Then and Now The Evolution of Congestion Pricing in Transportation Where We Stand Today Martin Wachs, Director Institute of Transportation Studies University of California, Berkeley

Critical Question for the Symposium QUESTION: Has road pricing finally entered, or is it at last about to enter, the main stream of transportation planning & policy? ANSWER: Not quite yet; but on the verge Road pricing at a critical juncture in both North America and Europe

The Idea is 83 Years Old A. C. Pigou proposed road pricing in 1920 Frank Knight elaborated in 1924 Similar forms of pricing used in other applications than roads for decades

Pigou on Congestion Pricing in 1920: Suppose there are two roads, ABD and ACD both leading from A to D. If left to itself, traffic would be so distributed that the trouble involved in driving a “representative” cart along each of the two roads would be equal. But, in some circumstances, it would be possible, by shifting a few carts from route B to route C, greatly to lessen the trouble of driving by those still left on B, while only slightly increasing the trouble of driving along C. In these circumstances a rightly chosen measure of differential taxation against road B would create an “artificial” situation superior to the “natural” one. But the measure of differentiation must be rightly chosen.

The Timing is Interesting 1920’s was period of fastest growth of automobiles Major needs in Europe and USA for intercity roads Oregon adopted hypothecated (earmarked) motor fuel tax in 1918 Legislatures PREFERRED tolls, but they were defeated on practical grounds

Motor Fuel Tax was Adopted as Second Best Solution Whether hypothecated (USA) or not (Europe) Tolls were seen to be superior and more flexible Tolls were “put off” until collection mechanisms could be perfected

For Eight Decades Economists offered arguments for congestion pricing based mostly on efficient management of investments in roads……but…. Fuel taxes produced adequate revenue Costs and complexity of collecting tolls continued to be issues……and….

For Eight Decades Political opposition to paying for road use through BOTH taxes and tolls Equity is always politically more difficult than efficiency, and equity is the issue most widely raised This opposition is still an issue…..but…at least in North America…..

Some Major Factors have Changed Revenue is falling from traditional method of taxing motor fuels…..revenue need may be more important in practical terms than efficiency goals of pricing Propulsion technology is reducing the long term viability of fuel taxes as a surrogate for tolls

Some Major Factors Have Changed Electronic toll collection can now reduce cost and complexity of toll collection Opposition to and cost of new capacity expansion have grown, making efficiency more important Opposition persists to paying tolls on roads already paid for by fuel taxes

Back to the Future? Underlying issues are similar to 1920’s… revenue shortages User fees seem reasonable & appropriate But now…..tolls easier to collect, electronically Fuel tax promises to be less useful in the future

When are New Policies Adopted? When their benefits are narrowly focused and their costs broadly distributed When there are many different interests supporting their adoption and few opposing them Technology, revenue needs, may now be changing this calculation

Curbing Gridlock Study TRB study committee of 15 experts Aided by many authors and a symposium like this one Recommendations guardedly optimistic but not enthusiastic

Findings from “Curbing Gridlock” Study Report of 1994 Congestion pricing would cause some motorists to change their behavior  Congestion pricing would result in a net benefit to society  Congestion pricing is technically feasible  Institutional issues are complex but can be resolved  All income groups can come out ahead given an appropriate distribution of revenues

Findings from “Curbing Gridlock” Study Report of 1994  Some motorists would lose  Congestion pricing would reduce air pollution and save energy  The political feasibility of congestion pricing is uncertain  Evaluation of early projects is crucial A An incremental approach is appropriate

Study Recommendations Some aimed at federal policy Some aimed at states Some aimed at research Summarized in Resource Paper Most important outcome may have been support for the federal pilot program, which was reauthorized in TEA-21

Progress in Past Decade Facility pricing in the USA vs. area pricing in Europe HOT lanes…SR 91, I-15 and growing Proving efficiency and effectiveness of electronic toll collection…also building public acceptance of tolls Prospects growing in many metro areas

What Does the Future Hold? Few North American applications for area pricing More applications to facilities Most applications will be on new capacity Specialized facilities: HOT lanes, bridges, bottlenecks, truck-only lanes

What Does the Future Hold? Revenue use critical to perception of equity decline of motor fuel basis of road user fees is inevitable; congestion pricing is not Prospects are improving