Monday 17 October 2011

Copenhagen congestion charge looks likely with change in government

In August 2011 I wrote on how the debate on congestion pricing in Copenhagen has largely evolved from "whether" to do it, to "how" to do it.   The recent change of government in Denmark from a centre-right to a centre-left coalition means that it looks like the debate has moved further in that direction, which looks like the one reflected by Lord Mayor of Copenhagen Frank Jensen, and Mayor of Rødovre Erik Nielsen.  The new government supports introducing a congestion charge, but the Mayor says the exact location and price of the charge is still up for debate.

According to the Copenhagen Post they just want to debate the how, not the whether:

we are thoroughly convinced that far more people will benefit from the congestion charge through a reduction in the amount of time they spend on the road and in terms of a cleaner environment. Major investments in infrastructure and public transport will alleviate some of these inconveniences, but it is paramount that we discuss where exactly the borders of the congestion charge zone should be drawn in order for it to have the greatest possible impact and fewest possible inconveniences for people living in the region. A congestion charge is a way of financing major improvements in our transport infrastructure. By improving public transport and lowering ticket prices, we hope that many commuters will transfer from privately owned vehicles to public transportation so that the Copenhagen air will be cleaner and the city will be more accessible for everyone

So there is a strong belief that the charge will be transformational for Copenhagen, which may well be true. It is not a timid vision

The Copenhagen Post reports some details about what a charge would look like:

by 2012 toll facilities would be set up at the city’s northern edge, along Ring Road 2, and through inner Amager to the south. Fees to enter or leave the zone would vary depending on the time of day, but according to the proposal rush hour fees would be 25 kroner (US$4.66). The yearly cost to a commuter crossing the toll ring daily during the rush hour would amount to 11,100 kroner (US$2,069).

Concept for Copenhagen congestion charge
The map on the right is a depiction of what the cordon would look like and is what Tetraplan consultants modelled for the charge.

A study by Tetraplan consultants shows that a congestion charge can reduce road traffic by 23 %, air pollution by 5 to 10 % and CO2 emissions by 10 to 15 %.

The Social Liberal Party argued that there should be national road pricing by distance using GPS.  The Copenhagen Post also quotes an expert who also is not keen on the cordon:

Harry Lahrmann, a traffic researcher with Aalborg University, also argued that road pricing is a more effective solution and that the congestion charge would create more traffic from motorists taking detours.

“Experience from England and Sweden suggests that while traffic within the zone decreases, it increases outside it,” Lahrmann said. “Motorists will still be queuing on the Køge Bay Motorway if a congestion charge is introduced. Road pricing using GPS is the only real solution.”

However, with the change in government it appears that there is a far greater chance of this solution being implemented.  This is despite criticism from motorists' lobbying group FDM, which argues that car drivers in Denmark are already heavily taxed (with 25% VAT on the purchase price and a 105% purchase tax on vehicles up to a price of around US$14,000 (180% on every DKK above that)).  The Danish Chamber of Commerce claims that the charge would damage trade and business in Copenhagen.

Criticism is lining up according to the Copenhagen Post, as one survey indicates only a third support the idea.  The Danish Construction Association claims it wont be financially viable until 2025.  The Copenhagen Post reported that traffic and pollution expert Kåre Press-Kristensen from the Ecological Council, told Politiken newspaper that the zone would have a negligible impact on fine particles air pollution, which can cause respiratory illnesses...If the goal of the congestion zone is to reduce pollution, then I’d have to say that as it stands it won’t have much effect. I would anticipate that pollution will drop by between seven and ten percent, with a five percent margin of error".  One reason being that Copenhagen already has good air quality.

The Copenhagen Post itself thinks the better option is national road pricing saying wisely:

a more equitable way to accomplish the same goals would be a national road pricing system that charges drivers based on where, when and how many kilometres they drove, rather than on whether they crossed an arbitrary line.

Another benefit road pricing has over a congestion charge is that it could replace the current tax and registration system, which punishes car ownership, not car use, and makes it cheaper to buy new, fuel-efficient cars. Due to the high purchase price of new cars, Denmark currently has the oldest average age of cars on the road of any country in Europe. Moreover, its “weight charge” puts relatively heavier, but more efficient, hybrid cars well out of the price range of the average family.

The Copenhagen Post is right, but road pricing should not exclude congestion pricing as well.  It's solution that distance charging should be done by odometer is mistaken, because that is fraught with enormous potential with fraud (New Zealand's experience with light vehicle road user charging, which I am familiar with, shows the risks of that approach).   However, is it not refreshing that a major newspaper is arguing about how to introduce road pricing, rather than simply opposing it?
What intrigues me is the statement that the charge will in part be used to subsidise lower public transport fares.

Two billion kroner (US$373 million) total is expected to generated from tolls, however, and this money would be put towards reducing the price of public transport by 40 percent, resulting in an average savings of 5,192 kroner (US$968) a year.

The advocates of congestion charging in Copenhagen are hoping for a major mode shift, and given they are advocating reducing public transport fares, this is likely to happen. Yet this doesn’t appear to be economically rational.

The fundamental reason why urban public transport demands subsidies is because much of the capacity is needed only for peak trips largely in one direction. During interpeak periods, between half and three-quarters of public transport network capacity sits idle. The subsidies effectively meet this, and the economic justification is because, in the absent of efficient road pricing, car commuting is underpriced at peak times. Once peak time car commuting is efficiently priced, it will in itself encourage more trips to go by public transport, but there is then a case for increasing fares so that those users now pay the full costs of their trips.

In short, setting aside social policy reasons for public transport subsidies, the economic efficiency argument for urban public transport subsidies is eroded when you have congestion charging because you no longer need to price public transport cheaper than car traffic through subsidies. The congestion charge should price road traffic at a rate to ensure the network operates efficiently.

Beyond the economics, I believe the Copenhagen Post is right in pointing out that communication to the public is critical.  Motorists need to get something in return, which means that at least some of the revenue should go to improving roads, or in reducing some motoring taxes (in particular, Denmark's punitive tax on new cars must have a negative impact on those wishing to buy new more fuel efficient cars).  I have watched how failed communications strategies and overall strategies brought down plans for congestion pricing in Edinburgh and Manchester.  Copenhagen needs to learn the unpublished lessons learnt from those disasters.

Some of them are:

-  Get your concept well designed, ensure it does reduce net congestion, that it targets congestion well and does not have too many exemptions;
- Decide what you will do with the net revenue, and make sure motorists get some of it back in some way;
-  Take charge of the communications strategy and make sure you spend good money on leading the clear simple messages of the proposal and you can answer all of the critics;
-  Spend good time talking to business and road user groups, make sure they understand what your objectives are and why you are choosing the option you have selected;
-   Don't get blinded by technology, be clever with vendors.

I hope Copenhagen can find a solution that meets its needs, but I would urge it to avoid using charge revenue to cut public transport fares, or to ignore giving motorists anything at all.   I have sympathy for the view that perhaps a distance based approach could create less distortions, but there is no reason why a small area charge can't deliver some benefits for the city.  However, the solution should not be dictated by what economic modellers can model, traffic engineers can imagine or what looks elegant on a map - it should be determined by whether it can deliver net benefits to the city.

I suspect the next four years for road pricing in Denmark will be interesting indeed.  For not only does the new government want to introduce congestion pricing in Copenhagen, but it wants to introduce road pricing for trucks across the country.  More on that later.

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