Shanghai not pursuing congestion charges, but continues to regulate and ration car ownership

Website Eastday reports that Shanghai city officials have said that they are not considering or investigating introducing a "road congestion fee" to address traffic congestion, despite Beijing having already announced the concept has been included in its traffic management plan.

Shanghai has a considerable ring road network

It is focusing on expanding public transport and managing its car number plate auction to ration ownership of cars in the city.  The number plate auction system effectively slows the growth of vehicle ownership and has been in place since 1994.

The number plate auction works by requiring any purchaser of a new car in the city to obtain a number plate through a monthly auction.  The monthly auction limits new vehicles to around 8,000 each month, with the latest price being equivalent to US$9,770 which is higher than China's annual per capita GDP (US$8382 on a Purchasing Power Parity basis), but not Shanghai's (over US$12,000). 

The report notes that there will be around 1.4 million cars with local number plates in the city by the end of 2012.  There is still ample scope for growth in car ownership, given the municipal population of Shanghai is over 23 million people.

Of course it isn't compulsory to have Shanghai registered plates, and over 500,000 vehicles on Shanghai roads are registered out of the city, but such vehicles are banned from "elevated roads" during peak times.  This effectively is a form of traffic rationing based on regulation, by banning non-Shanghai cars from expressways during peaks.  Anyone owning such a vehicle wanting to be registered in Shanghai would need to participate in the auction.

The city is already proposing extending this ban to longer time periods.

Of course, the other effect is to keep the vehicle fleet relatively old, as once one gets a number plate for the car, it stays with the car, so there is every incentive to keep the car as long as possible.  In a city with considerable pollution problems, discouraging fleet turnover will have a negative impact upon this issue.

The number plate auction, as a result, effectively rations car ownership and road space by restricting access to only locally registered vehicles.  However, it also raises revenue that helps subsidise public transport.  The same report indicated that over 2009 and 2010 the number plate auction raised US$1.06 billion for the city, which spent US$860 million on improving the public transport network and offering fare discounts to incentivise mode shift.

The big question will be for how long Shanghai can avoid pricing roads to manage congestion.  I'd wager that if Beijing can successfully introducing congestion charging, and given Shanghai already uses number plate enforcement to regulate usage of major highways at peak times, it would not be difficult for the city to introduce pricing - which after ownership has grown to a certain point, will be inevitable if it really wants to get to grips with traffic congestion.