The socio-economic impacts of road
pricing schemes
Assistant Professor of Economic Policy – Faculty of Social and Political Sciences, Catholic University Milan
Graduate School for Environmental Studies (ASA) - Coordinator
17-20 September 2013
My contribution to the ‘INTEGRATED
ASSESSMENT’ session
- not a technical contribution about solutions to
the atmospheric pollution problem
- but a reflection on a specific aspect of the policy
integration...
- ... knowing that policy integration is a basic
element in order to reach environmental and,
more specifically, air quality goals.
The European context
Many directives, guidelines, papers, proposals for a better
policies integration. At urban level, for istance:
European Union’s growth strategy ‘Europa 2020’
European Commission, Proposal for a Decision of the European
Parlamient and of the Council on a General Union Environment
Action Programme to 2020 ‘Living well, within the limits of our
planet’, COM (2012) 710 fin.
Communication from the Commission to the Council and the European
Parliament on Thematic Strategy on the Urban Environment, COM
(2005) 718 fin.
The specific aspect of policies
integration studied is:
- the environmental policies effects on other
sectors / fields of policies application
- in other words, we study the externalities and, in
particular, the socio-economic impacts of
environmental policies
- and, more in particular, we study the distributive
effects of environmental policies
- Which environmental policies?
- The introduction of road pricing schemes
What I mean with environmental
policies
- every policies which aims to the environmental
protection (eg. In the field of building policies,
the obligation of energy certification of
buildings)
URBAN ACCESS RESTRICTION SCHEMES (ARS)*
ARS main aim:
• 64% of towns: environment
• 35% of towns: congestion
•
1% of towns: other
* Fonte: www.accessrestriction.eu (417 european cities)
What do we mean with ‘redistributive effects’
of environmental policies?
The way income distribution changes through population
following a policy intervention
Specific case of policy intervention: the road pricing
schemes
Case study: road pricing
URBAN ACCESS RESTRICTION SCHEMES (ARS)*
4 types:
1) Point based
2) Cordon based
3) Area licence based pricing
4) Distance or time based
* Source: www.accessrestriction.eu (417 european cities)
Case study: road pricing / urban road user
charging – URUC
•
Low / now availability of italian documents, papers, etc.
•
CURACAO (european) project: it aims to identify various
impacts of URUC schems. Moreover, it studies impacts
in terms of EQUITY.
EQUITY (Giuliano, 1994): it relates to the distribution
among different groups in the society of the costs
resulting from the implementation of a scheme or policy
intervention.
Case study: road pricing / urban road user
charging – URUC
VERTICAL EQUITY and HORIZONTAL EQUITY
VERTICAL EQUITY : the distribution of impacts by income.
Whether a pricing system is equitable will largely depend on
the extent to which it is ‘progressive’, ‘regressive’ or ‘neutral’.
HORIZONTAL EQUITY (also referred to as spatial or territorial
equity): it relates mostly to impact on people living in areas
affected by a policy intervention or those who need to make
specific journeys.
Case study: road pricing / urban road user
charging – URUC
IMPACT GROUPS
Any consideration about equity implies defining impacts,
that is ‘winners’ and ‘losers’ from an Urban Road User
Charging scheme (Langmyhr, 1997).
This need to be done for each city and scheme, since
different schemes designs may have different
implications, and different cities may have differing
concerns over (perceived) inequities.
Case study: road pricing / urban road user
charging – URUC
IMPACT GROUPS: main kind of categorisations

Groups based on economic status

Groups based on demographic status

Groups based on geographical status

Groups based on transport use (or status)
(categorisations not mutually exclusive)
Case study: road pricing / urban road user
charging – URUC
IMPACT GROUPS
1)
GROUPS BASED ON ECONOMIC STATUS
• Closely related to the concept of vertical equity
•
•
Households are categorised into a series of income bands,
and comparisons are made of the differences in impact on
those income bands.
Do higher income groups pay more for using the service
provided or is there a mechanism to ensure that, for
example, the users who cause the most pollution or
congestion pay the most for using the facility?
Case study: road pricing / urban road user
charging – URUC
IMPACT GROUPS
1)
GROUPS BASED ON DEMOGRAPHIC STATUS
• This includes factors of household size, number and age
of children and number and age of elderly residents.
• People who are often considered the most vulnerable
within society include: children, young adults, unemployed
people, people in low paid work, people from minority
ethnic communities, disabled people, older people.
• For example: children will not incur road user charges
themselves, but parents needing to transport young
children may be less able to avoid such charges.
Case study: road pricing / urban road user
charging – URUC
IMPACT GROUPS
GROUPS BASED ON GEOGRAPHIC STATUS
It concerns the location of a household or of the activities which
it undertakes. Principal groups are:
• Car users who travel in and out of the charging zone
• People who are located, often resident, inside the
charging zone;
• People who are located, often resident, outside the
charging zone;
• Public transport users who travel in and out the charging
zone.
Case study: road pricing / urban road user
charging – URUC
IMPACT GROUPS
GROUPS BASED ON TRANSPORT USE (OR STATUS)
This principally concerns the journeys made, their length, timing
and the mode used. Main groups identified by travel activity are:
• by mode, with car users being adversely affected, while
bus users, cyclists, pedestrians benefiting from URUC
• by movement, with journeys (by car) in and out of the
charged area, journey wholly within and wholly outside
• by time of day, with journeys within the charged period
being adversely affected
• by journey purpose, since this will to some extent
influence the availability of an alternative timing.
1)
Case study: road pricing / urban road user
charging – URUC
WHAT ARE THE REDISTRIBUITVE EFFECTS OF A
ROAD PRINCING POLICY?
IT’S NOT POSSIBLE TO ANSWER DISREGARDING THE SPECIFIC
CASES. Each proposed road pricing scheme should probably be
judged on its own merits, geographical location and factors.
Generally speaking, the limited evidence from studies suggests that
‘horizontal inequities’ depending on geographic, demographic or
transport status are more important / significant than ‘vertical
inequities’ depending on economic status.
We have seen that the range of impacts will depend, above all, on:
the urban access restriction scheme ‘design’/form
the population socio-demographic caracteristics
Habits/needs of travel
Case study: road pricing / urban road user
charging – URUC
WHAT ARE THE REDISTRIBUITVE EFFECTS OF A
ROAD PRINCING POLICY?
NOT POSSIBLE TO ANSWER DISREGARDING THE SPECIFIC CASES
Eg. Research conducted in Paris:
- When impacts were considered in terms of percentage of
individuals’ income, it was found that all nine scenarios
studied were regressive, since lower income drivers were
disproportionately affected.
But if we look at the facts:
- High income motorists are less inclined to be deterred
from driving as a result of the imposition of a toll; by
consequence they tend to continue with tolled motoring.
Case study: road pricing / urban road user
charging – URUC
WHAT ARE THE REDISTRIBUITVE EFFECTS OF A
ROAD PRINCING POLICY?
NOT POSSIBLE TO ANSWER DISREGARDING THE SPECIFIC CASES
IN SOME CASES, ROAD PRICING IS EVEN USED AS A TOOL TO
REDUCE ‘INEQUITIES’
Es. New York, where situations of ‘inequities’ do exist in itself:
-
Afro-american are over-represented among those with a commute
of more than 50 minutes.
- Daily commute in excess of one hour each way:
- 64% of earners of 35.000$/year or less
- 6% of earners of 75.000$/year
Case study: road pricing / urban road user
charging – URUC
WHAT ARE THE REDISTRIBUITVE EFFECTS OF A
ROAD PRINCING POLICY?
NOT POSSIBLE TO ANSWER DISREGARDING THE SPECIFIC CASES
California:
Researcher studied the frequency with which drivers from different income
groups used the tolled Express Lanes provided on Highway SR-91.
They found that behaviour was less related to income, and more
related to the amount of flexibility that drivers had in their personal
schedule, and the availability of alternative routes.
Similar research featuring San Diego’s I-15 HOT Lanes concluded that
higher-income drivers were more likely to use the priced lanes than
other lanes, but that lower-income drivers did use these lanes.
Case study: road pricing / urban road user
charging – URUC
WHAT ARE THE REDISTRIBUITVE EFFECTS OF A ROAD
PRINCING POLICY?
Economic
Economic
advantages disadvantag.
High-income
people (hp:
they do not
change mean of
transport)
Low-income
people (hp:
they change
mean of
trasnport)
/
Social
advantages
Road charge to Less time consumed
pay, unless
in the traffic
exceptions are
introduced
They pay less Road charge to Possible
pay*, unless
investments in
exceptions are public transport
introduced
Community
/
Social
disadvantages
/
* People who cannot change the scheduled time
Clain air, less noise
pollution, less health
expenditure
Means of transport
more crowded,
transfers are more
time-consuming
(than car)
Case study: road pricing / urban road user
charging – URUC
HOW MIGHT ROAD PRICING ADVERSE EQUITY
EFFECTS BE REDUCED?
A) Modifying scheme design to overcome localised
adverse impacts
B) Reducing charge levels and introducing subsidies and
exemptions
C) Adopting complementary measures
Case study: road pricing / urban road user
charging – URUC
HOW MIGHT ROAD PRICING ADVERSE EQUITY
EFFECTS BE REDUCED?
A) Modifying scheme design to overcome localised
adverse impacts
i.e., changing the location of a cordon to avoid areas where
people have fewer alternative travel options, and limiting
the operating hours to times when alternatives are readily
available and users have more freedom to choose how
they travel.
Case study: road pricing / urban road user
charging – URUC
HOW MIGHT ROAD PRICING ADVERSE EQUITY
EFFECTS BE REDUCED?
B) Reducing charge levels and introducing subsidies and
exemptions
Reducing the charge level: the simplest approach but beyond a certain
point this will reduce the effectiveness of the scheme.
Reducing the charge level for certain users (i.e. London). More complex
options are also possible. I.e. (in literature) is considered the
allocation of free permits, which allows all users a limited basic level
of road use at charged times. But, such subsidies will add to the
complexity and costs of operating the scheme.
Exempting certain users. This has been done in most schemes for
disabled drivers, and for essential services such as emergency
vehicles. Once again, such exemptions add to the cost of operating
the scheme.
Case study: road pricing / urban road user
charging – URUC
HOW MIGHT ROAD PRICING ADVERSE EQUITY
EFFECTS BE REDUCED?
C) Adopting complementary measures
Improvement of public transport
i.e. In London and Stockholm, bus service improvements are targeted to
the corridors on which car users are most likely to seek alternatives, or where
more low income residents live.
Improvements to walking and cycling can also assist.
In the case of London (and Milan) any surplus from revenues raised from
Congestion Charge was required, by law, to be invested in the town’s transport
system. The aim was to raise 1.3 billion during the fast 10 years of operation.
Case study: road pricing / urban road user
charging – URUC
HOW MIGHT ROAD PRICING ADVERSE EQUITY
EFFECTS BE REDUCED?
THE END USES of REVENUES ARE of PRIMARY IMPORTANCE
Which uses for revenues from road pricing?

To directly fund improvements in public transport

Different subsidies

To fund reductions in public transport fares (the main beneficiaries
are people using public transport more)

To fund a reduction in income tax (in this case, high-income
individuals are the main beneficiaries)
MAIN REFERENCES
- The CURACAO Consortium, Final Report, April 2009, Coordination
of Urban Road User Charging Organisational Issues
- www.transport-research.info)
- www.isis-it.net
THANKS FOR YOUR ATTENTION
ILARIA BERETTA
ilaria.beretta@unicatt.it