3

Possible Effects

Adopting congestion pricing would represent a significant change in operation of the transportation system, one in which there would be significant net benefits, but some losers. Given that congestion pricing has to be authorized in a political context, estimates of the relative sizes of the benefits and costs and identification of winners and losers will affect the quality and the outcomes of the debates that will occur.

Reviewed in the first section of this chapter are analyses of recent efforts to estimate the effects that congestion pricing might have on aggregate travel choices and how these changes would improve traffic flow in specific metropolitan areas. The second section provides estimates of the net economic benefits. The improvements in traffic flow for the majority of travelers would result from the choices about how, when, and whether to travel made by other travelers, especially motorists with low values of time or with flexibility in their schedules. Because of the anticipated impact on low-income motorists, more of the debate about congestion pricing in the United States has focused on the possible equity consequences of this policy than on its congestion reduction potential. This issue is taken up in the third section.

Business logistics and commercial transportation within metropolitan areas should benefit from congestion pricing, but resistance to higher prices by commercial interests has been a significant source of political



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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion 3 Possible Effects Adopting congestion pricing would represent a significant change in operation of the transportation system, one in which there would be significant net benefits, but some losers. Given that congestion pricing has to be authorized in a political context, estimates of the relative sizes of the benefits and costs and identification of winners and losers will affect the quality and the outcomes of the debates that will occur. Reviewed in the first section of this chapter are analyses of recent efforts to estimate the effects that congestion pricing might have on aggregate travel choices and how these changes would improve traffic flow in specific metropolitan areas. The second section provides estimates of the net economic benefits. The improvements in traffic flow for the majority of travelers would result from the choices about how, when, and whether to travel made by other travelers, especially motorists with low values of time or with flexibility in their schedules. Because of the anticipated impact on low-income motorists, more of the debate about congestion pricing in the United States has focused on the possible equity consequences of this policy than on its congestion reduction potential. This issue is taken up in the third section. Business logistics and commercial transportation within metropolitan areas should benefit from congestion pricing, but resistance to higher prices by commercial interests has been a significant source of political

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion opposition to toll increases and congestion pricing proposals in the past. These issues are reviewed in the fourth section. Discussion about congestion pricing in the United States would not have advanced as far as it has without the emphasis on reducing pollution from mobile sources in the Clean Air Act 1990 Amendments (CAAA) and the growing interest in congestion pricing by environmental groups, business interests, and local and political leaders seeking market-based approaches to reducing congestion rather than regulations restricting travel. Plausible estimates of air quality and energy benefits are discussed next, followed by a review of the debate about how congestion pricing might affect the form of urban development and how this, in turn, might affect those firms located in areas or on routes subject to pricing. Although this chapter reviews available studies, in the absence of any direct experience with congestion pricing in the United States, it is difficult to predict with complete confidence how changes in travel might unfold and how these changes in turn would affect specific groups, air quality, energy consumption, and urban form. There is sufficient experience with traveler responses to toll increases, transit fare changes, and changes in parking pricing to predict the direction and magnitude of changes in total travel within a metropolitan area, but estimating these consequences across different income groups and classes of highway users is more speculative. Available estimates of changes in emissions are also subject to considerable uncertainty. Longer-term consequences for metropolitan development are even more difficult to gauge. It is possible to estimate near-term consequences with models that forecast aggregate changes in travel, but it is important to appreciate the approximate nature of these estimates. IMPACT ON TRAVEL The evidence from past changes in bridge and turnpike tolls, transit fares, and parking fees demonstrates that motorists do respond to changes in price, even for commuting trips (Harvey, Vol. 2). Economists refer to the sensitivity in demand for a good that results from changes in price as the “elasticity” of a response. Elasticities are calculated in percentage terms: a price elasticity of demand of -2.0 would indicate that a 1 percent increase in price would result in a 2 percent decline in demand. When consumer sensitivity to a price increase lies between -1.0 and 0, demand is referred to as “inelastic.” Thus, if the price elasticity is -0.5, a 1 percent increase in price will result in a 0.5 percent decline in demand. In this case, there will

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion POSSIBLE CHANGES IN TRAVEL CHOICES Route Choice: to untolled routes or to tolled routes with shorter travel times. Time of Travel: to earlier or later departures to avoid tolls or to tolled period for time savings. Mode: to or away from carpools, transit, or other mode. Destination: for nonwork trips, to shorter trips; for work trips, to changes in work or residential location. Linked Trips: to more combination of errands on a single trip. Trip Frequency and Activity Selection: for nonwork trips, to fewer discretionary trips; for work trips, to more telecommuting. Automobile Ownership: to forgo ownership. be a decline in demand following a price increase, but consumer demand for the product is strong enough that the percentage decline in demand will not be as large as the percentage increase in price. Analyses of individual behavior in response to price changes in transportation suggest an elasticity of “about -0.10 to -0.15 at the low end to -0.3 to -0.4 at the high end depending on the charge, the current costs of travel, and the capacity of alternative roads and transit systems” (Bhatt, Vol. 2). In other words, a 10 percent increase in price would result in a 1 to 4 percent decline in demand. 1 Although this response is inelastic compared with some other goods and services in the economy, a price increase does result in a decline in demand. Some travelers will change their behavior, and as illustrated in the previous chapter, when facilities are congested, the changes of a small proportion of motorists result in a more than proportionate improvement in traffic flow. The range of possible behavioral adaptations, however, is quite complex (see text box). A large body of literature is available to inform estimates of mode shifts between automobiles and transit, but less support is available 1   The price elasticity of demand for road use will vary substantially during the course of the day for a typical unit of roadway. Demand may be inelastic during the normal commute hours but elastic in mid-morning or mid-afternoon.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion for estimates of shifts among single vehicle occupancy, carpools, and transit (Kain, Vol. 2). There is also relatively little empirical information on adjustments in the timing of trips, the frequency of linked trips, or changes in employment or residential location that might occur because of pricing. A major unresolved issue in the context of the effect of congestion pricing is how a price that varies with the level of congestion (and hence with the time of day) will affect the temporal characteristics of travel behavior. (This issue is discussed in more detail in the paper by Harvey that appears in Volume 2.) Some of the possible behavioral changes outlined in the text box are probably more important than others, but the “theoretical literature is not much help in sorting out first-order effects” (Harvey, Vol. 2), and empirical evidence indicating the magnitude of effects is quite sparse. . The most detailed and recent modeling of congestion pricing for specific U.S. metropolitan areas was applied to the San Francisco Bay Area and the South Coast Air Basin (the greater Los Angeles area) (Harvey, Vol. 2). In these analyses, the goal was to improve and maintain traffic flow on highways in the range of 48 to 72 km/hr (30 to 45 mph) by imposing congestion fees on all thoroughfares in the region during peak travel periods. A similar level of service was aimed for in both studies, but the Bay Area study uses travel and emission levels for 1997 as a basis for comparison and the South Coast Air Basin study uses 2010 travel and mobile source emissions estimates as a base line. To accomplish this level of service, the model results suggest that congestion fees averaging $0.06/km ($0.10/mi) would be needed in the San Francisco Bay Area and $0.09/km ($0.15/mi) in the greater Los Angeles area during peak periods. The fees are expressed as averages. On some facilities they would need to be considerably higher—as much as $0.37/km ($0.60/mi) on the most severely congested facilities. These results are roughly consistent with estimates developed from other approaches. (See Appendix B for results from other studies.) For an average round trip of 32 km (20 mi), these fees would result in daily round-trip costs of roughly $2.00 in the San Francisco Bay Area and $3.00 in Los Angeles. Fees of this magnitude would generate substantial revenues—about $3 billion annually in greater Los Angeles (Small 1992). Regionwide congestion pricing would reduce total annual vehicle kilometers traveled (VKT) by 1.8 percent in San Francisco (Table 3-1) and 5 percent in Los Angeles (Table 3-2). These estimates are reductions in overall travel. Shifts in peak-period travel to the off peak would be considerably larger. For example, assuming that about one-fourth to one-third of

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion TABLE 3-1 Overview of the Bay Area Pricing Study (Harvey, Vol. 2)     Percent Change from 1997 Mobile Source Baseline Strategy Description VKT Trips Fuel ROG CO NOx CO2 Regionwide congestion pricing (LOS D/E), average $0.10/mi Automatic Vehicle Identification (AVI) scheme to price regional freeway and arterial system to maintain LOS D/E -1.8 -2.2 -6.5 -5.5 -7.5 -2.9 -6.5 Regionwide employee parking charge, $3.00/day All workers in region to experience minimum $3.00/day (1991) charge for parking automobile, pickup, or van at workplace -1.2 -1.5 -1.2 -1.4 -1.4 -1.5 -1.2 NOTE: VKT = automobile and private transit vehicle kilometers traveled; Trips = automobile vehicle trips; Fuel = gallons of fuel consumed; ROG = emissions of reactive organics; CO = emissions of carbon monoxide; NOx = emissions of oxides of nitrogen; CO2 = emissions of carbon dioxide. LOS = level of service (a measure of traffic flow; see Appendix A). 1 mi = 1.6 km. The accuracy of these estimates depends on uncertainties that are inherent in any travel forecasting exercise, such as in regional and subregional growth projections and assumptions about future infrastructure investments.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion TABLE 3-2 Overview of the South Coast Air Basin Pricing Study (Harvey, Vol, 2)     Percent Change from 2010 Mobile Source Baseline Strategy Description VKT Trips Fuel ROG CO NOx CO2 Regionwide congestion pricing (LOS D/E), average $0.15/mi Automatic Vehicle Identification (AVI) scheme to price the regional freeway and arterial system to maintain LOS D/E -5.0 [±.7] -3.8 [±.4] -9.2 [±.8] -8.2 [±.8] -12.1 [±1.0] -8.4 [±1.0] -9.2 [±.9] Regionwide employee parking charge, $3.00/day All workers in region to experience minimum $3.00/day (1991)charge for parking automobile, pickup, or van at workplace -1.5 [±.2] -1.8 [±.3] -1.7 [±.3] -1.7 [±.3] -2.1 [±.3] -1.6 [±.3] -1.7 [±.3] NOTE: VKT = automobile and private transit vehicle kilometers traveled; Trips = automobile vehicle trips; Fuel = gallons of fuel consumed; ROG = emissions of reactive organics; CO = emissions of carbon monoxide; NOx = emissions of oxides of nitrogen; CO2 = emissions of carbon dioxide. 1 mi = 1.6 km. Each value represents the midpoint of the estimated range of effect. Numbers in brackets indicate variation above and below the midpoint based on sensitivity tests of key parameters related to pricing (such as the travel cost coefficients). Accuracy of the estimates will also depend on other uncertainties that are inherent in any travel forecasting exercise, such as in regional and subregional growth projections and in assumptions about future infrastructure investments.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion trips occur during the peak, a 5 percent reduction in total travel would imply a 15 to 20 percent reduction in peak-period travel. This reduction in travel would result in time savings for the average congested peak-period round trip of about 10 to 15 min. As an alternative policy, regionwide parking charges on all employees of $3.00/day would reduce VKT by 1.2 percent in San Francisco and 1.5 percent in Los Angeles. Parking pricing would have a smaller effect on total travel in a congested area because it does not affect through traffic (Table 3-1 and Table 3-2). The 2 percent reduction in total travel as a result of congestion pricing fees of $0.06/km ($0.10/mi) in the San Francisco Bay Area may seem modest, but when compared with other, nonpricing travel demand management policies, it appears more substantial. By way of comparison, Deakin (1993) estimates that if the Bay Area implemented all reasonably available transportation control measures—including an employer-based trip reduction rule, improved transit services, reduced transit fares, and construction of carpool lanes—these measures combined might have roughly the same impact as congestion pricing on regional travel and emissions, but would impose a substantially higher cost on the region's economy. NET BENEFITS Congestion pricing on highways would have broad effects on the entire transportation system by shifting the demand for transportation services away from peak-period highway use by solo drivers. A reduction in the incentives to drive during peak periods would shift some traffic to the off peak, which would increase the efficiency with which the road system is used and reduce the demand for additional capacity. Some motorists would continue to drive during the peak but would elect to share rides with others or change the destinations of their trips. Sharing rides with others would also increase the efficiency with which the system is used by increasing the number of people per vehicle during peak periods. Some motorists would shift to transit. The improvement in traffic flows that would result from congestion pricing would improve service reliability and speed, which would combine with the direct monetary incentive to make transit considerably more attractive, relative to the automobile, than it is today. The increase in ridership would improve system revenues (Kain, Vol. 2). The revenues could be used to expand service frequency or route coverage, which would make transit service

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion all the more attractive to users (Kain, Vol. 2). With buses less delayed by traffic congestion, both drivers and buses could be used more productively. Congestion pricing would reduce the demand for new highway capacity; this reduced demand would ease the capital requirements for expanding highways in response to growing population and travel demand. The U.S. Department of Transportation currently estimates that over the next 20 years the capital demands for the nation's roads and highways will range between $758 and $1,009 billion (in 1991 dollars) (DOT 1993). The low end of the range in costs represents the mere addition of sufficient capacity to maintain congestion at existing levels. The high end of the range represents the cost of easing congestion above existing conditions. The cost of expanding urban roadways in response to congestion will range between $232 and $365 billion. On an annual basis, the need for roadway expansion in urban areas totals $11.6 to $18.25 billion (of a total annual cost for urban and rural investment of $38 to $50.5 billion). Because of the phenomenon of latent demand, there is little prospect that these investments would actually reduce congestion. If congestion pricing were to be adopted nationwide, it would greatly reduce most of the new capital investment needs in urban areas (Winston and Bosworth 1992). It would result in time savings and reduced investment needs valued at roughly $5 to $11 billion (Small et al. 1989; Repetto et al. 1992). DISTRIBUTIONAL EFFECTS Similar to any other marketlike mechanism for allocating demand, the fees imposed by congestion pricing would cost a larger proportion of the income of low-income motorists, and presumably these motorists would be among the most likely to shift travel time or mode to avoid the fee. Because of the substantial revenues that congestion pricing can raise, however, it is possible to provide compensation to those groups most disadvantaged by congestion pricing. For example, to offset adverse impacts on the poor, some of the revenues could be used to reduce the regressive taxes (property, sales, and gasoline) used to finance roads and transit. The revenues earned from congestion pricing could be used to ensure that all income groups benefit; this is important, because without the benefits that these revenues provide, the average commuter would be somewhat worse off than before (Small 1983; Hau 1992). The time gains of

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion congestion pricing will not be as large as the out-of-pocket expense for the average commuter; thus the average commuter will benefit only if some of the revenues are returned to users in some form. (The form for returning the revenues could include anything from a property tax rebate to investments in new capacity or social investments approved by motorists. This issue is taken up in Chapter 4.) The distribution of losses and gains across income groups can be illustrated by estimating the changes in commuting times and mode choices and the resulting time savings and losses, and by discussing how the revenues could be used to offset the disadvantages borne by certain groups. Small (1983) used the San Francisco Bay Area as a case study, analyzing a hypothetical $1.00 average peak-period expressway toll to reduce congestion. After valuing the time gains and losses, Small showed that before accounting for the revenue uses, the average lower-income commuter would “lose” $0.28 per day, the average middle-income user would “lose” $0.13 per day, and the average higher-income commuter would “gain” $0.08 per day (Small 1983).2 The losses to the lower- and middle-income groups, however, can be completely reversed by specific uses of the revenues. For example, if the revenues earned were simply divided among all the individuals in a jurisdiction, all income groups would gain, but the lower-income group would still be disadvantaged. More progressive reallocations, such as using the revenues to offset regressive gasoline, property, and sales taxes, would benefit the lower-income groups more and higher-income groups less (Small 1983; Small et al. 1989). (The political feasibility of managing a revenue distribution system of this kind and its potential complexity are discussed in Chapter 4.) Although the revenues earned could be used to compensate all disadvantaged groups, some individuals within these groups would still be disadvantaged. Congestion pricing induces some individuals to change their behavior. Individuals with the lowest value of time are the most likely to change the timing of their trips, join a carpool, or shift to transit. The availability of alternatives softens the impact, but they may still be at a disadvantage. Workers with less flexible schedules may be less able to shift their commute times to avoid the fee. Working women typically have more domestic and child-care responsibilities than working men and thus 2   Kain (Vol. 2) suggests that Small underestimates the benefits of congestion pricing to existing transit users, many of whom have low incomes, by not estimating the benefits from improved transit operating speeds and service as a result of improved traffic flow.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion are more likely to drive to work alone during peak travel periods (Rosenbloom and Burns 1994). Working parents of small children, regardless of job classification, typically are less able than other workers to adjust their schedules to avoid traffic congestion (Giuliano, Vol. 2). Lower-income working single parents, usually women, who rely on automobiles to get to work may be among those most directly affected. Despite the increased out-of-pocket expense, some working parents may appreciate the benefit of saving a few minutes in a hectic morning of getting children to daycare and trying to arrive at work on time, even if this cost does represent a larger share of their income. For those with no money to spare and little choice as to the mode or time of travel, however, congestion pricing could represent a substantial hardship. Commuters with long trips to their jobs may not have many other options (aside from changing jobs) than to drive alone. Such individuals are likely to be net losers, even after the revenues have been reallocated (Giuliano, Vol. 2). (Chapter 4 contains discussions of how the revenues might be distributed to compensate groups adversely affected by congestion pricing and how the political feasibility of this concept could depend upon the vigor with which adversely affected individuals and groups might oppose it.) A complete accounting of the potential winners and losers with congestion pricing also requires an assessment of how those who do not use automobiles could be affected (Gomez-Ibanez 1992). Current transit riders, among whom lower-income groups are more heavily represented, might experience more crowding if a significant proportion of road users shifts to public transportation. However, it is also plausible that the improvements in traffic flow, combined with increased revenues to transit agencies and followed by improved transit services, would result in net gains for transit users and transit agencies (Kain, Vol. 2). Research on the potential effects of congestion pricing on transit services and the benefits of improved services to lower-income users is of high priority. (This research need is discussed in Chapter 5.) COMMERCIAL TRAFFIC Estimates of the benefits of congestion pricing suggest that average speeds on arterial routes in Southern California could be improved by 8 to 16 km/hr (5 to 10 mph) and could be maintained at about 48 to 72 km/hr (30 to 45 mph). Although these changes appear small, they would make a

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion substantial improvement in traffic flow. On major facilities, speeds of 40 km/hr (25 mph) or less imply that congestion is so heavy that minor interruptions can lead to complete breakdowns in flow. Under such conditions the probability of minor traffic accidents increases, and such incidents can cause long delays. Roughly half the delays are attributed to incidents that disrupt traffic flows (Schrank et al. 1993). Thus, maintaining a steady flow, even at modest speeds, can substantially improve traffic conditions. Faster-moving traffic and more reliable traffic conditions would be valuable to commercial road users in congested metropolitan areas. A wide variety of commercial users depend on the road system. Although the large trucks delivering cargo to stores and factories come immediately to mind, commercial users also include panel trucks carrying package freight to stores and homes and light-duty vehicles driven by carpenters, electricians, plumbers, and delivery workers. Salespeople are also regular users of the road system, as are business people traveling between appointments or making trips to airports. Congestion causes immediate productivity losses to employers whose workers are stuck in traffic. Delays in the delivery of goods mean that physical assets are not being used efficiently. Increases in the transit time of cargo increase inventory costs. Although commercial users are among those highway users least able to shift to avoid congestion fees, it would appear that they are also among the users most likely to gain. Studies or analyses of the assumed benefits of congestion pricing to business activity and commercial transportation, however, have not been made for U.S. metropolitan areas. AIR QUALITY Concern about meeting state and federal air quality standards is a prime motivator behind the renewed interest in congestion pricing. Despite considerable reductions in several types of emissions over the last 20 years, many metropolitan areas are still unable to meet air quality standards for ozone and carbon monoxide. Emissions from automobiles are major sources of these pollutants. Some 94 urban areas are currently out of compliance with federal standards for ozone (EPA 1993); the 1990 CAAA requires those areas classified with “moderate” or higher nonattainment (55 urban areas) to develop specific measures to reduce the emissions caused by automobiles. EPA has designated 42 areas as being in non-attainment for carbon monoxide.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion The majority of reduced air pollution from mobile sources will come —as it has in the past—from policies affecting vehicles. Such policies have included tailpipe emission standards, regulations on fuel content and mixture, and improved vehicle inspection and maintenance programs. In some urban areas, however, these will not be enough to attain compliance with federal (and California) standards. In those areas, there is no choice but to try to change motorist behavior. Efforts to change behavior through specific policies, such as the requirement that firms with more than 100 employees develop programs to reduce the occupancy of the vehicles their employees drive to work, have yielded modest reductions in emissions but have done so at a high cost relative to the benefits (Giuliano and Wachs 1992). Congestion pricing would provide a more cost-effective approach to achieving the required reductions. The Bay Area Economic Forum (1990), a public-private partnership of governments and business in the San Francisco Bay Area, states, “The [California] Clean Air Act requires reducing vehicle emissions by one-third. We face tough decisions.” The Bay Area is required under California's clean air law to adopt transportation control measures that will reduce total trips, vehicle miles traveled, and traffic congestion. The Forum has strongly advocated that the Bay Area adopt market-based approaches to meeting air quality goals rather than relying on regulation, and has succeeded in garnering the support of local governments, businesses, and some in the media. In modeling the effects of congestion pricing for the Bay Area and the greater Los Angeles area, Harvey estimates that regionwide congestion pricing could result in reductions in two pollutants that are precursors to the formation of ozone—oxides of nitrogen and reactive organic compounds (which include hydrocarbons). Congestion pricing for the Bay Area and Los Angeles is estimated to reduce reactive organics by 5.5 to 8.2 percent and oxides of nitrogen by 2.9 to 8.4 percent. These calculations of emission benefits, however, rely on assumptions about emissions reductions that involve a number of uncertainties. Reductions in regional ozone and other emissions that might result from congestion pricing are quite difficult to predict for a variety of reasons. Estimates of the relationships between the emission rates of vehicles on the road and changes in average speeds are uncertain because of weaknesses in the data used to calibrate existing models (Guensler and Sperling, Vol. 2).

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion Reductions in congestion, or improvements in traffic flow, will reduce some emissions, such as reactive organics and carbon monoxide, particularly if the previous average speed was below 32 km/hr (20 mph), but as speed increases, emissions of oxides of nitrogen, another precursor to ozone formation, increase as well (Guensler and Sperling, Vol. 2). Improvements in the flow on a corridor can also affect the traffic flows on adjacent corridors, the net result of which can either increase or decrease emissions on the improved corridor (Horowitz 1982, 193). Assuming that in a regionwide congestion pricing program average speeds increase from less than 32 km/hr (20 mph) and do not increase to more than 64 km/hr (40 mph), emissions of all kinds are likely to be reduced (Guensler and Sperling, Vol. 2). The net effects that reductions in reactive organics and oxides of nitrogen would have on ozone formation within a region, however, will vary according to local atmospheric conditions. The formation of ozone in the lower atmosphere is very complex; oxides of nitrogen and reactive organic emissions mix to produce ozone at different levels depending on ultraviolet radiation, temperature, and the prevalence of other natural sources of nitrogen oxides (National Research Council 1991). In general, however, if increased speeds resulting from congestion pricing do not exceed 64 km/hr (40 mph), NOx and volatile organic compounds (VOCs) would decline and ozone formation should lessen (Guensler and Sperling, Vol. 2). As indicated in the paper by Guensler and Sperling that appears in Volume 2, there is a great deal of uncertainty about how vehicular emissions change with speed. Given this uncertainty, these authors have been cautious in defining a band of speeds in which emissions would be reduced [between 32 and 64 km/hr (20 to 40 mph)]. The California Air Resources Board and the Environmental Protection Agency have research under way that is designed to reduce the uncertainty about the relationship between emissions and vehicular speeds. The outcome of this research has important implications for the air quality benefits of congestion pricing. The emissions/speed curves in the paper by Guensler and Sperling indicate that emissions of hydrocarbons and carbon monoxide continue to fall between 64 and 80 km/hr (40 to 50 mph) and that even when they increase at higher speeds, they remain well below the emission levels that occur in congested conditions. Thus improvements in traffic flow resulting from congestion pricing should reduce these emissions. For oxides of nitrogen, however, speeds above 64 km/hr (40 mph) may actually increase the amount of these emissions compared with the amounts that would occur in congested

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion conditions. In metropolitan regions that are primarily concerned about controlling oxides of nitrogen, this implies that a pricing strategy would have to be very finely tuned to allow speeds to increase above stop-and-go conditions, but not so high as to allow free-flow conditions. Such fine tuning may not be practical with simple peak/off-peak pricing. Depending on how ongoing research reduces the uncertainty about the speed/emissions relationship and on the concern about oxides of nitrogen as opposed to other emissions, this could have implications for political feasibility by weakening the potential support of environmental groups. Congestion pricing could reduce some ozone precursor emissions by simply reducing the actual number of trips taken. A large share of such emissions is caused by starting cold vehicles; hence a reduction in trips would reduce these emissions directly. About 50 percent of hydrocarbon emissions (reactive organics) result from cold starts and another 10 percent from evaporative emissions (the evaporation of emissions when the vehicle is not running but the engine is still hot). In contrast to regionwide congestion pricing, estimates of emissions reductions from pricing individual facilities such as bridges or tunnels are highly dependent on the availability and capacity of alternate routes and on how much traffic would shift (Horowitz 1982). The availability of alternate routes may increase or decrease net emissions of carbon monoxide or oxides of nitrogen. To illustrate, consider two routes that serve the same origin and destination and that are reasonable substitutes for one another. Traffic on the two routes will tend to balance out as users shift back and forth to minimize trip times. If one of these routes becomes congested, some motorists will shift to the other. Alternatively, if one route were to be priced, demand for this route could be reduced during the peak and some traffic could shift during the peak to the alternate, unpriced route. Smoothing the traffic flow would reduce emissions of reactive organics or carbon monoxide for the priced route, but they could become worse on the alternate route if it became congested. These potential traffic shifts highlight the importance of designing congestion pricing pilot programs to avoid creating congestion at formerly uncongested points. ENERGY Regionwide congestion pricing would reduce energy consumption more directly than emissions. Fuel use would decline from both reduced trips and improved traffic flow. Harvey (Vol. 2) estimates a 6.5 percent reduc-

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion tion in fuel consumption in the Bay Area as a result of an average toll of $0.06/km ($0.10/mi) and a 9.2 percent reduction in the South Coast Air Basin as a result of an average toll of $0.09/km ($0.15/mi) ( Table 3-1 and Table 3-2). URBAN FORM Over the long term, changes in land use patterns could have substantial impacts on air quality and energy in addition to those already cited. Two different arguments are made about the possible effects of congestion pricing on the spatial development of metropolitan areas (Deakin, Vol. 2). One line of reasoning holds that the traditional underpricing of highways has encouraged urban sprawl and that correct pricing would encourage more dense development in and around urban centers. An opposing line of reasoning holds that congestion pricing would facilitate continued decentralization because (a) it would reduce the attractiveness of areas affected by pricing by creating a negative image (especially if competing commercial areas are unpriced) and (b) zoning regulation would prevent landholders from increasing the density of development. The outcome of this debate has both practical and political implications. At the practical level it is important to anticipate the effects on development in order to be able to design a program that would minimize adverse consequences. At the level of political feasibility, it is important to anticipate the possible resistance of affected interests. When areawide pricing was proposed for the most congested parts of Manhattan in the mid-1980s, for example, retail and commercial establishments in the area reacted with alarm, apparently thinking that increased out-of-pocket costs for travel would reduce the attractiveness of the central business district. Neither theory nor research on the relationship between the cost of transportation and urban development provides compelling evidence to support whether congestion pricing would have a centralizing or decentralizing effect (Deakin, Vol. 2). The possible impact of congestion pricing on urban form is complicated further by the intended use of the revenues and by steps that businesses might take to minimize the impact. For example, if the revenues are used to compensate adversely affected groups (which might include commercial establishments in an affected area), the land use impact might well be minimized. Alternatively, if the revenues were used to expand highway capacity at a major bottleneck serving the downtown area, it is possible that the improved access would benefit the

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion affected area and facilitate residential development in outlying areas. Regarding strategies that businesses in affected areas might take to minimize the impact on their employees, they could shift hours of operation, encourage telecommuting, reimburse workers who pay tolls, or relocate some or all of their operations to less congested areas. The complexity of the potential responses to congestion pricing makes it all the more difficult to predict its effect on urban form. As an alternative to affecting land use patterns, congestion pricing could affect the balance between the location of jobs and residences. In other words, congestion pricing could induce workers to move closer to their work sites. Such shifts could substantially reduce the total amount of travel required for work trips. Commuting times that exist within the current distribution of jobs and residences in the Los Angeles metropolitan area are two-thirds longer than what would be required if workers were located in neighborhoods that minimized their commutes (Small and Song 1992). Whether congestion pricing fees would induce substantial changes in residential location, however, would depend on the strength of other influences on residential location choice. The extra commuting that occurs already may be explained by preferences for neighborhood amenities such as schools or low crime rates, the difficulty of minimizing commutes for both workers in dual-worker households, and other influences, such as racial discrimination (Giuliano and Small 1993). SUMMARY The experience with pricing transportation in various modes provides a firm basis for predicting that congestion pricing would change traveler behavior and reduce congestion. The full range of potential behavioral responses is more complex than can be modeled with precision, but plausible estimates of the average motorist's response to price increases can be made. Congestion fees would cause some motorists to shift away from driving in the peak period. Estimates for the Bay Area and the Los Angeles area suggest that fees averaging $2.00 to $3.00/day on all thoroughfares in these regions would reduce peak-period travel by 10 to 15 percent and save average commuters 10 to 15 min per round trip. Congestion pricing would have valuable systemwide effects. It would increase the efficiency with which existing assets are used by encouraging trip making in off-peak periods, ridesharing, and use of transit. If adopted

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion in all metropolitan areas with traffic congestion problems, congestion pricing could result in net savings ranging from $5 to $10 billion. Motorists with low incomes are among those most likely to be disadvantaged by congestion pricing. (Alternative means of compensating adversely affected groups are discussed in the next chapter.) Working women, particularly those with child-care responsibilities, are less able to adjust their schedules to avoid traveling during the peak period. They are therefore more likely to have to pay congestion fees. Women in higher income brackets may well value the time-saving benefit of less traffic congestion, even if it does cost more in out-of-pocket expenses. Lower-income working women with child-care responsibilities, particularly single parents, would be among those most disadvantaged. Some businesses in central areas and individuals living in geographic areas without workable alternative forms of transportation may also be among those adversely affected. Travelers with higher values of time stand to be the primary beneficiaries. In theory, commercial travelers would be among those with higher values of time and would therefore enjoy net benefits. Insufficient information is available, however, to draw conclusions about the net effect of congestion pricing on the poor, on businesses in areas affected by congestion pricing, and on commercial users. These are high-priority areas for future research. Because congestion pricing would alter trip making and total travel, it would result in reduced air pollution from automobiles and would save energy. Regionwide congestion pricing in San Francisco and Los Angeles averaging $2.00 to $3.00/day, for example, could reduce emissions from automobiles by 3 to 9 percent, depending on the type of emission. Automotive fuel consumption would decline by 6.5 to 9.2 percent. Plausible arguments can be made that congestion pricing would either increase or reduce the density of development within regions, but neither theory nor available research leads to a definitive conclusion in favor of either argument. The specific form of congestion pricing imposed, the reactions businesses might choose to mitigate its effects, and the uses of the revenues would all affect how land uses might change. Past studies, including those drawn upon in this chapter, have assumed regionwide congestion pricing, but the proposals actually moving forward in the United States would price individual facilities. The Route 91 project in Orange County, the Bay Bridge proposal for San Francisco, and the other congestion pricing pilot project proposals received by the Federal Highway Administration concern individual congested routes or bridges. Because of the uncertainties about the actual impacts of congestion pricing

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion and because of the institutional complexities and political difficulties of regional congestion pricing proposals (discussed in the next chapter), incremental changes in the direction of congestion pricing may be the only way that this policy would be implemented in the United States. Incremental movements toward congestion pricing represented by current proposals, however, cannot be expected to have substantial effects on regional air quality, energy consumption, or land use. (The Bay Area proposal would be something of an exception, because the Bay Bridge carries such a large share of total traffic into San Francisco during the peak period.) Such effects may be small at the regional level, but could still have substantial local benefits. For carbon monoxide in particular, the health risks are caused by high concentrations, which result from heavy traffic flows, especially congested traffic. By smoothing traffic flow, congestion pricing on individual facilities can substantially reduce risks to health. In applying congestion pricing to individual facilities, however, it is important to anticipate traffic diversion to alternate routes and to design pilot programs such that new areas of congestion are not created. Studies of the application of congestion pricing on the Bay Bridge, the Route 91 project, and on individual toll roads would not address all the uncertainties about this policy, but careful evaluation of driver responses in these situations would greatly improve the ability to estimate the consequences of congestion pricing in a broader context. Such evaluation could also delineate more clearly who wins and who loses (an evaluation design is outlined in Chapter 5). REFERENCES ABBREVIATIONS DOT U.S. Department of Transportation EPA Environmental Protection Agency Bay Area Economic Forum. 1990. Market Based Solutions to the Transportation Crisis: Incentives to Clear the Air and Ease Congestion. San Francisco, Calif. Deakin, E. 1993. Policy Responses in the U. S.A. In Transport, the Environment, and Sustainable Development (D. Banister and K. Button, eds.), E. and F.N. Spon, New York. DOT. 1993.The Status of the Nation's Highways, Bridges, and Transit: Conditions and Performance. Report of the Secretary of Transportation to the U.S. Congress. Government Printing Office. EPA. 1993. National Air Quality Emissions Trends Report, 1992. Report 454/R-93-031. Office of Air Quality Planning and Standards, Research Triangle Park, N.C.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion Giuliano, G., and K. Small. Forthcoming. Is the Journey to Work Explained by Urban Structure? Urban Studies. Giuliano, G., and M. Wachs. 1992. A Comparative Analysis of Regulatory and Market-Based Transportation Demand Management Strategies. In Papers Presented at the Congestion Pricing Symposium, June 10–12. FHWA and FTA, U.S. Department of Transportation. Gomez-Ibanez, J. 1992. The Political Economy of Highway Tolls and Congestion Pricing. Transportation Quarterly, Vol. 46, No. 3, pp. 343–360. (For a summary, see Presentation Summary, In Exploring the Role of Pricing as a Congestion Management Tool, Searching for Solutions: A Policy Discussion Series, No. 1, U.S. Department of Transportation, March.) Hau, T. 1992. An Economic Analysis of Road Pricing: A Diagrammatic Approach. Policy Research Working Papers. WPS 1070. The World Bank, Washington, D.C. Horowitz, J. 1982. Air Quality Analysis for Urban Transportation Planning. The MIT Press, Cambridge, Mass. National Research Council (Committee on Tropospheric Ozone Formation and Measurement). 1991. Rethinking the Ozone Problem in Urban and Regional Air Pollution. National Academy Press, Washington, D.C. Repetto, R., et al. 1992. Green Fees: How a Tax Shift Can Work for the Environment and the Economy. World Resources Institute, Washington, D.C. Rosenbloom, S., and E. Burns. 1994. Why Working Women Drive Alone: Implications for Travel Reduction Programs. To be published in Transportation Research Record, TRB, National Research Council, Washington, D.C. Schrank, D., et al. 1993. Estimates of Urban Roadway Congestion. Research Report 1131-5. Texas Transportation Institute, College Station. Small, K. 1983. The Incidence of Congestion Tolls on Urban Highways.Journal of Urban Economics, Vol. 13, pp. 90–111. Small, K. 1992. Using the Revenues from Congestion Pricing. Transportation, Vol. 19, No. 4, pp. 359–381. Small, K., and S. Song. 1992. “Wasteful” Commuting: A Resolution. Journal of Political Economy, Vol. 100, No. 4, pp. 888–898. Small, K., C. Winston, and C. Evans. 1989.Road Work: A New Highway Pricing and Investment Policy. The Brookings Institution, Washington, D.C. Winston, C., and B. Bosworth. 1992. Public Infrastructure. In Setting Domestic Priorities (H. Aaron and C. Schultze, eds.), The Brookings Institution, Washington, D.C.