Congestion

I’m lucky in many ways. A wonderful woman, a decent job, financial comfort, a future with change and challenges and excitement – I tick a lot of boxes in the big-picture survey of Life. But I am also lucky in a much smaller, more mundane way – I don’t drive, and thus avoid traffic jams and their less dramatic cousin, road congestion. I want to use this post to work through some of my thinking on the issue of congestion and road pricing. I am no expert, so any comments and corrections are most welcome.

Some quick figures for you. In 1999, the Bureau of Transport Economics found that congestion cost Australians $12.7 billion a year. I don’t know what the current exact amount is, but that figure was projected to increase (even with infrastructure investment) to almost $30 billion by 2015. Those amounts do not include noise pollution, accidents, air pollution, CO2 emissions, etc. It’s just the straight-out cost of having too many cars and trucks competing for road space.

The reasons for congestion are many – centralised design of cities (CBD + suburbs, with minor variations), unhealthy obsession with road transport over alternatives (by governments of all stripes), inadequacy of public transport (in scope, concentration, convenience, cost, and innovation), skewed incentives for road users, planning restrictions, just to name a few.

None of them are easy to fix. But there are some ‘no-regret’ steps that can be taken – that is, they are positive in their own right, as well as achieving a policy goal. The best one for road congestion is reforming our complex, inefficient and unfair road-usage charges. They are typically not thought of as such, but registration and the fuel excise are methods of cost recovery. They do so very inefficiently – registration is the same whether you drive 500km a day, or 500km a year. Fuel approximates a charge for driving, but doesn’t distinguish between urban and rural driving, the time of day you drive or the type of road you use.

When I say they are inefficient, what I mean is that costs are not paid by by those creating them, or insufficiently so. That distorts people’s behaviour, and therefore resources aren’t put to their best use. It creates externalities – consequences for others outside the activity. Congestion is a negative externality of driving (remember your driving makes congestion for others – you can’t congest yourself – and they make congestion for you).

The economic discussion about road pricing started in the 1920s with Pigou, appropriately enough, who defined the concept of externalities. The idea is that a toll is charged during times of high congestion so as to reduce the number of vehicles on the road at that time. It can be thought of as a charge for the negative externality. It would mean drivers would bear a cost closer to the true value of their actions, and change their behaviour accordingly. Those who could, would drive at other times, smoothing out the peak hour. Those that could not, would benefit from faster trip times in compensation.

London’s now-famous scheme is not really a congestion charge, it’s more of an admission charge, but it’s had very similar effects. The NSW government’s recent announcement in the mini-budget of a varying toll for the Harbour Bridge according to the time of day also looks like a congestion charge, but it’s not – it’s more of a slug to the North Shore. The differences in price ($2.50 off-peak, $3 shoulder, $4 peak) are not enough to make people change their habits much at all. It only applies to the Bridge, not other entrances to the city or other congested roads – in fact, the M4 and M5 will continue to have their tolls subsidised, in flagrant contradiction.

What Sydney needs is more tolls, ones that replace other revenue-generating devices. If we are serious about doing something about congestion, we need collection points at all major entrances to the CBD – Harbour Bridge, Anzac Bridge, Bridge Road (just after Wattle) Eastern Distributor (just after Cleveland), Parramatta Road (at Victoria Park), City Road (at Victoria Park), Oxford Street (at Taylor Square), Anzac Parade (after Cleveland), maybe Bourke and Elizabeth streets and others. The tolls need to vary widely, eg from free midnight-6am to something on the order of $8-$10 in peak hour, with intermediate steps. It’s important that the tolls are completely unsubsidised (and the M4 and M5 subsidies are abolished), but the fuel excise (and/or registration fee) is reduced by a commensurate amount. I’ve swept various problems under the rug, like everyone in Sydney needing an e-tag, and what to do with visitors, but these have been addressed by many other people and governments, and they are definitely not insurmountable.

Once the CBD is sorted, the scheme should be expanded to the other centres like North Sydney and Parramatta, as well as roads that suffer from high congestion, like King Street. A national system would mean private tollways could really get going, reducing the need for government-provided roads. That last one might not be to everyone’s taste, but perhaps I should leave that for another post.

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