Friday 28 March 2014

Significant steps forward in New York, Finland, Germany and Australia

I've been busy, and meanwhile lots has been going on in the world of road pricing.  All of which I will giving more attention in the coming week or so.

They are:
- New push for tolling reform in New York that if implemented, would effectively be a congestion pricing scheme for the city that benefits residents of outer suburbs;
- A Ministry of Transport and Communications Working Group in Finland has recommended that the country move away from ownership based taxes to a "kilometre based" tax system;
- Germany is expanding the scope of its distance based truck toll and will introduce a private car vignette from 2016;
- Infrastructure Partnerships Australia, a lobby group advocating reform of infrastructure policy, has published a discussion paper, notably with several major Australian motoring associations, advocating fundamental reform of road transport taxation and charging, with a strong push to shift away from ownership and fuel taxes, to direct road pricing.

New York

It starts with New York where Move NY (a campaign group for transport policy reform in New York) and Sam Schwartz, former NYC traffic doyen launched a campaign to push the Fair Tolling policy that would normalise tolls around the city, introducing tolls on some existing untolled crossings and effectively a cordon charge for the CBD on Manhatten.

I have written about the plan before, and it is far from just another congestion pricing plan, but rather a more strategic approach to addressing congestion, inequities in the current tolling regime (tolls on crossings in more peripheral locations can be higher than those to Manhatten) and providing a new source of funding for transport spending (with some ideas about spending it, with a short-term focus on improving buses and making technological improvements to subways, with some money allocating for improving roads).  It is estimated to raise around US$1.5 billion a year, and anyone who regularly visits NYC will notice how many roads are in pitiful condition, and the subway is dismally undercapitalised compared with the likes of the London Underground or Paris Metro.

Eric Jaffe at Atlantic Cities has a good article on the plan here, although I'd caution that I don't believe it will "free" NYC from traffic congestion, it does have scope to significantly improve it.  The big impact will be from tolling four untolled crossings on the East River, and applying a charge south of 60th St.   That is also where there are risks of distortions.

As I said, I'll write more next week, but I am broadly supportive of the plan.  It is a practical and reasonable step forward to address two big problems. Congestion and revenue.  There are worthwhile debates to be had about what to do with the net revenue, but I'd argue that it needs to be seen in a mix of economically efficient transport spending and offsetting reductions in other charges.  The charges are proposed to be revised quarterly to target congestion based on performance, but at that point it will need to differentiate by crossing to be effective.  Similarly, the proposed new bus services will be needed on the day the plan gets implemented, not funded on a pay-as-you-go basis.

However, let's be clear, it is a way to go before there is political buy-in to the plan.  Neither the Mayor of NYC nor Governor of the state have shown the foresight needed to grab a plan that is both controversial, but revolutionary and potentially hugely beneficial in economic, environmental and fiscal terms.  For NYC's sake, I hope Move NY can chip away at this resistance so that the politicians, who are not going to be thought leaders in this, might actually show interest in being innovative in a sector that so much of the economy is dependent on, but is stuck in an archaic model that is no longer worknig.


I've written before about Finland's dalliance with congestion charging in Helsinki, and political opposition to the idea.  Well Finland has moved on, and a report has been published (main report in English, many other technical reports in Finnish) by the Working Group on Fair and Intelligent Transport, which was tasked to to investigate:

the impacts that would result from an overhaul of passenger car taxation so that taxes would be based exclusively on car use. In practice this would mean substituting fixed taxes (the motor car tax and annual vehicle tax) with taxes based on kilometres driven.

The report was published in December 2013, so now the debate ensues about whether and how to progress this.  The proposal is quite fundamental, and means charging all vehicles on all roads by distance, replacing existing taxes:
- Car tax ( a tax on new vehicles and vehicles newly registered in Finland, based on a % of the vehicle's value and its emissions rating); and
Vehicle tax and vehicle motive force tax.  Essentially an ownership tax that pre-purchases access to the public road network, and varies based on a combination of emissions rating and vehicle size.  It parallels Vehicle Excise Duty in the UK, motor vehicle registration/licensing fees in other jurisdictions.

The concept the Working Group considers is worthwhile would mean charges vary by vehicle type, CO2 emissions and by location (on a regional basis).  This doesn't suggest congestion charging being considered at this stage, although it would obviously be possible.  The suggestion is the average car would be charged €0.03 per km (US$0.07 per mile).

Unsurprisingly, the report recommends that a "wide range of tests should be carried out to pilot the technological systems, monitoring, privacy protection and information security" and so in a press release it has been announced that "The Ministry of Transport and Communications has launched an experimental project on electronic transport services for 2014–2015, which could be used to test kilometre-based taxation too".

This is all revolutionary stuff, and I look forward to reading more of the report and commenting on it.  One point that is curious is that it is not about replacing fuel tax, which would remain.  The EU makes fuel tax compulsory at a minimal level, although that is lower than the rate currently charged by Finland.  Clearly, the selling of the concept publicly and politically will be based on eliminating ownership taxes, but I wonder if the funding framework for roads, the levels charges are set and the future of fuel tax will also all be up for debate.  I suspect there is a long way to go yet for public acceptability, primarily because it will not be clear to many as to how they will benefit from the charge.


Drive Europe reported that the German Minister of Transport, Alexander Dobrindt, has announced that the truck toll system, called LKW Maut, operated by Toll Collect, will be expanded in scope.  The current system tolls trucks 12 tonnes and above on almost all autobahns and 1,135 km of national highways. This is to extended to trucks of 7.5 tonnes and above, and to an additional 1,000 km of national highways.   Whilst this looks on the face of it to be an efficient extension of the system, it partly reflects a requirement to lower the tolls for the 12 tonnes + trucks, because the calculated toll rates are now too high.  Those toll rates include a recovery of the cost of capital, which given German interest rates are lower than the last time the rates were calculated, means the tolls are too high according to European law. As a disclaimer, I should note that I was one of the authors of a report to the European Commission on this matter.

In parallel, I wrote about discussions around introducing vignettes for cars in Germany in January.   It would appear that legislation is to be introduced to allow for such a vignette to be imposed on all light vehicles (this may cover vehicles not charged by the truck toll) using the autobahn network.  I have no further details as of yet, but this will raise the issue of whether, how and if German motorists will be compensated for this new charge with reductions in existing ownership taxes.


There has been dialogue at state and federal levels in Australia for a few years about reform of road charges and finding different pathways to move away from registration (ownership) and fuel taxes, and towards distance based road user charging.  What Infrastructure Partnerships Australia has presented is a case to do that, which embraces road pricing being able to target different types of vehicle, by mass, location and time of day.  The objective is to address declining yields in fuel taxes, to enable congestion to be more effectively managed and to address cross subsidies and the poor relationship between expenditure on the network and what is paid to use the network.   The discussion paper that has been released pushes clearly for much more efficient pricing, that will mean charges relate to costs imposed on the network, and also on demand.  This is seen as not only changing user behaviour (i.e. less peak time usages of cars in major cities), but also the management and investment decisions in the network, and deliver more efficient allocation of resources overall.  I haven't read the full report yet, but the key recommendations include for the Australian Productivity Commission to do a Public Inquiry into the regulation, funding and pricing of the road transport sector, harmonisation of registration and safety regulation for light vehicles across all states, for governments, Motoring Clubs and key stakeholders to work together to educate the public on the shortcomings of the current system and to promote discussion about reform, and to undertake large scale public trials of road pricing.

The Infrastructure Partnerships Australia report is here.  It seems to suggest the first step might be heavy vehicle charging, which I broadly agree, but I look forward to reading the full report and making comments, which of course I will publish here.

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