Wednesday, 27 July 2011

Australian Professor suggests comprehensive road pricing reform

My attention was drawn to an article in Australian website Business Spectator by John Stanley, Adjunct Professor, Institute of Transport and Logistics Studies, Faculty of Economics and Business at University of Sydney.

He calls for radical road pricing reform for Australia saying:

My strong preference is for a broadly based road pricing reform agenda, which includes pricing for congestion and also for other identifiable costs of road use, such as road damage, various emissions and accident costs that are not adequately covered by existing arrangements. This could be done by a GPS-based pricing system that includes a variable road use charge to cover costs such as air pollution and accident costs that are not met by current charging/insurance arrangements and base road damage costs, levied through a vehicle kilometre charge.

In addition such a scheme would include tonne-kilometre (mass-distance-location) charging for additional road damage costs of heavy vehicles and congestion pricing by time and place.

I don’t agree that accident costs should be charged for, because that implies all motorists, those who do not have accidents included, pay for the costs imposed by those who do have accidents.  This is a matter for insurance premiums to reflect.  I also question whether the right approach to air pollution is to charge for it, when other activities are not also charged for creating air pollution (and when regulatory measures may be more effective).

However, he wisely notes that pricing shouldn't be introduced in isolation of offsetting complementary policies (the type that are essential for public acceptability):

As an offset, the reform should include abolition of existing excise and registration charges. Revenue should be hypothecated to a transport trust fund, with transport (road and public transport) and related environmental improvements being eligible for funding from this trust fund.

Reforming road pricing would also provide the opportunity to review public transport fares, many of which are currently artificially low to compensate for inadequate road pricing.

In other words a shift from vehicle ownership and fuel taxes to road pricing. He also notably recommends that public transport fares are too low because road pricing is inadequate, and that this should be corrected.

Beyond the detail, this is a good summary of the economic policy points around road pricing. It can better recover costs imposed by road use, and should be considered as a replacement for the legion of “second best” policies that have been introduced to tax fuel and vehicle ownership, and subsidise public transport as an alternative. It is a view that deserves more discussion and debate, and more forward thinking than simply seeing road pricing as a revenue raiser or as a way of suppressing traffic.

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