Overview on Interurban Road Pricing

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Overview on Interurban Road Pricing

• Going from A to B against a fair price

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It leads to more and better roads and therefore
to more economic growth
It is just a new way of filling the treasury
It enhances the choices of the consumer
It is the solution to make cars cleaner
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Interurban Road Pricing content

• What is interurban transport?
• Why do we want to implement Interurban Road
  Pricing?
• State of the art
• The economic perspective searching for the best
  implementation paths
• The technological perspective searching for an
  electronic breakthrough
• Gaining Social Acceptance leads to less optimal
  implementation paths
• Conclusions on implementing Interurban Road
  Pricing?

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What is interurban road transport?The majority
of EU mobility

• All trips gt 15 km
• Passenger appr 80 of all car km.
• Freight gt 90 of all tonkm
• Increasing share, especially 80-250 km category

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Reasons behind Interurban Road Pricing (IRP)

• Need for new (road) infrastructure and limited
  public funds. With interurban road pricing the
  private sector could be involved (see for
  instance France)
• 350B still required to complete TENs.
• 100B needed for the new Member States.
• 15-20B currently invested by the EU
• Towards fair and efficient pricing for transport.
  
• Fair competition among transport modes social
  marginal cost pricing would maximize the social
  surplus, i.e. the sum of the producers' surplus
  ( the profits of private and public transport
  enterprises) and the consumers' surplus.
• With the help of social marginal cost pricing it
  is possible to confront every user with real
  costs (assuming that at the moment this is not
  the case). This means that
• All external effects of transport will be
  internalized and
• Management of traffic flows (to fight congestion
  or even contain demand growth)

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State of the art_1 Tolling exists in a number
of countries

• Tolled motorways (long tradition - EU country)
• France and Portugal relied on tolls since early
  stages in the development of their road network
• Tolled roads (short tradition Non-EU country)
• Switzerland the first country in Europe in which
  am IRP was implemented to charge infrastructure
  and environmental costs according to actual
  mileage performed by HGV's on the whole national
  road network.
• Hungary A pioneering motorway project financed
  through tolls immediately after political change
  in Central Europe
• Mature for introduction of tolls
• Austria and Germany, implementation process is
  going on
• Netherlands was planning to implement a km
  charging system for all vehicles, specifically
  conceived to introduce interurban road pricing to
  support demand management/increase accessibility.
• Newcomer (Nordic countries)
• Denmark, Finland, Norway, Sweden, quite an
  integrated regional economy with common
  approaches to both environmental motor fuel
  taxation and Eurovignette Norway also has a
  long-standing tradition in electronic pricing
  around urban areas to fund investment on local
  road networks.
• Source DESIRE Project

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State of the art_2National perspectives
dominates

• National decisions concerning IRP are strongly
  determined by financial needs
• National decisions in the cluster of mature for
  introduction of tolls (Austria, Germany and the
  Netherlands) are by far the most critical for
  development of electronic IRP in the near future
• In many countries (including those where
  electronic IRP systems are in operation) regional
  impacts of alternative system configurations are
  key issues in national dossiers.
• In contexts where HGV charges are levied (either
  manually of automatically) to internalise
  environmental costs besides infrastructure costs,
  this will likely generate a surplus revenue,
  except in regions with low traffic volumes.
• Interoperability is in general not a major
  priority

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The economic perspective

• First best pricing
• Theoretical optimal situation, but in practice
  not (easy) feasible
• Second best pricing
• What is the optimal implementation path? Such as
• Passenger versus freight
• Road versus not road
• Differentiation versus no differentiation
• Within MC ICAM several implementation paths are
  evaluated (focus on freight)
• Do nothing (no new policies)
• Full social marginal cost pricing (All modes)
• Only freight road transport
• Only road (passenger freight)

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Do Nothing policy increased transport volume
leads to increased externalities despite reduced
externalities per kilometre
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Total transport performance only differs a little
between MSCP implementation paths
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Overall welfare effect of MSCP is positive for
all implementation paths in the long term

• But effect depends strongly on the way revenues
  are used (and on assumptions concerning labour
  markets and consumer behaviour)

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Revenue use strongly influences welfare effect
(and optimal charge) Source KU Leuven model
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Optimal congestion charge for freight is lower
when passenger transport is also chargedSource
KU Leuven model
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Routes change due to geographical differentiation
is for road a major impact This could lead to
more vehicle km rail and waterway have little
alternatives(source SMILE Model Netherlands case)
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Welfare effects are positive if prices are set
equal or lower than social marginal costs.
Welfare effect is negative if prices are above
social marginal costs. Overpricing must be
avoided(source SMILE Model Netherlands case)
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Welfare impacts differ between countries with
toll systems and without toll systemsCharging
Only freight road transport versus all road
transport is half of the impact

• Country First Best Freight Freight All
  Mway All
• Mway all roads traffic road traffic
• Spain 100 -26 63 -86 77
• France 100 -4 43 -51 64
• Italy 100 60 36 -44 63
• Portugal 100 -3 59 -10 75
• Austria 100 37 53 57 87
• Belgium 100 36 50 63 90
• Denmark 100 16 42 57 93
• Finland 100 46 87 48 88
• Germany 100 19 27 63 95
• Greece 100 26 82 27 89
• Ireland 100 4 85 6 95
• Lux. 100 12 29 32 92
• NL 100 26 37 71 92
• Sweden 100 41 76 47 89
• UK 100 18 52 32 96
• TOTAL 100 21 41 47 92

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Uncertainties on expected transport demand still
exist

• Estimation of behavioral responses of road
  freight transport differs considerably per
  transport model. Reasons
• Modeling transport costs versus logistic costs
  (demand elasticity versus impact higher transport
  costs on overall production costs)
• Differences in presuppositions on the ability to
  work more efficient trough enhancing the
  transport efficiency (less empty km and larger
  trucks)
• The use of the revenues
• Economic sense versus acceptability issues
• And if for instance certain user groups are
  compensated what will be their behavioral
  response?
• Second order impacts
• Relation employee employer what happens if the
  commuter is compensated for his higher costs?
• Location choice of consumers and business will be
  effected by a different price regime.

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Technological perspective_1

• From toll systems towards electronic pricing
  systems
• Electronic road pricing systems
• Successful in local situations (Norway, London)
• In use in Switzerland
• Under construction for interurban applications
  (Germany)
• There are no technological barriers, But TNO
  research for the Dutch KM charging system showed
  (source TNO FEL, 2001)
• The retrofit issue
• it takes time to produce the in-board units and
  to equip all vehicles
• Per vehicle the technological specifications can
  differ
• Accuracy at least 2 margin can be expected
• Devices tested are vulnerable for fraud
• The private sector will not pay for all costs in
  a combined road pricing system able to charge
  consumers for their car use and offering all kind
  of new services

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Only road pricing isnt enough to cover costs
Roadpricing systems typically generate almost no
mobile traffic, because Intelligent applications
are able to Switch mobile connection on when
needed Switch mobile connection off
asap Wholesale billing
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Acceptance Issues gaining public support leads
to sub-optimal solutions

• Most successful implementation of new forms of
  pricing can be found on the urban level (London,
  Trondheim, Singapore) with the exception of toll
  roads, interurban road pricing is faced with a
  lot of opposition
• In successful cases an alternative is available
  (Public Transport, another road).
• Revenues are directly invested in the same area
  (better public transport, new road
  infrastructure)
• A clear understanding by the public what the
  problem is (congestion or quality of life)

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Implementing interurban road pricing The
economic optimum versus the real world

• Main focus is on freight transport. However from
  a economic point of view passenger transport
  should be included as well
• MSC pricing
• Majority of people gains if revenues are used
  well, for instance lowering labor tax
• However for gaining public support it is better
  to choose for investing the revenues in the
  transport system
• Charging only interurban road traffic has a major
  impact on welfare levels (Scenes model says 90
  of first best situation)
• Welfare impacts differ strongly per country due
  to
• Different existing levels of charging
• Different charging systems
• Major distortions are toll roads
• Do not underestimate the technological aspects
• We are on the right track, but the remaining road
  is still long