Wednesday, 2 January 2013

Review of 2012

Given the New Year I thought I would do a geographic overview of the whole world and what I saw as important.


It has come with news, that isn't so much new, that the UK government is likely to announced in 2013 that it will allow private investment in the strategic road network and that this investment will allow for new capacity or "substantially upgraded roads" to be tolled.  I've already expressed my views on how this should be taken further to allow motorists to contract out of existing motoring taxes by paying directly.

It also repeats earlier claims that Vehicle Excise Duty may become a two tier system, with a basic level for everyone to access all local roads, and another level for accessing the strategic road network.

That, at least, shows a policy with a little innovation, although the fundamental problem of splitting Vehicle Excise Duty - a tax on owning a vehicle - into a system that requires more to operate on the strategic road network, risks some serious diversion onto local roads.  Given that the marginal costs of maintaining and renewing such roads is lower than the local road network, and that Vehicle Excise Duty does not reflect any factors of usage (although if converted into a European style vignette it may allow motorists to buy anything from 1 day to a year of access), it seems like a desperate attempt to try to have a form of faux road pricing, which delivers little in behaviour change, nothing in revenue (unless it is a stealth way of increasing charges) and is really only designed to introduce the much maligned concept of hypothecation back into UK motoring taxes.   Of course a real leap forward would be to treat a portion of fuel tax as a motoring tax, which would finally confront the point most motorists notice - that they already pay a lot in tax when they use the roads.   The political impossibility of raising fuel tax may well have been reached, and for the first time ever the unsustainability of fuel tax given rising fuel efficiency of vehicles (and alternatively fueled vehicles) is appearing on the horizon.

Sadly the politics of road pricing in the UK have constrained a willingness to be truly innovative and bold.  The themes in the past year have included a desire for more tolled new capacity, with the A14 upgrade showing some courageous options in redesigning a major capacity upgrade to rebuild a new local untolled route to be parallel to the tolled main highway.  It's clever, but let's not pretend there is much scope for new tolled capacity.   Beyond that, there are three other notable points in the UK:

1.  Dartford Crossing will get electronic free flow tolls by 2014, except that instead of it being recognised as offering major economic savings in itself in terms of travel time, and being paid for by the users of that system, existing manual toll users are paying for it - now - in an astonishing political blunder, as toll payers are paying for something before they can use it.   You'd think that the UK government wants to make tolling as unpopular as possible, whilst also expanding it.

2.  Lorries 12 tonnes and over will pay a vignette to use all UK roads, not because it will raise much money (£20 million a year net), not because it will see more efficient use of the network, not because it offers a step forward in better pricing, but because it is a cheap and easy way to partially "level the playing field" between UK and foreign lorries.  For all of the scaremongering from the Daily Mail and UKIP, the UK government wouldn't dare contemplate GNSS based tolling because it fears it couldn't contain the costs and risks, and isn't prepared to do what it takes to make it economically worthwhile.  Bear in mind that while the UK introduces vignettes for lorries, two European countries are replacing such systems with distance based tolling using GNSS technology.

3.  Whilst there is no real possibility of expansion of congestion charging in the UK (Cardiff oddly contemplated it for a short time this year before running scared), London is considering a new tolled crossing of the Thames, which also involves tolling an existing parallel (and heavily congested) crossing.  If that can get past the political test (it is likely to be both financially and economically worthwhile), it will cross another minor line, which involves tolling existing capacity parallel to new capacity.  Meanwhile, the London mayoralty passed by, with Boris Johnson being re-elected, and congestion charging being almost invisible as an issue, with neither of the two front running candidates (the other being Ken Livingstone, famous for introducing and expanding the charge) proposing any changes, after Johnson had abolished the Western extension of the congestion charge.


Outside the UK, several European countries have seen PPP concession toll roads under enormous pressure as demand forecasts based on continual growth in buoyant economies have been proven to be as realistic as the forecasts of perpetual economic growth.  Ireland, Spain, Portugal and Greece are obvious contenders for toll road concessions that have been bailed out by the state or simply refinanced by creditors writing off the equity in them.  Some other concessions in Italy, France, Germany and Poland are healthier.   The big developments are coming with France's "Ecotaxe" truck tolling system planning to be in operation in 2013.  Meanwhile, Belgium, Russia and Denmark are continuing development of their systems.  Interest will grow in other European states for the introduction of similar systems, largely for revenue purposes, with Spain, Italy and (once again) the Netherlands all contemplating the value of doing so.  The Netherlands will find it most compelling given that it will shortly be surrounded by countries with such systems.  For private vehicles, debate may become more open in Germany, France and Spain for the introduction of vignette systems for cars, also for revenue purposes (if only to raise some money from foreign vehicles).  However, in almost all such cases it will involve some reduction in existing ownership taxes for residents.

Congestion charging will have commenced in Gothenburg, Sweden on 1 January.  However, it is highly unlikely that other contenders for such a charge (Copenhagen, Helsinki) will progress this year.

European countries will start to acknowledge the longer term issues around the sustainability of fuel taxation in the coming year, as the politics of increasing fuel taxes become ever difficult, and revenues from such taxes yield slowly decreasing returns in western Europe (if not eastern Europe).

North America

Canada will see more interest at the provincial and city level to expand the use of tolls, with Vancouver likely to see forms of congestion charging as complementing its interest in promoting public transport and active modes, and in providing a sustainable source of future revenues.  Other provinces will also consider how they can move towards other forms of road pricing primarily for revenue reasons.

In the United States, states will be split between those avidly promoting conventional tolling for new highway capacity (e.g. Florida, Texas, Virginia), those promoting HOT lanes (e.g. California), those considering vehicle mileage taxation (e.g. Oregon, Washington, Minnesota) and those who are unsure exactly what to do.  Conversions from manual to free flow tolling have been picking up and will continue to do so, as the obvious traffic efficiencies and long term cost savings become clearer, as long as jurisidictions have the legislation to enable intelligent, effective and fair enforcement.   As free flow tolling becomes more widespread, and HOT lanes become more commonplace, US highway administrators will face the inevitable point whereby they cannot expand tolling further on existing roads without major equity issues arising about the roads that can be practicably tolled and those than cannot.  VMT/MBUF/distance based road pricing will appear increasingly attractive, and Oregon's progress will be watched with interest, but maybe, just maybe, those other states with VMT based truck road user charging systems (Kentucky, New Mexico and New York) will see these as platforms to modernise and expand.  Transit states will embark on a few studies to demonstrate just how well off they would be introducing some form of charging for traffic on major highways, which will cause some to raise constitutional issues, which will need careful management.

Big issues about the role of private sector investment in highway will continue to be debated by some states, notably Ohio.  New York will continue to debate whether it should fundamentally reform tolling in the environs of New York City to improve revenues and equity, which steadfastly denying that it becomes a de facto form of congestion pricing.

Other studies and attempts at congestion pricing will find difficulties in fairly addressing the boundary effects of conventional approaches to such pricing, as far too many continue to think London and Stockholm are the only examples worth replicating, rather than being more innovative and looking at what others have done to manage traffic access to their cities.

Most definitively, the next year will not see a transformation of transportation policy at the Federal level around this issue, as the status quo means little interest in dealing with the long term revenue sustainability issues of the Federal Highway Trust Fund.


South Africa had the big news in tolls, with the Gauteng Freeway Improvement Project proving to be a major test as to the political will to introduce free flow tolls on upgraded existing roads in South Africa.  It is finally going to proceed, but the opposition to the tolls on these roads have two key characteristics.  One is the difficulty which is seen worldwide, in introducing tolls on already existing roads.   New roads are easier if only going because motorists can choose to use them.  The second one is fear around the political and bureaucratic environment in a country where corruption is a real concern.   In that context, it is not wholly surprising that some people are suspicious, although SANRAL itself is widely considered to be a model operator of major highways in the developing world.   There can be little doubt that this scandal is hindering tolls in South Africa.

Beyond South Africa, tolling is appearing in more countries in Africa, including Uganda, Nigeria, Senegal and Mozanbique.   However, the problems seen in India of congestion at manual toll booths have also appeared in Nigeria.  It's encouraging to see more tolls in Africa, hopefully it can learn the lessons of others to make the institutional and governance changes needed to allow technology to be introduced where it is viable.


India continues to expand toll roads apace, as private sector concessions use manual toll systems as the only way to recover revenue to build a national highway network fit for the country of its population and size.   One of the big stories was the chronic congestion on the Delhi-Gurgaon expressway, which is the result of a high capacity highway close to a major city simply incapable of processing high volumes of traffic because its manual toll booths take too long to process customers.

India (and indeed China and other countries with high capacity and busy toll roads) badly needs to establish the systems in place to automate tolling, whether it be coin machines, DSRC accounts or the obvious need for reliable and regularly updated vehicle licensing systems that enable enforcement to be carried out effectively.    A good starting point would be for concessionaires to establish an industry association to set standards and work co-operatively to help make the industry more efficient and lobby when law changes are needed to facilitate tolling as an efficient means of raising revenue and managing traffic.  Avoiding potholing will also help to avoid a backlash against privately owned toll roads.  Meanwhile, Delhi wisely has chosen to focus on parking management before congestion pricing.

China is understanding the need for congestion charging in major cities like Beijing and Shenzhen to address rapidly rising vehicle levels, which are growing faster than the ability of government to widen roads and build new corridors, but Shanghai is preferring to increase taxes on vehicle ownership in the interim - presumably because of the perennial problem with congestion pricing in cities lacking good enforcement systems.  Meanwhile, private/public concession companies dominate the expansion of its highway network, with tolls.

Indonesia is also one of the great toll building countries of Asia, with a rapidly developing toll road highway network across the country, and new toll road corridors across the heavily congested capital Jakarta.   However, toll roads in Indonesia are dominated by state owned concessionaires.  Jakarta is pursuing congestion charging, based on the Singaporean model, but faces the issue of enforcement and licence plates as one of its major barriers to implementation.  

The Philippines also continues to build out a toll road network with private concessionaires, including astonishingly approving two new competing toll roads across Manila, because it expects traffic levels to make both viable. Malaysia also continues to build out a toll road network, although its concessionaires are mostly companies with some degree of state ownership, albeit indirectly through state owned companies.

Japan continues to grow its uptake of electronic tolls on its major highways, and South Korea is not far behind as well, with a wide network of tolled motorways using barrier controlled ETC.

Meanwhile Iran quietly continues to operate its congestion charging system in Tehran.


Australia remains split between the east coast states, which have embraced tolling as a way of funding large highway projects in the three largest state capitals, and the others (Western Australia and South Australia) which have rejected tolls and PPPs.  The biggest challenge to this has been the issue of toll traffic and revenue forecasting, which has been the subject of a report that was commissioned by the Federal Government.  The court case between shareholders/creditors of Rivercity Motorway and AECOM is being closely watched by toll road forecasting professionals worldwide, but regardless of the outcome of that case, hopefully a more in depth consideration of the issues behind such forecasts will be taken by investors, and scheme developers.  More spent on better analysis may save more in the long run.

Beyond that case, there are likely to be a handful of more such toll roads emerging in Sydney and Melbourne, but the bigger issue is wider reform of motoring taxation across Australia. It is likely in the shorter term than conventional tolling will be expanded to the extend practicable for new projects.   However, there is strong interest in considering how to reform existing taxes on ownership and fuel to provide a more sustainable, equitable and economically efficient form of charging across the country.

The Federal-State split of responsibilities adds a layer of complexity, as fuel tax is collected Federally, and other motoring taxes at state level.  However, there is likely to be movement on reforming heavy vehicle charges if the states can get together and agree on a programme of work to progress this.  A lot can be done without tackling fuel taxes at present, so expect Australia to closely follow what is going on in the United States, and to talk more about reform, with the political will to act being the key issue.

New Zealand has seen some moderate tweaking of its existing weight/distance nationwide tax on heavy vehicles and light diesel vehicles, but beyond interest in raising revenue to pay for large transport projects in Auckland, there is likely to be little major change in the current year.  The key interest will be in development of a major motorway north of Wellington that may be tolled.


Politics, not technology.  That is what will limit what can be done in road pricing in 2013, as it has been the case for 50 years.  As many people in developed countries now carry with them mobile phones with the capabilities to measure distance travelled, by time of day and location, it isn't difficult to conceptually have a system of road pricing with the key ingredients being verification and enforcement.  However, in an environment where almost all roads are run by government agencies, which are inherently conservative in their approach to technology, and which are largely not driven by service to customers,  the stumbling blocks are going to remain politicians who are afraid that changing how roads are paid for, will be seen by the public as making them pay more, for little gain.

It will be the politicians, public agencies and private companies that can demonstrate that road pricing can deliver better results for users, and more efficient and better quality highways, that will be able to press forward.  The key to that is delivering the message that roads that are untolled are not free and not paid for, as long as road users pay a special tax for the fuel consumed in using them, and as long as roads need maintenance, renewal and to be managed as depreciating assets.

1 comment:

  1. A great summary of where we have got to globally - many thanks, Scott!