with that information then being sent on to the charging system, while the latter “tag and beacon” system uses on-board units that communicate with control points by or over the road to identify vehicles. The on-board units can also include “smart card” payment methods (as in Singapore). GPS has been

touted as the next step in congestion charging, as satellite tracking would allow variable pricing by location. However, satellite positioning is not ideal in dense city areas, as satellite signals can be blocked by tall buildings, leaving vehicles in blind spots, or can be reflected from a building’s surface, causing the positioning to be incorrect. City congestion charging may also require a more precise location than that offered by GPS, in particular for vehicles travelling close to the perimeter of the charging zone.

● A means of enforcement: Each road user charging solution will have its own pattern of evasion attempts, and by considering this aspect from the early design phase many can be effectively addressed. The remainder of evasion attempts, though, must be monitored and enforced by a control mechanism. In some cases this may mean that legal amendments are required. If camera-based identification or enforcement is used, for example, it could become necessary formally to ban elements on cars that reduce the readability of number plates. In some jurisdictions, a general clause on tax evasion may be applicable.

Each of these four elements—a defined area, a pricing scheme, the technology to identify and charge users, and a method for enforcement—can of course be implemented in a variety of ways, in support of a number of different objectives. Three European success stories (London, Stockholm and Oslo), a conspicuous European failure (Edinburgh) and the comparison of the world leader in road pricing (Singapore) together provide some sense of the many different ways in which road user charging can be implemented.



London

With average speeds in central London as low as 5 km/h and congestion worsening, Ken Livingstone campaigned for mayor on a platform including a promise to introduce congestion charging. On February 17th 2003, in the face of heavy opposition, the London congestion-charging system went live. The objective of the scheme was at first solely to reduce congestion in central London, although at later points Mr Livingstone suggested that it would also help to improve the environment. In advance of the introduction of the congestion charge, Mr Livingstone added hundreds of new buses to serve central London, and made it clear that the revenue from the charge would be used to improve public transport.

Unlike the Singapore and Stockholm systems, which are cordon-based systems, the London congestion-charging system is area-based. This means that not only vehicles driving into or out of the charging area, but also vehicles which are solely driven within the charging area, are charged. As a practical consequence, the charge levied is a flat daily fee. As a result, unlike the systems in Singapore and Stockholm, which aim at changing traffic routes and redistributing traffic flows, the London systems seeks to clamp down on private vehicle traffic in central parts of the city altogether.

The London system is a pure ANPR system, and includes 230 camera positions, of which 180 are located on an inner ring road and 50 are located within the scheme area, providing an effective image capture rate of approximately 98%. Taxis, emergency vehicles, alternative-energy vehicles, vehicle owners with certain disability classifications and some public

vehicles are exempt. Controversially, foreign vehicles are not exempt, although a number of embassies have claimed that they should not be required to pay, as they consider the scheme to be a tax rather than a charge. Residents within the scheme area are entitled to a 90% discount.

The introduction of congestion charging immediately reduced traffic volumes entering the charge area by 18% (cars fell by 35%). Traffic volume has, however, remained quite stable since 2003. Transport for London (TfL, the integrated body responsible for London’s transport system) estimates that delays fell by 30% within charging zone, typically by around two minutes per kilometre driven. Bus speeds within the charged area improved markedly, and passenger waiting times fell. No evidence was found of a significant impact on traffic immediately outside the charging area, which had been a concern before the scheme’s implementation.

The economic impact has been more difficult to assess. TfL finds “no evidence…of a congestion charging impact, either positive or negative, on aggregate business performance in central London”.7 The London transport authority suggests that the scheme brought in net revenue of €174m in 2005-06. However, observers have questioned the high cost of collecting payments in the London scheme, given the need to match photos with registration data and the cost of transferring data between the systems of several different authorities in order to do so. Nevertheless, buoyed by its success so far, TfL plans roughly to double the charging area by extending it westwards in 2007.

7. TfL fourth monitoring report, June 2006.



Stockholm

The Stockholm congestion-charging scheme was part of a comprehensive urban transport initiative which had three objectives: reducing congestion, improving accessibility for buses and cars, and improving the physical environment by reducing emissions. In addition to the road pricing system, the policy included better public transport and more commuter parking. In the face of significant local scepticism about the project, the authorities decided to implement road pricing on a trial basis and then allow citizens to decide via a non-binding referendum whether to make it permanent.

After numerous delays, the congestion tax went live in January 2006 and was in force during a trial period of seven months. Passages are charged a variable rate (of around €1.50-3.00) per cordon crossing, depending on the time of day. This is intended to influence driver behaviour and also to convince people that the scheme is actually intended to reduce congestion, not simply to raise more money for the public coffers.

Vehicle owners can choose either to pay in banks or convenience stores for each day’s worth of passages, or to install an on-board unit that communicates with gantries at 18 entry points to the city and pay using direct debit. Owing to complex constitutional restrictions, the fee levied is defined as a tax rather than a charge, meaning that it cannot be paid in advance and that no bulk discounts are available.

The system relies on both ANPR and DSRC technologies, and because of significant redundancy (intentionally overlapping functionality) built into the system, the success rate in identifying and charging road users is over 99%. The legal framework has also caused some headaches on the technological side: the registration of a passage via DSRC, as opposed to via photographic evidence, is not legally binding, meaning that in order to be able to address disputes all vehicles must be photographed anyway. This has called into question the long-term future of on-board units as part of the Stockholm road pricing system.

In the end, the trial period proved a major success. The aim was to cut traffic levels by 10-15%, but the

The Singapore experience

The world’s first significant road pricing initiative was not in Europe but in Singa-pore. Singapore’s area licensing scheme, introduced in 1975, required vehicles to display a special paper licence in order to enter the central business district (CBD). The high manpower needs of the paper-based system led to a switch to electronic road pricing (ERP) in 1998, using DSRC-equipped gantries and mandatory installed

on-board units in cars. As in Stockholm, the ERP system uses variable pricing at different times of day in order to encourage road use at off-peak times. However, it is unique in that the authorities adjust the entire pricing schedule on a regular basis (both upwards and downwards) to achieve target average travel speeds in affected areas.

The objectives of road pricing in Singapore have developed over the years, but it now stands out as the best example of a pure focus on the control of traffic congestion via optimisation of the use

of road infrastructure. Revenue from the scheme is not directed to any particular project or constituency (in part because public transport is already so good), meaning that the operational emphasis is exclusively on meeting the target ranges for average speeds on the most affected roads of the CBD. Although the effective functioning of the Singapore system is not in question, its applicability to other cities is: the system requires the kind of comprehensive surveillance that contradicts data privacy rules in Europe.



actual fall in traffic was even more dramatic, with 22% less traffic in and outside the congestion zone. “Crucially, everyone saw there was less traffic and everyone saw that travel by road was quicker,” says Gunnar Soderholm of Stockholm City Council. “The impact was obvious.” Emissions fell by more than 12% in the city centre, the public transport system reported an additional 40,000 daily users and, despite worries, retailers reported no drop in business.

The scheme was a political hot potato for the authorities. Both the mayor of Stockholm at the time and the two main political parties had been opposed to introducing the congestion charge. But a small coalition partner had insisted on a trial scheme as a condition for supporting the government. This meant that the scheme needed to demonstrate a clear benefit straight away.

The referendum, held in September 2006, produced a mixed result: 52% of Stockholm city-dwellers supported the extension of the trial into a permanent scheme, but those in all the 14 surrounding regions that voted in the referendum rejected it. Given the majority in favour in central Stockholm, the new mayor, Kristina Axen Olin, has softened her party’s stance considerably (it had been strongly opposed to the congestion charge), and the scheme now looks set to be extended, although the new government expects to adjust the way the revenue is spent from 2007.

Oslo

Norway has a long tradition of road tolling, so the decision to implement a road pricing scheme was supported across a broad political spectrum, assuming that the finances could be worked out. In 1990 Oslo joined Trondheim and Bergen (two smaller Norwegian cities that were among the first European urban areas to introduce road pricing) with a ring of 18 toll stations on the main roads approaching the city. Car users are charged about €1.50 per inbound trip. The toll stations can accommodate manual payments and credit cards, but during peak hours some 90% of users pay via on-board units using DSRC technology.

The objective of the Oslo scheme is fundamentally different to those of the London and Stockholm projects, and as a consequence so are its results. The primary objective was to raise money to finance road capacity improvements, including a bypass tunnel underneath the city centre. As a fundraising initiative it has been particularly successful, yielding revenue of about €150m a year at a very low cost of around 10 cents per €1 collected.

However, because the Oslo system was designed first and foremost to raise capital rather than to reduce congestion, it has not had a major impact on traffic volumes and waiting times in the city centre. The bypass tunnel reduced congestion by only 2-3% in central Oslo, although conditions for pedestrians and public transport users have undoubtedly improved.

The current scheme will expire in 2007, but a new initiative has recently been agreed, with a stronger focus on using toll revenue to improve public transport. It will also include a shift to 100%-automatic toll collection, helping to cut operational costs even further—possibly by up to one-half.



Edinburgh

Edinburgh City Council began exploring congestion-charging options in the late 1990s, and in 2001 settled on a proposed cordon-based scheme. The scheme that it hoped to implement was relatively complex, with two concentric cordons, passage through which would incur charges at different times of the day. The council expected to use ANPR technology, and expected the scheme to raise over €1bn (excluding set-up, operating and financing costs), to be put towards investment in the public transport system over a 20-year period.

The local authorities decided to hold a non-binding referendum to determine public support before launching the scheme. To show that they were serious

about improving the city’s transport infrastructure, they also promised to spend several hundred million pounds on the public transport system (as had been done in London). However, the council was unable to secure funding from the Scottish Executive (Scotland’s central government) for additional bus services, and the eventual spending of £100m on several new railway stations and other projects did not provide a noticeable, city-wide improvement. In addition, Edinburgh City Council struggled to convince politicians in surrounding authorities of the value of the scheme. In the end, the referendum failed overwhelmingly. Turn-out was high, and three-quarters of voters rejected the congestion charge. The project has been shelved indefinitely.

Road user charging schemes at a glance

Objective Optimise the usage of road infrastructure

Fund new road and public transport infrastructure projects

Reduce congestion and fund investments in the London transport system

Reduce congestion, improve the environment and fund increased public transport

Pricing scheme €0-2 per inbound trip; variable chargeMonday-Friday 7.30-19.00

€1.5 per inbound trip; flat rate all days

€8-10 area charge per day, flat rate Monday-Friday 7.00-18.30

€1-2 per in- and outbound trip; variable chargeMonday-Friday 6.30-18.30

Identification method 98% DSRC 90% DSRC 100% ANPR 50% DSRC50% ANPR

Payment Automatically deducted from pre-pay account

Most drivers pay via Autopass electronic payment collection system

Before midnight the day of passage, by SMS or Internet, or in shops

Within 14 days from the date of passage, in shops or banks or by Internet

Revenue per year €40m €150m €122m (net) €85m

Future GPS-based system in consideration, geographical expansion

Full payment automation, extension and variable pricing scheme considered

Western extension, DSRC pilot project

Trial to be extended and revenue used to fund bypass construction

Singapore Oslo London Stockholm



Now that these and a number of smaller examples are up and running, there is clear evidence that road user charging in urban

areas can work in the European context, if it is done right from both the technological and policy perspectives. At the highest level, there are two fundamental factors that will determine whether a road user charging scheme is successful or not: it has to work, and it has to be made acceptable to the voting public. Failure in either of these basic requirements will doom the project. Practitioners and experts involved in both the successful and the unsuccessful schemes suggest that a number of lessons can be learned from the positive (and negative) experiences to date across Europe and beyond.

Making it workEstablish a clear objective, and design to meet that objectiveThere are a wide range of potential objectives in establishing a road pricing scheme: reducing congestion, increasing accessibility, raising capital, reducing accidents, improving the environment and the like. The key for policymakers is to get clear agreement on what the specific objectives of the scheme are, and then to design a system that is directly focused on achieving those objectives.

The objective of the earliest road pricing schemes in Europe—introduced in Norway—was to raise funds for road construction. The first Norwegian road pricing scheme, introduced in Bergen in 1987, was proposed to fund a bypass when it became clear how long the town would have to wait for the central government to make the necessary investment, and

Oslo followed suit in due course with its toll scheme. In both cases the systems implemented were designed to maximise revenue rather than to affect user behaviour. In Oslo the impact on congestion has been a secondary concern, and it shows—Jonas Eliasson, a transport economist with experience in both Oslo and Stockholm, points out that “the Oslo ring is simply too far from the city centre to have a real effect on the traffic there”.

Singapore’s road pricing objectives have always, by contrast with the Norwegian practice, been focused exclusively on the control and reduction of traffic congestion. This still remains the scheme’s sole objective, and its design solidly supports this aim. No concessions are offered, buses pay three times the charge for cars (since they occupy three times the road capacity) and revenue goes straight into the government’s coffers.

In Edinburgh, by contrast, as Tom Rye of the Transport Research Institute at the city’s Napier University points out, there was disagreement on objectives, especially between the city council and surrounding councils, which made the process of selling the programme to the public and deciding what to do with the revenue more difficult.

Get the technology right, but don’t overdo itGiven that road user charging is bound to be controversial at first, it is essential that the system that is put in place works right away and proves reliable over time. The Stockholm congestion-charging system achieved full operational reliability in its seven-month trial period, and fewer than 1% of vehicles crossing the cordon were not identified. Stockholm project managers point out that the system was intentionally designed with several layers of

IV. Lessons for policymakers



redundancy in order to protect against gaps in service. The choice of technology will be driven in large part

by the system’s objectives and the specifics of a city’s design. In central London, for example, the density and complexity of the city-centre road network and surrounding architecture made a gantry-based system impossible to implement, even leaving aside the strong opposition that the introduction of gantries would have been likely to generate. This helps to explain the technical “bluntness” of the London scheme. The tightly packed capital cities of most central European countries, with their narrow and winding city-centre roads, would also be likely to find the introduction of gantry-based systems difficult if not unworkable. The London authorities, in planning their scheme’s extension, have therefore been researching a novel gantry design that is much smaller and looks like a streetlight, as a possible compromise.

The system’s ability to handle sensitive personal information must also be proven at the outset. In Singapore political conditions on the ground made it easier for the government to mandate the installation of on-board units, but in the European context concerns about privacy and government intrusion must be addressed through the technology.

However, there are limits—Professor May points out that the London scheme was also “designed to be foolproof and evasion-proof”, but that this complexity has been a factor in the high costs of the system. In addition, practitioners warn against overdoing the technology. Jonas Eliasson sits on a panel reviewing the Stockholm scheme, and thinks that current discussion of the possible introduction of satellite-based systems in Stockholm and elsewhere is wide of the mark. “Satellites are probably unnecessarily sophisticated. We only have 18 entry points and this

enables us to get very close to achieving the maximum benefit, so we don’t really need to go much further. A few extra charging points and we will be close to the optimal situation.”

Manage costsThe collection of €1 in revenue costs 22 cents in Stockholm, 21 cents in Singapore, 10 cents in Oslo, 5 cents in Bergen—and 60 cents in London. In large part, cost is driven by system complexity. London’s high costs are at least partially the result of the cumbersome requirement to cross-check daily two large and inevitably imperfect data sets containing the number plates of those who have visited the area and those who have paid. The costs of pursuing non-payers and of catching payment dodgers are also significant.

However, it is not just day-to-day operational factors that drive cost. Experts suggest that, to a certain degree, London’s high costs are the result of shortcomings in the procurement process: owing to the fact that TfL did not define its requirements tightly enough from the outset, the authorities have faced subsequent difficulties in ongoing negotiations with suppliers. This is one of the in-built problems for a “first-mover” city such as London, which may be working within an untested legal framework and without relevant external benchmarks in the procurement process.

In essence, the introduction of a road charging scheme is like setting up a new company, and treating it as such in the procurement process can help to keep costs down. In Stockholm, project executives point to the importance of assigning end-to-end responsibility to one supplier (in this case, IBM), which was given the task of managing relationships with, and the



functional requirements assigned to, a host of subcontractors.

Understand the legal frameworkIn Stockholm the introduction of the congestion-charging scheme required numerous changes to legislation around vehicle registration, the handling of personal data and the receipt of payments from citizens. According to the Swedish constitution, the payment is technically a tax rather than a charge, which has major implications in terms of how, when and by whom it can be collected, and what can be done with the revenue. Executives in the Stockholm project suggest that the legal issues inherent in the scheme probably added a year to the project’s life-cycle. The municipal authorities in Prague are currently studying the feasibility of introducing road user charging, and concerns have already been raised over where revenue from the project would go—the current legislation seems to suggest that income from road pricing would be likely to go to the state budget, rather than to the city of Prague.

Working out the relationship between local and national governments is also crucial—in particular, the question of what role the national government will play. In Norway, observers point out that the national government has had difficulty controlling investment levels in the cities that have implemented road charging (and has therefore also had difficulty in controlling its contribution to that investment), because it gave too much initiative to the local governments up front. Nonetheless, according to experts, there is no doubt that national governments have a critical role to play in limited areas, for example in setting standards for inter-operability and in some stages of the procurement process. Most importantly,

effective national government involvement can help it all happen much more quickly.

Making it acceptableIdentify a visible problemThe first priority for policymakers is to make sure that a real problem exists, and to show voters that other options have been tried before resorting to the controversial introduction of road user charging. Authorities should not introduce road pricing unless congestion is at a level that appreciably affects the average road user—otherwise the scheme risks being perceived as merely a revenue-generation exercise for the government.

As described at the beginning of the present paper, this should not be much of a problem in most of the capital cities of central Europe. In Budapest a proposed road charging system is being linked with the impact of car use on the very poor environmental conditions in the city centre. A recent study found that the level of dust particles in the air was between eight and ten times higher than the commonly acceptable level, and the study’s authors even suggested that city-centre pollution had led to deaths in the capital. Their findings were not reached in isolation: in May 2006 demonstrators wearing gas masks converged on a central junction to highlight the problem of pollution in Budapest. With clarity regarding the scope of the problem, it will be easier to sell a road charging scheme to voters.

Sell the benefitsInevitably, public opinion with regard to congestion charging will be sceptical at first. As Tom Rye puts it, by definition road pricing is “asking people to pay more for something that they at present get for



nothing”.8 In most real-life cases, public opinion improved significantly after the introduction of the scheme as the benefits became more apparent. But an effective public information campaign can make a crucial difference in the run-up to implementation. Most importantly, the burden lies with the authorities to prove that congestion is a major problem and that non-charging options have been tried but have failed to solve the problem.

However, it is not enough to put out a media blitz at the time of a scheme’s launch and then expect the public to fall in line as traffic volumes decline. In Trondheim the introduction of an inner-city charging scheme and electronic payment system in 1991 saw levels of user acceptance of the scheme improve significantly in subsequent years.

However, survey data since then show that, left unchecked, public opinion is likely eventually to turn against such schemes unless the benefits are continually underlined in voters’ minds. “In October 2003, we saw a sharp one-off deterioration in public support, because of negative publicity about the

imminent introduction of an inner charge cordon around the city centre and an increase in the number of charging points,” explains Terje Tretvik of SINTEF, a research firm engaged on the Trondheim project. “Since then, though, we’ve seen a continuation of the longer-term trend of increasing user frustration with the charging, which is generally related to a lack of continuing information from the authorities about the purpose of the scheme.”

Gunnar Soderholm of Stockholm City Council says that this is a big job: “We have measured the effects on a daily basis, and held press conferences daily; there was no room for allowing rumours to spread about the system’s reliability or impact.”

Get the timing rightLinked closely to the question of public opinion is the issue of timing. The Edinburgh example shows the danger of going to the voters too early. Even leaving aside the difficulties that the Edinburgh authorities experienced in getting public transport improvements off the ground, their task in convincing the public to 8. Gaunt/Rye/Ison 2006.

Trondheim road user chargingLevel of user acceptance (%)

Very negative Negative Neither negative or postive Positive Very positive Do not know/no answer

April 1991 46 26 19 6 2 2

December 1991 25 22 27 15 4 6

June 1992 19 16 22 28 10 6

June 1993 18 18 27 24 8 5

September 1994 27 16 26 16 13 3

October 2003 35 22 27 11 4 1

November 2005 28 19 32 14 5 2

Source: SINTEF



go along with a road user charging scheme before they had seen how it worked was close to an impossible one. In London the opposite approach was taken: Mr Livingstone pushed the decision through, and then asked voters to judge him on its impact at the next election. The crucial innovation of the Stockholm trial was in its hybrid approach—offering voters a “trial period” and then the opportunity to decide via a referendum—which seems to offer the best prospects for fostering public support.

Keep it fairThe equity issues created represent one of the main arguments used against road charging. The implementation of a road charging scheme will inevitably create winners and losers, and these must be addressed both in system design and in implementation. Equity concerns arise on both “horizontal” and “vertical” levels. The differing impact of a congestion-charging scheme on citizens living in different areas (in particular those living around any cordon) is considered a horizontal equity problem, whereas variations in the effect of a charging scheme on different social and economic categories represent the vertical aspect. Vertical problems can be addressed via the introduction of exemptions, for example for disabled drivers, car pools, residents or taxis. On the one hand, broadly speaking congestion-charging schemes are likely to have a progressive vertical impact—that is, more affluent members of society will pay more and will receive less benefit from public transport enhancements. However, low-income car users are often the least flexible in terms of vehicle use (owing to inflexible work schedules, for example), meaning that authorities need to ensure that revenue is directed in a way that will alleviate the hardship

caused to these groups. For city officials in central European markets, there

is the additional factor of the often overwhelming role played by the city centre in the metropolitan economy. This means that systems need to be designed in such a way as to minimise the impact on economic activity within the road charging area, for example by introducing exemptions for commercial vehicles. However, there appears to be broad agreement among implementing authorities and transport academics that the impact of urban road pricing on city-centre businesses is minimal if implemented correctly.

Horizontal issues can be more difficult to address, but more sophisticated pricing systems are in general more efficient at distributing traffic in such a way as to minimise disruption around the cordon. Economists also favour the integrated use of road charging with other more geography-neutral forms of revenue generation, such as fuel or ownership taxes, to balance the impact of traffic management policy on different neighbourhoods.

Ensuring that the system is both fair and perceived as fair is crucial in securing public support. This is a function both of system design and of public communications. Chan Kwok Cheong, deputy director for ERP Policy in Singapore’s Land Transport Authority, stresses the importance of the scheme’s flexibility: “It’s very important that in our regular reviews of the pricing structure we both increase and decrease charges—when the situation warrants—to drive on certain roads. If average speeds get up above our optimal speed range on a particular stretch of road, we lower the cost of driving in that area. This helps people understand that this is about traffic management, and not a money-making scheme.”



In Singapore the introduction of road pricing was timed with a reduction in the high up-front taxes on car ownership, allowing the authorities to position the new programme as reducing, or at least keeping unchanged, the total cost of car usage.

At the same time, how communications are framed is significant. “Our communication strategy has always been solely focused on our objective of managing traffic congestion effectively and equitably,” says Mr Chan. “We spend a lot of time explaining that our system ensures that all participants are paying for their individual contribution to congestion.”

Tom Granquist, a transport co-ordinator in Akershus county council (Oslo’s neighbouring regional authority), points out that communications underline the fact that the Oslo toll is not intended as a money-spinner for the government. “We want to remind people that we are their servants,” he says. “We’re not quoted on the stock exchange, we don’t pay dividends. We want to be the good guys.” This is especially crucial in municipalities in which public support for or trust in government is already tenuous.

Enforceability is another issue related to the equity problem. Authorities should not be drawn into implementing road user charging unless they are absolutely certain that the technical, legal and political conditions are in place to support full enforceability, as any hint that cheaters will not or cannot be punished is certain to provide a major blow to public acceptability. This could represent a major problem for the municipal authorities in some central European cities, where weaker administrative capacity means that some governments are not even able to collect parking fines effectively.

The system’s technical design must therefore be robust, but must also make use of identification

methods that are legally enforceable—Stockholm’s use of transponders that do not count as legal evidence of location stands out as a weakness in this respect. At the same time, governments in central Europe must ensure that they hold the appropriate information about car users to allow them to direct charges effectively, and that they think about the legal changes needed to minimise cheating. In Stockholm, for example, new laws were needed to prevent car users from fixing metal plates on to their cars in order to block ANPR cameras from reading their number plates.

Sweeten the pillTransport economists insist that, from a theoretical perspective, what you do with the money raised from road charging doesn’t matter. In the real world, however, experiences in Europe and extensive behavioural surveys show that clear targeting of revenue is essential in countering the argument that road user charging is simply intended to increase revenue. More crucially, experience shows that authorities must provide visible new public transport alternatives (or some other sweetener) before the implementation of congestion charging; simply promising improvements in the future is not enough.

In London the introduction of hundreds of new buses had a significant visible impact even before the congestion-charging scheme went live. More importantly, the scheme’s champion, Ken Livingstone, made it clear that the revenue from the scheme would be pumped back into public transport, and specifically into the bus system.

In Stockholm a similar carrot-before-stick approach was taken, with similar results. Gunnar Soderholm admits that “we are not even actually sure



that the 200 [new] buses were strictly needed to carry former car users, but they were popular”.

Singapore is in this sense an outlier—the revenue from the scheme goes straight into the coffers of the Ministry of Finance. This is in part owing to the city-state nature of Singapore’s government and the country’s political system. But it is also because Singapore’s public transport system is already so good—and well funded—that there is no great need to demonstrate increased investment in it.

Nonetheless, the experience of European authorities suggests that future road user charging programmes will need to spell out carefully how and where they add value—especially in cities with sceptical citizens and big infrastructure problems to solve, such as many of the capitals of central European countries.

Lead from the frontAcademics and practitioners alike have stressed the importance of strong political leadership in successful road charging examples. This is particularly important given the long lead and procurement times that these projects entail, which mean that the project’s life-cycle is usually longer than a single government’s term. In London, Mr Livingstone made the project a central issue in his campaign for mayor, and has been a high-profile proponent of it since taking office. In the words of one senior TfL staff member, “Ken said he was going to do it. And when he was elected he did it.” By contrast, the lack of a clear political champion in Edinburgh has been cited as a contributing factor to that programme’s demise.



Without doubt, congestion in Europe’s urban areas will continue to get worse before it gets better. City authorities have a range of

tools with which to address the problem, although it is increasingly clear that road user charging will need to be integrated into urban traffic-management strategies in the future if authorities are to have any hope of beating congestion. London and Stockholm provide a strong signalling effect as positive examples of road pricing used to strengthen public transport

and reduce congestion, while Oslo shows how European municipal authorities can use road pricing to raise funds for infrastructure development. The case of Singapore is unique in some ways—notably in terms of the political context—but also provides useful insights, and the recent failure of a planned scheme in Edinburgh shows what not to do. Together, these examples provide a powerful set of lessons for European policymakers who are looking to introduce successful schemes in their cities.

Conclusion

Whilst every effort has been taken to verify the accuracy of this information, neither The Econo-mist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper.

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