Melbourne Eastlink faces takeover crunch time

A casual observer of the Australian PPP toll road scene might be excused for being pessimistic about the finances of them. After all, more news is made of the ones that don’t do well than the many that do. Cross City Tunnel in Sydney, Clem 7 tunnel in Brisbane and the Eastlink toll road in Melbourne have all failed to meet expectations. However, in all of these cities are very successful privately owned toll roads as well, and even poorly performing ones have interest from investors with their eye on future growth.

M3 - Eastlink toll road

Melbourne’s Eastlink is one of those. Eastlink is 39km long and was fully completed in 2008. It forms a major north-south corridor through the eastern suburbs of the greater metropolitan area of Melbourne. It connects the untolled Eastern Freeway (a radial route from the north of the central city to the eastern suburbs to the untolled Monash Freeway (a radial route to the south east) and ends at the Mornington Peninsula Freeway. It is owned by ConnectEast, which has as its largest shareholder Australian Infrastructure Investment firm CP2 (35%), other major shareholders being Lazard Asset Management, RARE Infrastructure and the Commonwealth Bank of Australia.

CP2 is seeking to buy out ConnectEast in its entirety through its investment house Horizon Roads, which is a consortium of eight funds (includes the British Universities Superannuation Scheme, the National Pension Service of Korea, New Zealand Superannuation Fund and the Teachers Insurance and Annuity Association of America). The offer is worth A$2.17 billion (US$2.24 billion) or A$0.55 (US$0.57) per share. Given the shares for ConnectEast originally floated at A$1 a few years ago, and Deloitte has since claimed the offer is “fair and reasonable” within a range of A$0.51 and A$0.57 (US$0.53-US$0.59), there may be a reasonable chance of it proceeding as shareholders seek to get what they can. The shareprice jumped 20% when the offer was made, and is now around A$0.51. CP2 isn't supporting rival investor, Transurban, making a bid - which seems obvious, except that it has a minority stake in Transurban as well.

Presumably Horizon Roads thinks there are good prospects for the road. The Herald Sun reports  that the difference between the forecast and actual revenue per month is around A$242,237 (US$249,818). More recently, traffic and revenue have been climbing. ConnectEast reported a 11.9% rise in annual daily revenue for August 2011 compared to August 2010, with total revenue of A$661,525 (US$682,229) for the month. Traffic numbers were 194,555 in August 2011, which was a 8.5% increase on the previous year, indicating increasing yields.

The takeover offer has been given the clearance by the Foreign Investment Review Board, so shareholders will vote on it on 27 September 2011. It will be interesting to see if they think the offer is fair and reasonable. Some may see it as a chance to bailout of what looked like a bad investment, others may prefer to hang on, because the current investment climate may make the road look like a better prospect than some alternatives.

Whatever happens, it wont affect toll rates which under the concession can only be varied annually according to changes in the consumer price index. ConnectEast spokesman James Tonkin claims “EastLink will continue to have the cheapest per kilometre car tolls of any private tollway in Australia”. He’ll be hoping that persuades a few more motorists to consider the road is better value than they may otherwise think.

Washington State Initiative 1125 - good intentions marred by unrealistic complexity

According to The NewsPaper, there will be a vote in November in Washington State, USA, on Initiative 1125. The referendum will require a yes vote for a negative proposition that “no revenue in the motor vehicle fund or toll fund could be used for non-transportation purposes”. Now it looks on the face of it like a great initiative for motorists, particularly since it avoids diverting such revenues to top up other funds. However, when you get into the detail it contains some flaws.

The proposals are:

- “Prohibit state government from diverting gas taxes and toll revenues in the motor vehicle fund or other funds to the general fund or other funds and used for non-transportation purposes”. 

Now I can go along with that, given it is about specific funds and revenues from road users. The case for diverting such funds for non-transport purposes is weak in an environment of publicly owned conventional toll projects. Indeed, it might strengthen the case for tolls. 

- “Prohibit state government from transferring or using gastax-funded or toll-revenue-funded lanes on state highways for nonhighway purposes”. 

This is not exactly grammatical, but I infer from it that it means not allowing revenue raised from toll lanes or indeed gas tax on state highways to be spent for “non highway” purposes. If it means not spending on other roads, I wouldn’t be supportive of that because there are plenty of instances where it is sensible to cross subsidise parallel routes, feeder routes or bridges over major highways. This is clumsy and its objective isn’t clear.  I am unsure as to what it adds to the above provision, other than confusion.

- “Require tolls to be dedicated to the project they’re paying for, ending such tolls when the project is completed, and only allowing tolls to be used for purposes consistent with the 18th Amendment to the Washington Constitution. Tolls on a project must be spent on that project and may not be diverted and spent on other things (allowing tolls to be imposed on anyone and spent on anything stops them from being tolls and makes them into de facto taxes)”. 

This is where it really gets unstuck. The myth that a road is ever “paid for” and that after the initial capital expenditure has been recovered, no more capital ever need be put into the road. It’s nonsense. The surface, road furniture and the like regularly need replacing and renewal, the base layers will eventually need renewal, and bridges will as well. Only the land and the earthworks for the original right of way are “permanent”, the rest of the road needs regular injections of capital. So this doesn’t exactly reflect economic reality. If it said tolls should be based on recovering the long run costs of capital and operating costs of the road, I’d be more inclined to agree. However, to confine tolls in time does not make sense. The counter-factual is not that “tolls be imposed on anyone and spent on anything”, but that they be introduced on a network basis. 

How would a system like the German truck tolls manage under this? Revenue from the entire motorway network and some highways would need to be directed to the exact roads charged in proportion to the revenue raised? No other utility network is that precise. Rail, telecommunication and electricity network providers engage in pricing that reflects network costs and spend money across a network, not just revenue raised on individual components, although there may be some review of costs and revenues at such levels where it makes sense. I understand the purpose, but I don't think it is economically efficient or reflects economic reality, but rather a widely held misperception that treats roads unlike any other capital assets. 

It is tempting to stop politicians using tolls as an easy tax to divert from motorists, but it also doesn’t make sense to be ridiculously prescriptive in ways that don’t reflect good economic principles. I can understand imposing a restriction on a hypothecated fund to spend money on roads, and for tolling to be related to the costs of the roads tolled, and be spent on the network of the entity tolling. However, to restrict time and purpose of toll revenue spending is unduly restrictive. For example, toll revenue needs to be spent on running the toll system itself, or may be spent on a common toll system for multiple roads, which may be in breach of the third proposal. While I am no great fan of tolling be used to fund public transport, I am also not a fan of tolling being prescribed to specific conditions that would limit it scope inefficiently.

It’s a shame. It is good to have public engagement on these issues, but it would be wrong for this initiative to pass, because it is better to sacrifice improvements in one area to avoid a significant deterioration in the law on tolling in another.

Philippine government pushing more toll roads and VAT on tolls

Reuters reports that the Filipino government is seeking bids for a US$37 million DBFO toll road project called the Daang Hari-SLEX toll road that will link southern Cavite province to the South Luzon Expressway. Interest is expected from local firms such as San Miguel Corp , Metro Pacific Investments Corp , Ayala Corporation and JG Summit Holdings. Deadline for bids is 19 September 2011. Details on the road are here.

However, this is only one of three major highway projects expected to be put out to tender this year. The other projects are the NAIA Expressway Phase 2 project (NAIAX) and the NLEX-SLEX connector road. According to broadcaster ABS-CBN, “PPP Center Executive Director Phil Torio said the bidding process for NAIAX and the NLEX-SLEX connector may be started this year but there may not be time for final bids”.

In addition, Trade Undersecretary Cristino Panlilio said “ It also plans to push for raising the foreign ownership limit to 60 percent, or remove the limit entirely”. This will improve the attractiveness of Filipino toll roads for foreign investors able to have a controlling stake. It has been government policy for some time for major highways in the Philippines to be tolled PPP concessions, and so there are certainly some opportunities for investors, although many of these may be around enhancing operations. The risks of such investments need to be considered as well of course.

Meanwhile, the Philippine Daily Inquirer reports that Filipino toll operators are awaiting the outcome of a Supreme Court case that could force them all to impose a 12% Value Added Tax on toll charges. They have been opposing it, but the government insists that it needs the additional revenue and that tolls are a payment for a service.

Jakarta congestion pricing - what might it look like?

The unfolding story of Jakarta’s planned introduction of congestion charging (called ERP - Electronic Road Pricing, just like Singapore) looks like being one of the largest deployments of urban road pricing for some time. It certainly will be the most “easterly” example and the first in the southern hemisphere. It is encouraging that it looks like learning a lot from the nearby example in Singapore. More could look at that example, although its success is also paralleled by a culture and state that is both law abiding and very efficient. Not something that is necessarily easily translated elsewhere.

I have written before on this, so please look at these articles as well for further background:

- Is Jakarta about to introduce congestion charging?

- Jakarta to be first of five Indonesian cities to introduce congestion pricing

The Jakarta provincial government website has now reported that the Jakarta Head Dept. of Transportation Udar Pristono said his side proposed tariff Rp 6,579 (US$0.77) to Rp 21,072 (US$2.45). The tariff is based on vehicle operating cost savings, replacing the current mandatory HOV requirement of 3 occupants per vehicles at peak times, the price of the inner city toll road and pricing in other countries. The system will apparently use either a form of DSRC (with three gantries, modeled on the Singapore prepaid smartcard approach) or ANPR (with two gantries).

The site describes the locations as follows:

First stage will be implemented in Blok M-Stasiun Kota, Gatot Subroto (Kuningan-Senayan), Rasuna Said-Tendean, Tendean-Blok M, Asia Afrika-Pejompongan. Tariff to be proposed is Rp 12,500 (US$1.45).

Personal depiction of first stage of Jakarta's Electronic Road Pricing

Area 2 are Dukuhatas-Manggarai-Matraman-Gunungsahari dan Jatinegara-Kampungmelayu-Casablanca-Satrio-Tanahabang,

and area 3 are Grogol-Roxy-Harmoni, Tomang-Harmoni-Pasar Baru, Cempakaputih-Senen-Gambir, Cawang-Pluit-Tanjungpriok, Cawang-Tanjungpriok, Sunter-Kemayoran.

I have cobbled together rough maps of what the first stage appears to mean, and what the entire rollout may look like. Bear in mind this is simply drawing lines on roads, and that it is far from clear whether the project will be simply charging the roads concerned or also include some form of cordon/area charge. Please do not rely on this as being accurate, as all I have done is match the place names to the main roads, but it does give you an idea of the scale of the plans.

Depiction of full extent of Jakarta Electronic Road Pricing (yellow and red being Phases 2 and 3

It's worth noting that the bigger underlying controversy is who gets the money.  The Jakarta Province wants to receive all the money, but the central government also does.   Until that is resolved, progress is unlikely to be complete!

New South Wales tolling policy has become less clear

Politics in the Australian state of New South Wales have been characterised by one very long term by the Labor Party, which won every election over the past 15 years, until March this year. The Liberal Party in coalition with its partner the National Party finally defeated Labor, and so the decade and a half of support for tolls on New South Wales highways has come under pressure, not least because of populist promises to deliver a better deal for the motorist. The new Roads Minister is Duncan Gay, who once owned a small trucking company and hails from the rural based National Party. His more recent statements regarding tolls have not exactly made policy that clear. I hope it is just about him finding his feet as a first time Minister.

The Australian Daily Telegraph reported how he wanted to scrap congestion pricing on the Sydney Harbour crossings because some people using it “have no alternative route”. Given there is a free crossing some distance to the west and there are intensive rail, bus and ferry services across the harbour, it isn’t clear what he meant. The congestion pricing is only a $A1 surcharge between 6.30-9.30am and 4.00-7.00pm compared to the rate between the peaks (although it is A$1.50 more than the overnight rate which operates till 6.30am) and (PDF report) it has reduced demand by between 0.4% and 2.8% during the peak periods on the crossing during the first year of operation (and raised around A$12 million a year additional revenue).

However, he has since said “the money needs to be found somehow” while he is still looking to find ways to scrap it. The laws of economics seem to have escaped the analysis, with little valuation of the benefits of the reduced congestion and pollution.

Meanwhile, the M2 Hills Motorway is to go fully electronic free flow in 2012 as part of a widening project, as the same government is keen to eliminate toll booths across Sydney’s tolled motorway network. It is seeking to encourage the same move for the M5 and the Eastern Distributor. All good stuff and will improve the reputation and impact of tolling.

Yet, according to Stock and Land, the same roads Minister threatened to cut tolls on the motorway, which is owned by Concessionaire Transurban. Why? Because demand on the road has dropped (and diverted onto parallel routes) because of road works. TransUrban said it would demand compensation, as it is using the toll revenue to help build the A$550 million widening project, which is the source of the roadworks. 

Somehow, the Minister thinks that the private concessionaire doesn’t have an incentive to encourage use of the road, yet its revenue depends on it. Given he has no money to compensate Transurban and no money to offset cutting the congestion pricing on the harbour crossings, the policy appears to be to find ways to cut tolls without paying for it. Certainly encouraging free flow tolling is a good step, although it needs to be matched with rigorous pursuit of evaders. 

One policy also floated is even considering bringing “all toll roads under common ownership” so that tolls could be co-ordinated. This would fly in the face of the free market credentials of the ruling party, and would go against the principle of user pays in that toll roads – currently charged at rates that reflect the costs of the different roads – but could enable a strategic view to be taken of pricing on the roads. However, quite whether it would be worth the cost of compensating private toll road owners who invested their own money in the infrastructure for the sake of returns under specific conditions, has to be questionable. 

Perhaps the state should focus more on its own roads, which are far less effectively priced than any of the toll roads?  Much more could be gained from improving the pricing and management of those roads than fiddling with the toll roads, and believe me a lot can be done.

Indiana toll road privatisation success?

There has been a fair bit of controversy about the temporary privatisation of the Indiana Toll Road, largely because it is seen by some as an example to follow for the Ohio Turnpike. A couple of recent article have published some details that present a more positive story about the privatisation.

The Evansville Courier and Press notes:

- The US$3.85 billion the state was paid was well beyond its expectations

- The Indiana Toll Road lost money in five of the seven years before it was sold

- It was politically impossible for tolls to be raised to enable the road to be viable when it was under state ownership and control.

In other words, whilst some politicians complain that the privatisation means the private owners are now raising tolls so they can make a profit, the truth is that politicians themselves were unwilling to raise tolls so that the state could sustain the maintenance and operations of the road (let alone generate a return on capital. In other words, the private sector did what the state could not do.

TV station WSBT did some research on comparative toll rates across the US, looking at the price per mile to travel the full distance of some major roads. It found the following:

• Pennsylvania Turnpike 8c/m with EZ Pass, 9c/mile without
• Ohio Turnpike 4c/m with EZ pass, 6c/mile without
• Indiana Toll Road 2c/m with iZoom, 5c/mile without

Ohio and Pennsylvania toll roads are State owned. The revenue from the Ohio one is apparently all used to pay for the road. The Pennsylvania one does that and generates a surplus to be spent elsewhere. It’s not difficult to see why the Pennsylvania Turnpike is so successful, it is demand.

• 45 million vehicles a year use the Indiana Toll Road
• 49 million use the Ohio Turnpike
• 190 million use the Pennsylvania Turnpike.

So it would seem that Indiana is NOT being ripped off by the private sector, but indeed has been subsidised by it for the past five years, and the road is progressively getting to a point of breaking even. Opponents of privatisation may get upset when the road becomes profitable and the new owners get back the money they paid the state for the lease of the road, but they should hardly be complaining now. Indiana toll road needed increases in tolls, but the privatisation deal, besides handing the state a windfall it would never have otherwise got, means the road is not losing the state money and there are positive incentives on the owners to extract efficiencies out of its operation, and make it profitable. Which it presumably will be when it gets handed over to the state after the lease.

Brisbane's other unprofitable toll road

The bankruptcy of the privately owned Clem 7 tunnel has already been noted on this blog, a victim of a combination of overly-optimistic traffic forecasts and the delays in completing a key connecting highway (Airport Link). However, despite all of that, the tunnel remains in operation and is an asset for the city, even though it is operating in administration. After all, there is nothing else to do with the tunnel, but operate it as a toll road!

Brisbane’s other less than financially stellar toll road is owned by Brisbane City Council. The Go Between Bridge in downtown Brisbane, Australia is unusual as far as toll bridges are concerned. It isn’t typical to find a central city river crossing tolled when other crossings are not. While the bridge undoubtedly is a shortcut for many, the toll is also a deterrent that reduces the optimal use of the bridge compared with others. The Go Between Bridge is, to be fair, a link to the Brisbane Inner City Bypass, so has convenience in that sense, and it apparently saves up to 15 minutes. Yet it is 250m away from a parallel untolled road bridge. 

Go Between Bridge in blue, nearest untolled road bridge in yellow

The toll is A$2.42 for cars (A$2.48), half price for motorcycles, A$3.63 (US$3.72) for light commercial vehicles and A$6.41 (US$6.58) for vehicles over 4.5 tonnes.  Payment is by DSRC based account (it is fully electronic free flow) which requires a A$25 (US$25.65) prepay balance.  Those without a tag pay a A$0.25 (US$0.26) surcharge for automatic number plate recognition (ANPR).  There is a A$5 (US$5.13) fee if payment is not made within 3 days, with it rising to A$10 (US$10.26) for a reminder notice and A$15 (US$15.39) for a demand notice before it goes to debt collection.

It cost A$338 million to build and gets an average 14,000 motorists a day. Brisbane City Council expects it to be over 21,000 by 2016 and will be hoping for that figure – yes a city council hoping for more downtown traffic – so it can pay its way. Not something environmentalists would be thrilled with, but the hope is that the increase is a diversion from other routes. According to the Brisbane Times the bridge costs A$30 million a year just to maintain and operate, but is only collecting A$8.18 million in tolls. A yawning gap in revenue, that reminds me of the far smaller, but equally dismal (financially) Route K in New Zealand.

One solution for Brisbane is some form of congestion charging, which could then be used to help pay for the bridge (which could form part of a boundary to a charging zone as it follows the Inner City Bypass, as could Clem 7). However, the politics behind that are complicated and are likely to require thought of how to reduce other taxes to, at least partly, offset such a charge. Given the RACQ’s interest in discussion on it, maybe it is time for an intelligent discussion to be had – which gives motorists something back in exchange for pricing use of Brisbane’s city centre roads?  

Of course an even simpler idea would be to toll the parallel bridge on the basis that it must be getting some relief from the Go Between Bridge, so its users should pay perhaps a toll of 50% the price of the new bridge?

Texas toll road revenue forecasts look bleak

The global economic slowdown has particularly hit toll roads in a number of countries. I’ve already noted how Ireland, Spain and California have all seen toll roads financially affected by the economic situation (as opposed to toll roads that are performing badly because demand hasn’t met overly optimistic expectations. Now Texas has reported a particularly poor financial outlook for one network of toll roads, but it is unclear whether this can be blamed on demand or poor forecasting. However, a report from Statesman.com does give the appearance of it being the latter rather than merely a reflection of the economy (given Texas is not exactly performing that poorly by national standards). 

According to the report, the Central Texas Turnpike System has seen a shortfall of US$100 million in revenue since 2007, which has meant the roads have had to be subsidised from fuel taxes to cover debt servicing and operating costs. The Texas Department of Transportation now estimates a US$38 million subsidy per annum for the next decade, with the roads not generating a surplus until 2030.

However, one of the reasons for this appears to be the cheapness of the toll rates. The same report states that “The Texas Transportation Commission has not raised the system's initial toll rates, which, at about 12 cents a mile, are less than a third of what the Central Texas Regional Mobility Authority charges drivers on the 183-A tollway in Cedar Park “.

Now if there is a public policy purpose of encouraging use of the toll roads with subsidised prices to reduce delays and externalities elsewhere, then that can be respected, but it shouldn’t be pretended that the toll roads are there to do anything other than supplement revenue, not be self sustaining.

Of course, given the success in Indiana in privatisation and talk in Ohio of the same thing, it is inevitable that there is now talk of repeating this in Texas. The roads cost US$2.7 billion to build (nominal prices) opening between 2006 and 2009, one could expect that this, and more might be recovered if sold and the new owners were allowed to increase prices sufficient to make money.

There is hope that new connecting highways and some land development could increase demand, but it remains a risk carried by the state. I can imagine that there are more than a few in the state keen to see some serious investigation into comparing the risk and cost of the state maintaining ownership vs the price it would have to get to make it worthwhile to transfer that risk, with the offsetting opportunity of net positive revenues in the future.

News briefs: Australia and Sweden

Toll evasion in Queensland: Brisbane’s Courier Mail reports that the Queensland Government is owed A$7 million (US$7.3 million) in unpaid tolls from around 58,000 toll evaders using toll roads owned by state owned tollway company – Queensland Motorways. “State Penalties Enforcement Registry has finalised 6368 toll debts totalling $891,000 but it is still trying to recover almost $7.25 million from 52,000 others.” The problem arises from motorists using free flow lanes on the toll roads, which results in them getting four notices to pay before the debt is referred to the State Penalties Enforcement Registry.

Professor pushes first toll road for Western Australia: According to WA Today, Professor Peter Newman, well known in “new urbanism” circles, is pushing for a new expressway planned between Perth and its airport to be the city’s first toll road. He says that Australian capital cities would inevitably have to introduce a sophisticated pricing mechanism such as the system used in Singapore for the past 15 years, which measures the level of congestion on a road and charges accordingly. He’s an advocate for road pricing to subsidise public transport, but it is notable how Perth is currently Australia’s fastest growing city, but the largest city with no toll roads (unlike Sydney, Melbourne and Brisbane).

Q-Free wins Gothenburg congestion charging contract: CisionWire notes that Norwegian toll supplier, Q Free has won the contract to supply roadside equipment for the Gothenburg, Sweden, congestion charge scheme, it has been subject to a complaint by a competitor that as of writing, appears to yet to be finalised.

What should a Beijing congestion charge system look like? 了北京交通拥堵费应该是什么样子？

北京交通拥堵费

The BBC reported earlier this week that the Xinhua News Agency had reported that Beijing is looking to introduce congestion pricing. It offers few insights, but Beijing has been experiencing reductions in traffic recently due to increases in parking charges and fuel prices. It introduced a limit on new car registrations, but the effectiveness of this will be restricted to those who have no options to register addresses or ownership of cars outside the city.

The idea of congestion charging Beijing has received a lot of commentary, some ill-informed suggesting that CCTV cameras can do it (they can’t). Some suggesting it be London style (it wont be enough). The report itself indicated it might apply to a few roads, but Beijing would be wise to not just copy what is done elsewhere, or let engineers implement what is feasible. Rather it should analyse the congestion problem itself, map out where and when it happens, and design a system to address that. Given the exuberance of engineers to build and design solutions that fit what they think can be done, it is wiser for policy managers to take a deep breath and decide what they want to achieve, rather than what they are told they can do.

China Daily reports the goal is to increase public transport mode share for trips within the Fifth Ring Road to 50%, up from 40%, and to reduce travel time to 1 hour from outer suburbs to the fifth ring road.

Beijing with Fifth Ring Road highlighted

On the face of it, Beijing needs a charging system that is quite comprehensive. Simply charging individual routes will result in diversion, and simply charging one big zone will have only limited impact. What is needed is a scheme that will be easy to implement as of first, but which is readily scalable. Singapore has the closest model to this at the moment, but its technology is now obsolete for any new systems. My suggestion is that Beijing, indeed China, take a far bolder step.

Given the expected growth in road transport in the next few decades, China is in a perfect position to take advantage of Intelligent Transport Systems (ITS) to manage traffic and improve safety. A few years ago it was reported that China had the highest road fatality rate globally, on a per vehicle basis. While there are a lot of conventional measures that can be taken to address this, one should be to build an ITS platform for safety and tolling measures to be introduced across the country.

One option would be to adopt the US 5.9GHz platform as mandatory for all new vehicles (no doubt China may prefer to have its own and the EU has another standard), which would allow for the following safety related applications:

- Emergency vehicle warning system;

- Forward collision warning;

- Intersection collision warning and avoidance (road and rail crossing);

- Active highway cruise control (allowing vehicles to be more closely spaced);

- Priority signal control for buses and emergency vehicles;

- In vehicle sign displays;

- Vehicle instability warning (e.g. cornering too fast).

I visited Beijing for the ITS World Congress in 2007, and saw that there are hundreds of Chinese firms and people with the talent to progress such systems in the country.  There are equally many firms worldwide eager to install and help operate systems.  The key frustration for most ITS professionals is the cost of retrofitting infrastructure and vehicles to take their technology, a problem that isn't so big where both infrastructure and vehicles are newer, and growth makes such a transformation potentially affordable.

However, my key interest is having a vehicle identifier that makes it cheap and efficient to do electronic free flow tolling. Then the matter of number plate recognition and maintaining a high quality number plate database (and enforcement system to recover fines), can be minimized if all vehicles are required to have a DSRC device that is sophisticated enough to be used for tolling.

Initially, it could be used to phase out manual toll booths, reducing congestion on them, but for Beijing it would allow for electronic toll gantries to be installed strategically to manage congestion. Each gantry could be priced at different times at different prices in order to target charges. Of course the best targeting could be done with a GPS based system measuring distance, but for now let’s consider what Beijing could do with a tag and beacon/DSRC type system.

The image below (click it to expand) shows how Beijing, within the 5th ring road, can be split between major arterials to form zones. The obvious example for an area charge is the very centre, but that would never be enough to address congestion on the scale required in Beijing. Far better will be to charge for trips between zones. Trips on the boundary roads could remain untolled, far better to allow efficient trips around the zones, but to penalise for travelling further.

Ring roads in red, radials in yellow, a framework for a charge?

Parallel to this obviously has to be to allow for growth in bus services, but I’d suggest they also must consider active modes as well, which have done extremely badly from Beijing’s rapid expansion of roads. Walking and cycling may have once been seen as modes used by people in poor countries, but they are cheap, healthy and occupy the lowest amount of road space per person moved. Enforcing pedestrian crossing, building over and underpasses, and cycle lanes will all be important in ensuring people don’t feel that it is unsafe to walk and bike short distances.

Meanwhile, Beijing could do worse than watch Jakarta as it seems likely to progress before it does, or to look at the extensive work undertaken in the 1990s on electronic road pricing in Hong Kong. However, the key enabler for all of this is enforcement, identifying vehicles and pursuing violators, without the means to do this efficiently, congestion pricing is not going to be effective.

Then there is the issue about what to do with the money.  The obvious answer is to use it to pay for road maintenance and upgrades, improved pedestrian and cycling facilities, or offset other taxes or restrictions.   The more transparency around this the better, and it could gain public support if people saw

Meanwhile, central government in China should consider how to future proof road transport by considering how it can built in ITS to its networks and vehicles from the start. For developed motoring countries like the USA, the cost and transition period to move to using technology on roads is high and long term. China has both the money, time and the forward growth to be a world leader in ITS and ITS managed highways. It can do so and at the same time, save lives, reduce congestion and pollution.

Meanwhile, Shenzhen is considering congestion pricing according to Xinhua, and it definitely has the experience of Hong Kong's extensive studies and trials to draw upon.