"Motorists First" - Findings of the Independent Toll Review for the NSW Government - Part Two: The Findings

Following on from my previous post, this is a listing of the 16 findings of the review. Not the recommendations, but the findings. I have included some of my own comment on these at the end of each finding. Generally the findings are fair, although I think some of them are repetitive and essentially different sides of the same point. The findings have a strong consumer interest element to them, which is unsurprising given it was led by Allan Fels, but there is also some discussion around public policy implications and a bit around markets and delivery of services. Again it reads a bit like an ACCC series of findings, unsurprisingly.

For me, the main points are the lack of coherence around toll rate setting and structures, the inflexibility to apply time-of-use based pricing to better manage congestion and demand, and the poor policy responses to the current structures.  The dominance of Transurban is valid in the toll concession process, but with the presence of E-toll, its retail market share is not monopolistic. Future envisaged toll roads are not intended to be undertaken as PPP concessions, indicating a willingness to take a different approach, although it should be possible to proceed with PPPs without the restrictions and constraints (including the toll rate escalators) implemented in previous years.  Following this article will be one on the recommendations and what I think of those.  However, for those outside NSW, the main benefit of this report is on lessons to apply elsewhere around toll rate setting, PPP contracts and taking a strategic network view, rather than an ad-hoc approach to separate major projects. 

The structure of the findings is a summary of the findings from the report, followed by my brief comment.

The findings

1: The process for setting tolls has been flawed: Largely because governments determined them in advance of PPP concessions, rather than using competition in procurement to incentivise bidders to propose the lowest tolls needed to fund the roads. Long concession periods and higher than inflation cost escalators mean tolls in early years are lower than they should be, as the cost of the infrastructure is pushed towards future users more than early users.  Efficient in road and toll operations almost entirely benefits owners of concessions and is not reflected in lower tolls. Comment: Ideally tolls should be proposed by project bidders or proponents and be subject to competitive pressure, and rigorous public sector scrutiny. It is worth reviewing the merits of allowing tolls to increase above CPI if costs do not do so, but not there is also no scope for tolls to reflect actual demand. Rigid concession conditions around tolls affect the ability for future tolls to be able to address distortions in pricing between tolled and untolled roads, and changes in demand across the network.

2: PPP details relating to toll setting are not publicly disclosed reducing information available to assist in public understanding: Commercial confidentiality claims around PPP agreements limit this information, and consequently increase public disquiet about toll rate setting. The Review noted that Base Case Financial Models are confidential and commercially sensitive, but said returns from PPPs are “generous”. The Review cannot publish the differences between actual revenue and model forecasts because of this confidentiality, making it difficult to assess whether tolls set are too high and whether excessive profits are being generated from toll concessions. Comment: Future concessions should enable regulatory oversight of the differences between actual and forecast revenue. A careful balance is needed between incentivising PPPs sufficiently and not enabling rent-seeking behaviour.

3: Toll road users bear a disproportionately high proportion of the cost of toll roads: The key issue is when toll roads bypass the untolled network and generate significant local amenity benefits. The Review noted the Cross City Tunnel (which provides a bypass of inner Sydney between east and west) which brings significant benefits to surface traffic, including property owners and pedestrians, but was expected to be fully funded by the users of the tunnel. There is a case for those others benefiting from the project to contribute towards its costs. Comment: Toll roads offering significant local amenity improvement, due to removal of traffic and enhancing of property values ought to be partially supported by revenue generated from surface traffic (through network charges such as fuel taxes) and property taxation from property owners. It is clear the Cross City Tunnel in Sydney is underutilised due to its high toll structure.

4: There is no overall system of tolls: Tolls are all set in isolation of each other, and although they could be set to send price signals to optimise the use of road infrastructure they are not designed to do so. The complexity of tolls as they are, including toll relief schemes, untolled motorway sections (which are often used by many motorists paying tolls on other sections).  Comment: From a network perspective, tolls in Sydney send inefficient price signals that distort behaviour and do not encourage efficient network use. For example, overnight toll prices are far too high and ought to be set to remove traffic from surface streets whilst peak period tolls are often too low, and should be priced to encourage time and modal shift. There are no effective means to enable this.

5: The lack of a unified tolling system creates complexity, inefficiency, inequities and unfairness: With different vehicle classification systems and toll regimes, similar trips are priced differently across the network. Roads with similar levels of service are priced differently. Smaller trucks are in some cases charged the same as larger trucks, discouraging them from using some toll roads. Comment: As above, there should be more efficient pricing applied by location, distance and time-of-day and vehicle class. More standard pricing across the network, unless particularly costly parts of infrastructure are being used, would be rational and efficient.

6: Tolls are too rigid and locked-in for decades without options for review:  No other sector of the economy sets prices for such a long period, certainly no other transport mode. This increases perceptions of unfairness over time, as prices rise faster than inflation. The Review reports modelling that around A$123 billion in tolls will be paid between 2024 and 2060. With no processes or means to review tolls during those concession periods, it raises serious questions as to why it is justifiable to have prices set for well over a generation through contract between the private sector and state government. Comment: Concessionaires like guaranteed toll levels and escalations, but no other investments in the private sector guarantee such revenues without regulatory oversight (see energy and water utilities which are subject to such oversight). This suggests that future PPPs have provision for regulatory oversight of pricing at regular intervals.

7: On most toll roads, time-of-day tolling is not used:  At off-peak periods many toll roads are heavily underutilised, and at peak periods several can be highly congested. Pricing should enable better utilisation of the infrastructure. Comment: Generally, there are wider economic benefits in enabling better use of tolled infrastructure, especially since most of it has natural monopoly characteristics and there are some amenity benefits in enabling it.  However, there is limited elasticity of demand off-peak, in that lower prices will result in lower revenues (as additional traffic is unlikely to offset reduced prices), although at peak times higher tolls that reflect demand profiles should improve congestion on a network basis and encourage modal shift. There are considerable merits in enabling time-of-day pricing, subject to regulation, in ways that do not undermine concession net revenues, but significant improve outcomes for the transport network. 

8: The financial impact of tolls is greatest in Western Sydney: Western Sydney suburbs have the highest proportion of motorists paying over A$60 a week on tolls, reflecting the extent of tolled infrastructure in the West and the lack of useful alternative routes. This arguably affects access to employment and other opportunities for residents in those suburbs. 

9: Transurban’s profitability has not been excessive in recent years, but its NSW toll road portfolio profitability is likely to increase over time in line with traffic and toll rate escalation, and declining construction costs: Sydney generates 50% of the toll revenue for Transurban, but its returns are not excessive when considered against the Weighted Cost of Capital. However, it is expected that profitability will row in future years. Comment: This is critically important, as it is important to ensure that Transurban isn’t extracting excessive rents from Sydney road users. However, it also suggests that the toll rate setting system for future concessions should not enable continued increases above inflation.

10: The level of tolls appears to be higher than necessary and desirable: This is in part, counting earlier points as follows. There was no competitive bidding for PPPs on the basis of toll price, concession agreements allow relatively high returns for multiple reasons including a regulated monopoly price safe from competitive challenge, incentives for efficiency are largely captured by concessionaires (and not shared with users). Toll roads are relatively free-flowing and potentially underutilised (indicating tolls are certain times are too high) and motorists perceive tolls as too high. Most of those surveyed who claimed tolls are too high tend to use alternative non-toll routes or reduce frequency of non-essential travel. 15% use other modes, but nearly 40% do not change behaviour (but pay the toll). Comment: There is clearly a distortion in travel between tolled roads and untolled roads essentially because of underpricing of untolled roads. Surveying the public about tolls is likely to result in an answer that many people think tolls are too high, but the real evidence is that the tolled network has much less congestion, on average than the untolled network. Many complain about tolls but still pay them, but that does not mean that tolls are not too high, but it does mean that this is overplayed. Toll roads take up land, and are high capital cost assets and arguably it is fair they generate a return on capital (even if this isn’t what explicitly happens with other roads). However, the negative externalities of pricing only part of the network are not insignificant, and there is a strong case for enabling time-of-use pricing.

11: Transurban has a dominant market share in the current provision of toll roads in Sydney:  Although this is clearly the case, there is competition from untolled roads and other modes. Restrictions on Transurban include the limits on toll rate increases and the conditions on maintaining network quality during concession periods. Comment: Transurban has been commercial adept in expanding its presence in the market, but the “market” itself has entirely been driven by the State Government issuing concessions and the conditions it sets for those. The presence of the state account manager adds significant competition in terms of customer service, for “some” services, but concern over Transurban’s dominance is within the control of the State Government for future toll road concessions and in future regulation of them.

12: Transurban has been dominant in the NSW market for acquisition of toll road concession contracts: This is due to factors, such as its experience in bidding, the economies of scale of its existing operations and its access to in-house data on traffic and in modelling.  It’s noted that of the four motorways under construction in Sydney today, two wont be tolled and the other two will be state-owned toll roads. Comment: This is essentially a repeat of the previous finding, and what matters is what impact it has on public finances, motorists and the economy. That hasn’t been explained clearly.

13: The significant position of Transurban in the toll retailer market could adversely affect competition for tolling concessions: Until 2019 there were four toll road retailes, but Transurban acquire two of them. Now it is Linkt (Transurban), E-Toll (State Government) and Eastlink (a toll road in Victoria) that hold the entire market, with Eastlink’s presence essentially only for a handful of vehicles that hold such accounts in Victoria visiting Sydney. Barriers to entry are not seen as significant, and clearly the presence of E-Toll makes a difference to Transurban’s performance in the market. Comment: There is a “could” here significantly diluted by the presence of E-Toll, but there aren’t enormous barriers to market entry and future concessions and toll roads should be open to more innovative solutions in providing retail services. This could include the growing mobile phone based suppliers, but longer term the inevitable implementation of RUC in Australia should see providers of such services also being able to supply toll retail services to their customers (e.g. telematics service providers for heavy vehicles). 

14: Current tolling information fails to adequately enable, inform, and educate motorists thus reducing user empowerment and efficient decision-making: There is no “one-stop” platform for motorists to obtain all tolling information (including available rebates) and undertake trip planning in a way that is easy to use. Signage about toll rates is inadequate to give motorists sufficient time to adjust route choice. Retail toll platforms do not allow motorists to project future toll usage. There is little understanding as to how tolls are calculated, or understanding about toll administrative charges, and what revenues are used for on non-PPP toll roads. There is also insufficient information about the rights and responsibilities of toll road customers. Comment:  This is true, although there is nothing stopping there being such an app or platform to do this, other than the lack of commercial interest in doing so.  Signage should better enable route choice, and even could compare travel times by tolled and untolled road, although this would have to be the responsibility of the public road controlling authorities. 

15: Toll reform is preferable to toll relief: The current toll relief schemes are inadequately targeted and underutilised, in part due to overly complex administration. Toll relief is not financially sustainable given the existing pattern of toll escalation and limitations on the availability of government resources to fund relief:  This is focused on the M5 toll relief scheme which is confined by geography, does not have processes for review. It appears to be politically entrenched and is likely to have significantly affected transport and land use decisions along the M5 corridor. This and other toll relief schemes are blunt and likely to be financially unsustainable, and likely to primarily benefit higher income earners. It would be preferable to reform tolls more widely. Comment: Clearly the current toll relief schemes are inefficient ways to address public concerns about toll rates, and it would be much preferable to phase it out and reform the toll system more widely. 

16: Concessionaires are an unintended beneficiary of the current approach to toll relief. Increased traffic and patronage of toll roads, through induced demand created by toll relief, directly benefits operators by increasing their revenues: By subsidising tolls, toll relief effectively benefits concessionaires by subsidising demand for their facilities. It is not enough to generate funds beyond agreed levels that would require upside sharing with government, but is enough to benefit Transurban.  Comment: This highlights the inefficiency of toll relief as a subsidy from other road users and taxpayers to concessionaires and the beneficiaries of relief.

"Motorists First" - Findings of the Independent Toll Review for the NSW Government - Part One: Background

 This is the first in a multi-part series about the epic toll review.

“Motorists First” (PDF) is the title given to the latest report on tolling in Sydney. Led by Professor Allan Fels. Fels is best known as having been Chairman of the Australian Competition and Consumer Commission between 1995 and 2003. The focus of his career has been on breaking monopolies, and he took this opportunity of leading the Independent Toll Review for the Minns’ Government in New South Wales to try to do the same to Transurban – which has a stake in most of the toll roads in Sydney.

The review was announced in July 2023, three months after Labor won the state election, but it follows a long line of reviews of tolling in New South Wales (by which I mean Sydney as there are no toll road outside the greater Sydney metro region).  The review posted this handy list of the reviews undertaken by multiple NSW state governments. 

Major toll road openings and New South Wales tolling reviews over 21 years

Why so many reviews? Sydney has one of the most extensive toll road networks of any cities globally, although I have yet to see any detailed research to identify whether it has the biggest tolled road network of any city (Santiago, Chile has quite a network).

Most people are aware of the Sydney Harbour Bridge, opened with tolls in 1932 and still tolled, but much of Sydney’s urban motorway network has been funded through tolling and financed through a patchwork of PPPs.  The latest review notes that of 320km of motorways,156km are tolled. Although there are alternative routes, it is slow and inconvenient to drive from the north or south of Sydney towards the airport or city centre without using toll roads. 

Sydney's tolled and untolled motorway network

Untolled sections were mostly built in the 70s and 80s, whereas the tolled sections have been built since then, with more under construction (the Western Harbour Tunnel and Stage 1 of the M6, which eventually will bypass Sydney’s southern suburbs towards Wollongong). 

The 382 page review has a lot of information in it, and so is worth pouring over for those who are interested. Here are some highlights that I found of interest:

• Only around 4% of journeys (using any mode) were made using toll roads, and 7.6-8.8% of car journeys are undertaken using toll roads at least once.

• There are 10 PPP concessions and 2 state government owned toll roads, Transurban has some shareholding in all of the PPPs (ranging from 50-100%).

• 56% of the toll retail market is held by the state operator E-toll, and 44% by Transurban operator Linkt. This suggests that a majority of toll road users prefer having the state as account manager, not the operator of most of the toll roads (only the Sydney Harbour Crossings are not at least partially owned by Transurban) 

• Westconnex has the biggest proportion of toll road traffic and revenue.

• Toll rates on all routes, except Westlink M7 and Westconnex are point charges (M7 and Westconnex have flagfalls plus a per km rate)

• Only the Sydney Harbour crossings have prices that vary by time of day (A$4.27 peak, A$3.20 interpeak and A$2.67 off peak), but there are only tolls in one direction on the crossings (and the Eastern Distributor).

• Toll escalation factors for the PPPs tend to be based on the greater of CPI or 1% per quarter.  

The review includes this handy chart describing the ownership and key suppliers throughout the supply chain for all of Sydney toll roads:

Sydney toll road ownership/supplier distribution

What's the problem?

What’s the problem?

Fundamentally there are public and political concerns that tolls are incoherent and unfair, largely because each toll concession has seen tolls set that reflect the cost of supplying each individual segment of tolled road at the time it was built. This has resulted in a network that isn’t priced like a network, but priced ad-hoc. The result of this has seen a range of interventions by the state government which are arguably also heavily flawed, including the M5 Cashback scheme, which gives refunds to regular users of that toll road, and was set up entirely for political reasons. That scheme alone costs around A$127m per annum. 

What did the Review find?

16 findings were published by the review, which I will summarise in my next post... 

London makes two steps forward with congestion charging and tolls

In the past couple of weeks two significant changes have been announced regarding road pricing in London:

• Removal of the Cleaner Vehicle Discount (more widely known as the EV exemption) from the London Congestion Charge from 25 December 2025;
• Proposed time-of-use based tolls for the Blackwall Tunnels and the new Silvertown Tunnel.

Congestion Charge Cleaner Vehicle Discount abolished

Since 2003, the London Congestion Charge has provided a concession, in the form of a 100% discount, for lower emitting vehicles.  Initially the discount applied to Alternatively Fuelled Vehicles, which initially meant vehicles powered by natural gas or hybrid or electric vehicles.  Over time that discount has been tightened, with the most recent change in 2021 restricting the discount to pure EVs (not hybrids) and hydrogen-fuel cell vehicles. 

It is a 100% discount for such vehicles which register for the discount and are identified through the UK’s motor vehicle register. Owners have been required to pay a £10 annual fee for this registration. Over 112,000 cars and light commercial vehicles are registered for the discount, with another 16,000 private hire vehicles (i.e., Uber and app/phone booked minicabs) also registered. Transport for London (TfL) has provided no data on the estimated impacts, either in terms of traffic or in financial terms as it has not prepared annual impact assessments for 19 years. Given reports from several years ago, it seems likely that abolition of the Cleaner Vehicle Discount should increase the number of vehicles that the Congestion Charge applies to by between 10-20% per day, and so should have an impact on reducing congestion within and approaching the Congestion Charge zone.

Note the latest TfL annual report (PDF year ended September 2023) indicates the operating costs of the London Congestion Charge consume around 37% of gross revenues.

Note also that the entire area of the London Congestion Charge has been an ultra-low emission zone since 2019, applying a £12.50 per day charge (on top of the Congestion Charge) for vehicles that do not meet specific standards. At present that standard is a minimum of Euro 4 for petrol vehicles (generally any vehicles manufactured from 2005) and Euro 6 for light diesel vehicles (generally any vehicles manufactured from 2015).

Blackwall Tunnel and Silvertown Tunnel toll/time-of-use pricing announced

The Blackwall Tunnel is a pair of two-lane, one-way tunnels (one built in 1897 and another in 1967) under the Thames that comprise part of a major arterial highway from north-east to south-east London. The route (A102 and A12) is the eastern portion of the never completed Ringway 1 – an inner London orbital motorway proposed in 1966, but mostly cancelled in 1973.  More details on the route here.

Location of Blackwall Tunnel

The Blackwall Tunnel is the eastern-most fixed road crossing of the Thames within the boundaries of Greater London (the next crossing is the Dartford Crossing 26km to the east, which comprises part of the M25 orbital motorway). The northbound tunnel handles around 49,000 vehicles per day and the southbound around 53,000. It is one of the most heavily congested corridors in Greater London with severe delays all day during weekdays and for many hours in the weekends. The tunnels have never been tolled.

To help relieve congestion and improve network resilience, the Silvertown Tunnel is being built to the east connecting the approaches from the south of the Blackwall Tunnel to the suburb of Silvertown and main arterials towards the east and the centre of London. It is currently under construction and is planned to open in 2025. It will have two-lanes in each direction, albeit one lane in each direction is dedicated to trucks and buses only. It will be the first new road crossing of the Thames since the QE2 Bridge at Dartford Crossing in 1991. 

Location of Silvertown Tunnel

The road has been controversial in some circles, concerned that any road building contributes to congestion and emissions, but given half of the new capacity is for freight and buses, and tolls are to be applied, in part, to manage demand, it seems highly unlikely that the new tunnel will make congestion worse. It is far more likely that the combination of pricing and new capacity will improve conditions for both traffic, but also the environment. More detail on the tunnel here.

The Mayor of London had always proposed that the Silvertown Tunnel be tolled to pay for most of the capital costs of the tunnel, but also that the Blackwall Tunnel be tolled, to ensure that demand between the tunnels was not distorted by having tolls on one crossing. Furthermore, it was expected that applying time-of-use pricing to the Blackwall Tunnel would help relieve the chronic congestion on that route.

The Mayor of London has now proposed a time-of-use toll to apply to all tunnels as follows:

• Peak charges between 0600-1000 northbound weekdays and 1600-1900 southbound weekdays only

• Off-peak charges between 1000-2200 northbound weekdays and 0600-1600 and 1900-2200 southbound weekdays, and 0600-2200 weekends

• No charges between 2200-0600 all days.

The price schedule is below. Autopay applies if vehicle owners register their vehicle number plate with TfL to be automatically detected and have their bank account or credit/debit card deducted for crossing each day.  

Proposed Silvertown and Blackwall Tunnel tolls

Taxis, blue badge vehicle holders (disabled), buses, coaches, minibuses, emergency vehicles, military vehicles, vehicles in disabled tax class and NHS vehicles exempt from vehicle tax and zero-emission/wheelchair accessible private hire vehicles are all exempt.

Low income drivers in east London (in any of 13 boroughs) may register for a 50% discount. This is determined based on being in receipt of one of a range of means-tested benefits such as Jobseekers Allowance.

A £1 discount at off-peak times only applies for registered small businesses and charities located in the Royal Borough of Greenwich, and the Boroughs of Newham and Tower Hamlets.

Furthermore, three new cross-river bus services and the new cycle bus will be free for local residents for the first 12 months, as well as further enhanced public transport services and Docklands Light Railway trips between two station pairs.

The cumulative effect of the new tunnel and the time-of-use tolls is expected to be up to a 20-minute reduction in peak period travel times. Part of this relief is from a 50% increase in capacity, but also expected is some demand management as drivers shift travel to off-peak periods and some demand shifts to the new bus services.

Estimated gross revenue from tolling the tunnels will be £123m per annum, which should fully recover the construction cost of the Silvertown Tunnel in just over 10 years (indicating that there is more than adequate demand for the additional capacity and new connection).  

Conclusion

Removal of the Cleaner Vehicle Discount is a useful step forward for the London Congestion Charge, as there is already an Ultra Low Emission Zone applying across of London which is the tool for emissions. The Cleaner Vehicle Discount undermines the effectiveness of the congestion charge in managing congestion, so removing it should help wind back some of the congestion growth in recent years.

It is rational to apply tolls to both the Silvertown and Blackwall Tunnels, as the Silvertown Tunnel will directly relieve the Blackwall Tunnels, so it is fair for users of the latter to pay for the former. The benefits of reduced congestion will be significant.  Furthermore, it is a welcome leap forward for London to effectively trial time-of-use pricing at peak periods by direction. London needs more congestion charging on existing roads to manage demand at peak periods, and this should be seen as a pilot for implementation on other routes.  Hopefully shoulder periods will be introduced too, to encourage peak spreading. 

New York is coming: but it is hardly a model for other US cities: UPDATE NEW YORK CANCELLED BY NEW YORK GOVERNOR

UPDATE: On Wednesday. New York State Governor Kathy Hochul issued a video statement in definitely suspending the New York congestion charge scheme. This is despite the entire system having been installed and tested with literally weeks to go before implementation. I'll write more about this soon, but it is a devastating set back for congestion pricing/time of use charging in the United States.  The reason being to "address the rising cost of living in New York" even though it would affect a tiny proportion of New York drivers or even commuters into lower Manhattan. It's completely bizarre that she claims one of the reasons for suspending the charge is because commuting on Mondays and Fridays is at a lower level than before the pandemic.  More details on the announcement are here.

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On the 30th of June 2024 New York will be the first city in the Americas to introduce time-of-day based road pricing on existing roads.  It may have been designed to generate revenue for the subway, commuter rail and bus systems in New York, but it is also expected to relieve congestion, let's hope it does.

New York Congestion  Charge Zone

What it is officially called is the "New York City Central Business District Tolling Program", which is a fair description.  It is arguably NOT congestion pricing because the rate structure being applied is blunt, and applies 24/7.  It is urban road pricing, but it is applying pricing at all times so may also reasonably be called a toll on existing roads.  It is being called the "Congestion Relief Zone" and I am sure officials in New York City will be relieved to see if it has a significant and sustained impact on congestion, I expect it probably will have some immediate impact as it is modelled to reduce the daily vehicle count by 100,000, which is around a 14% reduction in traffic overall. 

The time-of-day charging component is essentially a higher price during daylight hours, which are 0500-2100 weekdays and 0900-2100 weekends. 

Nevertheless, it is significant. Although the US is peppered with what are variably called HOT, express or toll lanes, which have peak (and in some cases dynamic) pricing of lanes, these are mostly conversions of HOV lanes to enable better utilisation of their capacity, by offering a premium level of service.  This is the first implementation of charging, varying by time-of-day, on previously untolled roads.

It is important to note that it is a cordon as in Stockholm, not an area charge, as in London. Trips wholly within the zone are not charged (setting aside special fees for taxis and for-hire vehicles), but relatively few vehicles are likely to never leave the zone and not enter again.

Note that one can drive all of the way around the periphery of lower Manhattan and not be subject to the charge, providing essentially a through route from the Hugh L. Carey Tunnel to the north of Manhattan. It's not clear this is necessary, but it has meant a lot of charging points have had to be installed on the roads connecting with FDR Drive and the West Side Highway (which at the southern end is an at-grade arterial route).

Price structure

During the peak period (0500-2100 weekdays and 0900-2100 weekends) cars and light commercial vehicles will be charged US$15, and during the off-peak period US$3.50.  This seems highly likely to encourage a rush of traffic before and after the peak period, although before 0500 is likely to be insignificant, after 2100 may be moreso.  

Motorcycles are to be charged US$7.50 during the peak and US$3.75 off-peak.

Smaller (rigid) trucks and some buses will be charged US$24 during the peak and $6 off-peak, whilst larger (articulated) trucks and tour buses will be charged US$36 during the peak and $9 off-peak. 

There are credits for vehicles that have entered lower Manhattan through tolled crossings, specifically the Holland, Lincoln, Queens-Midtown and Hugh. L. Carey Tunnel (Brooklyn-Battery Tunnel), but only during the peak period, not the overnight period.

The full price schedule is here and pictured at the bottom of this article.

Taxis and licensed per hire vehicles are subject to a different charge. Each trip from, to, within or through the zone will be subject to a fee of US$2.50 for for-hire vehicles, and for taxis, green cabs and black cars it will be US$1.25 per trip, with the fee not varying by time-of-day.

Cars and motorcycles are subject to a single charge per day, other vehicles are not. 

There is the power to impose a 25% surcharge on Gridlock Alert Days, which is when the UN General Assembly meets and "throughout the holiday season". 

Discounts and exemptions

Two discounts and five exemptions are listed.

These are:

• A 50% discount for low income vehicle owners enrolled in the Low Income Discount Plan. This applies after 10 trips per calendar month, to all peak period trips after that point.  This discount requires an application. It is eligible for those enrolled in a qualifying government assistance program or with an income no greater than US$50,000 in the previous calendar year as reported to the IRS. It requires an EZ-Pass toll account.
• A tax credit for residents within the zone with an income of no greater than US$60,000 in the previous calendar year.  Details on this tax credit are due in Fall 2024.
• Individual Disability Exemption Plan.  Applies to individuals who have disabilities or health conditions that prevent them using public transport. It either applies to a vehicle registered by the individual or identified by the individual as owned by a person the individual designates (such as a caregiver). 
• Organisational Disability Exemption Plan. Applies to organisations that transport people with disabilities. To qualify, vehicles must be used in the zone solely to transport people with disabilities.
• Emergency Vehicle Exemption. This includes vehicles for fire, ambulance, police, civil defence, corrections, blood and organ delivery, environmental and hazardous substances emergency response and sanitation patrol.
• Commuter and school bus exemption. Applies to buses providing scheduled commuter services, school buses contracted with the Department of Education and licensed commuter vans. Note this does apply to scheduled fixed route commuter and intercity buses, but not tour and charter buses.
• Specialized Government Owned Vehicle Exemption. Applies to vehicles providing public works, owned by federal, state, regional or local government. This includes garbage trucks, street-cleaning trucks, snow plows, pavers, bucket trucks, etc.

How to pay

The system is set up to prefer vehicle owners to use the EZ-Pass DSRC based toll system used on NY and NJ tolled roads already. All of the exemptions and discounts require EZ-Pass accounts. Those without an EZ-Pass will get "toll by mail" with invoices sent to the registered vehicle owner, identified by Automatic Number Plate Recognition, and will be subject to additional fees to recover the cost of number plate reading and posting the invoice (although the website indicates that these will be waived for the first 60 days).

How much money will it raise?

By law it is required to net US$1b per annum. One estimate, reported by New Jersey Member of the House of Representatives Josh Gottheimer is that it will be much much more, at around US$3.4b per annum, with most of the revenue (understandably) raised during weekdays. The report also noted around US$83m p.a. in revenue could decrease due to reductions in traffic reducing use of tolled crossings to lower Manhattan.  The net revenue in any case are to raise up to US$15b in debt to finance upgrades to the subway system.  It's not clear what motorists think of their money being used to pay for NYC transit systems, especially those driving from New Jersey (which is not served by the NYC Subway, but rather the Port Authority's PATH subway). 

New York Congestion Charge tariff schedule Part 1

New York Congestion Charge tariff schedule Part 2

What next?

It will be interesting to see the impact of the zone on traffic in NYC, both within and outside the zone and hopefully it will not worsen traffic on routes seeking to bypass it, or result in any major distortions of behaviour (or negatively impact businesses or residents near the edge of the zone at the north). It ought to reduce congestion during the day, improve the flow of commercial and private vehicle traffic and buses.

However, it is not likely to be followed by other US cities in the short-term. Lower Manhattan is a lot more like central London than other US cities, most of which have much more dispersed trip patterns using their highways.  For example, downtown Los Angeles has around 1% of all of the employment of the LA metro region, so a cordon for that location would have little impact on congestion except perhaps on some offramp or routes approaching it. That isn't to mean that downtown cordons are not worth considering, but in themselves they will have little impact on congestion.

My hope is that New York will be a success, and may spur interest elsewhere in the US, and for New York to expand in some form, whether it be additional zones or some corridor charging on major highways from the New York State side (which don't have tolling).  New York succeeding should help to encourage more debate and discussion about using congestion pricing to reduce congestion even though the primary driver of this scheme is to generate revenue for the subway.

Japan planning introduce time and location based pricing on expressways nationwide

 Japan's nationwide expressway network is run by a series of private businesses. In 1956, the Japan Highway Public Corporation was formed to build and operate a national highway network, using tolls and accessing private financing. At the time, only 23% of Japan's national highway network was sealed including only two-thirds of the Tokyo-Osaka highway.  Tolling was extensively used, and for sections of highway that did not gain private finance, the government guaranteed the loans. Tolling revenue was pooled to cross-subsidise parts of the network that did not generate enough toll revenue to pay for construction (details on the history of highway in Japan is available here (PDF). 

In 2005, the Japan Highway Public Corporation was split and privatised into multiple companies, including the Japan Expressway Debt Repayment Agency (to use toll revenue to repay the considerable debt that remained for the development of the network) and six regional expressway companies. They are:

• East Nippon Expressway Company Limited;
• Central Nippon Expressway Company Limited;
• West Nippon Expressway Company Limited;
• Metropolitan Expressway Public Corporation (Tokyo);
• Hashin Expressway Public Corporation (Osaka-Kobe-Kyoto); and
• Honshu-Shikoku Bridge Authority.

Tolls were authorised to be collected until 2050, recently extended to 2065.  The privatisation was driven by several concerns, in particular:

• As Japan's network had essentially been completed, there was concern about public ownership enabling politicians to authorise new construction that favoured the construction industry, even if projects were not viable. 
• The pooling of toll revenue nationwide was seen to enable this cross-subsidisation where there was no need for new infrastructure. Residents objected to paying higher tolls in their area for projects that were far away from them and of dubious economic value.
• Interest in improving the efficiency of administration and encourage innovation in operations of the network.
• Interest in enabling comparisons between the performance of companies so encourage more productivity and lift standards across the sector.
• Concern about the levels of debt government was taking on for the expressway company, and privatisation was seen as a way to put discipline on costs, debt and the scale of capital spending.

Map of Japan's expressways and major highways

The national expressway network is 9050km long. Tolls in Japan are generally set to reflect distance travelled between interchanges, and vary by vehicle type. Most toll roads still have a mix of electronic and manual toll lanes.

So the announcement in the Japan Times in the past week that the Ministry of Land, Infrastructure, Transport and Tourism will be introducing the ability for expressway companies to introduce time-of-day varying tolls, based on location, to manage congestion, is a significant step for the history of expressways in Japan.  It was trialled during the 2021 Tokyo Olympics with a higher daytime charge, and discounts after midnight, but the idea is that time periods and variations in toll fees will depend upon the specific route and the conditions on it. This is NOT dynamic tolls, but rather targeted congestion pricing to enable more free flowing traffic and reduce pollution.

Also announced was the enabling of commuter passes for high frequency users of toll roads in particular areas, to encourage greater use of expressways to remove traffic from untolled parallel local roads.

What will be of interest is how congestion pricing (which is what it is) will be applied to urban tolled expressways as there is an obvious risk that it could divert some traffic onto parallel routes, and it would not take much of a diversion to severely impact such routes. Although most urban expressways offer significant improvements in travel time, there may be localised points of networks to avoid tolls that could cause worse congestion on the local network (which is not the responsibility of the expressway companies).

Crucial next steps for Auckland congestion pricing

 I wrote on my Rational Transport policy blog on this topic, largely because it was around transport governance issues.  The article is here.

Don't make road pricing a tool in a "war on cars"

The BBC website, under its “Future Planet” science-based section, published an article on 23 January 2024 called “From London to New York: Can quitting cars be popular?” It has received quite a bit of acclaim, but although the article does make a case for the benefits of reducing car traffic in major cities, it is largely one-sided in a way that, largely, “preaches to the choir” about a wide range of policy measures with the objective of making driving less attractive in cities.

Road pricing is a powerful policy tool that can significantly improve the efficiency and the environmental impact of a road network, as well as providing an efficient way to fairly recover the costs of capital and maintenance of the network and ensure demand does not overwhelm supply. It can also generate net revenues for improvements, or simply net revenues as a return on the capital tied up in the network, for complementary purposes, such as improving infrastructure for alternatives.

However, undoubtedly the biggest barrier to implementation of road pricing is concern that it is a tool to penalise and punish, or to tax, rather than a tool to deliver better outcomes for those who choose to pay, as well as those who benefit from less congestion and well-maintained roads. This includes those riding buses on them, walking, cycling and those who live, work or own businesses, or community facilities adjacent to roads.  It is extraordinarily difficult to convince the public and as a result, many politicians, that any form of road pricing should be introduced, because many don’t believe there are benefits to them from pricing roads.  It is difficult enough to convince people that electric cars should pay a distance-based road user charge, because they are not subject to fuel tax, let alone convince people to pay governments to use roads directly.

This article doesn’t help in changing that perception.

There are real perceptions about a war on cars, the article cites someone who produces a podcast called “War on Cars”, so it isn’t entirely a conspiracy theory. There have long been policies to discourage car use in cities, whether it is removal or caps on parking, slower speed limits, traffic light phasing or reducing road capacity. Road pricing can have a range of objectives, but to treat it only as a tool to reduce driving, rather than also a tool to improve the conditions for those who remain on the road, is a mistake.

There are precious few congestion pricing systems in operation around the world. In Europe there remain only five cities of scale with congestion pricing: London, Stockholm, Gothenburg, Milan and Olso although plenty more have investigated it (and a few Norwegian cities with toll rings that exist primarily to raise revenue).  Abu Dhabi, Doha and Dubai all have pricing systems, and further east is Singapore. New York will be the first in the US, but Lower Manhattan is very different from pretty much any other urban area in the US.

The reason for this is public opposition. 

It’s absolutely true that after pricing is introduced it generally gains better acceptance, as sceptical drivers notice that the impacts are not bad, and in some cases improve conditions. This is certainly the experience in London and Stockholm, although it was not the experience in Gothenburg, because Gothenburg’s congestion tax was applied far too broadly, in geographic and temporal terms (to locations at times where/when there was no congestion). Opposition after it was introduced persisted for some years. A referendum held a year after it was introduced in 2013 saw 57% oppose it, but it was ignored as local politicians had committed to spending the revenue on large projects (and there was no other means to pay for them). 

The article quotes Leo Murray, director of innovation at climate charity “Possible” saying “We can't find a single example of a traffic-reduction measure that's been in place for more than two years that's then gone on to be removed because of a lack of public support”.

Well, I can. It’s the Western Extension of the London Congestion Charge. It was introduced in 2007 and removed at the end of 2010. It was removed because it was poorly designed (it granted residents in one of the wealthiest parts of London a 90% discount for driving into the central zone), poorly focused and implemented for partisan political reasons (the Mayor of London wanted to target a wealthy area, but perversely gave them discounts to drive to the centre of London that poorer area residents did not have). 

So, in short, you can’t just introduce road pricing and assume the public will accept it. Note the Stockholm congestion tax referendum is cited as giving its scheme approval, but in fact the referendum was held across many municipalities across metro Stockholm, where a majority voted against the congestion tax, and it was only by ignoring those other municipalities that it was said that the majority voted for the congestion tax. Stockholm Municipality voted for it, but only consists of 38% of the population of metro Stockholm. Had the votes in all Stockholm municipalities been taken into account, it would have been a vote of 52.5% against road pricing.

Again, the article seems to be dismissive of how hard road pricing is to introduce.

The article returns to London with the correct point that the congestion charge was more popular after it was introduced, but with the closure of the Western Extension, the congestion charge in London has the same geographic scope as it had when it was introduced in 2003, which is roughly 1% of the area of metropolitan London.  It hasn’t expanded because there isn’t the political will or public support, in no small part because congestion in central London has essentially returned to pre-congestion charge levels.  It is difficult to convince the public that expanding the congestion charge will reduce congestion, when the existing charge has not kept up with demand, and when significant amounts of road capacity is reallocated from general traffic to cycling and walking capacity.  London was a success, but why has no other UK city (Durham doesn’t count in this context) have a congestion charge?  It’s fairly basic – too many of those advocating for it, don’t want to deliver any benefits to those who would pay it.  Furthermore, it’s simply wrong to cite the ULEZ expansion and ignore the significant opposition to it.  

New York’s implementation of the Central Business District Tolling Program is cited as a key example, and questions whether New York has learned from elsewhere, although it is a stretch to call it congestion pricing.  The article says “The scheme will also operate a fluctuating charge system, with smaller fees during off-peak hours, providing flexibility”. The charges don’t “fluctuate” unless it is meant that they have just two time zones over a 24 hour period (which are different during weekend. Off-peak is… 2100-0500 weekdays. Unless you are currently driving around 2000 or 0530, you probably don’t think this is “flexible”.  The London Congestion Charge has shorter operating hours, and although it is a flat fee, 0700-1800 weekdays provides a bit more flexibility to avoid it. 

Its program is designed primarily to raise revenue for the ailing subway network, which is desperately in need of capital renewal.  Reducing congestion and emissions matter, but it has been designed, in terms of hours of operation and scope, to raise money.  This is all very well, but lower Manhattan is hardly translatable to most other cities in the USA. I’m sceptical as to whether it will generate more than some more studies in the next five years, just because of the tendency of many engineering consultancies to simply look to “copy and paste” what is done in another city onto whatever city they are commissioned to study.  That would be a mistake and would take road pricing backwards in any city that simply commissions a quick study from people with no experience on the topic, to just “do a New York”.  This is what happened in the UK for a few years after London (although Manchester had quite a different scheme design), and nothing came of it.

The BBC article goes off-topic when it claims Oregon is “considering following suit”, by saying it is testing a “more extensive system” based on vehicle-miles travelled. No it is not. This is the OReGO program, which is testing road usage charging (RUC) as a way of charging electric and other ultra-fuel efficient motor vehicles to use all public roads in Oregon, as a replacement of state fuel taxes. It is absolutely not planned to reduce car traffic, and is not focused on cities. It is about sustainable and fair charging of light vehicles to pay to maintain the road network, and it is really important to keep these objectives distinct and different. 

I hope New York can spur wider interest in the US for congestion pricing, and not on the basis of overly simplistic drawing a cordon around a downtown area. There are a range of different solutions, depending on the definition of the problem, but regardless of what is considered, it is extraordinarily difficult to get social licence, so to speak, for congestion pricing when a key objective is not to reduce congestion and improve travel times for those that are expected to pay.

In that context the global examples worth citing as success stories are Singapore, Stockholm and the evolution of the Oslo toll ring to a congestion charge.  London as a success story lasted around five or so years.  The world is littered with studies that went nowhere. Hong Kong has been studying congestion pricing for nearly 40 years, Copenhagen, Helsinki and the Netherlands more generally have tried and failed due to public opposition.  Consider that many would perceive those cities (and country) to have enviable standards of public transport, and levels of cycling, and it is still difficult.

Congestion pricing can deliver so many potential benefits for cities, firstly by freeing up sclerotic networks that drag productivity and efficiency down, by adding to the cost of freight and the cost of services needed to make cities function.  So much is invisible, because it is not delivered by government, but electricians, plumbers, builders, painters, tilers etc, all can do less at higher cost, because of congestion, and almost none of them have any modal choice.  Road freight supplies the food, the clothing, the consumables (toilet paper!), the appliances and building materials that keep people alive and keep infrastructure maintained.  Then there are people who need cars for specific trips, either because of where they are going or what they are carrying, or more generally there is urgency in a trip, such as for medical purposes or an urgent appointment, or a flight.  Big cities work well with all modes well catered for, and operating efficiently, but buses can't always have their own lanes, and get caught up in traffic.  

Roads that enable traffic to flow efficiently help all of this, they also help contain emissions by not wasting fuel on either idling or erratic stop/start movements (this includes EVs), and improve access, as gridlocked streets hinder everyone (let alone emergency services from time to time).  It is entirely understandable and logical to seek to reduce car traffic on some city streets, because of how space inefficient they are, but cars have their place. In central London many users of the congestion charge are occasional drivers, on one-off trips for any variety of reasons (e.g., medical appointment, collecting a purchase) and the use of taxis and rideshare services reflects demand that is met by more car use elsewhere.  Road pricing can deliver significant modal shift and can reduce travel demand, but in doing so it shouldn't be seen as a tool to punish drivers, but just the application of a concept (price) to an underpriced and scarce resource - road space.

While I always encourage those seeking to promote road pricing, the record of the past 25-30 years (since technology has made electronic pricing feasible) is that it is very difficult to implement because of public acceptability.  Seeing it or promoting it as a tool to wage “the war on cars” just makes that even more difficult. 

Iceland and New Zealand: The first two countries to mandate road user charging for EVs

After many many years of others talking about it, one country has done it and another will soon follow.  On 1 January 2024, Iceland introduced mandated road user charging (RUC) for electric vehicles (EVs), Plug-In Hybrids (PHEVs) and Hydrogen powered vehicles, and from 1 April New Zealand will also do so for EVs and PHEVs.

Iceland

Iceland has launched EV RUC with a website called "Our Roads to the Future".  No later than 20 January 2024, eligible vehicles are required to have had their odometers read and recorded and transmitted to a government website or via a specific app. Those unable to use websites can go to an authorised service centre for an official reading.

The website indicates that the average petrol powered car pays ISK178,000 a year to use the roads (~US$1305) so the rate for EVs and hydrogen powered vehicles will be ISK6/km (US$0.044/km or US$0.07/mile), and for PHEVs at ISK2/km (US$0.015/km or US$0.024/mile). The lower fee for PHEVs reflect that they are still paying fuel excise for the use of petrol. Iceland presumably calculating that around two-thirds of kms driven by PHEVs is powered by petrol.

Iceland has indicated that this is a first step towards phasing out fuel taxes as a means of charging for road use, with the intention that RUC apply to all vehicles from 2025 (a distance-based tax already applies to some heavy vehicles). 

The reason given is the growing proportion of EVs and PHEVs in the vehicle fleet as illustrated by the graph below:

Proportion of private car fleet in Iceland with EVs or PHEVs

Furthermore, Iceland reports a 50% increase in distance travelled on its roads between 2012 and 2022, including a 36% increase in the number of registered cars.  On average vehicles are paying 30% less per vehicle in 2022 compared to 2012, because of the rise of EVs and PHEVs, as well as the emergence of more fuel efficient vehicles generally. 

In Iceland each vehicle owner will be invoiced monthly for distance travelled, which will be estimated based on the national average, until another odometer reading is reported after one year.  After that point motorists will be expected to supply more regular odometer readings.

Of interest is that the Icelandic Government has estimated that even after introduction of RUC, it will still be around ISK160,000 (US$1173) less per annum to drive an EV compared to an ICE vehicle, so that the impact of RUC on purchases of such vehicles is expected to be minimal. 

Some interesting stats from Iceland include:

• 75% of owners of EVs and PHEVs are located in Reykjavik compared to 64% of the population
• 64% of EV and 61% of PHEV owners are in the top three income deciles
• The highest distances travelled by residents are in those located in municipalities immediately surrounding the Reykjavik metro area, lowest by those in more rural areas.  This contradicts some concerns that distance-based charges would unfairly penalise those in rural areas.

Iceland has a population of 373,000 but has one of the highest car ownership rates per capita in the world, with a road network of 12,898km. Iceland is moderately larger than South Korea and Hungary, and smaller than Bulgaria.

New Zealand

NZ has long had a RUC system that applies to heavy vehicles and light diesel vehicles (since 1978), but an exemption for EVs was introduced in 2009 and it was done on the basis that it would be lifted once EVs reached 2% of the light vehicle fleet (which has occurred).  Following the recent change of government in New Zealand from the centre-left Labour majority government to a centre-right National led coalition government, the newly appointed Minister of Transport, Hon. Simeon Brown had announced that RUC will apply to both EVs and PHEVs from 1 April. 

Owners of both types of vehicles will get a two-month grace period to buy a RUC licence, which are available prepaid in blocks of 1,000 of kilometres (e.g. a motorist might buy 1,000 or could buy 100,000 kms, although there is a time limit on RUC expiry in the event of a price increase).  The RUC rate for EVs will be the same as light diesel vehicle at NZ$0.076/km (US$0.046/km or US$0.074/mile), but the rate for PHEVs is NZ$0.053/km (US$0.032/km or US$0.052/mile).  This reflects a calculation that the majority of PHEV distance travelled in NZ is undertaken using electricity (with the difference made up from fuel excise duty paid through petrol).

Owners of both types of vehicles will need to take odometer readings after 1 April and will have subsequent odometer readings verified through annual Warrant of Fitness (WOF) (vehicle safety) checks.

At the end of 2023, there were around 73,000 EVs registered in NZ, and around 30,000 PHEVs.  RUC in NZ is administered by the NZ Transport Agency, which receives all RUC revenue to distribute to road controlling authorities and regional councils (and itself for maintenance and development of the state highway network) through the National Land Transport Programme (NLTP).

New Zealand has a population of around 5.3 million, with one of the highest car ownership rates in the world. Its road network is around 97,000km long. New Zealand is larger than the UK and moderately smaller than Italy.

Similar to Iceland, New Zealand's government has also announced intention to phase out fuel tax as a means of charging for road use, although there is no timetable for that to be implemented. It is likely that following the EV and PHEV RUC introduction, that other ICE powered hybrids would be next to be transitioned to RUC.  That's because petrol hybrids will soon be paying the least of any cars on NZ roads, because their average fuel consumption is around half of the petrol vehicle average.

In NZ a cost-allocation model is used to inform the setting of RUC rates, based on forecasting revenues needs for the forward-looking expenditure in the NLTP, and allocating that based on various vehicle characteristics includes axle load, weight, road space occupancy, vehicle specific factors and on a flat per km basis (depending on the type of spending).  This informs setting of the entire schedule of RUC rates distinguished by weight band and axle configuration.  The light RUC rate is converted into the fuel excise duty rate for petrol, by basing it on the total vehicle kilometres travelled of petrol vehicles divided by the average fuel economy of all light petrol vehicles.  Fuel tax for petrol is then, on average, the same as RUC for light vehicles.  

As petrol hybrid vehicles generally have half the fuel consumption of the fleet average, they pay half as much as petrol vehicles per km, on average, and after 1 April 2024, they will be charged half as much as pure EVs and PHEVs.  It will be important for NZ to shift such vehicles onto RUC within the next few years.  

Does London's ULEZ expansion help or hinder better road pricing in the UK?

Greater London Ultra Low Emission Zone (ULEZ) coverage area

To say that the Mayor of London's expansion of the Ultra Low Emission Zone (ULEZ) to all of the territory of greater London under his authority has been controversial is an understatement.  For some it is a necessary response to climate change and the effects of local air pollution on public health, for others it is an impost on those who cannot afford a newer vehicles with benefits that are questionable, given that most vehicles comply with it already (hence it cannot have much of an impact).  Even Leader of the Opposition, Labour Leader Sir Keir Starmer has refused to back it.

The ULEZ started by being parallel to the London Congestion Charge in inner London, was expanded to the A406/A205 North and South Circular Roads. Its coverage of all of London includes rural areas and rural roads, as well as outer suburbs.

For a start it is important to be clear that the ULEZ is not road pricing. It is fundamentally a regulatory instrument that requires permits for vehicles that do not comply with the zone, in order to enter or drive within it. There is no relationship between the ULEZ and either the costs of providing road infrastructure or demand for it.  The fee is set at a level to dissuade use and generate revenue, and it is blunt. It doesn't matter if you drive a EURO 0 diesel van in crawling traffic beside a school or a EURO 3 petrol car at 3am on the motorway like A12 East Cross Route, you pay the same, even though objectively the local air quality impact is vastly different.  Although a vehicle scrappage scheme has been set up in parallel, owners of vehicles outside London are not eligible even though many cross into the zone.  Some categories of vehicles have exemptions, such as historic vehicles (e.g., vehicles built before 1973) vehicles registered to carry disabled people (until 24 October 2027), wheelchair accessible vehicles, drivers on specific disability benefits.  Those travelling to hospital appointments deemed unfit to use public transport can also apply for a refund. 

Vehicle scrappage scheme

All London residents can apply for up to £2,000 for scrapping a car or up to £1,000 for scrapping a motorcycle. For wheelchair accessible vehicles there is a payment of £10,000 to scrap or £6,000 to retrofit to the ULEZ standards. The scrappage scheme has been claimed by over 37,200 individuals or entities, which has cost £120m. The total budget for the scheme is £160m.  The biggest criticism of it, is that £2,000 will not come remotely close to buying a new vehicle, although it might come close to buying one that barely crosses the ULEZ standard.  However, it is unclear if the ULEZ standard advances (so EURO 4 petrol cars are no longer compliant), if people who took the £2,000 for scrapping a non-compliant vehicle, can claim it again if their latest vehicle is also non-compliant.  

ULEZ  impacts

There are a range of claims about the impacts of the ULEZ. 

Compliance rates for the ULEZ are reportedly 95% meaning the proportion of vehicles that meet the ULEZ standard. Of note, Heathrow Airport claims 7% of its employees drive non-compliant vehicles (and Heathrow is located just within the boundary of the ULEZ

The BBC claims this indicates revenue of around £23.6m per month. This is not inconsiderable, and certainly backs some claims that ULEZ is about revenue more than it is about environmental outcomes.  Van compliance is much lower than the average, with around 86.2% compliance.  However, City Hall claims it will generate no net revenue by 2026-2027, presumably as the costs of operating it are not exceeded by the fine and fee revenue generated (as it is expected few non-compliant vehicles will enter the zone). 

One claim is that ULEZ will reduce the number of cars on London roads by 44,000. Fewer cars means some people won't own a car anymore, which reduces their mobility. For some, London's ample public transport network and expansion of cycleways provide alternatives that may be reasonable for most trips, with carshare schemes plugging the gap. If people choose to give up owning a car because the cost isn't worth the benefit, and alternatives meet their needs, that's all very well, but if they are choosing to give it up because of the cost of ULEZ makes it unaffordable, it is clearly a policy measure that is pricing poorer households out of car ownership (because wealthier ones can afford a car that meets the standard).  

The Mayor of London has published a report on the first month after the introduction of the wider ULEZ. Its findings include:

• 77,000 fewer non-ULEZ compliant vehicles per month identified than before its expansion (a 45% reduction), with a reduction of 48,000 unique vehicles identified overall (which may indicate non-compliant vehicles not being used, but compliant vehicles may be used more in some cases).
• 96% of vehicles driving in Outer London meet the ULEZ standard (86% of vans).
• On an average day only 2.9% of vehicles driving in the ULEZ pay the charge, 1.7% are registered for a discount or exemption and 0.2% are issued a Penalty Charge Notice.

What isn't clear is the impacts on air quality.

What about road pricing?

Beyond extending the operating hours of the central London congestion charge, there has been no changes to policy on road pricing in London since 2011 when the Western Extension was scrapped. Mayor Sadiq Khan has claimed there are plans to introduce distance-based road pricing in London, according to the Evening Standard.  Expanding road pricing in London has been discussed for some time, but it hasn't been advanced largely because:

• Nobody (since Ken Livingstone) has been willing to spend political capital on making a cogent and consistent argument for wider road pricing across London;
• The objectives of such a scheme have not been well defined. Mayor Khan's primary transport policy objective has been around local air quality, not congestion;
• The options for road pricing across London have a significant upfront cost (in roadside infrastructure and potentially in-vehicle technology);
• Central government has been keen to leave it as primarily a local matter, and for the Mayor of London and Greater London Authority to take the risk in advancing road pricing, rather than lead from Westminster.

London's geography lends itself to two broad options for more road pricing:

• Zonal based boundaries, pricing for driving across parts of London (but not within zones). This would have the advantage of being relatively simple to understand, but would significantly disadvantage people and businesses needing to drive across multiple boundaries. In particular, businesses located adjacent to a boundary may feel aggrieved if part of their customers face a charge, which their rivals on the other side of the boundary do not.
• Distance, time, location based pricing.  This is considered by some to be the best option because it offers unparalleled flexibility, and can address issues such as "rat-running" and can be set up to encourage more use of arterial routes over local roads.

Zonal boundaries can be implemented with Automatic Number Plate Recognition (ANPR) cameras, as has  been done for the ULEZ, but depending on the number of zones (there aren't obvious boundaries in some parts of London, and borough boundaries often make little sense from a road network perspective), it would involve a lot of images and a lot of processing, to distinguish between vehicles crossing different boundaries at different times and directions.

Distance/time and location based charging (once called TDP (Time Distance Place) pricing) would require some form of telematics.  Traditionally the thought has been that devices would need to be installed in vehicles to enable this, but the options of Original Equipment Manufacturer (OEM) telematics are beginning to emerge, along with self-installed GNSS dongles that plug into EOBD (OBDII in Europe) ports in newer vehicles or even mobile phones with apps. The latter options would still require location of some ANPR cameras to ensure vehicles drove with such systems operating.

However, the key question still to be answered is why do it?

Congestion, revenue and the environment

There is little doubt that road pricing on a wide scale in London could be transformative for the city's transport networks, productivity and environmental impact.  It could significantly reduce traffic congestion by spreading demand by time of day, route and mode, and in doing so would increase the capacity of existing bus services, and increase fare revenue across public transport.  However, to improve congestion would require taking a different approach than what happened with the central London scheme. In central London much road space was reallocated to other modes, which improved access by those modes, but rendered delays for much traffic to be little better than before, after the reallocation of road space.  It is understandable in the context of reducing car traffic, but for freight traffic (which mostly has little chance for modal substitution), it means they are paying to use road space with little improvement in the level of service provided.

Wide scale road pricing should change that. If there is plenty of excess capacity that might be well used for cycleways or footpaths, then reallocation of road space could be considered (bus lanes are less important if road pricing is introduced, unless there is desire to implement bus rapid transit). 

Most of all, to improve congestion there should be targets set for improved travel times, and for a change in approach and policy regarding congestion.  For decades congestion has been seen both as a problem, but also a tool to constrain traffic growth. However, congestion is a reflection of inefficiency and a very poor use of precious space.  Having consistently flowing traffic mean there is more usable capacity, and so those that pay get a better level of service as a result.  This has rarely been part of the narrative discussed around road pricing in London.

Revenue is important, and almost always the key focus, and plenty will be generated, but it will be key to consider carefully what to do with it. It seems unlikely that Londoners will back road pricing as "just another revenue source", without it making a difference for those who pay it.  Whether it be fixing the continuing backlog of road maintenance, or fixing intersections or corridors that have historic bottlenecks or poor design affecting congestion and safety, road pricing needs a commitment that at least some of the money will be used to ensure London's roads are fit for purpose. It could support undergrounding the Hammersmith Flyover addressing resilience and revitalising public space and land for other purposes, for example.

The environment would win out of road pricing regardless, as less congestion and less motor traffic, with more use of public transport and active modes all improving local air quality and reducing CO2 emissions. So there will be overall benefits environmentally, and the social benefits should come from improving mobility of bus services and accessibility more generally, as long as pricing matches demand and capacity, and is not punitive.  

What hope is there for such pricing?

Given the backlash on ULEZ, regardless of merit, it seems likely that the political appetite to introduce wide scale road pricing in London is likely to be low, certainly before the 2024 general election. After that, the next Government may have more appetite to advance it, knowing that unless it is advanced in London, it seems unlikely to get public support to be advanced in cities or regions which have inferior public transport options.

There remains a revenue issue from electric and hybrid vehicles which isn't going away, which might be solved in the short term by imposing higher Vehicle Excise Duty on such vehicles, but it is clear the appropriate medium term answer is some form of road user charging (RUC).  

However, whether it be revenue replacement with RUC or reducing congestion with congestion pricing (and generating revenue), the fundamental problem with road pricing in the UK remains the toxicity of the politics around an issue that for too many looks like a way to extract money from road users, with little to no talk about improving either the infrastructure  (which outside the national network is in woeful condition) or improving travel times from less congestion.

Until a political leader can communicate clearly about this, and ignore Treasury resistance to hypothecation of road pricing revenues and ignore political calls to treat pricing as a tool to make driving simply more expensive and less convenient, then it will continue to languish.