pg funding and management strategies task m4: the impacts of road pricing on the socio-economy

PG Funding and ManagementStrategiesTask M4: The Impacts of Road Pricing on the Socio-Economy

Kristín H. Sigurbjörnsdóttir and Anton GoebelReykjavik 4.12.2008

04.12.2008 CEDR 2

Authors

• Anton Goebel and Juha Tervonen, Finland• Oscar Alvarez Robles, Spain• Morten Welde and Inger Andrea Thrane, Norway• Laurent Donato, Belgium Wallonia• Samira Irsane-Semaan, France

04.12.2008 CEDR 3

Starting point for the task

• CEDR's strategic plan 2005-2009

- Task M4 "Show the effects of road pricing (RP) on socio-economics"- to show that RP is only one tool in tool kit of public authorities- the objectives of road pricing must be defined- to analyse the nature of the toll systems applied- identify and examine existing studies on the impact of RP

04.12.2008 CEDR 4


• Group's judgment

- There are already endless amount of general reviews of existing systems and pricing theory, but not so many papers on general impacts of RP -> The group decided to be loyal to the original task title and concentrate on impacts of RP.

- Objectives, equity and acceptability should also be treated as they are closely related to impacts of RP.

- Also a short review of current EU policy development would be useful, but no reviews or case studies of existing systems -> they are only used as examples of impacts!

04.12.2008 CEDR 5


The following content was agreed:

1) Introduction

2) Objectives of RP

2) RP in Europe

3) Socio-Economic Impact Chains of RP

4) Equity of RP

5) Acceptability of RP

7) Conclusions

04.12.2008 CEDR 6

Objectives of road pricing

• Two primary objectives- Regulation: users pays all the costs (including all external cost) they induce for the whole society -> demand management.

- Funding: generating revenues for construction and maintenance of roads or in some cases e.g. revenues for promotion of public transport.

• Other objectives- to limit CO2 emissions

- increase the quality of living environment

- decrease the fluctuation of travel time

One remark: the aim of RP is not to promote social fairness, but to avoid distortions that lead to an inefficient allocation of resources and, in turn, to a situation where the whole society is worse off!!!

04.12.2008 CEDR 7

Road pricing in Europe

• EU policy

- Taxes and fees must be related to level of pollution, congestion and wear and tear of infrastructure -> polluter pays principle!

- Since the publication of the White paper in 1998, the Commission has taken several legislative initiatives.

04.12.2008 CEDR 8


- Eurovignette directive (1999) gives the legal basis for the implementation of RP:

- HGV's over 12 tonnes for designated parts of network,

- HGV’S over 3,5 tonnes since 2012 (amended in 2006)

- minumum levels for taxes on HGV's and maximum levels for user charges

- tolls should be proportionate to the cost of building, operating, maintaining and developing the infrastructure and may also include a return on capital or a profit margin

04.12.2008 CEDR 9


- 2008 proposal for revision of Eurovignette directive

- option for internalisation of external costs

- the revenue from internalisation of externalities will be earmarked for reduction of externalities

- the scope is the entire network (national and local roads).

- The member countries have submitted their opinions on the proposal and the final decision making process is in progress.

04.12.2008 CEDR 10

Socio-economic impact chains of road pricing

- the impacts of different road pricing instruments (including taxation)

- no quantitative measurement of impacts, but some examples of existing systems

- application of "The Impact Map of Road Management" and causal impact chain approach developed by FINNRA

04.12.2008 CEDR 11


Strategy level impacts

Road pricinginstruments

THE IMPACT CHAIN APPROACH

Concept analysis: the strategy level impacts (e.g.. environment, accessibility, regional development...) are divided into partial impacts.

Causation: the change in state that follows directly from RP (output) and the impacts that follows from it in logical progression.

Result: the higher level abstract impacts are presented in more concrete way for illustration of impacts of RP.

04.12.2008 CEDR 12


Gen

eral

eco

nom

ic p

ersp

ectiv

e

RP

Travel costs (households)

Freight costs (companies)

Price of goods & services

Volume of travel & consumption

Employment

Funding of the transport system

Tax compensations

GNP

Use

of r

even

ue

Production

Direct impacts

German HGV road tax: supplementary prices 0.15 - 0.90 €/100kg for shipment from Finland to Germany.

04.12.2008 CEDR 13


AC

CE

SS

IBIL

ITY

Tra

vel a

nd t

rans

port

atio

n co

sts

RP Change in travel &

freight costs


Tax compensations

Revenue

Cost of using passenger car

Cost of operating bus

services

Cost of operating

freight services

Fixed cost, fuel cost, km cost

German HGV road tax: supplementary prices 0.15 - 0.90 €/100kg for shipment from Finland to Germany. Empty runs of HGV reduced by 15% since 2005.

04.12.2008 CEDR 14


AC

CE

SS

IBIL

ITY

Fun

ctio

nalit

y

Charges

Volume, timing, route,

mode of travel / delivery


Revenue

Predictability of travel and

delivery times

Smooth flow of traffic

Average speed

Fluctuation of travel times

Disruptions

Need to plan travel and consider certainty margins

Travel time Stockholm: number of entered vehicles - 22%.

London: travel time savings 37 000 hours per day.

04.12.2008 CEDR 15


AC

CE

SS

IBIL

ITY

Tra

vel c

onve

nien

ce

Charges


mode of travel

Convenience of travel


Revenue

Experience of travel

environment

Experience of travel

situation

No valid examples available, only some indicative statements.

04.12.2008 CEDR 16


AC

CE

SS

IBIL

ITY

Tra

ffic

saf

ety

Vehicle taxes

Charges


mode of travel/

delivery

Changes in traffic flow


Revenue

Accident risk & risk

perception

Number and severity of accidents

Vehicle characteristics Insurance system Traffic

behaviour

Fatalities

Injuries

Damage to property

Traffic regulation penalties

Stockholm: personal injury accidents reduced 5-10% inside the area.

Norway: if traffic moves from high quality toll road to "free" lower class roads, safety impact is not necessarily positive.

04.12.2008 CEDR 17


EN

VIR

ON

ME

NT

Charges


mode of travel / freight


Revenue

Emission volumes and noise levels

Environmental risks and the

quality of the local and global

environment

Vehicle characteristics/fuel consumption

Vehicle/fuel taxes

Health and comfort, global

economy

Stockholm:CO2 emissions reduced by 14%.

04.12.2008 CEDR 18


CO

MM

UN

ITY

ST

RU

CT

UR

E

Charges Cost of travel & freight

Location of services,

workplaces and housing


Revenue

Size and density of community

Vehicle/fuel taxes Community planning

Accessibility

Number and/or length of trips and deliveries

London: sales reduced by 5.5-8.2% in tolled area during the year after the charge.

04.12.2008 CEDR 19


QU

ALI

TY

OF

TH

E L

IVIN

G

EN

VIR

ON

ME

NT

Charges Changes in travel and

freight


Revenue

Vehicle/fuel taxes

Quality of living

environment

Green areas

Townscape

Environmental nuisances

Security

No valid estimates, but e.g. in Stockholm general "feeling" is positive.

04.12.2008 CEDR 20


RE

GIO

NA

L D

EV

ELO

PM

EN

T

Charges Cost of trips

& deliveries

Location advantage/

disadvantage


Revenue

Vehicle/fuel taxes

Firms

Households

Availability of labour

Costs of logistics

Choices in labour markets

Access to markets

Access to services

Quality of living

environment

Öresund bridge: major integration of the Öresund region in the employment market, housing, business, shopping and leisure activities. (Not direct impact of RP, but RP made the project possible.)

04.12.2008 CEDR 21


RO

AD

FIN

AN

CE

Charges Transport

system funding (maintenance /

investment)

State / local budget Revenue

Vehicle/fuel taxes

State budget

Finland: 11% of the State revenue from road user taxation.

Norway:25 % of the total road construction budget comes from toll road revenues.

04.12.2008 CEDR 22

Equity of road pricing

• Equity could be defined as the fair distribution of impacts across the whole population.

• RP does not have to be regressive (take larger percentage of income from the poor that the rich), but there are always some loser and winners.

Winners Losers

Motorists who value timePublic transport passengers who experience shorter travel times and service improvementsReceivers of net revenues

Motorists who do not value time and have no alternative modes of travelMotorists who change destinationResidents in areas that experience increased traffic

Source: Gomez-Ibanez (1992)

04.12.2008 CEDR 23

Equity of road pricing

• Equity implications are sensitive to the scheme's specification and the location of workplaces and residential areas, car ownership and travel patterns in different cities.

• The use of revenue is crucial from equity viewpoint- Small (1992) and Goodwin (1989) tripartition of the revenue:

- general tax cuts or cuts in car taxes

- public transport improvements

- road investments.

04.12.2008 CEDR 24

Acceptability of road pricing

• In general RP is not acceptable!

96

4

92

8

59

41

19

81

16 16

84 84 86

14

91

9

100%

75%

50%

25%

0%Im p ro vep ub lic

tra nsp o rt

P&R Ac c e sre stric tio n

Re d uc ingp a rkingsp a c e

Inc rea singp a rking

c o st

C o rd o np ric ing

C o ng e stio np ric ing

Dista nc eb a se dp ric ing

Ac c epta b le Not a c c epta b le

Source: Schade 2001.

04.12.2008 CEDR 25


• Acceptability of RP increases when road users start to benefit from impacts of RP (improved traffic conditions, roads, quality of living environment, public transport etc).

70%

41

19

64%

16

72%

48%

60%54%

37% Ac c e sre stric tio n

Tro nd he im (o p e n 199 2)

C o rd o np ric ing

C o ng e stio np ric ing

Neg a tive a ttitud es in p e rc e nt b e fo re o p ening Neg a tive a ttitud es in p e rc e nt a ye a r a fte r o p e ning

70%

50%

40%

30%

20%

10%

80%

O slo (o p e n 1990 )Be rg e n (o p e n 1986)

0%

Source: Odeck and Brathen 2002.

04.12.2008 CEDR 26


• Three main forms of acceptability are public, business and political acceptability.

• The acceptability of RP increases with the clarity of the perceivable positive impacts.

Cost of travel and

freight

Functionality

of road links

Traffic Safety

Environ-ment

Community

structure

Quality of living

environment

Regional develop-

ment

Funding

Public acceptability

- - - + ++ + + - +++/- - -

Business acceptability

- - + - - - - - ++/- - -

Political acceptability

- - + + + + - - ++

+++ very important positive factor, ++ important positive factor, + small positive factor, - - - very important negative factor, - - important negative factor, - small negative factor, blank = very little or meaningless factor

04.12.2008 CEDR 27

Conclusions

• When designing the pricing system, there must be an understanding of the impacts of pricing and what impacts are important for the acceptability of the system.

• The socio-economic impacts of RP are diverse and far reaching -> it is much easier to estimate the amount of direct impacts (e.g. user costs, accident level, etc.), but estimating the broader impacts (e.g. regional development, impact on GNP, etc. ) is challenging and often only at an indicative level.

• The magnitude of the impacts depends on the level of fees that are set.

• RP can have both regressive and progressive impacts and it does not necessarily have to hurt the poor and have negative impacts on mobility and thus lead to social exclusion.

04.12.2008 CEDR 28

Conclusions

• The acceptability of RP has a clear connection to its impacts: acceptability increases when the actual impacts are similar to what was predicted.

• Although road management in Europe is usually funded from the general State budget, road user charges are becoming increasingly important in the regulation of traffic and the funding of road management.

• Vehicle and fuel taxes are effective instruments only for obtaining funding, but are very ineffective in producing other impacts.

04.12.2008 CEDR 29

Thank you!

[email protected]

[email protected]

pg funding and management strategies task m4: the impacts of road pricing on the socio-economy

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