6

Summary

Congestion pricing has great promise: it could reduce congestion significantly while helping to meet air quality and energy conservation goals. Moreover, by relying on a market mechanism, it would accomplish these ends while providing net benefits to society. Congestion pricing, however, has long been the ugly duckling of travel demand management policies. Economists have promised for decades that a swan would emerge if governments would only try it. Transportation officials have consistently thought the policy impractical. Politicians have feared that motorists would pay the fees but hate them, and would then retaliate against the officials who allowed such a duckling into their pond. If this report were being written in the 1960s, 1970s, or 1980s, it would probably end here.

What is different about the 1990s is that congestion pricing proposals are moving forward in the United States, albeit in a cautious and incremental fashion. Why is such an oft-dismissed concept being tried at all? There are several reasons:

  • With the passage of the Clean Air Act Amendments in 1990 and the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), national transportation policy has shifted toward demand management;

  • Congestion has worsened on many routes for many commuters;

  • Environmental mandates in federal (and California) law make capacity expansion unlikely in metropolitan areas unable to meet clean air standards;



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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion 6 Summary Congestion pricing has great promise: it could reduce congestion significantly while helping to meet air quality and energy conservation goals. Moreover, by relying on a market mechanism, it would accomplish these ends while providing net benefits to society. Congestion pricing, however, has long been the ugly duckling of travel demand management policies. Economists have promised for decades that a swan would emerge if governments would only try it. Transportation officials have consistently thought the policy impractical. Politicians have feared that motorists would pay the fees but hate them, and would then retaliate against the officials who allowed such a duckling into their pond. If this report were being written in the 1960s, 1970s, or 1980s, it would probably end here. What is different about the 1990s is that congestion pricing proposals are moving forward in the United States, albeit in a cautious and incremental fashion. Why is such an oft-dismissed concept being tried at all? There are several reasons: With the passage of the Clean Air Act Amendments in 1990 and the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), national transportation policy has shifted toward demand management; Congestion has worsened on many routes for many commuters; Environmental mandates in federal (and California) law make capacity expansion unlikely in metropolitan areas unable to meet clean air standards;

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion Even in areas without air quality problems, cost, other environmental restrictions, and community opposition prevent significant capacity expansions; The regulatory restrictions on motorist behavior called for in federal (and California) law appear to some to be less palatable than congestion pricing; The substantial revenues that can be raised are appealing in an era of financial stringencies in many states and regions; Past efforts to resolve congestion through capacity enhancement have not worked because latent demand fills up any added capacity in areas experiencing population or employment growth; and Advances in technology have made it possible to charge users at low cost and with minimal inconvenience or intrusion on privacy. These reasons why congestion pricing appears more appealing to some do not mean that the political barriers to this policy have disappeared. The political and administrative challenges faced by congestion pricing are as significant as before. Many continue to view congestion pricing as an ugly duckling. What is different is that elected officials in a few places are coming to appreciate congestion pricing's potential to emerge as a swan. Congestion pricing has a proven track record in stifling latent demand: it has significantly dampened demand for peak-period travel in Singapore since 1975. Peak-period automobile travel into the core of the city almost 20 years later is still some 25 percent below what it was in 1974. No other transportation demand management policy tried in the United States has achieved results anywhere close to these. Actually, the success of Singapore's policy has not been questioned as much as its transferability to other places. Singapore is not a Western-style democracy, nor do officials there have to deal with the multiple, often conflicting governmental units that exist in U.S. metropolitan areas. The lack of existing institutions to manage regional congestion pricing in the United States remains a significant barrier. The proposals going forward in the United States, however, apply to single corridors in which, despite the conflicting goals of different governmental units within regions, entities (public and private) do exist that can propose and manage the projects. The kinds of technology that would allow for automatic, convenient pricing are being applied today. The technology being used in the Norwegian toll rings could be readily extended to congestion pricing. Electronic tolling costs far less than attended or automatic toll booths and allows for high traffic volumes since vehicles equipped with transponders

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion do not have to stop at toll booths. Further advances in electronic toll collection, which are being introduced on toll roads in the United States, are making it possible to bill users with minimal intrusion on privacy. The cost of the technology, enforcement, and administration of electronic pricing would total roughly 5 percent of the potential revenues in an areawide application. Metropolitan areas that are failing to meet federal and state air quality mandates face unattractive choices. The many areas unable to meet federal standards for ozone and carbon monoxide are required by the 1990 Clean Air Act Amendments (CAAA) to propose transportation control measures to reduce the total amount of motor vehicle travel. Employers with more than 100 employees in metropolitan areas classified as in severe nonattainment of CAAA ozone standards must submit plans for employee trip reduction programs by 1994 and be in compliance by 1996. An employer trip reduction policy is already in effect in Southern California; Regulation XV of the South Coast Air Quality Management District requires employers with over 100 employees to develop measures that will increase the average occupancy of the vehicles that employees drive to work. The first-year experience with California's Regulation XV indicates that it did boost average vehicle ridership by 3.4 percent, but this resulted in a net decline in regional travel of, at most, 0.4 percent and cost employers in the region about $150 million. The program is not popular with employers because of the cost and reporting requirements. If travel demand management programs such as employee trip reduction are necessary for meeting air quality goals, they would be more effective if combined with a congestion pricing strategy. Congestion pricing may not be popular initially with motorists, but it is more likely to be effective in improving mobility and meeting air quality goals. The funding provided by ISTEA for pilot congestion pricing projects has served as a catalyst for the renewed interest in this policy. The federal government has provided incentives, but local government must take the initiative. Although ISTEA allows for up to five pilot projects between 1991 and 1997, only the proposal from the San Francisco Bay Area was selected in the first round of solicitations in 1993. Many other applications were received, but they were not sufficiently developed to be considered projects that might be implemented or they proposed hybrid projects that the federal review panel rejected. This experience reflects the controversy surrounding congestion pricing proposals, the difficulty in proposing eligible projects that are politically feasible, and the considerable gestation period required to develop support at the local level.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion Because of the controversy about congestion pricing proposals, careful analyses of how the policy would work at the local level, who would benefit, and how to compensate those disadvantaged by the policy are essential to informing the public deliberations about this policy. The Bay Area proposal benefited by having been subject to extensive modeling efforts to estimate the potential impacts. POSSIBLE EFFECTS Travel Behavior The best available estimates from models, though still approximate, indicate that a $0.06/km ($0.10/mi) charge on all major corridors in the Bay Area and a $0.09/km ($0.15/mi) charge in the greater Los Angeles area would reduce total automobile travel and trips during the peak period by about 10 to 15 percent. The benefits to motorists traveling in congested conditions and willing to pay the fee would be tangible. On average they would save 10 to 15 min per round trip. Society as a whole would gain from the more efficient use of resources. Emissions The travel reductions in the Bay Area and in the greater Los Angeles area would result in about a 3 to 9 percent reduction in different vehicular emissions regionwide. (The local effects on some pollutants, particularly carbon monoxide, would be much greater.) These estimates may appear to indicate a small effect on traffic and regional emissions from areawide congestion pricing. Other policies aimed at changing motorist behavior, however, have even smaller effects at the regional level. A combination of reasonably available demand management efforts such as improved transit services, lower transit fares, improved bicycle access, expansion of high-occupancy-vehicle lanes in the Bay Area, and other measures might approximate the effect that congestion pricing alone would have on trips and emissions, but would do so at a much higher cost. Shifts to Alternative Modes The estimates of the regional effects of congestion pricing are only approximations. Empirical information is not available for some important

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion potential behavioral responses. Sufficient experience with pricing transportation services indicates that congestion pricing would reduce demand, but the magnitude of that change is not known. In addition, little specifically is known about how motorists might shift the timing of trips; choose alternate routes; choose among solo driving, carpools, and transit options; or simply forgo trips. Fairness Lack of understanding about the ability of motorists to adapt to congestion pricing also makes it difficult to estimate the potential hardship on some individuals. The economic effects on commuters of different income levels show that all income groups can benefit from congestion pricing if some of the funds collected are redistributed in ways specifically designed to achieve this goal. As shown in Chapter 4, however, motorists with substantially longer-than-average commutes could be disadvantaged even after revenues are redistributed if they continue to drive alone. Those who do not have better alternatives will drive alone and be made worse off. Those who do have better alternatives than driving alone (who can shift to a carpool or to transit with an acceptable trade-off between lower out-of-pocket costs and time losses) might be made better off because of more attractive carpooling and transit alternatives or higher speeds and, perhaps, more frequent transit service. Specific Facilities In contrast to the areawide pricing scheme in Singapore, the toll rings in Norway, and the many studies of regional congestion pricing, the projects moving forward in the United States will apply congestion pricing to individual facilities. (These projects will have to be designed carefully to ensure that diverted traffic does not cause such congestion on alternate routes that the benefits would be lost.) Although these proposals promise considerable congestion relief, the net effects on regional travel, air quality, and energy conservation are likely to be modest. A peak-period toll on the San Francisco –Oakland Bay Bridge, for example, is estimated to reduce precursors to ozone in the region by 0.10 to 0.15 percent. Smaller-scale efforts such as those being proposed and implemented in the United States reflect the controversy and political risk of congestion pricing. Incremental

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion applications may be the only way this policy can be tested in the United States. POLITICAL FEASIBILITY Whether congestion pricing will prove politically feasible in more than one or two places remains to be seen. Public and political concerns about fairness and motorist resistance to direct charges for highway use continue to be significant obstacles. The uses of the substantial revenues that congestion pricing can generate provide an opportunity to improve the efficiency of the transportation system, ameliorate the negative impact on adversely affected groups, and result in a net benefit for society. Some individuals would still be hurt, however, and whether they would be more motivated to resist congestion pricing than the majority who would benefit will be demonstrated only in actual practice. IMPORTANCE OF EVALUATION Assuming that these early congestion pricing projects are implemented, careful and extensive evaluation is essential. These projects will remain controversial. The quality of the debates about these efforts would be substantially enhanced by reliable information about how traffic flows change, by careful analyses of winners and losers, and by survey research regarding motorist perceptions before and after the change. The early congestion pricing projects are not likely to provide substantial new insight into their potential for relieving regional air pollution and saving energy, but they will provide unique opportunities to learn about motorist sensitivity to price changes, how different groups and individuals are affected, and the political sensitivity to pricing as a transportation policy option. The earliest congestion pricing project to be implemented will be a private toll road in Southern California; this is not an ISTEA congestion pricing pilot project and is not eligible for the extensive evaluation funding permitted for pilot projects. The national interest, however, is sufficient to warrant a substantial federal investment in evaluation of any congestion pricing project. Congestion pricing has the potential to be a useful way to significantly reduce traffic congestion. It is a policy facing substantial political and administrative challenges; overcoming these challenges would be aided with the help of reliable information about the full range of issues surrounding it.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion The risks associated with congestion pricing and the nature of policy development in a pluralistic society imply that this policy will progress in small steps. Given that congestion pricing represents a substantial change from the current operation of the road system, such small steps are appropriate. If individual projects succeed, they will help convince policy makers and the public of the benefits of congestion pricing. This process will take time, however; thus it may be many more years before congestion pricing would be applied throughout a metropolitan area in this country. Whether congestion pricing will evolve to this level will depend on how it is implemented, how well it works, and how much motorists and voters come to accept it. Only time, experimentation, and careful evaluation will tell.