Friday 17 May 2024

New York is coming: but it is hardly a model for other US cities: UPDATE NEW YORK CANCELLED BY NEW YORK GOVERNOR

UPDATE: On Wednesday. New York State Governor Kathy Hochul issued a video statement in definitely suspending the New York congestion charge scheme. This is despite the entire system having been installed and tested with literally weeks to go before implementation. I'll write more about this soon, but it is a devastating set back for congestion pricing/time of use charging in the United States.  The reason being to "address the rising cost of living in New York" even though it would affect a tiny proportion of New York drivers or even commuters into lower Manhattan. It's completely bizarre that she claims one of the reasons for suspending the charge is because commuting on Mondays and Fridays is at a lower level than before the pandemic.  More details on the announcement are here.

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On the 30th of June 2024 New York will be the first city in the Americas to introduce time-of-day based road pricing on existing roads.  It may have been designed to generate revenue for the subway, commuter rail and bus systems in New York, but it is also expected to relieve congestion, let's hope it does.

New York Congestion  Charge Zone

What it is officially called is the "New York City Central Business District Tolling Program", which is a fair description.  It is arguably NOT congestion pricing because the rate structure being applied is blunt, and applies 24/7.  It is urban road pricing, but it is applying pricing at all times so may also reasonably be called a toll on existing roads.  It is being called the "Congestion Relief Zone" and I am sure officials in New York City will be relieved to see if it has a significant and sustained impact on congestion, I expect it probably will have some immediate impact as it is modelled to reduce the daily vehicle count by 100,000, which is around a 14% reduction in traffic overall. 

The time-of-day charging component is essentially a higher price during daylight hours, which are 0500-2100 weekdays and 0900-2100 weekends. 

Nevertheless, it is significant. Although the US is peppered with what are variably called HOT, express or toll lanes, which have peak (and in some cases dynamic) pricing of lanes, these are mostly conversions of HOV lanes to enable better utilisation of their capacity, by offering a premium level of service.  This is the first implementation of charging, varying by time-of-day, on previously untolled roads.

It is important to note that it is a cordon as in Stockholm, not an area charge, as in London. Trips wholly within the zone are not charged (setting aside special fees for taxis and for-hire vehicles), but relatively few vehicles are likely to never leave the zone and not enter again.

Note that one can drive all of the way around the periphery of lower Manhattan and not be subject to the charge, providing essentially a through route from the Hugh L. Carey Tunnel to the north of Manhattan. It's not clear this is necessary, but it has meant a lot of charging points have had to be installed on the roads connecting with FDR Drive and the West Side Highway (which at the southern end is an at-grade arterial route).

Price structure

During the peak period (0500-2100 weekdays and 0900-2100 weekends) cars and light commercial vehicles will be charged US$15, and during the off-peak period US$3.50.  This seems highly likely to encourage a rush of traffic before and after the peak period, although before 0500 is likely to be insignificant, after 2100 may be moreso.  

Motorcycles are to be charged US$7.50 during the peak and US$3.75 off-peak.

Smaller (rigid) trucks and some buses will be charged US$24 during the peak and $6 off-peak, whilst larger (articulated) trucks and tour buses will be charged US$36 during the peak and $9 off-peak. 

There are credits for vehicles that have entered lower Manhattan through tolled crossings, specifically the Holland, Lincoln, Queens-Midtown and Hugh. L. Carey Tunnel (Brooklyn-Battery Tunnel), but only during the peak period, not the overnight period.

The full price schedule is here and pictured at the bottom of this article.

Taxis and licensed per hire vehicles are subject to a different charge. Each trip from, to, within or through the zone will be subject to a fee of US$2.50 for for-hire vehicles, and for taxis, green cabs and black cars it will be US$1.25 per trip, with the fee not varying by time-of-day.

Cars and motorcycles are subject to a single charge per day, other vehicles are not. 

There is the power to impose a 25% surcharge on Gridlock Alert Days, which is when the UN General Assembly meets and "throughout the holiday season". 

Discounts and exemptions

Two discounts and five exemptions are listed.

These are:

  • A 50% discount for low income vehicle owners enrolled in the Low Income Discount Plan. This applies after 10 trips per calendar month, to all peak period trips after that point.  This discount requires an application. It is eligible for those enrolled in a qualifying government assistance program or with an income no greater than US$50,000 in the previous calendar year as reported to the IRS. It requires an EZ-Pass toll account.
  • A tax credit for residents within the zone with an income of no greater than US$60,000 in the previous calendar year.  Details on this tax credit are due in Fall 2024.
  • Individual Disability Exemption Plan.  Applies to individuals who have disabilities or health conditions that prevent them using public transport. It either applies to a vehicle registered by the individual or identified by the individual as owned by a person the individual designates (such as a caregiver). 
  • Organisational Disability Exemption Plan. Applies to organisations that transport people with disabilities. To qualify, vehicles must be used in the zone solely to transport people with disabilities.
  • Emergency Vehicle Exemption. This includes vehicles for fire, ambulance, police, civil defence, corrections, blood and organ delivery, environmental and hazardous substances emergency response and sanitation patrol.
  • Commuter and school bus exemption. Applies to buses providing scheduled commuter services, school buses contracted with the Department of Education and licensed commuter vans. Note this does apply to scheduled fixed route commuter and intercity buses, but not tour and charter buses.
  • Specialized Government Owned Vehicle Exemption. Applies to vehicles providing public works, owned by federal, state, regional or local government. This includes garbage trucks, street-cleaning trucks, snow plows, pavers, bucket trucks, etc.

How to pay

The system is set up to prefer vehicle owners to use the EZ-Pass DSRC based toll system used on NY and NJ tolled roads already. All of the exemptions and discounts require EZ-Pass accounts. Those without an EZ-Pass will get "toll by mail" with invoices sent to the registered vehicle owner, identified by Automatic Number Plate Recognition, and will be subject to additional fees to recover the cost of number plate reading and posting the invoice (although the website indicates that these will be waived for the first 60 days).

How much money will it raise?

By law it is required to net US$1b per annum. One estimate, reported by New Jersey Member of the House of Representatives Josh Gottheimer is that it will be much much more, at around US$3.4b per annum, with most of the revenue (understandably) raised during weekdays. The report also noted around US$83m p.a. in revenue could decrease due to reductions in traffic reducing use of tolled crossings to lower Manhattan.  The net revenue in any case are to raise up to US$15b in debt to finance upgrades to the subway system.  It's not clear what motorists think of their money being used to pay for NYC transit systems, especially those driving from New Jersey (which is not served by the NYC Subway, but rather the Port Authority's PATH subway). 

New York Congestion Charge tariff schedule Part 1

New York Congestion Charge tariff schedule Part 2

What next?

It will be interesting to see the impact of the zone on traffic in NYC, both within and outside the zone and hopefully it will not worsen traffic on routes seeking to bypass it, or result in any major distortions of behaviour (or negatively impact businesses or residents near the edge of the zone at the north). It ought to reduce congestion during the day, improve the flow of commercial and private vehicle traffic and buses.

However, it is not likely to be followed by other US cities in the short-term. Lower Manhattan is a lot more like central London than other US cities, most of which have much more dispersed trip patterns using their highways.  For example, downtown Los Angeles has around 1% of all of the employment of the LA metro region, so a cordon for that location would have little impact on congestion except perhaps on some offramp or routes approaching it. That isn't to mean that downtown cordons are not worth considering, but in themselves they will have little impact on congestion.

My hope is that New York will be a success, and may spur interest elsewhere in the US, and for New York to expand in some form, whether it be additional zones or some corridor charging on major highways from the New York State side (which don't have tolling).  New York succeeding should help to encourage more debate and discussion about using congestion pricing to reduce congestion even though the primary driver of this scheme is to generate revenue for the subway.




Thursday 16 May 2024

Japan planning introduce time and location based pricing on expressways nationwide

 Japan's nationwide expressway network is run by a series of private businesses. In 1956, the Japan Highway Public Corporation was formed to build and operate a national highway network, using tolls and accessing private financing. At the time, only 23% of Japan's national highway network was sealed including only two-thirds of the Tokyo-Osaka highway.  Tolling was extensively used, and for sections of highway that did not gain private finance, the government guaranteed the loans. Tolling revenue was pooled to cross-subsidise parts of the network that did not generate enough toll revenue to pay for construction (details on the history of highway in Japan is available here (PDF). 

In 2005, the Japan Highway Public Corporation was split and privatised into multiple companies, including the Japan Expressway Debt Repayment Agency (to use toll revenue to repay the considerable debt that remained for the development of the network) and six regional expressway companies. They are:

  • East Nippon Expressway Company Limited;
  • Central Nippon Expressway Company Limited;
  • West Nippon Expressway Company Limited;
  • Metropolitan Expressway Public Corporation (Tokyo);
  • Hashin Expressway Public Corporation (Osaka-Kobe-Kyoto); and
  • Honshu-Shikoku Bridge Authority.
Tolls were authorised to be collected until 2050, recently extended to 2065.  The privatisation was driven by several concerns, in particular:
  • As Japan's network had essentially been completed, there was concern about public ownership enabling politicians to authorise new construction that favoured the construction industry, even if projects were not viable. 
  • The pooling of toll revenue nationwide was seen to enable this cross-subsidisation where there was no need for new infrastructure. Residents objected to paying higher tolls in their area for projects that were far away from them and of dubious economic value.
  • Interest in improving the efficiency of administration and encourage innovation in operations of the network.
  • Interest in enabling comparisons between the performance of companies so encourage more productivity and lift standards across the sector.
  • Concern about the levels of debt government was taking on for the expressway company, and privatisation was seen as a way to put discipline on costs, debt and the scale of capital spending.

Map of Japan's expressways and major highways

The national expressway network is 9050km long. Tolls in Japan are generally set to reflect distance travelled between interchanges, and vary by vehicle type. Most toll roads still have a mix of electronic and manual toll lanes.

So the announcement in the Japan Times in the past week that the Ministry of Land, Infrastructure, Transport and Tourism will be introducing the ability for expressway companies to introduce time-of-day varying tolls, based on location, to manage congestion, is a significant step for the history of expressways in Japan.  It was trialled during the 2021 Tokyo Olympics with a higher daytime charge, and discounts after midnight, but the idea is that time periods and variations in toll fees will depend upon the specific route and the conditions on it. This is NOT dynamic tolls, but rather targeted congestion pricing to enable more free flowing traffic and reduce pollution.

Also announced was the enabling of commuter passes for high frequency users of toll roads in particular areas, to encourage greater use of expressways to remove traffic from untolled parallel local roads.

What will be of interest is how congestion pricing (which is what it is) will be applied to urban tolled expressways as there is an obvious risk that it could divert some traffic onto parallel routes, and it would not take much of a diversion to severely impact such routes. Although most urban expressways offer significant improvements in travel time, there may be localised points of networks to avoid tolls that could cause worse congestion on the local network (which is not the responsibility of the expressway companies).

Friday 16 February 2024

Crucial next steps for Auckland congestion pricing

 I wrote on my Rational Transport policy blog on this topic, largely because it was around transport governance issues.  The article is here.

Wednesday 31 January 2024

Don't make road pricing a tool in a "war on cars"

The BBC website, under its “Future Planet” science-based section, published an article on 23 January 2024 called “From London to New York: Can quitting cars be popular?” It has received quite a bit of acclaim, but although the article does make a case for the benefits of reducing car traffic in major cities, it is largely one-sided in a way that, largely, “preaches to the choir” about a wide range of policy measures with the objective of making driving less attractive in cities.

Road pricing is a powerful policy tool that can significantly improve the efficiency and the environmental impact of a road network, as well as providing an efficient way to fairly recover the costs of capital and maintenance of the network and ensure demand does not overwhelm supply. It can also generate net revenues for improvements, or simply net revenues as a return on the capital tied up in the network, for complementary purposes, such as improving infrastructure for alternatives.

However, undoubtedly the biggest barrier to implementation of road pricing is concern that it is a tool to penalise and punish, or to tax, rather than a tool to deliver better outcomes for those who choose to pay, as well as those who benefit from less congestion and well-maintained roads. This includes those riding buses on them, walking, cycling and those who live, work or own businesses, or community facilities adjacent to roads.  It is extraordinarily difficult to convince the public and as a result, many politicians, that any form of road pricing should be introduced, because many don’t believe there are benefits to them from pricing roads.  It is difficult enough to convince people that electric cars should pay a distance-based road user charge, because they are not subject to fuel tax, let alone convince people to pay governments to use roads directly.

This article doesn’t help in changing that perception.

There are real perceptions about a war on cars, the article cites someone who produces a podcast called “War on Cars”, so it isn’t entirely a conspiracy theory. There have long been policies to discourage car use in cities, whether it is removal or caps on parking, slower speed limits, traffic light phasing or reducing road capacity. Road pricing can have a range of objectives, but to treat it only as a tool to reduce driving, rather than also a tool to improve the conditions for those who remain on the road, is a mistake.

There are precious few congestion pricing systems in operation around the world. In Europe there remain only five cities of scale with congestion pricing: London, Stockholm, Gothenburg, Milan and Olso although plenty more have investigated it (and a few Norwegian cities with toll rings that exist primarily to raise revenue).  Abu Dhabi, Doha and Dubai all have pricing systems, and further east is Singapore. New York will be the first in the US, but Lower Manhattan is very different from pretty much any other urban area in the US.

The reason for this is public opposition. 

It’s absolutely true that after pricing is introduced it generally gains better acceptance, as sceptical drivers notice that the impacts are not bad, and in some cases improve conditions. This is certainly the experience in London and Stockholm, although it was not the experience in Gothenburg, because Gothenburg’s congestion tax was applied far too broadly, in geographic and temporal terms (to locations at times where/when there was no congestion). Opposition after it was introduced persisted for some years. A referendum held a year after it was introduced in 2013 saw 57% oppose it, but it was ignored as local politicians had committed to spending the revenue on large projects (and there was no other means to pay for them). 

The article quotes Leo Murray, director of innovation at climate charity “Possible” saying “We can't find a single example of a traffic-reduction measure that's been in place for more than two years that's then gone on to be removed because of a lack of public support”.

Well, I can. It’s the Western Extension of the London Congestion Charge. It was introduced in 2007 and removed at the end of 2010. It was removed because it was poorly designed (it granted residents in one of the wealthiest parts of London a 90% discount for driving into the central zone), poorly focused and implemented for partisan political reasons (the Mayor of London wanted to target a wealthy area, but perversely gave them discounts to drive to the centre of London that poorer area residents did not have). 

So, in short, you can’t just introduce road pricing and assume the public will accept it. Note the Stockholm congestion tax referendum is cited as giving its scheme approval, but in fact the referendum was held across many municipalities across metro Stockholm, where a majority voted against the congestion tax, and it was only by ignoring those other municipalities that it was said that the majority voted for the congestion tax. Stockholm Municipality voted for it, but only consists of 38% of the population of metro Stockholm. Had the votes in all Stockholm municipalities been taken into account, it would have been a vote of 52.5% against road pricing.

Again, the article seems to be dismissive of how hard road pricing is to introduce.

The article returns to London with the correct point that the congestion charge was more popular after it was introduced, but with the closure of the Western Extension, the congestion charge in London has the same geographic scope as it had when it was introduced in 2003, which is roughly 1% of the area of metropolitan London.  It hasn’t expanded because there isn’t the political will or public support, in no small part because congestion in central London has essentially returned to pre-congestion charge levels.  It is difficult to convince the public that expanding the congestion charge will reduce congestion, when the existing charge has not kept up with demand, and when significant amounts of road capacity is reallocated from general traffic to cycling and walking capacity.  London was a success, but why has no other UK city (Durham doesn’t count in this context) have a congestion charge?  It’s fairly basic – too many of those advocating for it, don’t want to deliver any benefits to those who would pay it.  Furthermore, it’s simply wrong to cite the ULEZ expansion and ignore the significant opposition to it.  

New York’s implementation of the Central Business District Tolling Program is cited as a key example, and questions whether New York has learned from elsewhere, although it is a stretch to call it congestion pricing.  The article says “The scheme will also operate a fluctuating charge system, with smaller fees during off-peak hours, providing flexibility”. The charges don’t “fluctuate” unless it is meant that they have just two time zones over a 24 hour period (which are different during weekend. Off-peak is… 2100-0500 weekdays. Unless you are currently driving around 2000 or 0530, you probably don’t think this is “flexible”.  The London Congestion Charge has shorter operating hours, and although it is a flat fee, 0700-1800 weekdays provides a bit more flexibility to avoid it. 

Its program is designed primarily to raise revenue for the ailing subway network, which is desperately in need of capital renewal.  Reducing congestion and emissions matter, but it has been designed, in terms of hours of operation and scope, to raise money.  This is all very well, but lower Manhattan is hardly translatable to most other cities in the USA. I’m sceptical as to whether it will generate more than some more studies in the next five years, just because of the tendency of many engineering consultancies to simply look to “copy and paste” what is done in another city onto whatever city they are commissioned to study.  That would be a mistake and would take road pricing backwards in any city that simply commissions a quick study from people with no experience on the topic, to just “do a New York”.  This is what happened in the UK for a few years after London (although Manchester had quite a different scheme design), and nothing came of it.

The BBC article goes off-topic when it claims Oregon is “considering following suit”, by saying it is testing a “more extensive system” based on vehicle-miles travelled. No it is not. This is the OReGO program, which is testing road usage charging (RUC) as a way of charging electric and other ultra-fuel efficient motor vehicles to use all public roads in Oregon, as a replacement of state fuel taxes. It is absolutely not planned to reduce car traffic, and is not focused on cities. It is about sustainable and fair charging of light vehicles to pay to maintain the road network, and it is really important to keep these objectives distinct and different. 

I hope New York can spur wider interest in the US for congestion pricing, and not on the basis of overly simplistic drawing a cordon around a downtown area. There are a range of different solutions, depending on the definition of the problem, but regardless of what is considered, it is extraordinarily difficult to get social licence, so to speak, for congestion pricing when a key objective is not to reduce congestion and improve travel times for those that are expected to pay.

In that context the global examples worth citing as success stories are Singapore, Stockholm and the evolution of the Oslo toll ring to a congestion charge.  London as a success story lasted around five or so years.  The world is littered with studies that went nowhere. Hong Kong has been studying congestion pricing for nearly 40 years, Copenhagen, Helsinki and the Netherlands more generally have tried and failed due to public opposition.  Consider that many would perceive those cities (and country) to have enviable standards of public transport, and levels of cycling, and it is still difficult.

Congestion pricing can deliver so many potential benefits for cities, firstly by freeing up sclerotic networks that drag productivity and efficiency down, by adding to the cost of freight and the cost of services needed to make cities function.  So much is invisible, because it is not delivered by government, but electricians, plumbers, builders, painters, tilers etc, all can do less at higher cost, because of congestion, and almost none of them have any modal choice.  Road freight supplies the food, the clothing, the consumables (toilet paper!), the appliances and building materials that keep people alive and keep infrastructure maintained.  Then there are people who need cars for specific trips, either because of where they are going or what they are carrying, or more generally there is urgency in a trip, such as for medical purposes or an urgent appointment, or a flight.  Big cities work well with all modes well catered for, and operating efficiently, but buses can't always have their own lanes, and get caught up in traffic.  

Roads that enable traffic to flow efficiently help all of this, they also help contain emissions by not wasting fuel on either idling or erratic stop/start movements (this includes EVs), and improve access, as gridlocked streets hinder everyone (let alone emergency services from time to time).  It is entirely understandable and logical to seek to reduce car traffic on some city streets, because of how space inefficient they are, but cars have their place. In central London many users of the congestion charge are occasional drivers, on one-off trips for any variety of reasons (e.g., medical appointment, collecting a purchase) and the use of taxis and rideshare services reflects demand that is met by more car use elsewhere.  Road pricing can deliver significant modal shift and can reduce travel demand, but in doing so it shouldn't be seen as a tool to punish drivers, but just the application of a concept (price) to an underpriced and scarce resource - road space.

While I always encourage those seeking to promote road pricing, the record of the past 25-30 years (since technology has made electronic pricing feasible) is that it is very difficult to implement because of public acceptability.  Seeing it or promoting it as a tool to wage “the war on cars” just makes that even more difficult. 

Wednesday 24 January 2024

Iceland and New Zealand: The first two countries to mandate road user charging for EVs

After many many years of others talking about it, one country has done it and another will soon follow.  On 1 January 2024, Iceland introduced mandated road user charging (RUC) for electric vehicles (EVs), Plug-In Hybrids (PHEVs) and Hydrogen powered vehicles, and from 1 April New Zealand will also do so for EVs and PHEVs.

Iceland

Iceland has launched EV RUC with a website called "Our Roads to the Future".  No later than 20 January 2024, eligible vehicles are required to have had their odometers read and recorded and transmitted to a government website or via a specific app. Those unable to use websites can go to an authorised service centre for an official reading.

The website indicates that the average petrol powered car pays ISK178,000 a year to use the roads (~US$1305) so the rate for EVs and hydrogen powered vehicles will be ISK6/km (US$0.044/km or US$0.07/mile), and for PHEVs at ISK2/km (US$0.015/km or US$0.024/mile). The lower fee for PHEVs reflect that they are still paying fuel excise for the use of petrol. Iceland presumably calculating that around two-thirds of kms driven by PHEVs is powered by petrol.

Iceland has indicated that this is a first step towards phasing out fuel taxes as a means of charging for road use, with the intention that RUC apply to all vehicles from 2025 (a distance-based tax already applies to some heavy vehicles). 

The reason given is the growing proportion of EVs and PHEVs in the vehicle fleet as illustrated by the graph below:

Proportion of private car fleet in Iceland with EVs or PHEVs

Furthermore, Iceland reports a 50% increase in distance travelled on its roads between 2012 and 2022, including a 36% increase in the number of registered cars.  On average vehicles are paying 30% less per vehicle in 2022 compared to 2012, because of the rise of EVs and PHEVs, as well as the emergence of more fuel efficient vehicles generally. 

In Iceland each vehicle owner will be invoiced monthly for distance travelled, which will be estimated based on the national average, until another odometer reading is reported after one year.  After that point motorists will be expected to supply more regular odometer readings.

Of interest is that the Icelandic Government has estimated that even after introduction of RUC, it will still be around ISK160,000 (US$1173) less per annum to drive an EV compared to an ICE vehicle, so that the impact of RUC on purchases of such vehicles is expected to be minimal. 

Some interesting stats from Iceland include:

  • 75% of owners of EVs and PHEVs are located in Reykjavik compared to 64% of the population
  • 64% of EV and 61% of PHEV owners are in the top three income deciles
  • The highest distances travelled by residents are in those located in municipalities immediately surrounding the Reykjavik metro area, lowest by those in more rural areas.  This contradicts some concerns that distance-based charges would unfairly penalise those in rural areas.
Iceland has a population of 373,000 but has one of the highest car ownership rates per capita in the world, with a road network of 12,898km. Iceland is moderately larger than South Korea and Hungary, and smaller than Bulgaria.

New Zealand

NZ has long had a RUC system that applies to heavy vehicles and light diesel vehicles (since 1978), but an exemption for EVs was introduced in 2009 and it was done on the basis that it would be lifted once EVs reached 2% of the light vehicle fleet (which has occurred).  Following the recent change of government in New Zealand from the centre-left Labour majority government to a centre-right National led coalition government, the newly appointed Minister of Transport, Hon. Simeon Brown had announced that RUC will apply to both EVs and PHEVs from 1 April. 

Owners of both types of vehicles will get a two-month grace period to buy a RUC licence, which are available prepaid in blocks of 1,000 of kilometres (e.g. a motorist might buy 1,000 or could buy 100,000 kms, although there is a time limit on RUC expiry in the event of a price increase).  The RUC rate for EVs will be the same as light diesel vehicle at NZ$0.076/km (US$0.046/km or US$0.074/mile), but the rate for PHEVs is NZ$0.053/km (US$0.032/km or US$0.052/mile).  This reflects a calculation that the majority of PHEV distance travelled in NZ is undertaken using electricity (with the difference made up from fuel excise duty paid through petrol).

Owners of both types of vehicles will need to take odometer readings after 1 April and will have subsequent odometer readings verified through annual Warrant of Fitness (WOF) (vehicle safety) checks.

At the end of 2023, there were around 73,000 EVs registered in NZ, and around 30,000 PHEVs.  RUC in NZ is administered by the NZ Transport Agency, which receives all RUC revenue to distribute to road controlling authorities and regional councils (and itself for maintenance and development of the state highway network) through the National Land Transport Programme (NLTP).

New Zealand has a population of around 5.3 million, with one of the highest car ownership rates in the world. Its road network is around 97,000km long. New Zealand is larger than the UK and moderately smaller than Italy.

Similar to Iceland, New Zealand's government has also announced intention to phase out fuel tax as a means of charging for road use, although there is no timetable for that to be implemented. It is likely that following the EV and PHEV RUC introduction, that other ICE powered hybrids would be next to be transitioned to RUC.  That's because petrol hybrids will soon be paying the least of any cars on NZ roads, because their average fuel consumption is around half of the petrol vehicle average.

In NZ a cost-allocation model is used to inform the setting of RUC rates, based on forecasting revenues needs for the forward-looking expenditure in the NLTP, and allocating that based on various vehicle characteristics includes axle load, weight, road space occupancy, vehicle specific factors and on a flat per km basis (depending on the type of spending).  This informs setting of the entire schedule of RUC rates distinguished by weight band and axle configuration.  The light RUC rate is converted into the fuel excise duty rate for petrol, by basing it on the total vehicle kilometres travelled of petrol vehicles divided by the average fuel economy of all light petrol vehicles.  Fuel tax for petrol is then, on average, the same as RUC for light vehicles.  

As petrol hybrid vehicles generally have half the fuel consumption of the fleet average, they pay half as much as petrol vehicles per km, on average, and after 1 April 2024, they will be charged half as much as pure EVs and PHEVs.  It will be important for NZ to shift such vehicles onto RUC within the next few years.  

Tuesday 23 January 2024

Does London's ULEZ expansion help or hinder better road pricing in the UK?

Greater London Ultra Low Emission Zone (ULEZ) coverage area

To say that the Mayor of London's expansion of the Ultra Low Emission Zone (ULEZ) to all of the territory of greater London under his authority has been controversial is an understatement.  For some it is a necessary response to climate change and the effects of local air pollution on public health, for others it is an impost on those who cannot afford a newer vehicles with benefits that are questionable, given that most vehicles comply with it already (hence it cannot have much of an impact).  Even Leader of the Opposition, Labour Leader Sir Keir Starmer has refused to back it.

The ULEZ started by being parallel to the London Congestion Charge in inner London, was expanded to the A406/A205 North and South Circular Roads. Its coverage of all of London includes rural areas and rural roads, as well as outer suburbs.

For a start it is important to be clear that the ULEZ is not road pricing. It is fundamentally a regulatory instrument that requires permits for vehicles that do not comply with the zone, in order to enter or drive within it. There is no relationship between the ULEZ and either the costs of providing road infrastructure or demand for it.  The fee is set at a level to dissuade use and generate revenue, and it is blunt. It doesn't matter if you drive a EURO 0 diesel van in crawling traffic beside a school or a EURO 3 petrol car at 3am on the motorway like A12 East Cross Route, you pay the same, even though objectively the local air quality impact is vastly different.  Although a vehicle scrappage scheme has been set up in parallel, owners of vehicles outside London are not eligible even though many cross into the zone.  Some categories of vehicles have exemptions, such as historic vehicles (e.g., vehicles built before 1973) vehicles registered to carry disabled people (until 24 October 2027), wheelchair accessible vehicles, drivers on specific disability benefits.  Those travelling to hospital appointments deemed unfit to use public transport can also apply for a refund. 

Vehicle scrappage scheme

All London residents can apply for up to £2,000 for scrapping a car or up to £1,000 for scrapping a motorcycle. For wheelchair accessible vehicles there is a payment of £10,000 to scrap or £6,000 to retrofit to the ULEZ standards. The scrappage scheme has been claimed by over 37,200 individuals or entities, which has cost £120m. The total budget for the scheme is £160m.  The biggest criticism of it, is that £2,000 will not come remotely close to buying a new vehicle, although it might come close to buying one that barely crosses the ULEZ standard.  However, it is unclear if the ULEZ standard advances (so EURO 4 petrol cars are no longer compliant), if people who took the £2,000 for scrapping a non-compliant vehicle, can claim it again if their latest vehicle is also non-compliant.  

ULEZ  impacts

There are a range of claims about the impacts of the ULEZ. 

Compliance rates for the ULEZ are reportedly 95% meaning the proportion of vehicles that meet the ULEZ standard. Of note, Heathrow Airport claims 7% of its employees drive non-compliant vehicles (and Heathrow is located just within the boundary of the ULEZ

The BBC claims this indicates revenue of around £23.6m per month. This is not inconsiderable, and certainly backs some claims that ULEZ is about revenue more than it is about environmental outcomes.  Van compliance is much lower than the average, with around 86.2% compliance.  However, City Hall claims it will generate no net revenue by 2026-2027, presumably as the costs of operating it are not exceeded by the fine and fee revenue generated (as it is expected few non-compliant vehicles will enter the zone). 

One claim is that ULEZ will reduce the number of cars on London roads by 44,000. Fewer cars means some people won't own a car anymore, which reduces their mobility. For some, London's ample public transport network and expansion of cycleways provide alternatives that may be reasonable for most trips, with carshare schemes plugging the gap. If people choose to give up owning a car because the cost isn't worth the benefit, and alternatives meet their needs, that's all very well, but if they are choosing to give it up because of the cost of ULEZ makes it unaffordable, it is clearly a policy measure that is pricing poorer households out of car ownership (because wealthier ones can afford a car that meets the standard).  

The Mayor of London has published a report on the first month after the introduction of the wider ULEZ. Its findings include:

  • 77,000 fewer non-ULEZ compliant vehicles per month identified than before its expansion (a 45% reduction), with a reduction of 48,000 unique vehicles identified overall (which may indicate non-compliant vehicles not being used, but compliant vehicles may be used more in some cases).
  • 96% of vehicles driving in Outer London meet the ULEZ standard (86% of vans).
  • On an average day only 2.9% of vehicles driving in the ULEZ pay the charge, 1.7% are registered for a discount or exemption and 0.2% are issued a Penalty Charge Notice.

What isn't clear is the impacts on air quality.

What about road pricing?

Beyond extending the operating hours of the central London congestion charge, there has been no changes to policy on road pricing in London since 2011 when the Western Extension was scrapped. Mayor Sadiq Khan has claimed there are plans to introduce distance-based road pricing in London, according to the Evening Standard.  Expanding road pricing in London has been discussed for some time, but it hasn't been advanced largely because:

  • Nobody (since Ken Livingstone) has been willing to spend political capital on making a cogent and consistent argument for wider road pricing across London;
  • The objectives of such a scheme have not been well defined. Mayor Khan's primary transport policy objective has been around local air quality, not congestion;
  • The options for road pricing across London have a significant upfront cost (in roadside infrastructure and potentially in-vehicle technology);
  • Central government has been keen to leave it as primarily a local matter, and for the Mayor of London and Greater London Authority to take the risk in advancing road pricing, rather than lead from Westminster.
London's geography lends itself to two broad options for more road pricing:
  • Zonal based boundaries, pricing for driving across parts of London (but not within zones). This would have the advantage of being relatively simple to understand, but would significantly disadvantage people and businesses needing to drive across multiple boundaries. In particular, businesses located adjacent to a boundary may feel aggrieved if part of their customers face a charge, which their rivals on the other side of the boundary do not.
  • Distance, time, location based pricing.  This is considered by some to be the best option because it offers unparalleled flexibility, and can address issues such as "rat-running" and can be set up to encourage more use of arterial routes over local roads.
Zonal boundaries can be implemented with Automatic Number Plate Recognition (ANPR) cameras, as has  been done for the ULEZ, but depending on the number of zones (there aren't obvious boundaries in some parts of London, and borough boundaries often make little sense from a road network perspective), it would involve a lot of images and a lot of processing, to distinguish between vehicles crossing different boundaries at different times and directions.

Distance/time and location based charging (once called TDP (Time Distance Place) pricing) would require some form of telematics.  Traditionally the thought has been that devices would need to be installed in vehicles to enable this, but the options of Original Equipment Manufacturer (OEM) telematics are beginning to emerge, along with self-installed GNSS dongles that plug into EOBD (OBDII in Europe) ports in newer vehicles or even mobile phones with apps. The latter options would still require location of some ANPR cameras to ensure vehicles drove with such systems operating.

However, the key question still to be answered is why do it?

Congestion, revenue and the environment

There is little doubt that road pricing on a wide scale in London could be transformative for the city's transport networks, productivity and environmental impact.  It could significantly reduce traffic congestion by spreading demand by time of day, route and mode, and in doing so would increase the capacity of existing bus services, and increase fare revenue across public transport.  However, to improve congestion would require taking a different approach than what happened with the central London scheme. In central London much road space was reallocated to other modes, which improved access by those modes, but rendered delays for much traffic to be little better than before, after the reallocation of road space.  It is understandable in the context of reducing car traffic, but for freight traffic (which mostly has little chance for modal substitution), it means they are paying to use road space with little improvement in the level of service provided.

Wide scale road pricing should change that. If there is plenty of excess capacity that might be well used for cycleways or footpaths, then reallocation of road space could be considered (bus lanes are less important if road pricing is introduced, unless there is desire to implement bus rapid transit). 

Most of all, to improve congestion there should be targets set for improved travel times, and for a change in approach and policy regarding congestion.  For decades congestion has been seen both as a problem, but also a tool to constrain traffic growth. However, congestion is a reflection of inefficiency and a very poor use of precious space.  Having consistently flowing traffic mean there is more usable capacity, and so those that pay get a better level of service as a result.  This has rarely been part of the narrative discussed around road pricing in London.

Revenue is important, and almost always the key focus, and plenty will be generated, but it will be key to consider carefully what to do with it. It seems unlikely that Londoners will back road pricing as "just another revenue source", without it making a difference for those who pay it.  Whether it be fixing the continuing backlog of road maintenance, or fixing intersections or corridors that have historic bottlenecks or poor design affecting congestion and safety, road pricing needs a commitment that at least some of the money will be used to ensure London's roads are fit for purpose. It could support undergrounding the Hammersmith Flyover addressing resilience and revitalising public space and land for other purposes, for example.

The environment would win out of road pricing regardless, as less congestion and less motor traffic, with more use of public transport and active modes all improving local air quality and reducing CO2 emissions. So there will be overall benefits environmentally, and the social benefits should come from improving mobility of bus services and accessibility more generally, as long as pricing matches demand and capacity, and is not punitive.  

What hope is there for such pricing?

Given the backlash on ULEZ, regardless of merit, it seems likely that the political appetite to introduce wide scale road pricing in London is likely to be low, certainly before the 2024 general election. After that, the next Government may have more appetite to advance it, knowing that unless it is advanced in London, it seems unlikely to get public support to be advanced in cities or regions which have inferior public transport options.

There remains a revenue issue from electric and hybrid vehicles which isn't going away, which might be solved in the short term by imposing higher Vehicle Excise Duty on such vehicles, but it is clear the appropriate medium term answer is some form of road user charging (RUC).  

However, whether it be revenue replacement with RUC or reducing congestion with congestion pricing (and generating revenue), the fundamental problem with road pricing in the UK remains the toxicity of the politics around an issue that for too many looks like a way to extract money from road users, with little to no talk about improving either the infrastructure  (which outside the national network is in woeful condition) or improving travel times from less congestion.

Until a political leader can communicate clearly about this, and ignore Treasury resistance to hypothecation of road pricing revenues and ignore political calls to treat pricing as a tool to make driving simply more expensive and less convenient, then it will continue to languish.





Tuesday 21 November 2023

Auckland's Mayor and Council vote overwhelmingly for congestion charging, but there are some issues

The big road pricing news in New Zealand in the past week was the Mayor of Auckland, Wayne Brown, calling for congestion charging and appearing on media declaring how critical it was for the city. This was not in terms of raising revenue, but in addressing congestion.  On Radio NZ he said Auckland could not afford another motorway, and that the charge would be avoidable by driving outside of peak times.

“I am of the view that this should be on our motorways in the central areas of Auckland, which are the most congested, and this is also where public transport works best, which gives some people an option rather than paying the charge”

He ridiculed concerns about equity around trade businesses, saying that to pay $5 to save 20 minutes was a small fraction of the price the tradespeople charge their customers in an hour. He also said that schoolchildren “don’t’ have a right to be taken to school in a BMW” and more should walk, bike or use public transport. 

The Mayor was elected in 2022 and has a three year term, but his support for the concept was only solidified when Auckland Council voted 18-2 in favour of setting up a team to oversee implementation of congestion charging.

Despite that report, Auckland is not going to get congestion pricing in two years. Legislation will take around a year to introduce and pass at best, and it will take around 18 months to procure and install a system at best. However, you have to admire the ambition.

The astonishing level of local political support for the concept is unheard of in any other city where the private car is by far the dominant transport mode.  In 2018 (according to the Census), around two-thirds of Aucklanders commuted by car (whether as driver or passenger), 11% by bus, 9% walked and 8% worked from home, 3% by train and just over 1% by bicycle. It seems likely that the proportion working from home, cycling and using public transport has increased since then. 

Let's be clear to those unfamiliar with Auckland. The Mayor is ostensibly "centre-right" and got elected opposing the "war on cars". The Council as well is fairly balanced between left and right wing members.

Unlike New York and almost all other US cities that have been investigating congestion pricing, Auckland is regarding the net revenues as secondary (although the Mayor is interested in revenue, as the incoming government has pledged to abolish the regional fuel tax of NZ$0.10 per litre that raises revenue for transport projects in the city). The primary focus is reducing congestion and encouraging behavioural change. However, it would clearly generate net revenue and would also have positive environmental benefits.

Why does this matter?

All of the cities that have introduced congestion pricing around the world so far have been quite different from Auckland, and indeed all of the predominantly car-oriented low density cities that are seen in New World cities in New Zealand, Australia and North America. Singapore, Oslo, London, Stockholm and Milan all have significant mode shares for public transport. However, Dubai and Abu Dhabi (and soon Doha) are car dependent cities, even moreso than Auckland, whereas Gothenburg in Sweden is much closer to the mode shares seen in New World cities. 

Although New York will be the first US city to introduce some form of congestion charging, it is being implemented in lower Manhattan, which is much more like central London than most US cities, and it is being introduced 24/7 (with peak charges) primarily to raise revenue. New York is not a model for other North American cities.

Auckland on the other hand, has around 87% of its employment outside the central city, it has around a 50% mode share for public transport and active modes for trips to the central city at peak times, but a much lower mode share for trips to other parts of Auckland at peak times. In short, congestion in Auckland is primarily about trips across the city, not to the downtown.  Pricing in Auckland will work only in part by encouraging modal shift, but will in a large part be about encouraging a small proportion of trips to shift time of day or frequency of driving. 

Furthermore, unlike many other developed cities, Auckland has had over 20 years of billions of dollars in continuous major capital spending on its transport networks.  During that time, the road network has been significantly upgraded, with additional lanes on motorways and a ring route around the west bypassing the congested central motorway junction. The commuter rail network was extended to the downtown, electrified with new trains, adding new lines, and is now being expanded with an inner city loop. Bus services have been expanded, with busways and new buses, routes and expanded frequencies.  In short, Auckland has seen extensive capital spending on its transport infrastructure and it has been unable to keep up with demand, and congestion has not been resolved.  

Supply of transport infrastructure does not sustainably reduce traffic congestion. 

If Auckland successfully implements congestion pricing, it will be a world leader in implementing road pricing in a city with automobile dominance.

What has been proposed?

The Mayor has specifically proposed a charge on two segments of motorway of NZ$3.50 - $5 per trip.  It would operate in the AM and PM peaks only on the North Western Motorway (SH16) between Lincoln Road and Te Atatu Road, and on the Southern Motorway (SH1) between Penrose and Greenlane. These are two of the most congested parts of Auckland’s motorway network.  The map below depicts the short section of North Western Motorway, the segment of Southern Motorway and the earlier proposed downtown cordon (which is bypassed by the motorway network which goes from south to the Auckland Harbour Bridge and from the west to the Ports of Auckland).

Auckland congestion pricing concepts.

Undoubtedly the motorway proposals would have a positive impact. While the North Western motorway at this location has no reasonable alternative route, the Southern motorway does have a wide at-grade arterial road, albeit with multiple sets of traffic signals and a much lower speed limit. Some measures would need to be taken to minimise diversion onto the parallel routes. 

It's worth noting that a major study into congestion pricing in Auckland, called The Congestion Question, was carried out from 2016-2020, and recommended that a downtown cordon be introduced, followed by corridor charges on major routes in the isthmus and beyond.  The Mayor is proposing the second stage, but that is good as the downtown cordon concept was likely to have a less dramatic impact than the proposed corridor charges.

The proposed technology would be automatic number plate recognition (ANPR) cameras.

What needs to happen?

Congestion pricing is currently illegal in New Zealand. The outgoing Labour Government had draft legislation prepared to implement it, but this will be revised with the incoming National led Government. National included congestion pricing in its transport policy, so there is little chance of the policy being rejected by the new government. Until legislation is introduced and passed, congestion pricing cannot be implemented, but in the meantime, it is possible for Auckland Council and Auckland Transport (a separate entity under the auspices of Auckland Council) to plan and prepare for road pricing. 

The motorways in Auckland are not under the control of Auckland Transport, as they are State Highways. They are Crown owned (and fully funded by) and managed by the New Zealand Transport Agency/Waka Kotahi. It seems unlikely that central government would devolve power to impose pricing on motorways it owns and manages to local government. However, it seems much more likely that a joint entity, between central and local government could be set up to manage pricing across roads in Auckland. 

What are some of the big issues?

Oversight

A key issue is how much control central government, in particular the forthcoming Minister of Transport and/or Cabinet, wish to have in approving and later amending congestion pricing schemes. At present the Minister approves tolling schemes, which are only for new roads. At present there are only three toll roads in New Zealand (one in outer Auckland). It seems unlikely that government will want to give road controlling authorities free rein to implement congestion pricing, but it would also be unwise to require changes in pricing to go through a political process. 

A middle approach would be to require Ministerial approval for a road pricing proposal (by a road controlling authority on specific roads within certain time periods) concept but grant powers to road controlling authorities to adjust pricing and business rules within set parameters, with oversight by an economic regulator (such as the Commerce Commission or a more specialised highway economic regulator).  The oversight would be to ensure prices were not set to be higher than necessary to relieve congestion, or to be unduly burdensome on different types of road users, and to monitor use of net revenues (which is another issues). Ultimately the need for political approval could be reduced, if the economic regulator has sufficient powers to protect consumers.

Governance

The other governance issue is what entity should be responsible for pricing? It could be left to the relevant road controlling authority, but for Auckland it would make sense to have a joint-governance entity for both Auckland Transport and NZTA roads, with sufficient delegated authority to manage pricing within set parameters. A joint entity would mean that there could be a single road pricing account, and that enforcement, communications and information could be unified. It would also provide a structure for managing net revenues, contracting for equipment and services.

Use of Net Revenues

The Mayor would like pricing to replace the regional fuel tax in Auckland, which raises around $150m per annum. However, this is likely to be controversial. There are clearly a range of options available such as:
Capital funding for public transport and active transport projects
Capital funding for road improvements
Offsetting ratepayer funding for road maintenance and improvements (reduces rates)
Offsetting ratepayer funding for public transport subsidies (reducing rates)
Dividend to ratepayers, households or residents

Internationally, the most popular options have been to use the net revenues to support some mix of road and public transport projects. If that option is selected, the projects ought to be high-quality (i.e. net economic benefits) and ideally be related to the locations subject to pricing (i.e. new transport capacity). However, it is likely to be tempting to simply replace the regional fuel tax as a revenue source (as removing that tax will benefit all Auckland motorists). It may also be tempting to use it to offset ratepayer funding on transport capital projects in any case, but if done on the scale proposed by the Mayor, it seems unlikely to gain much support if revenue from specific locations is used to benefit transport users not using those corridors. If motorways are going to be priced, it seems unlikely that central government will want to pass on control of use those revenues to local government. However, if a joint pricing entity is established, it may be reasonable to get agreement across both levels of government as to the use of net revenues for several years in advance.  

Prices, products, discounts and exemptions

Rates should be set at levels that will achieve enough behavioural change to relieve traffic, they should only be applied at peak times, and have a shoulder rate either side (for say half an hour) to avoid rushes to avoid the peak.  Rates should only apply in the peak direction (which may be both ways).  Exemptions and discounts should be minimised, and focused on local buses, emergency services, drivers with mobility disabilities and motorcycles, and there is a case for higher charges for heavy trucks and coaches (due to the amount of road space they occupy). A daily caps on charges might be considered, but if pricing is implemented on the scale proposed by the Mayor it seems likely to be unnecessary.

Motorists could be billed directly through direct debit, or have prepaid accounts able to be topped up through internet banking, phone banking or manually using cash at selected retail outlets.  Visitors could be offered “daypasses” for unlimited driving of congestion priced routes, but if only operating at peak times, it seems easier to simply send an invoice to a registered vehicle owner through post/email. 

Is it a good idea?

The biggest strategic decision is whether the Mayor’s idea of pricing a couple of sections of motorway should be the first step or if the downtown cordon concept should be.  There are advantages and disadvantages of each option.

Undoubtedly the pricing of two sections of motorway would have a more direct and obvious impact to motorists and could be seen as demonstrating more clearly how pricing could work, and be implemented incrementally around Auckland. It is likely to be higher risk than implementing a downtown cordon because of that impact, but will be more effective.  Given that, it makes sense to seriously consider the Mayor’s proposal.

On the other hand, the downtown cordon would be an effective pilot. It is clear that almost all drivers into downtown Auckland have modal alternatives, and with the opening of CRL (City Rail Link) which provides an underground rail loop around downtown Auckland, that case is strengthened.  Such a cordon would improve congestion on a range of routes approaching the city centre, including three motorways, but the effects of that reduction would drop significantly a good kilometre or two away, as so much traffic in Auckland is not focused on trips to downtown. 

If it were up to me, I’d say it would be preferable to implement the Mayor’s proposal of pricing on two stretches of motorway as a first step, rather than the downtown cordon.  The downtown cordon should be implemented, but in and of itself it doesn’t demonstrate to Aucklanders the effectiveness of pricing a corridor, which is as much about shifting time of demand as it is about shifting mode. The downtown cordon should be timed to be implemented shortly after CRL opens (CRL needs to work seamlessly first). 

The North Western Motorway corridor ideally wouldn’t have pricing until the North Western Busway is built, but the existing bus lanes could provide sufficiently additional services to make pricing worth implementing there. The Southern Motorway corridor parallels a railway line, and some bus services, so that shouldn’t be a problem in terms of alternatives.

If rat running is an issue (which it may be for the Southern Motorway) then technology can be used to deter it, by identifying vehicles leaving the motorway early to avoid a charging point and returning to it after. Pricing could be set at levels to make diverting not worth the time penalty.

What do stakeholders think?

The Employers and Manufacturer’s Association (EMA) head of advocacy and strategy Allan McDonald was supportive according to RNZ saying “You come back to getting the most out of the system you can and finding different ways to help those who may be disadvantaged by the cost but there are significant benefits too”. He noted Auckland needed better public transport, but the road network needed to work better too. 

Automobile Association Auckland issues spokesperson Martin Glynn said there were benefits, but he was concerned about the impacts on low-income drivers with few alternatives. 

Public Transport Users Association chairperson Niall Robertson was concerned that there needed to be better public transport alternatives. 

What next?

First and foremost, a new Government needs to be formed, and the incoming Minister needs to make it clear the parameters within which congestion pricing will be authorised. 

Secondly, the policy and the messaging around congestion pricing needs to be clear, to address fears and concerns, and to avoid the public guessing, wrongly, about what may be implemented, why and how.  It needs to be clear it is about reducing congestion and pricing should be based on meeting performance standards. It also needs to be clear that pricing does not need public transport alternatives for all drivers, to be implemented, but that the choices drivers have range from changing time of travel, mode of travel, route of travel or to drive less frequently. 

Thirdly, legislation needs to be drafted and introduced to implement the intended policy.

Fourthly, Auckland Council, Auckland Transport and NZTA need to work together on a detailed design and implementation of a phased plan for congestion pricing in Auckland. Starting with either two corridors or a downtown cordon. 

Fifthly, NZTA and Wellington and Tauranga local authorities also need to work together to undertake more detailed studies for both cities, consistent with legislation and central government policy.

What NOT to do?
  1. Don't see London as an example to copy. London is an area charge, it has a flat all day rate and has not enabled traffic to flow relatively efficiently for over 10 years because it is too blunt. London may be seen as culturally closest to Auckland, but it is vastly different. Better examples are in Singapore and Stockholm.
  2. Don't make this project about raising revenue. When the focus becomes revenue raising, the design will change and it becomes a lot more difficult to get the public on-board, because you are designing a tax, rather than a traffic management and pricing scheme.
  3. Don't make this about reallocating road space. While there will be localised cases where there is merit in doing this (specifically for cycling safety or bus priority at intersections), a successful congestion pricing system should enable all traffic to flow efficiently, including buses, and will improve conditions for all modes on the roads.  Some advocates for congestion pricing see it as a tool to penalise driving and to make it more difficult for motorists to drive. If this is the policy adopted, it will be rejected by the public (as it has been in many many cities), as pricing need not be a tool of penalty, but a tool to make existing networks work better. 
  4. Don't play with technology yet. There would be nothing wrong in eventually linking the current eRUC telematics systems to congestion pricing so their users (almost all commercial vehicles) pay charges automatically, alongside RUC.  However, ANPR is just fine for now.
  5. Don't make any announcements on details until you have decided on most of them, and have responses as to why you made certain decisions. Don't let the media and public discourse determine policy. Design a good system with defensible policies, and then present it to the media and public, so you can make clear what might be negotiable and what is not.  A litany of failures elsewhere are due to letting policy debates get out of control, raising fears and uncertainty, and consigning the concept to the "too hard" basket.

(Disclaimer: I worked on The Congestion Question project from 2016 to 2019)  


Monday 30 October 2023

Iceland likely to be first European country to introduce RUC for light vehicles

Few remember Iceland when discussing experience in road user charging (RUC) in Europe, perhaps because it is an island (and so has virtually no foreign vehicles visiting), and it is also not a member of the European Union (but then neither are Switzerland or Norway). 

Iceland has had for many years a RUC for heavy vehicles, in the form of a fairly simple weight-distance charge on vehicles with a maximum allowable mass of ten tons or greater.  In 2008, it raised IKK1.083b (US$7.8m).  

RUC for EVs and plug-in hybrid vehicles

However, Iceland is about to leap ahead of all other European countries in being the first to implement a nationwide distance-based RUC for electric, plug-in hybrid and hydrogen vehicles from 1 January 2024.  Consultation on a draft Bill (Icelandic only) to implement this charge has recently closed. Iceland Monitor reports that the fee will be ISK6 per km for electric and hydrogen powered vehicles (US$0.043 per km or US$0.069 per mile), but hybrids will be charged only ISK2 per km (US$0.014 per km or US$0.022 per mile), to reflect that they continue to pay fuel taxes. 

Iceland has had a significant growth in electric and hybrid vehicles, with 85% of new light vehicles sold in Iceland in 2022 being electric or plug-in hybrids.  This reflects a VAT exemption for such vehicles, and other very low taxes. 73% of Iceland's electricity comes from hydro-power and almost 27% from geothermal energy, so electricity prices in Iceland are immune from international commodity prices.  Nearly 20% of all cars in Iceland are either electric or hybrid of some form, so the impacts on fuel tax revenues have been considerable.

So Iceland will have surpassed the rest of Europe as no European country has so far mandated or even agreed to introduce some form of distance-based RUC for any light vehicles at all. 

RUC for all vehicles

This isn't the end, as the Icelandic budget indicated that the introduction of the new fee will be monitored in 2024 with an eye to applying it to ALL vehicles under ten tons, and to review the future of taxation of petrol and diesel. This had led to speculation that Iceland could put all vehicles on RUC and reduce or abolish fuel taxes used to fund the transport system. If it does so, then it will be a world-leader in transitioning from fuel taxes towards RUC, and so shifting from taxing energy to taxing road use.

Thursday 26 October 2023

Reactions in Singapore to ERP 2.0

Following the announcement of the roll-out of ERP 2.0 in Singapore (using GNSS-based On Board Units for congestion pricing), there has been some comment in the media in Singapore about the new system and policy around it. Some of this is likely to be relevant to other jurisdictions considering mandating such technology into motor vehicles.

What do motorists and car dealers think?

The Straits Times published an article on 25 October by Lee Nian Tjoe on what motorists and car dealers think.

Dealerships generally said that they were ready for the rollout, as some had been establishing how to conceal wiring and have the equipment installed in their vehicles, but some still were awaiting information...

Ms Tracy Teo, marketing director of Komoco Motors, which represents Hyundai, Jeep, Ferrari, Maserati and Alfa Romeo in Singapore, said the company is awaiting information and instruction from LTA on the next steps.

One of the key issues is that getting such equipment installed in a wide variety of makes and models may present challenges for some varieties of vehicles. 

Comments from members of the public approached by the journalist were largely questioning with some concerns, such as the location of the OBU on the side of the passenger footwell.  One objected to the system having capability to have stored value cards inserted given how technology had moved beyond that. 

The article describes how a fleet operator was used to test installation of 500 devices in a pilot.

Should it have been rolled out in the first place?

A second article from the website Techgoondu is critical of the new system.

Author Alfred Siew describes it as:

the unwanted rollout of a costly project that has taken nearly 20 years to complete, if you count its early efforts. It is clearly outdated and inconvenient for users. Many questions have already been raised about this “next-gen” ERP 2.0 unit when it was unveiled two years ago. Most damning was why it was even necessary.

Part of this is unfair, as it is not a 20 year long project, but it is certainly was being thought about 10 years ago. Singapore needed a new system because "ERP 1.0" was creaky and obsolete, and needed replacement.  It would have been cheaper to go all ANPR (Automatic Number Plate Recognition) based, but certain features would not have been available, and it could have simply been an update of the current technology.  However, Siew notes correctly that the "next-generation" features around traffic information are largely available through apps such as Waze.  Smartphones are able to be used as the in-vehicle display is optional, so the question becomes what it would have taken to make smartphones work?  The key issues around reliability and linking it to the vehicle remain, but this is being trialled in Brussels now.

Siew describes the system as old technology, with the stored-value cards which are increasingly obsolete and an in-vehicle display reminiscent of pre-smartphone navigation systems.  Of course many cars have automaker installed telematics with some key elements of the ERP 2.0 system included, although not available for congestion pricing applications. Making Original Equipment Manufacturer (OEM) telematics systems available and suitable for road pricing is perhaps the "rosetta stone" for ubiquitous road pricing in the future.  Unfortunately efforts to do this so far have been very limited across the globe.

Siew finally criticises it for being a system with the capability to introduce distance based charging, but that capability is not to be used as of yet.  That doesn't mean that it won't  be and it is entirely understandable that a policy decision to do that would not be announced until the entire system is installed and proven, but unless it is used, it seems like an expensive solution to what is just an effort to replace an old system with one with less intrusive roadside infrastructure.

Of course LTA had signed the contract for the ERP 2.0 system some years ago and became committed to the project, so it had to be rolled out.  Hopefully it will all prove to be worthwhile and operate successfully for many years to come.

Distance-based pricing is unlikely anytime soon

Newspaper Today online published an article by Loraine Lee on 25 October saying that it was unlikely LTA would implement distance based pricing soon.

Key issues identified were:

  • How to apply it equitably, including the future of fuel taxes and vehicle registration/ownership taxes, so that those that travel the most are not paying disproportionately compared to what they do now.  
  • Questions over the location accuracy of the technology in parts of Singapore with tall building, and with tunnels (the latter is not a real issue, as systems elsewhere can clearly note when vehicles travelling on a road disappear and reappear at another location, that they must have been in the tunnel on that route). 
  • Need to consider the wider impacts of a shift towards distance-based charging on some road users.
The accuracy issues can certainly be addressed, as they have been in other GNSS-based road user charging systems in Europe, the United States and New Zealand, but the policy issues about Singapore's mix of taxes require some further work to disaggregate.  Clearly fuel taxation will be eroding due to the emergence of electric and hybrid vehicles, and a shift from ownership based taxes to usage based taxes is likely to increase car ownership, but reduce distance travelled by car and congestion, so some modelling will be needed to forecast the impacts on Singapore's traffic (and vehicle fleet size).  

The key point is the new system will provide options, and it would be a poor use of the technology to not have some form of distance based charging or at the very least use it to implement more 'virtual gantries' for pricing.  

Time will tell whether other cities will copy Singapore technologically (they should copy parts of it in terms of pricing policy), my suspicion is that the inclusion of a slot for stored-payment cards is unlikely to be replicated, nor is a in-vehicle display, but the core of the technology still has merits.  The options for using GNSS-technology for congestion pricing are:
  • Purpose built OBUs for professional installation in vehicles
  • Scaled down "self-installed" OBUs
  • OEM telematics 
  • Smartphones
Singapore has chosen the first, we will see if the next GNSS-based congestion pricing system selects an alternative.

Wednesday 25 October 2023

Singapore launches ERP 2.0... finally

The Straits Times reports that Singapore has, finally, announced to roll out of its ERP 2.0 On Board Units (OBUs) over then next two years. Starting in November 2023, fleet operators will get OBUs installed in their vehicles, and from no later than April 2024, new vehicles will have the new OBUs installed.  Remaining vehicles in Singapore will be required to have the OBU installed based on date of registration over the subsequent two years.  

Installation is estimated to take three hours for a car.  All motor vehicles in Singapore will be required to have the new OBUs, including motorcycles (which have a smaller single unit OBU).  Installation will be free of charge if done within a two month window specified by the Land Transport Authority (LTA) (notified to the registered vehicle owner in advance). 

Payment options will remain the same including direct debit of credit or debit cards, or use of prepaid stored value cards (which can be inserted into the base unit of the OBU).

The car unit is in three components:

  • Processing Unit
  • Antenna Unit
  • Touchscreen Display
The image below is the official depiction of the ERP 2.0 installation.

Singapore ERP 2.0 OBU for cars

The touchscreen display is optional, as motorists can choose to use their smartphone which will deliver road pricing and traffic data through a choice of three apps. 

The report notes why the LTA did not choose smartphones as the processing devices:
  • Security for real-time charging transactions from prepaid stored value cards
  • Reliability, given the range of smartphone models and operating systems available (including older models)
  • Concern over ensuring whether an app is functioning, the smartphone is sufficiently charged and is connected to the mobile network.

Singapore's highly intrusive ERP gantries will not be removed until the installation is completed, after which they will be progressively removed and replaced with signage, and in some cases Automatic Number Plate Recognition (ANPR) cameras for spot enforcement (and to ensure ERP 2.0 devices are not malfunctioning). 

Importantly, Singapore has no plans to change its policy on road pricing, and plans to keep charging at specific points on the network as it does now.


The installation of ERP 2.0 is three years later than originally planned by the Singaporean Government. It had been delayed by a combination of the effects of the Covid 19 pandemic, and subsequent chip supply shortages hindering the production of the new system.  In 2016 I wrote that Singapore was planning to have the new system up and running by 2020.  It is unclear if the budget for the system S$556m has been exceeded as a result.

What it does mean is that Singapore can be declared as having the world's first GNSS-based congestion pricing system.  It has the flexibility to charge by distance, but also the flexibility to introduce "virtual gantries" anywhere in the network, and with the installation of OBU 2.0 as compulsory, it means there needs to be only small-scale enforcement of whether the devices are installed and functioning, unlike cities with many vehicles visiting from other jurisdictions. Foreign vehicles in Singapore without an OBU are charged on a per day basis for the time spent in Singapore, at a rate of S$5 per day, regardless of the extent of use of ERP charged roads. 

Singapore's OBU 2.0 may provide a benchmark for other cities, although the need for three hours of installation time, and at least two components, is likely to be seen as expensive and intrusive for many other cities. Nevertheless, Singapore still remains the gold standard of congestion pricing systems internationally, and it remains notable that in a city-state that has relatively low levels of evasion and little difficulty in enforcing traffic offences, that it continues to be sceptical of the reliability and security of using smartphones for road pricing.  This might reflect the commitment it had already sunk into the new OBUs, but it has accepted the use of smartphones as a customer interface and information system.

This video has been published by Channel News Asia (of Singapore) about the new OBU: