Tuesday, 26 May 2015

Long term trend towards less oil use - what does this mean for fuel tax?

An excellent article in Slate describes the long term trend in the use of transport fuels in the United States:

According to the EIA, the U.S. transport system required about 6 percent fewer BTUs of energy to function in 2014 than it did in 2007. And it used nearly 10 percent less oil than it did that year. In fact, oil consumption was lower in 2014 than it was in 2000. And as a proportion of transportation fuel, petroleum hasn’t been this low since 1954, when coal was still a significant transportation fuel. Petroleum’s market share has fallen from 96.5 percent in 2004 to 91.5 percent in 2014.


US transport sector energy consumption by fuel (Source: Slate)
So in proportionate AND absolute terms, there is less oil being used for transport in the US.  This is not because there is less tonnage being shipped (quite the opposite) or fewer people travelling, no it is because of fuel efficiency and the emergence of alternative fuels and motive power for road vehicles. Given that in 1954 the reason petroleum was a lower proportion was because railroads still used coal for steam locomotives (they virtually all use diesel now), the transformation today is considerable.  

4.7% of consumption is now alternative fuels including ethanol and biodiesel, 3.5% is now natural gas.  In 7.5 years the average fuel consumption of cars sold in the US has improved by 25%.

Although oil prices have dropped, there is little indication that this trend is about to be reversed, which poses an obvious question.  What is the future of fuel tax (or "gas tax" in the US)?

In the United States and a few other countries, fuel taxation is a direct source of revenue that is dedicated to government spending on roads and public transport subsidies.  However, in many other countries it is simply another form of taxation, although it tends to be acknowledged as a way of charging bluntly for the negative externalities generated by burning petroleum products.

Of course, lower consumption does mean some obvious benefits, from lower noxious emissions and contributions to CO2 emissions.  These benefits can be monetised, and there is an argument for maintaining this momentum, but it is unlikely that fuel taxes are the key driver for this, not least because they are so low in the United States compared to other markets (in some cases less than a tenth of the taxes in Europe).  

The growth of alternative fuels and greater fuel efficiency creates the obvious issue that revenue per vehicle mile is dropping, so what should be the response to this?  There are three broad paths that jurisdictions can go down:

1. Do nothing: This is, in effect, the default position of the US Federal Government, but also all those jurisdictions that do not increase such taxes.  The implication of this is that either funding for roads gets subsidised from non-usage based taxes (which is what the US Federal Government does), or funding gets cut, or those dependent on funding find alternatives (which in a federal-state relationship can mean greater use of tolls).  As easy as this option is, it lacks any strategic focus and is essentially an adhoc approach to charging road vehicles and raising revenue for highway infrastructure.  The mere fact that this has been the primary approach of most US state governments, as well as Federal, is a damning indictment on the political process to think strategically about the highway sector.  In Europe, given such revenues are rarely even partially dedicated to transport spending, it may be easier, although this simply means as a source of revenue, fuel taxes diminish over time.  It doesn't necessarily mean transport funding has to, but it does beg the long term question about reform of taxation.

2. Increase fuel taxes:  By increase, I mean go beyond inflation (which a few jurisdictions already so, such as New Zealand), and increase to take into account the real loss of revenue due to efficiency. This may have some initial appeal, as it is likely to encourage a more rapid shift to alternative fuels and more fuel efficient vehicles.  Yet the distributional impact of this is going to be more mixed.  It will impact those who are least able to afford new vehicles the most, and also those with fewer alternatives in terms of mode or trip consolidation (e.g. rural motorists).  On the other hand, it also means those driving alternatively fueled vehicles or highly fuel efficient vehicles are paying much less to use the roads, so the vague relationship between what is paid and the costs imposed upon the highway system (or capital consumed in using roads) reduces even further.

Of course, in many jurisdictions fuel tax isn't even nominally intended to be a way of recovering the infrastructure, let alone external costs, of highway use, although the economic case for doing so is clear.  When there are clear policy goals to avoid subsidising overuse of highway networks (because of congestion, pollution and lack of public funding for maintenance, renewals and network enhancements), it seems obvious that moving towards a user pays approach makes sense.  Fuel taxes may be a first, blunt, but low administrative cost way of doing this.  Yet, if the relationship between fuel consumption and road use widens more and more across the vehicle fleet, it simply means that some road users are paying much more than others, going above and beyond the pollution costs that may be fair to recover from those users.   Even if there were a hypothetical solar powered car, it consumes road space and road capital tied up in the infrastructure.  It should pay for using that infrastructure, even if the case to charge it for negative externalities is zero.

So, whilst increasing fuel taxes may be a short term palliative, it feeds the cycle of ever decreasing consumption of petroleum and inequities between those who pay more through such taxes, and those who avoid such taxes because they can afford to buy more fuel efficient vehicles.

3. Implement road usage charging:  In my view, the only solid case for fuel tax is as a carbon tax.  If it were set at an appropriate price to reflect this, it would easily be the most defensible way of recovering that cost.  It is, not, a good way of recovering the imputed costs of noxious pollution, because it isn't a tax on particulates or NOx or other emissions (as diesel vehicles emit more of these by-products that petrol vehicles, but emit less CO2 and use less fuel). Beyond that, it has long been established that the relationship between fuel consumption and infrastucture costs is very weak. One reason being that the greater stresses imposed on road infrastructure due to heavier vehicles is not reflected in proportionately higher fuel consumption to recover such costs.  Furthermore, it is clear that there is no relationship at all between the long run amortised capital costs of roads and the consumption of fuel of vehicles as they use them.

However, it is not the argument that charging vehicles through fuel taxes is inefficient and badly targeted that is driving investigation of options for distance based road usage charging in the USA, but rather concern about the sustainability and equity of continuing to do so.  Oregon is already well on the way to implementing such a system for the most fuel efficient cars, as an option. and other states are investigating how to move in that direction.  What it raises are a whole host of questions, not least how to transition from the current taxation of fuel to charging by road usage, and also whether there is a role for continuing to tax fuel (if only because of the environmental externalities).

 Conclusions

Many of the problems of highway management and infrastructure in the US today are due to a lack of funding, but also poor pricing and recovery of the costs of maintaining such infrastructure.  Looking at charging directly for use, rather than through the proxy of fuel taxes would help answer one element of this, and opens up wider questions of thinking of the links between using roads, paying for roads, spending money on roads and their management.  It isn't just an issue for the US, but in all jurisdictions where fuel taxes are a significant contribution to public funds.

Doing nothing may remain the easy option, particularly if the politics of raising fuel taxes are difficult, (and the politics of considering direct charging even more so), but what it ought to do is open up a dialogue and discussion about what roads are for, who should pay for them, how funding for them should be allocated, and where policy on highways should be heading.  I advocate an approach that more closely linked road users to decisions on funding, and how and by how much they are charged, because doing so has delivered greater benefits in other economic sectors.   It requires some strategic thinking that goes beyond how vehicles are taxed.




Thursday, 14 May 2015

Vancouver telephone debate indicates introducing sales tax would be unpopular

The Surrey Leader reports on a telephone town hall on the referendum for a proposed regional sales tax to pay for public transport improvements.  It reported on opposition to paying more, although a dial in poll indicated an almost even divide between confirmed opposition, and confirmed or indicative support for the sales tax.  However, one comment took my interest was the claim by Vancouver Board of Trade CEO Iain Black who is reported as saying that road pricing is proposed for the region and could reform the toll structure but said it isn't likely to come for 10 to 15 years.

Let's be clear, Vancouver could have road pricing in three years if it wanted to do so.  It could charge by a combination of distance, time and geography, with a back up of day passes for entry, if it wanted to.  It could combine this with reforming tolls on the Port Mann Bridge.   The issue is that the politics are seen to be too complicated.  It should be clear that the option of road pricing in Vancouver remains, but is not proceeding for political reasons, not technical reasons.  After all, Jakarta, Indonesia can roll out a pilot system in less than three years, Vancouver could certainly do the same.

Wednesday, 13 May 2015

Hong Kong to consult on congestion pricing, rejects raising fuel tax or promoting car-pooling

Hong Kong newspaper The Standard reports that the Hong Kong Transport Secretary, Anthony Cheung Bing-leung, has announced that there is to  be public consultation on the introduction of an electronic road pricing scheme on Hong Kong Island to combat congestion.

The reason for doing so is concern that the public "does not have a clear understanding" of the "proposed scheme", despite it being clear from past studies that there could be considerable merits from introducing congestion pricing for the city.

The Transport Secretary has already stated his support for the 12 proposed measures to relieve congestion from its Report on Study of Road Traffic Congestion in Hong Kong (PDF). These measures included short to medium term steps to:

- Manage the growth of the total motorised vehicle fleet size;
- Better manage efficient use of limited road space (including planning for a pilot congestion charging scheme, and increasing fees at metered kerbside parking places)
- Introduce stringent penalties and enforcement of traffic offences.

Long term measures proposed include:

- Review parking policies around planning (which appears to mean reducing minimum parking requirements);
- Introduce technology to provide real-time information about availability of off-street car parking places;
- Encourage on-street loading/unloading at off-peak times, considering options to use road pricing to incentivise this;
- Provide more park and ride facilities at new towns and developments further out of central Hong Kong.

It is notable what was not recommended such as:

- Introducing a Singapore style vehicle quota system for vehicle ownership;
- Vehicle rationing systems such as applies in Beijing (odd number/even number permits to use roads on certain days);
- Increasing fuel tax;
- Promoting car-pooling/sharing for cross-harbour tunnels;
- Contracting enforcement of traffic offences to the private sector.

There is little explanation as to why increasing fuel tax and encouraging car-pooling were rejected, except that the former has a blunt impact that affects the whole region, and isn't particular effective at targeting congestion, and that the latter is not expected to have much impact.  However, it is considered that once concessions expire for two of the tolled cross harbour tunnels, tolling may be varied between them to help manage demand across the three tunnels (the central one is typically the most congested).

The proposed zone for introduction of a scheme is similar to one investigated in the past, and comprises the area known as Central and Wan Chai, which will be bypassed by a new highway currently under construction.

Possible Hong Kong congestion charge zone

It is not clear what a pilot would look like. I'd say that some sort of trialling of variable peak tolls on the harbour tunnels would actually be a low-risk obvious start, although it would cost money to compensate and negotiate with the concessionaires that own the Western and Eastern crossings. However, the concession on the Eastern Harbour Crossing purportedly ends in 2016 (although the Western Harbour Crossing concession continues to 2023), so there may be some scope to vary tolls to increase utilisation of the Eastern Crossing compared to the Cross Harbour Tunnel.   However, such variations are likely to have to await completion of the Central-Wan Chai Bypass which can more readily distribute traffic on the island side.

Beyond the crossings, a pilot could operate in a small sub-set of central Hong Kong at peak times only, and would be easy to trial.  

Of course, Hong Kong has a history in studying this, having launched trials with GPS technology on vehicles at the closed Kai Tak Airport site over 17 years ago.  It would be a great leap forward for Hong Kong to finally move from that to a pilot.  I can only hope that the consultation and information provided in Hong Kong to the public can be positive, and perhaps it needs to answer one of the biggest questions asked when pricing is offered to the public - what is the money going to be used for?

The answer to that question is far from clear, but perhap therein, lies the scope for more work to be done and for options to be presented to motorists.

Friday, 24 April 2015

Norway reviewing future of fuel tax

Norway has started a review of motoring taxation and its support for subsidies for electric vehicles according to Reuters.

It had a target of having 50,000 electric vehicles registered in the country, and has reached that level, with a wide range of incentives including:
- Toll free use of roads;
- Zero charges for public car parks;
- Access to bus lanes;
- Free use of car ferries;
- Free use of public vehicle charge points.

Norway is well known as a major oil producer, but it is also geographically blessed with considerable hydro-electricity, which supplies nearly 99% of its electricity, so it can export the oil and use its own electricity from a source than is a very conventional renewable one (so there are no issues around the use of electricity increasing emissions).

20% of all vehicles sold last year were electric, with Norway alone representing one third of all such vehicles sold in Europe (Norway notably is outside the European Union, but has free trade with the EU through the European Free Trade Agreement).  According to InAutoNews, the subsidy scheme meant that purchasers of the Tesla Model S, a luxury sedan, were getting subsidised. 

The subsidy scheme is one thing.  I tend to think that policymakers need to be very careful not to make programmes to encourage purchases of electric vehicles subsidies to relatively well off individuals and businesses.  There is a case for taking into account the relatively lower environmental impact, but there is little evidence that most such schemes do that.

However, there is little indication of what is behind the review of fuel tax and other motoring taxes.

It's worth remembering that Norway has many toll roads, not just the relatively well known Oslo toll ring (which effectively operates as a congestion charging cordon), but on major highways across the country, with 40 currently listed (full list here).  I addition, it recently became compulsory for almost all heavy vehicles (those over 3.5 tonnes) to have a toll tag account.


Map of Norwegian toll roads from Norwegian Public Roads Administration

So tolls are a well established way of paying for major new highway infrastructure in Norway. However, fuel tax is important as well.  Fuel tax is US$3.87 per gallon (US$1.02 per litre) including a tax on CO2.  However, with such significant increases in the electric fleet, revenue from such tax will be dropping significantly.  Will Norway increase such taxes further (which is likely to particularly harm larger commercial vehicles with fewer viable options to switch to electric vehicles), or replace it with more tolls or a distance based charge?

I suspect the subsidy programme for electric vehicles will be significantly scaled back, bearing in mind Norway is significantly affected by the recent drop in oil prices, affecting state revenues.

However, the future of fuel tax will be more interesting.  Bear in mind that its neighbour Sweden has an influence, as having taxation significantly lower than Sweden will encourage some informal and illegal trade across the border (which itself has low levels of control because both countries have signed up to the Schengen Agreement).  So there may be limits as to what can be done quickly. However, with a culture used to tolling, is it too much to think that maybe Norway will be the first country in Europe to start a transition away from fuel tax and towards network wide road charging?

Wednesday, 25 February 2015

Talk of Beijing congestion charging creates opposition

Typically, narratives around government policies in China are dominated by the false belief that if a Chinese Government body says something is going to happen, then nothing can be done about it.  The truth is much more subtle, and besides indicating - in this case - that congestion charging needs to be considered carefully if it is to get public support - it also indicates that China has moved from the stereotype of the Maoist single-minded unity, to one where there is public discourse about policy.

The (Hong Kong based and owned) South China Morning Post reports on a delegate from the Beijing Municipal Commission of Transport saying that congestion charging was being considered for city.  However, the public response on weibo (Chinese equivalent of Twitter) was mostly negative. 

The report says:

Opinions posted on weibo accounts were almost one-sidedly negative, with some accusing the government of being "lazy", "brutal" and "greedy".

Nie Sheng, a resident of Daxing who drives to work in Haidian, said a congestion charge would not solve Beijing's traffic jams, judging by past experience.

"In recent years, the government has restricted sales of cars, raised parking fees in the city centre and banned non-local vehicles from the city, but the traffic has only got worse," he said.

Nie also worried that the charge would penalise low income and middle class drivers while sparing the rich and powerful, who could either afford the charge or used government cars.


It shows that if a charge is to be introduced, it needs to be part of a strategy that complements it, not just a tax.  One comment from a government body expresses concern that a congestion charge could affect retail sales, but professor of urban traffic management at Beijing Jiaotong Univeristy, Chen Xumei says one reason why so many use cars is the attitude to public transport:

Most people drive because they feel no dignity on public transport, which is inconvenient, congested, uncomfortable and dirty," she said. "The money collected from the congestion charge should be used to improve public transport"


Indeed, a package to make public transport more user friendly and able to meet a wider range of demand would also make a difference. 

Thursday, 19 February 2015

Hong Kong report proposes electronic road pricing

Congestion pricing in Hong Kong seems like a no-brainer, and the authorities in Hong Kong, both before and since the "hand-over" back to China, have acknowledged this formally and informally. Both the north side of Hong Kong Island and Kowloon (the parts of Hong Kong that weren't formally part of the lease from China, but were acquired by the UK effectively through conquest) have such high-densities of people (and public transport usage) that pricing those roads would appear to deliver enormous benefits from reduced congestion and pollution, with alternatives (certainly for people movement) obvious.  The added benefit in Hong Kong is that most public transport does not require subsidy, as the network of bus and mini-bus services operates commercially, all with integrated smartcard ticketing, so growth in demand is met by operators investing themselves.  Even the metro system pays for itself, and there has been ongoing investment to expand it, supported by revenue from the property development at station sites.

Options for road pricing in Hong Kong were comprehensively considered in the late 1990s, to the point that the closed Kai Tak Airport site was used for technology trials including GPS for distance, time and location based road pricing.  Options were revisited twice since then, but on both occasions the Hong Kong Government has rejected the idea for political reasons.  New roads and metro lines have continued to be built, but a report in December 2014 from the Transport Advisory Committee recommends that road pricing be looked at again.

The full report is available here (PDF) and states that average road traffic speeds have fallen by 11% in 10 years and air quality has worsened, which is partly attributable to congestion.

The report concluded that traffic congestion has five recurrent causes in Hong Kong:

- Physical and spatial constraints to expanding road infrastructure make it impossible to add capacity to meet demand, with scope for additional capacity becoming severely limited (expecting around 0.4% per annum expansion in road length by 2020);

- Size of the vehicle fleet continues to grow, at a rate of around 3.4% per annum in recent years;

- Competing use of road space generates network delays, such as the loading/unloading of trucks, pick up/set down of buses, taxis and cars, and vehicles circulating for kerbside parking.  All of these activities interfere with smooth traffic flow;

- Illegal parking and stopping, exacerbated by parking fine penalties not increasing by inflation;

- Road works, whether to maintain the highway or in relation to infrastructure underneath the highway.

Measures proposed to address it run across the whole range of road pricing measures, including ownership taxes, fuel tax, parking charges and road pricing itself:

- Increase the First Registration Tax (for all newly registered vehicles) and Annual Licence Fee, including for "Environmentally Friendly Petrol Private Cars"(which have a concession) to reduce the growth in vehicle ownership.

- Tighten up the category for "Environmentally Friendly Petrol Private Cars" reflecting that they still contribute to congestion (this can be done by continually lifting the standard to reflect the latest technology);

- Fuel tax on diesel should be reintroduced, as diesel is tax free, but petrol taxed at HK$6.06 per litre (US$0.78 per litre).   This incentivises a shift to diesel, which should be removed.

- Increased parking meter charges (as these have not increased in 20 years, but inflation in that time would have added 40% to them) as they are significantly underpriced compared to commercial parking facilities, and encourage circulation of vehicles seeking for parks.  

- Central District of Hong Kong should be a pilot site for a congestion charge pilot scheme, following completion of the Central-Wan Chai Bypass, with early public engagement on how it should be implemented.

Wednesday, 18 February 2015

Jakarta finally proceeding with urban congestion charging

As has been discussed previously on here, Indonesia's capital has been looking at replicating the success of its neighbour, Singapore, in introducing urban road pricing, even using the same terminology - Electronic Road Pricing (ERP).  It has been getting serious consideration for over four years now, but has been subject to some delays in part because the aspiration and ambitions for road pricing were clearly too big, especially given the timescales proposed for introduction.

Jakarta itself has an enormous congestion problem, with a population approaching 10 million, it has suffered from poor public transport and rapid economic and population growth.  Jakarta is probably the largest city by population with no urban metro rail system (although it does have a commuter rail system, it largely uses secondhand rolling stock from Japan, and carries around 700,000 passengers per day).  

The Jakarta Post now reports that tenders will be called to supply an electronic road pricing system (just like Singapore called the ERP), with the hope being that it can be in operation before the end of 2015 at pilot sites.

The city has already involved Kapsch and Q-Free in technical trials since 2014.  The proposed pilot charge will be applied to two corridors.  I've indicated these out below, both appear to just cross the inner ring tollway.  

Jakarta ERP pilot corridors
However, these are only short corridors in the context of greater Jakarta as can be seen below, so it really is a pilot:

Greater Jakarta with proposed pilot congestion priced roads in blue
The law passed two years ago to support the introduction envisaged a first stage that was somewhat larger:

Proposed first full stage of Jakarta congestion pricing
This would focus on one of the busiest corridors into central Jakarta and some parallel routes. The system is intended to replace the "three-in-one" effective HOV requirement for such roads, which means that at peak times it is compulsory for cars on those roads to have a minimum of three occupants.  That will increase the flexibility in using the roads, but should also better target compliance based on payment.  It also will avoid the current abuse of the HOV system whereby entrepreneurial "jockeys" charge motorists Rp 25,000 (US$1.95) to Rp 30,000 (US$2.34) to make up the number in their cars (even when roads aren't market oriented, market solutions to individual problems appear).

Successful technology trials to expand

Technology trials using  conventional DSRC technology have been successful, with 95-98% accuracy reported, although given DSRC ought to achieve 99% it is unclear why it should be so low.  The claim is that with very heavy congestion, number plates are not always detected, although it should not be a problem for virtually all DSRC vehicle tags to be detected.  One of the key issues for Indonesian number plates is the lack of a standard typeface or "font" used for the numbers and letters.  This is a classic example of one of the enabling issues that I've referred to before that needs resolution before such systems can be introduced.

Up to 50 vehicles were installed with equipment from Kapsch, Q-Free and Watch Data for a technology trial last year.  The trial will relaunch on the pilot routes in March 2015 with equipment from only Kapsch and Q-Free according to the Jakarta Post report.  Kapsch and Q-Free are widely known in the tolling industry, both being well known and established suppliers of electronic free-flow tolling systems using DSRC technology.  

This report from ITS International also indicates that the trial included a system from Q Free that is more sophisticated than the standard DSRC tag and beacon operation familiar in many other countries, but involved deduction of credits from a prepaid smartcard.   This parallels the Singapore ERP system, which enables motorists to pay anonymously, as long as the smartcard in the onboard unit has sufficient credit to cover the toll. 

Strategy to use surplus revenue to expand public transport

A separate management unit within the Jakarta Transportation Agency has been created to manage the revenues.  I would hope that it spends considerable time development the enforcement and compliance system, which can be the weakness for any such system.

Net road pricing revenue will be used to increase public transport services, which in Jakarta suffer from the lack of any underground metro (although one is now under construction), and so is focused on bus services and a series of commuter rail lines.

It's notable that the Jakarta Post report includes comments from various freight haulage and courier business representatives which oppose ERP, because they can only see the cost involved.  However, this is where some effort needs to be put into ensuring the pricing and implementation actually deliver improvements to travel times, and so significant savings for road users.  

There is clearly potential for Jakarta to have a network of priced roads, combining both the existing toll road network (which includes manual toll booths) and charging existing roads, but to make it successful it will need to be careful in setting prices and how it uses the net revenues.  I'd suggest that some of the latter should be put into targeted congestion relief projects whether it involves roads, public transport or even improving the environment for pedestrians and cycling traffic.  

What's next?

Further trials, but a tender will be developed for implementation of an actual pilot that will involve users having to pay to use at least part of the roads I have highlighted above.  In due course it may expand step-by-step, like the Singapore system, but first it has to be piloted with real users, to see what the reaction is and to prove it can be successful.  I can only hope that Jakarta gets the pricing right, the products right, the network planning right and the compliance/enforcement right to prove the concept in practice.  Introduction by January 2015 may yet be too ambitious.

Earlier proposals for a network of charged roads in Jakarta
Footnote: Curiously, one measure that will have a long term impact on congestion is that Indonesia abolished virtually all subsidies on fuel on 1 January 2015, taking advantage of rapidly declining oil prices (Indonesia, once a major oil exporter is now an importer).  The drop in prices has meant that even after the abolition of subsidies, retail prices remain lower in January than they were in December.  As prices rise over time, then growth in traffic can at least reflect market prices for fuel.

Tuesday, 17 February 2015

The "war on cars is winnable" doesn't need to be "a war"

An interesting, but lengthy article by Carlin Carr on a Scroll.In website puts forward the case for how cities can avoid being heavily congested by cars, and makes some valid points.

For Japan, yes here is a country with dense rail transport, albeit much in dense cities where such rail is profitable.  This has meant that rail travel is very normal for residents in major cities and between cities, bearing in mind distances between many of the major cities are not large, lending themselves well to fast rail travel.

What missing about the analysis around Japan is two key factors. The ruling Liberal Democratic Party (which literally monopolised government in Japan until the 1990s) has always been closely aligned to the construction industry, which was largely relaxed as to whether vast amounts of money were poured in roads, railways or airports.  In truth, Japan has overbuilt much of its infrastructure, with there being more than enough road and railway capacity outside metropolitan areas.  While the original Shinkansen lines have demonstrated positive economic results, more recent lines have not, as they simply reflect a belief that building infrastructure is good in itself.  It isn't, and Japan is, in part, paying for this now, with public debt in excess of 200% of GDP, and a stagnant economy.  It's worth noting Japan's railway system is privatised, and has always has an element of competition even before that.  The second point is alluded to in that all major national highways are tolled, and urban routes may also be tolled, but the national highway network is Japan is privately owned (under a PPP lease).  As such, the roads are managed commercially and tolls set to recover maintenance costs and the cost of the lease of the assets, so tolls have to cover costs and generate a return.  Yes the shaken (regular safety inspection and tax) does incentivise lower levels of car ownership, but it also incentivises rapid turnover of the fleet, with old vehicles not remaining in the fleet in large numbers because of the costs of them meeting safety and emissions standards.

Singapore remains the world's most sophisticated example of urban road pricing.  No other city charges by route, direction of travel and time of day with differential pricing based on congestion, and it works very well.  Yet many will point out that Singapore has specific characteristics that make it special.  One is that housing density is high, as a city-state, it is easy to develop the densities of travel that make public transport viable.  Singapore's metro, for example, does not require subsidies for operation and renewals.  Secondly, is that Singapore has a combination of a highly credible judicial system and public bodies for enforcement, and a culture of compliance that means it is easier to implement such a radical solution in the city-state. 

As far as solutions are concerned, there is plenty of merit in developing cities in countries like China and India providing heavily for pedestrians and cyclists, so that these options for short trips remain preferred, and then to focus on enforcing parking laws and in rationing parking by price.  Beyond that, regardless of whatever planning options are chosen, the future for rationing road space belongs to road pricing.

Of course, to do that requires some key elements to be in place, which includes the ability to robustly track down violators and to enforce violations meaningfully, which isn't always possible in countries where number plates and databases of owner records are haphazard.

However, my main point is that it shouldn't be seen as a "war" on cars.  Cars have a role in cities, it is just about how cities ration precious road space so they pay for it appropriately.  Of course not everyone can use their car at the same time, it's not physically possible and when they try, it creates negative externalities for others.

Rationing road space rationally!

Yet, if you pay to park and pay to use the roads, at a price that ensures an efficient flow of traffic, then it should be fine to use your car.  Disabled motorists might be given preferences or discounts to recognise that alternatives for them may not be viable, but overall the roads can be managed so that, like other scarce resources, their use gets rationed by price.  

The first step to doing this is to ration road use by basic enforcement of requirements around safety - that drivers have licences, that vehicles are safe to be on the roads, and for regular violators of safety related laws to lose licences.  It requires that parking laws be enforced where they interfere with road safety and capacity, but after that a rational approach to rationing road space used for parking and loading should be considered.  Charging for access, time limiting access for loading, setting aside spots for disabled vehicles and bus stops, all of these sound basic to those with well developed highway rules, but need to be the first approach for many developing countries.

Intelligent technology makes dynamic parking charges all the more possible, and from then we go to pricing.  Whether it be tight city centres, or major new capacity, or charging cordons, zones or by distance, it can be introduced in steps, and what it is about, is not just thinking about mode choice but route choice and time of day choice,

No planner can second guess the best option for anyone on a particular trip whether it be for themselves, family or for goods, but by pricing roads and parking rationally, these choices can appear, and can come from either using roads differently, or using other modes.

It's not about a war, it's about applying a rational approach to rationing a scarce economic resource, 

Monday, 16 February 2015

Vehicle ownership tax mooted for California

Like many US states, California too has issues around raising sufficient funding to pay for highway maintenance and construction.  UT San Diego reports that Toni Atkins, Speaker of the California State Assembly has proposed, in essence, a motor vehicle ownership tax at US$52 per annum.  She suggests it could be higher for trucks (based on weight) and electric vehicles (because they don't pay fuel taxes), but would be hypothecated to transport funding. 

Arguably this is an efficient way of recovering at least part of the fixed costs of the highway network, which by some measures accounts for an average of half of all network maintenance costs.  This is the network degradation due to the effects of radiation from the sun, rain and changes in temperature. 
Charging all vehicles a "network access charge" isn't a bad idea in that context, and it parallels similar taxes in other jurisdictions.  In the UK it is called Vehicle Excise Duty, and is related to vehicle weight and CO2 emissions, although none of the money raised is dedicated to spending on transport, it can cost a vehicle owner anything from nothing (for low emission vehicles) to US$1676 for the highest emission vehicles (full schedule here).

In Australia, vehicle registration fees are set by states, with heavy vehicle rates set them to offset the undercharging inherent in charging diesel tax (as the heaviest vehicles do not pay enough diesel tax to reflect the damage they cause).  For example, in the state of Western Australia an average car will cost US$167 to register.  By contrast, the heaviest truck combination will cost US$7551 a year to register.  That incentives high utilisation and also incentivises vehicle fleet owners to buy vehicles that are suited for what they want to do, and not to purchase those that are too big.  

However, such charges have some fundamental weaknesses, most notably that they reward those who use the network the most, and in the absence of charges for congestion or by location, it is a blunt mechanism.  It also can incentivise evasion, as some will choose to supply false details for registration or register in neighbouring jurisdictions to avoid higher charges.  

A better option for fixed charging operates in some European countries in the form of "vignettes", whereby an access charge is set for using just motorways and major highways.  It means that the stereotypical "little old lady" who only drives around town doesn't get hit, but heavy commercial users and most others do.  For countries and states where driving off of major highways is a huge inconvenience, it works.  It's worth noting that it is primarily applied in Europe as a way of also capturing foreigners using national highway networks.  The access charge itself is time based, so that you can buy a vignette for as long as a year, or as short as four days.

However, revenue only grows as vehicle fleet numbers grow, not traffic.  So it can never replace other means of charging, only supplement them, and even then for it to fully recover fixed costs it would have to be at levels that would incentivise too much evasion to be desirable.

In my view, whilst there are sound reasons why such charges could be turned to in the past, today it is more questionable as to whether they should be introduced now beyond simply recovering the administrative cost of operating the vehicle registration database.   However, it is still a closer link to road use than any talk of a sales tax on everything everyone buys, to subsidise roads.

Far better will be to charge for the use of the roads, by distance and eventually location, weight and time of day.  That's both economically efficient and equitable, the question is how to get there.

Tuesday, 10 February 2015

News shorts: Vancouver, Washington State

Vancouver debates a sales tax to pay for transport


Although evidence and professional opinions would suggest that road pricing is the best way forward for Vancouver, it is instead going to hold a referendum on a sales tax that will be hypothecated to pay (primarily) for more public transport.  The tax will be 0.5% on all sales.  The North Shore news reports  that the tax will raise C$250m (US$201m) per annum, at a cost of between C$125 and C$250 per household, depending on which side of the argument you believe.  Of course that includes households that wont use any of the proposed transport projects and those who will use it everyday.  Equity and economic efficiency are thrown out of the door in the quest to raise tax revenue.


Hypothecated general taxes for transport are no more intelligent than such a tax for health or for subsidising farms.  However, it is a question of what can be done politically and legislatively, versus economic rationale.

A better approach would be at least some increase in taxes on owning and operating vehicles, a more rational appraisal of where benefits lie with some of the projects (and then charging accordingly) and looking at expanding tolling.  It is always unclear quite why everyone should pay regardless of their use of the transport network or the benefits they obtain (whether they be users, property owners or businesses).

Ballots will be sent out March 16, and votes must be in by May 29, 2015.  It's none of my business, but I'm hoping for a no.  Sales taxes are very poor ways of raising money for specific purposes, and it is telling that advocates of it clearly don't think they could convince the users of the new infrastructure to contribute much of the capital cost.


Washington state consulting on higher HOV thresholds for HOT lanes

According to the Bothell/Kenmore Reporter, the Washington State Transportation Commission in consulting on tightening up the eligibility for vehicles to use the I-405 HOT lanes that are currently under construction.  The idea being that high-occupancy vehicles (HOVs) will need three occupants to use the new lanes untolled.  This is inconsistent with the current approach to such lanes in the state, whereby two occupants are sufficient. 

I wrote about these lanes before, questioning their financial viability, but now it seems like this move is designed to partially address this.  However, the report indicates that having a three occupant HOV threshold is needed to cover operating costs, re-emphasising my point that new capacity HOT lanes invariably are a form of subsidised new capacity.  Those paying to use the lanes are not paying the capital costs of the capacity, but paying as a market mechanism to manage demand.  That's positive in terms of ensuring a high quality of service (and bearing in mind that users of parallel untolled lanes benefit from the transfer of traffic onto the new lanes), but it is not a solution for funding new capacity.  It appears that the key goal is meet the federal and state guidelines of maintaining a 45mph average speed, and it is more fair to target the HOV users, rather than hiking the tolls.

In terms of pricing the report says:

The recommended average toll for the express lanes will be between 75 cents and $4 at the start of the tolling system. More congested days would fall between $4 and $10, the latter being the maximum and expected only 10 percent of travel days. Seventy-seven percent of trips are expected to be below $1, according to the WSDOT.


As I've said before, I see value in converting underutilised HOV lanes to HOT lanes, and even in considering whether new lanes should be toll lanes.  However, as HOT lanes you leave some users benefiting whilst paying nothing more for vastly improved levels of service.  It is more equitable and financially prudent to simply build them as toll lanes.