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Road pricing

From Academic Kids

Road pricing is a generic term for charging for the use of roads using direct methods, charging the users of a specific section of the road network for its use. Examples include traditional methods using toll booths such as turnpikes and toll roads, as well as more modern schemes employing electronic toll collection such as the London Congestion Charge, Singapore's Electronic_Road_Pricing, the Trondheim Toll Scheme, the Highway 407 bypass of Toronto, Ontario and high-occupancy toll lanes (such as SR-91 in Orange County, California and Interstate 15 in San Diego, California). It is in contrast to indirect charges such as gas taxes, or other types of taxes.

The aims of road pricing are several. The most obvious is financing: raising money to pay back the construction of the road or to build new facilities. This may become more important in the future if gasoline is replaced as a source of fuel for automobiles by hybrid vehicles or alternative fuel vehicles (such as fuel cells) which consume little or no gasoline and thus don't generate gas tax revenue. A second aim is management, by varying charges by time of day (sometimes called congestion pricing or value pricing), users can be discouraged from making trips during the peak times and encouraged to travel in the off-peak, thus balancing flows and reducing congestion loss. In the absence of pricing, individual drivers do not consider the congestion costs they impose on others. Similarly, by varying charges by location (like the London Congestion Charge), travelers can be dissuaded from driving to a specific place. A third aim is to discourage driving altogether, which is often supported by environmentalists.

A fourth aim, more applicable to rural areas, is to directly charge for any public bad that arises from use of a road, for example, charging more for use of roads that enable poaching, illegal logging, and even road accidents. This aim is shared by some schemes of pay at the pump automobile insurance, which may apply a higher charge near roads with more accidents. It is thought that these measures engage more people in watching and preventing these activities, reporting unsafe vehicles and impaired driving, as they increase road use price under these schemes, making these "everyone's problem".

The disadvantages of road pricing are largely related to perceptions of fairness. By charging for something that was once "free" it may be seen as unfair. The burden falls more heavily on the poor drivers than the rich. (Though this should be compared with the burden of other financing systems, such as the gas tax, which is also regressive). New toll roads in a largely free system may be seen as punishing one area when others don't pay for roads. Proponent of pricing would counter the fairness or equity argument by stating that prices create choices, and choices are fair because people are not identical, sometimes people have high values of time (e.g when they are late for an appointment), sometimes they have lower values of time (e.g. when they are enjoying the drive). The proponents would thus suggest that making all drivers pay the same tax to receive the same service isn't fair if people aren't the same.

Another important question is what is done with the revenue. Marginal cost pricing, which economists favor, often raises more money than is needed for the road itself. The revenue can be used to offset gas taxes, to pay for public transport, or to build new infrastructure, among other uses.

European application

Facing rising levels of congestion, European governments are giving serious consideration to nationwide road pricing schemes which would exploit the new Galileo satellite positioning system. Every vehicle would have to contain a satellite tracking device which would determine which roads were being driven along, for how far and at what time of day. This information would then be sent to a central computer system.

This system is already being tested (http://www.cfit.gov.uk/congestioncharging/factsheets/lorry/) on trucks (lorries) in Germany by the company Toll Collect. Under the scheme, lorries pay between €0.09 and €0.14 per kilometre depending on their emission levels and number of axles.

In the UK, the Labour government will introduce a lorry charging scheme based on the German trial. Extensive studies are also being done (http://www.dft.gov.uk/stellent/groups/dft_control/documents/contentservertemplate/dft_index.hcst?n=10676&l=1) on introducing a scheme for ALL vehicles, with an aim to implementation around 2013. This scheme would see a charge being levied per kilometre depending on the time of day, the type of vehicle and the road being driven along. For example, a large car driving along the western section of the M25 in rush hour would probably pay the highest charge; a small car driving along a rural lane would pay a much lower charge. It is expected that rural motorists would benefit the most from such a scheme, probably paying less through road pricing than they do at present through petrol and car taxes, whereas urban motorists would pay much more than they presently do.

It is important to note that such a scheme could be either be designed to be revenue neutral or congestion neutral. A revenue neutral scheme would replace petrol and vehicle taxes, and would be such that Treasury revenue under the new scheme would equal the revenue from current taxes. An congestion neutral scheme would be designed so that growth in traffic levels would stop as a result of the new charges; the latter scheme would require significantly higher charges than the revenue neutral scheme and so would be unpopular with the UK's 30 million motorists.

It should also be noted that the current government did not originally float the idea of road user pricing for all UK vehicles; the previous Conservative government were also studying the idea in the 1980s; any governing party will generally find that congestion is unavoidable without some form of price restraint being applied in the future.

See also

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