the socio-economic impacts of road pricing schemes

The socio-economic impacts of road pricing schemes

Assistant Professor of Economic Policy – Faculty of Social and Political Sciences, Catholic University Milan

Graduate School for Environmental Studies (ASA) - Coordinator

17-20 September 2013

My contribution to the ‘INTEGRATED ASSESSMENT’ session

- not a technical contribution about solutions to the atmospheric pollution problem

- but a reflection on a specific aspect of the policy integration...

- ... knowing that policy integration is a basic

element in order to reach environmental and, more specifically, air quality goals.

The European context

Many directives, guidelines, papers, proposals for a better policies integration. At urban level, for istance:

European Commission, Proposal for a Decision of the European Parlamient and of the Council on a General Union Environment Action Programme to 2020 ‘Living well, within the limits of our planet’, COM (2012) 710 fin.

Communication from the Commission to the Council and the European

Parliament on Thematic Strategy on the Urban Environment, COM (2005) 718 fin.

European Union’s growth strategy ‘Europa 2020’

The specific aspect of policies integration studied is:

- the environmental policies effects on other sectors / fields of policies application

- The introduction of road pricing schemes

- Which environmental policies?

- in other words, we study the externalities and, in particular, the socio-economic impacts of environmental policies

- and, more in particular, we study the distributive effects of environmental policies

What I mean with environmental policies

- every policies which aims to the environmental protection (eg. In the field of building policies, the obligation of energy certification of buildings)

URBAN ACCESS RESTRICTION SCHEMES (ARS)*

ARS main aim:• 64% of towns: environment• 35% of towns: congestion• 1% of towns: other

* Fonte: www.accessrestriction.eu (417 european cities)

What do we mean with ‘redistributive effects’

of environmental policies?

The way income distribution changes through population following a policy intervention

Specific case of policy intervention: the road pricing schemes

Case study: road pricing

URBAN ACCESS RESTRICTION SCHEMES (ARS)*

4 types:

1) Point based

2) Cordon based

3) Area licence based pricing

4) Distance or time based

* Source: www.accessrestriction.eu (417 european cities)

Case study: road pricing / urban road user charging – URUC

• Low / now availability of italian documents, papers, etc.

• CURACAO (european) project: it aims to identify various impacts of URUC schems. Moreover, it studies impacts in terms of EQUITY.

EQUITY (Giuliano, 1994): it relates to the distribution among different groups in the society of the costs resulting from the implementation of a scheme or policy intervention.


VERTICAL EQUITY and HORIZONTAL EQUITY

VERTICAL EQUITY : the distribution of impacts by income.

Whether a pricing system is equitable will largely depend on the extent to which it is ‘progressive’, ‘regressive’ or ‘neutral’.

HORIZONTAL EQUITY (also referred to as spatial or territorial equity): it relates mostly to impact on people living in areas affected by a policy intervention or those who need to make specific journeys.


IMPACT GROUPS

Any consideration about equity implies defining impacts, that is ‘winners’ and ‘losers’ from an Urban Road User Charging scheme (Langmyhr, 1997).

This need to be done for each city and scheme, since different schemes designs may have different implications, and different cities may have differing concerns over (perceived) inequities.


IMPACT GROUPS: main kind of categorisations

Groups based on economic status

Groups based on demographic status

Groups based on geographical status

Groups based on transport use (or status)

(categorisations not mutually exclusive)


IMPACT GROUPS

1) GROUPS BASED ON ECONOMIC STATUS• Closely related to the concept of vertical equity

• Households are categorised into a series of income bands, and comparisons are made of the differences in impact on those income bands.

• Do higher income groups pay more for using the service provided or is there a mechanism to ensure that, for example, the users who cause the most pollution or congestion pay the most for using the facility?


IMPACT GROUPS

1) GROUPS BASED ON DEMOGRAPHIC STATUS• This includes factors of household size, number and age

of children and number and age of elderly residents. • People who are often considered the most vulnerable

within society include: children, young adults, unemployed people, people in low paid work, people from minority ethnic communities, disabled people, older people.

• For example: children will not incur road user charges themselves, but parents needing to transport young children may be less able to avoid such charges.


IMPACT GROUPS

GROUPS BASED ON GEOGRAPHIC STATUS

It concerns the location of a household or of the activities which it undertakes. Principal groups are:• Car users who travel in and out of the charging zone• People who are located, often resident, inside the

charging zone;• People who are located, often resident, outside the

charging zone;• Public transport users who travel in and out the charging

zone.


IMPACT GROUPS

1) GROUPS BASED ON TRANSPORT USE (OR STATUS)

This principally concerns the journeys made, their length, timing and the mode used. Main groups identified by travel activity are:• by mode, with car users being adversely affected, while

bus users, cyclists, pedestrians benefiting from URUC• by movement, with journeys (by car) in and out of the

charged area, journey wholly within and wholly outside• by time of day, with journeys within the charged period

being adversely affected • by journey purpose, since this will to some extent

influence the availability of an alternative timing.


WHAT ARE THE REDISTRIBUITVE EFFECTS OF A ROAD PRINCING POLICY?

IT’S NOT POSSIBLE TO ANSWER DISREGARDING THE SPECIFIC CASES. Each proposed road pricing scheme should probably be

judged on its own merits, geographical location and factors.

Generally speaking, the limited evidence from studies suggests that ‘horizontal inequities’ depending on geographic, demographic or transport status are more important / significant than ‘vertical

inequities’ depending on economic status.

We have seen that the range of impacts will depend, above all, on:the urban access restriction scheme ‘design’/formthe population socio-demographic caracteristicsHabits/needs of travel



NOT POSSIBLE TO ANSWER DISREGARDING THE SPECIFIC CASES

Eg. Research conducted in Paris:

- When impacts were considered in terms of percentage of individuals’ income, it was found that all nine scenarios studied were regressive, since lower income drivers were disproportionately affected.

But if we look at the facts:

- High income motorists are less inclined to be deterred from driving as a result of the imposition of a toll; by consequence they tend to continue with tolled motoring.




IN SOME CASES, ROAD PRICING IS EVEN USED AS A TOOL TO REDUCE ‘INEQUITIES’

Es. New York, where situations of ‘inequities’ do exist in itself:

- Afro-american are over-represented among those with a commute

of more than 50 minutes.

- Daily commute in excess of one hour each way:

- 64% of earners of 35.000$/year or less

- 6% of earners of 75.000$/year




California:

Researcher studied the frequency with which drivers from different income groups used the tolled Express Lanes provided on Highway SR-91. They found that behaviour was less related to income, and more related to the amount of flexibility that drivers had in their personal schedule, and the availability of alternative routes.

Similar research featuring San Diego’s I-15 HOT Lanes concluded that higher-income drivers were more likely to use the priced lanes than other lanes, but that lower-income drivers did use these lanes.



Economic advantages

Economic disadvantag.

Social advantages

Social disadvantages

High-income people (hp: they do not change mean of transport)

/

Road charge to pay, unless exceptions are introduced

Less time consumed in the traffic

Low-income people (hp: they change mean of trasnport)

They pay less Road charge to pay*, unless exceptions are introduced

Possible investments in public transport

Means of transport more crowded, transfers are more time-consuming (than car)

Community / /

Clain air, less noise pollution, less health expenditure

* People who cannot change the scheduled time


HOW MIGHT ROAD PRICING ADVERSE EQUITY EFFECTS BE REDUCED?

A) Modifying scheme design to overcome localised

adverse impacts

B) Reducing charge levels and introducing subsidies and exemptions

C) Adopting complementary measures



A) Modifying scheme design to overcome localised adverse impacts

i.e., changing the location of a cordon to avoid areas where people have fewer alternative travel options, and limiting the operating hours to times when alternatives are readily available and users have more freedom to choose how they travel.



B) Reducing charge levels and introducing subsidies and exemptions

Reducing the charge level: the simplest approach but beyond a certain point this will reduce the effectiveness of the scheme.

Reducing the charge level for certain users (i.e. London). More complex options are also possible. I.e. (in literature) is considered the allocation of free permits, which allows all users a limited basic level of road use at charged times. But, such subsidies will add to the complexity and costs of operating the scheme.

Exempting certain users. This has been done in most schemes for disabled drivers, and for essential services such as emergency vehicles. Once again, such exemptions add to the cost of operating the scheme.



C) Adopting complementary measures

Improvement of public transport

i.e. In London and Stockholm, bus service improvements are targeted to the corridors on which car users are most likely to seek alternatives, or where more low income residents live.

Improvements to walking and cycling can also assist.

In the case of London (and Milan) any surplus from revenues raised from Congestion Charge was required, by law, to be invested in the town’s transport system. The aim was to raise 1.3 billion during the fast 10 years of operation.



THE END USES of REVENUES ARE of PRIMARY IMPORTANCE

Which uses for revenues from road pricing?

To directly fund improvements in public transport

Different subsidies

To fund reductions in public transport fares (the main beneficiaries

are people using public transport more)

To fund a reduction in income tax (in this case, high-income

individuals are the main beneficiaries)

MAIN REFERENCES

- The CURACAO Consortium, Final Report, April 2009, Coordination

of Urban Road User Charging Organisational Issues

- www.transport-research.info)

- www.isis-it.net

THANKS FOR YOUR ATTENTION

ILARIA BERETTA

[email protected]

the socio-economic impacts of road pricing schemes

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