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C A L C U L AT I N G C O S T S A N D M E A S U R I N G B E N E F I T S O F P R I C I N G S C H E M E S 29 potential to vary the charge in response to congestion external accident costs totaled nearly 3% of gross domes- levels, and the application of the scheme to an urban tic product, or double the level of infrastructure costs. area generally or to highway travel. Thus, costbenefit Thus, charging solely to recover infrastructure costs is analysis can be a powerful tool for gaining insight into likely to lead to charges that are too low. But a further not only the advisability of a stated project but also the major issue is the inadequate differentiation of charges by impacts of various refinements of a proposal. vehicle type, location, and time of day; UNITE also undertook case studies to see how marginal social cost could be measured to identify those differences. WHY REFORM TRANSPORT PRICING? A number of projects (including Pricing European AN OVERVIEW OF EUROPEAN TRANSPORT Transport Systems and Models for Transport Environ- INFRASTRUCTURE CHARGING POLICY AND ment and Energy) have undertaken case studies that have RESEARCH predicted the results of marginal social cost pricing for all modes of transport. As would be expected, these typ- Christopher Nash ically show higher charges for the use of roads in urban areas, particularly in the peak period, with a fall in road In its 1998 White Paper on Fair Payment for Infrastruc- traffic in the range of 5% to 20%, as well as changes in ture Use, the European Commission adopted a clear time and route of travel where pricing systems are suffi- policy calling for the phased introduction of marginal ciently sophisticated to reflect these factors. For interur- social cost pricing for infrastructure use. It proposed ban traffic the outcome is more variable and reflects legislation to implement this for commercial transport major differences in current charges and levels of con- of all modes; the policy is confined to encouragement gestion. Typically, cars are overcharged and heavy goods rather than legislation for private vehicles. For rail, the vehicles undercharged, but there are similar discrepan- policy was implemented under Directive 2001/14, but cies in other modes so that the outcome of transport pric- for roads, the current proposal to revise the Eurovi- ing reform is relatively limited in terms of changes in gnette Directive on heavy goods vehicle charging falls traffic volume and mode split. Transport pricing reform short of this principle. It requires differentiation by con- may thus be more important for interurban traffic due to gestion and environmental costs but ties the average its impact on vehicle type, time, and route of travel than level of charge to average infrastructure and external for its effect on the overall volume of traffic. accident cost only. It is not clear whether this is to be seen as a step on the way to full marginal social cost pricing or as a change in policy. AN EXPLORATION OF MOTOR VEHICLE Implementation of marginal social cost pricing CONGESTION CHARGES IN NEW YORK requires that we be able to measure and value its three components: Jeffrey Zupan and Alexis Perrotta Marginal cost of infrastructure maintenance and Currently 830,000 vehicles enter Manhattan's central operations imposed on the infrastructure manager; business district (CBD) each day, and 78% do so for Marginal cost imposed on other infrastructure free. Of the 19 entry points to the CBD, four are tolled users in the form of congestion and accidents; and tunnels, four are free bridges, and 11 are free city streets Marginal cost imposed on the rest of society, pre- and highways. The tolled tunnels are operated by two dominantly in the form of environmental costs but also distinct authorities; both use electronic toll collection some elements of accident costs. and one varies the charges by time of day. The free facil- ities are operated by the city of New York. Among the many criticisms of this approach is the Our organization identified and assessed four pricing complexity of measurements. A second major criticism scenarios to highlight distinctions between flat and vari- is the view that charges should be tied to total costs able pricing, daytime and 24-hour pricing, and pricing rather than marginal costs, either for reasons of equity at some or all of the entry points to Manhattan's CBD. or dynamic efficiency. Several research projects have The scenarios use the sensitivities of drivers who may addressed measurement challenges and sought to clarify respond to an added charge by not making the trip at all the impact of marginal cost pricing on different classes or by changing destination, mode, route of travel, or the of vehicles and uses. trip's time of day. All four scenarios assume a cashless Participants in the Unification of Accounts and Mar- toll system and one-way inbound tolls: ginal Costs for Transport Efficiency (UNITE) project esti- mated the total social cost of road transport for most of Toll East River bridges as does the Metropolitan Europe and found that costs of congestion, pollution, and Transportation Authority (MTA): a flat fee on East