Wednesday 31 January 2024

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. 

Wednesday 24 January 2024

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 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.  

Tuesday 23 January 2024

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.