1. delivering results that endure Road Congestion Pricing A Global Perspective Mark Streeting St Lucia Golf Club Brisbane 16 November 2007

2. With a globally expanding population and increased car usage, congestion is an urgent issue for both consumers and governments As economies grow, demand for travel rises steeply Rail and air journeys have seen enormous increases in passengers over the last few years Passion for motor cars continues to grow including developing countries such as China and India The growth in vehicle use is leading to mounting congestion worldwide Investment in road networks continues, adding much needed capacity on some of the busiest roads. Increasing capacity will only tackle congestion for so long - building new roads is not an answer, practically or environmentally We associate cars with freedom and choice, but if we fail to tackle congestion, soon freedom and choice will no longer exist More radical approaches are required to get the best out of our road networks

3. Motorists are becoming more receptive to road pricing as necessary to tackle many of the problems faced when travelling For congestion charging schemes to be successful, they must be acceptable to the public – acceptable in terms of cost, privacy and the benefits they bring Congestion is not only an irritation and concern for drivers, it is a problem which can have a major impact on economic competitiveness and environmental performance The UK RAC Report on Motoring 2006 showed “the modern motorist recognises the scale of the problem and the need for radical action, provided that there is ‘give’ as well as ‘take’.” Of motorists surveyed in the UK, over two-thirds (68%) believe that much tougher measures are needed to resolve the problems of congestion and 40% are in favour of congestion charging These figures suggest the debate is moving from “why is road pricing necessary?” to “how is road pricing delivered?” The acceptability of road pricing may depend on the provision of reliable and affordable alternatives

4. With public sentiment shifting we can leverage the well established economic arguments for urban road pricing Economic Rationale For maximisation of the economic efficiency of the transport system:  User charge = Marginal Externality Costs (MEC) associated with trip For maximisation of the economic efficiency of the transport system:  User charge = Marginal Externality Costs (MEC) associated with trip Marginal Private Costs (MPC) + Marginal Externality Cost (MEC) = Marginal Social Cost (MSC) Fares Fuel duty Charges Vehicle, Operations, Maintenance Congestion (other road users) Environmental Road Operations, Maintenance (bus) Accidents (some) User economies of scale Congestion (other road users) Environmental Road Operations, Maintenance Accidents (some) Externality Costs Travel time (access/ egress, wait time and in-vehicle time) Travel time Vehicle running costs Accidents (insurance) Parking Private (internal) Costs Car Use PT Use

5. Estimated Marginal Externality Cost by Mode, Auckland, Off-Peak Period The relationship between user charges and marginal externality costs enables some strong conclusions to be drawn Estimated Marginal Externality Cost by Mode, Auckland, Peak Period Source Booz Allen Hamilton (2005) Note: The net car and bus external cost makes provision for the ‘Mohring effect’. For both car and bus, the marginal user reduces average traffic speeds and hence the number of severity of road accidents. In addition, for bus, the required increases in bus service frequency to meet additional demand reduces average waiting time for existing passengers

6. We can readily identify the implications of adopting a (‘first best’) efficient pricing policy Car use charges should increase in peak and off-peak periods Desirably charges related closely to congestion costs (in time and space) Public transport fares should increase in the peak period and decrease in off-peak Align car / public transport prices to MEC Likely financial impacts Substantial revenues raised from car users Public transport cost recovery also likely to increase Likely mode share impacts Peak: no dramatic changes (maybe some switch to public transport) Off-peak: significant switch from car to public transport

7. We can also identify the implications of adopting an efficient ‘second best’ pricing policy ‘Second-best’ approach results in excessive transport use (cars and public transport), as all users paying less than economic costs This could be an alternative to the ‘first best’ policy with road pricing: But less desirable economically, and requires much greater public subsidy to the urban transport system ‘Second-best’ approach results in excessive transport use (cars and public transport), as all users paying less than economic costs This could be an alternative to the ‘first best’ policy with road pricing: But less desirable economically, and requires much greater public subsidy to the urban transport system Off-peak public transport fares Migrate to ‘free’ fares? Otherwise similar to current pricing regime Likely mode share impacts Similar to ‘first-best’ pricing Peak: no dramatic changes Off-peak: some significant switch to public transport Likely financial impacts Increased public transport deficits and public funding requirements

8. Congestion charging schemes have been studied, piloted and implemented, with varying success, in numerous global locations Piloted China – Hong Kong USA – Portland Germany - Stuttgart China – Hong Kong USA – Portland Germany - Stuttgart Implemented UK – Durham, London Norway – Bergen, Oslo, Trondheim Sweden – Stockholm Italy – Rome Malta Singapore UK – Durham, London Norway – Bergen, Oslo, Trondheim Sweden – Stockholm Italy – Rome Malta Singapore Studied UK – Cardiff, Edinburgh, Manchester Denmark – Copenhagen Finland – Helsinki Italy – Genoa Netherlands Czech Republic – Prague New Zealand – Auckland, Wellington USA – San Francisco, Seattle China - Shanghai UK – Cardiff, Edinburgh, Manchester Denmark – Copenhagen Finland – Helsinki Italy – Genoa Netherlands Czech Republic – Prague New Zealand – Auckland, Wellington USA – San Francisco, Seattle China - Shanghai

9. Global developments in congestion charging in over 30 years 1970s: Singapore cordon charge, full electronic road pricing (ERP) in 1996 1986: Bergen, Norway, toll ring 1990-2003: Oslo, Trondheim and other Norwegian cities adopt toll rings 1995-96: Southern California high occupancy toll lanes(I-15, SR-91) 2000: Congestion pricing of NY bridges 2002-2004: Swiss, Austrian truck tolls 2004: London cordon charge 2005: Germany tolls autobahn trucks 2006: Stockholm congestion charge 2005: Minnesota, Colorado HOT lanes

10. delivering results that endure Case Studies

11. A number of congestion charging schemes have been successfully implemented in the UK, the first being Durham Durham Reduction of 85% in vehicular traffic – from over 2,000 to 200 vehicles per day Source: Transport for London, Central London Congestion Charging, Impacts Monitoring, Fifth Annual Report, July 2006 Location: Durham Introduced: 2002 Type: Cordon Price: ₤2 Times: 10am – 4pm Mon to Sat Technology: Manual payment machine on exit Location: Durham Introduced: 2002 Type: Cordon Price: ₤2 Times: 10am – 4pm Mon to Sat Technology: Manual payment machine on exit United Kingdom Reduced vehicle emissions 10% increase in pedestrian activity – each day between 13,000 to 19,000 pedestrians use the same stretch of road, which is only wide enough for one vehicle at a time Majority of businesses (83%) have not altered their servicing arrangements following the introduction of the charge 70% now believe the charge is a good idea and 78% consider Durham to be a safe place to visit Revenues are used to support a frequent bus service to and from the charging area Durham County Council has recently been awarded funding from the Department of Transport to examine the potential of extending the existing charging zone

12. London successfully implemented the largest congestion charging scheme in the UK in 2003, with a recent extension and price raise in 2007 London Congestion charging in London has contributed directly to the achievement of four transport priorities: Reduce congestion Make radical improvements to bus services Improve journey time reliability for car users Improve efficiency of goods and service distribution United Kingdom In 2006/07 the scheme generated revenues of ₤123 million, which have been spent on transport improvements across London, in particular on improved bus services Congestion in the charging zone reduced by 30% Traffic levels reduced by 18% 30% reduction in number of cars and 65,000 fewer car movements 20% increase in movements by buses, coaches and taxis Increase of 29,000 bus passengers entering zone during morning peak Bus reliability and journey times improved – bus routes serving charging zone experience 60% less disruption due to traffic delay Location: London Introduced: February 2003 Type: Fixed fee cordon Price: ₤8 Times: 7am – 6.30pm Mon to Fri Technology: CCTV and ANPR on entry and exit Location: London Introduced: February 2003 Type: Fixed fee cordon Price: ₤8 Times: 7am – 6.30pm Mon to Fri Technology: CCTV and ANPR on entry and exit

13. Following a successful trial in 2006, Stockholm has decided to go ahead and implement congestion charging in the city Stockholm All costs for the trial were met by the national government, with a total budget of ₤270 million Primary objectives were to reduce congestion, improve the environment & increase accessibility Sweden These objectives were essentially met, and, in some cases, exceeded during the trial: Reduce congestion by 10-15% - Congestion was reduced by 20-25% Increase accessibility – Queue times were reduced by 30-35% in/near the city Decrease emissions – emissions fell by 10-14% in the city and 2-3% in the county The current government has decided to use revenues for new roads rather than public transport After the first month of operation, numerous achievements were made: Traffic at cordon points reduced by 25% - 10,000 vehicles per day Train and transit passengers increased by 40,000 per day Congestion during peak hours dramatically reduced No major re-routed traffic problems Parking fines reduced by 29% Location: Stockholm Introduced: 2007 (trial in 2006) Type: Cordon-based variable Price: 80p to ₤1.60 based on time Times: 6.30am – 6.30pm Mon - Fri Technology: Electronic Toll Collection (ETC) using microwave technology, supported by ANPR Location: Stockholm Introduced: 2007 (trial in 2006) Type: Cordon-based variable Price: 80p to ₤1.60 based on time Times: 6.30am – 6.30pm Mon - Fri Technology: Electronic Toll Collection (ETC) using microwave technology, supported by ANPR

14. Norway has one of the longest histories of road pricing, with a central cordon-zone introduced in Oslo in 1990 Oslo The main aim of the scheme was to raise funds for road investments, but some contribution is also made to public transport An initial investment of 250 million NKr was exceeded by revenue of 750 million NKr in first year of operation Norway Current revenue is approximately 1 billion NKr with operational costs 10% of total revenue In addition to raising funds, the Oslo ring has: Reduced delay due to the removal of bottlenecks Reduced overall traffic by 3-5% Increased public transport usage by 6-9% Made road space above ground available for other uses Removed barrier effects from the surface street network Reduced noise from above ground traffic Less pollution Improved traffic safety Location: Oslo Introduced: 2007 (trial in 2006) Type: Central zone cordon Price: 20Nkr & 40NKr weight- based Times: All times Technology: AutoPASS – electronic payment collection system Location: Oslo Introduced: 2007 (trial in 2006) Type: Central zone cordon Price: 20Nkr & 40NKr weight- based Times: All times Technology: AutoPASS – electronic payment collection system

15. Singapore has successfully operated a road pricing scheme to reduce congestion for over 30 years The main objective of road pricing in Singapore is to reduce congestion, followed by encouraging use of public transport, car pooling and use of alternative routes and travel times Traffic in the CBD zone is reduced by 13% during charging periods Scheme generates revenue for roads and public transportation Singapore Road pricing in Singapore has curbed traffic demand and managed road space for highest productive capacity, cutting congestion, pollution, GHG emissions and fuel use Annual revenue is $80 million with operating costs of $16 million The main achievements of road pricing in Singapore are: Reduction of nearly 25,000 cars during peak times and an increase in average traffic speed of approx. 20% Total vehicles using the roads in the RZ has reduced from 270,000 to approx. 235,000 Car pooling has increased and fewer solo motorists drove in the RZ Many vehicle trips have shifted from peak to non-peak times ERP has been effective in maintaining a speed range of 45 to 65 km/h for expressways and 20 to 30 km/h for major roads Location: Singapore Introduced: 1975 Type: Cordon-based variable Price: Varies based on vehicle type Times: 7.30am – 7pm CBD; 7.30am – 9.30am expressways/ outer ring roads Technology: On Board Unit and smartcards with overhead gantries Location: Singapore Introduced: 1975 Type: Cordon-based variable Price: Varies based on vehicle type Times: 7.30am – 7pm CBD; 7.30am – 9.30am expressways/ outer ring roads Technology: On Board Unit and smartcards with overhead gantries

16. Road pricing is a cornerstone of 21 st century congestion management strategies, but cannot – on its own – be a solution Road pricing must be complemented by a comprehensive strategy surrounding supply (roads, public transport, walking/cycling) and management (network maintenance, optimal regulatory environment, high quality information systems) Road pricing can form a core part of a comprehensive congestion management strategy by: Placing value on a scarce resource Reallocating road space at peak times by changing demand patterns, reducing congestion Increasing the relative competitiveness of public transport compared to private motoring Reducing net costs for freight movement Reducing emissions from road traffic by improving traffic flow Allowing charges for transport use to be better aligned towards costs Road pricing also generates revenue that can be used to: Fund additional capacity Improve the quality and management of existing capacity Fund alternative modes Reduce other taxation on road users or general public

17. If congestion relief is to be adequately addressed, it needs to be approached in an integrated way Transplanting solutions adopted elsewhere is unlikely to succeed, as city geographies, demographics and transport conditions can vary wildly Some cities have inadequate or incomplete road networks, some have inadequate public transport systems and others already have significant amounts of road tolling A strategy for congestion relief needs to be led by an understanding of the problem, defined by when and where it happens, and monetising it to calculate what the costs are that motorists impose on society at different places and times Understanding needs to lead some key objectives, based on metrics developed for local conditions Metrics should take into account economic efficiency and ensuring that congestion AND the measures to relieve congestion do not impose net costs on the local economy

18. When implementing road pricing, there are some key points to take into account Understand your problem Develop strategic objectives Identify and appraise options Design a scheme for local conditions and the local problem Identify complementary initiatives and evaluate the impact of the package on the economy and communities from economic, social and environmental perspectives Work with various stakeholders to get their viewpoints, compromises and buy-in on use of revenue Consult on the whole package, understanding the overall impacts and effects Congestion management is a dynamic, not static, exercise Implement with a smart procurement strategy and be open about the best governance approach Ensure relevant bodies have the appropriate powers and means to implement road pricing Be mindful of the longer term, as technology, congestion, economic growth and urban form development all influence the evolution of cities Road pricing is a dynamic solution to a dynamic problem

19. Taking into account the lessons learned in Durham and London, Manchester was able to implement a better focused scheme The scheme targets motorists on the busiest routes at peak times during weekdays The scheme involves setting up two rings of charging points around the city centre and only charging if a journey takes the traveller across one of the charging points The proposed charges between 7 – 9.30am are ₤2 to cross the outer ring and ₤1 to cross the intermediate ring, and between 4 – 6.30pm are ₤1 to cross the intermediate or outer rings Occasional users will be able to pre-pay before passing active charging points, whereas regular users would register to a franchised agent and payment would be debited as the car passes an active charging point, which would automatically read a special tag placed inside the car’s windscreen Cars that do not pay the charge or have a valid tag will be captured by the cameras and the registered vehicle owner will be responsible for paying the charge “The Manchester scheme looks like a significant improvement on the unpopular and inflexible London congestion charge. Whereas the London scheme operates all day, the Manchester proposals include a six and a half hour charge-free window in the middle of the day” Dr Helen Hill, London Chamber of Commerce “The Manchester scheme looks like a significant improvement on the unpopular and inflexible London congestion charge. Whereas the London scheme operates all day, the Manchester proposals include a six and a half hour charge-free window in the middle of the day” Dr Helen Hill, London Chamber of Commerce

20. delivering results that endure Booz Allen Hamilton (Australia) Ltd. Level 35, 123 Eagle Street Brisbane QLD 4000 Australia Tel +61 (7) 3230 6400 www.boozallen.com.au For more information contact: Name: Mark Streeting Tel: +61 (7) 3230 6401 Email: streeting_mark@bah.comstreeting_mark@bah.com