PG Funding and Management Strategies Task M4: The Impacts of Road Pricing on the Socio-Economy

1. PG Funding and ManagementStrategiesTask M4: The Impacts of Road Pricing on the Socio-Economy Kristín H. Sigurbjörnsdóttir and Anton Goebel Reykjavik 4.12.2008

2. Authors • Anton Goebel and Juha Tervonen, Finland • Oscar Alvarez Robles, Spain • Morten Welde and Inger Andrea Thrane, Norway • Laurent Donato, Belgium Wallonia • Samira Irsane-Semaan, France CEDR

3. Starting point for the task • CEDR's strategic plan 2005-2009 - Task M4 "Show the effects of road pricing (RP) on socio-economics" - to show that RP is only one tool in tool kit of public authorities - the objectives of road pricing must be defined- to analyse the nature of the toll systems applied - identify and examine existing studies on the impact of RP CEDR

4. Starting point for the task • Group's judgment - There are already endless amount of general reviews of existing systems and pricing theory, but not so many papers on general impacts of RP -> The group decided to be loyal to the original task title and concentrate on impacts of RP. - Objectives, equity and acceptability should also be treated as they are closely related to impacts of RP. - Also a short review of current EU policy development would be useful, but no reviews or case studies of existing systems -> they are only used as examples of impacts! CEDR

5. Starting point for the task The following content was agreed: 1) Introduction 2) Objectives of RP 2) RP in Europe 3) Socio-Economic Impact Chains of RP 4) Equity of RP 5) Acceptability of RP 7) Conclusions CEDR

6. Objectives of road pricing • Two primary objectives - Regulation: users pays all the costs (including all external cost) they induce for the whole society -> demand management. - Funding: generating revenues for construction and maintenance of roads or in some cases e.g. revenues for promotion of public transport. • Other objectives - to limit CO2 emissions - increase the quality of living environment - decrease the fluctuation of travel time One remark: the aim of RP is not to promote social fairness, but to avoid distortions that lead to an inefficient allocation of resources and, in turn, to a situation where the whole society is worse off!!! CEDR

7. Road pricing in Europe • EU policy - Taxes and fees must be related to level of pollution, congestion and wear and tear of infrastructure -> polluter pays principle! - Since the publication of the White paper in 1998, the Commission has taken several legislative initiatives. CEDR

8. Road pricing in Europe - Eurovignette directive (1999) gives the legal basis for the implementation of RP: - HGV's over 12 tonnes for designated parts of network, - HGV’S over 3,5 tonnes since 2012 (amended in 2006) - minumum levels for taxes on HGV's and maximum levels for user charges - tolls should be proportionate to the cost of building, operating, maintaining and developing the infrastructure and may also include a return on capital or a profit margin CEDR

9. Road pricing in Europe - 2008 proposal for revision of Eurovignette directive - option for internalisation of external costs - the revenue from internalisation of externalities will be earmarked for reduction of externalities - the scope is the entire network (national and local roads). - The member countries have submitted their opinions on the proposal and the final decision making process is in progress. CEDR

10. Socio-economic impact chains of road pricing - the impacts of different road pricing instruments (including taxation) - no quantitative measurement of impacts, but some examples of existing systems - application of "The Impact Map of Road Management" and causal impact chain approach developed by FINNRA CEDR

11. Socio-economic impact chains of road pricing THE IMPACT CHAIN APPROACH Concept analysis: the strategy level impacts (e.g.. environment, accessibility, regional development...) are divided into partial impacts. Causation: the change in state that follows directly from RP (output) and the impacts that follows from it in logical progression. Result: the higher level abstract impacts are presented in more concrete way for illustration of impacts of RP. Strategy level impacts Road pricinginstruments CEDR

12. Socio-economic impact chains of road pricing General economic perspective German HGV road tax: supplementary prices 0.15 - 0.90 €/100kg for shipment from Finland to Germany. CEDR

13. Socio-economic impact chains of road pricing ACCESSIBILITYTravel and transportation costs German HGV road tax: supplementary prices 0.15 - 0.90 €/100kg for shipment from Finland to Germany. Empty runs of HGV reduced by 15% since 2005. CEDR

14. Socio-economic impact chains of road pricing London: travel time savings 37 000 hours per day. Stockholm: number of entered vehicles - 22%. ACCESSIBILITYFunctionality CEDR

15. Socio-economic impact chains of road pricing No valid examples available, only some indicative statements. ACCESSIBILITYTravel convenience CEDR

16. Socio-economic impact chains of road pricing ACCESSIBILITYTraffic safety Stockholm: personal injury accidents reduced 5-10% inside the area. Norway: if traffic moves from high quality toll road to "free" lower class roads, safety impact is not necessarily positive. CEDR

17. Socio-economic impact chains of road pricing ENVIRONMENT Stockholm:CO2 emissions reduced by 14%. CEDR

18. Socio-economic impact chains of road pricing COMMUNITY STRUCTURE London: sales reduced by 5.5-8.2% in tolled area during the year after the charge. CEDR

19. Socio-economic impact chains of road pricing No valid estimates, but e.g. in Stockholm general "feeling" is positive. QUALITY OF THE LIVING ENVIRONMENT CEDR

20. Socio-economic impact chains of road pricing Öresund bridge: major integration of the Öresund region in the employment market, housing, business, shopping and leisure activities. (Not direct impact of RP, but RP made the project possible.) REGIONAL DEVELOPMENT CEDR

21. Socio-economic impact chains of road pricing Finland: 11% of the State revenue from road user taxation. ROAD FINANCE Norway:25 % of the total road construction budget comes from toll road revenues. CEDR

22. Equity of road pricing • Equity could be defined as the fair distribution of impacts across the whole population. • RP does not have to be regressive (take larger percentage of income from the poor that the rich), but there are always some loser and winners. Source: Gomez-Ibanez (1992) CEDR

23. Equity of road pricing • Equity implications are sensitive to the scheme's specification and the location of workplaces and residential areas, car ownership and travel patterns in different cities. • The use of revenue is crucial from equity viewpoint - Small (1992) and Goodwin (1989) tripartition of the revenue: - general tax cuts or cuts in car taxes - public transport improvements - road investments. CEDR

24. Acceptability of road pricing • In general RP is not acceptable! Source: Schade 2001. CEDR

25. Acceptability of road pricing • Acceptability of RP increases when road users start to benefit from impacts of RP (improved traffic conditions, roads, quality of living environment, public transport etc). Source: Odeck and Brathen 2002. CEDR

26. Acceptability of road pricing • Three main forms of acceptability are public, business and political acceptability. • The acceptability of RP increases with the clarity of the perceivable positive impacts. +++ very important positive factor, ++ important positive factor, + small positive factor, - - - very important negative factor, - - important negative factor, - small negative factor, blank = very little or meaningless factor CEDR

27. Conclusions • When designing the pricing system, there must be an understanding of the impacts of pricing and what impacts are important for the acceptability of the system. • The socio-economic impacts of RP are diverse and far reaching -> it is much easier to estimate the amount of direct impacts (e.g. user costs, accident level, etc.), but estimating the broader impacts (e.g. regional development, impact on GNP, etc. ) is challenging and often only at an indicative level. • The magnitude of the impacts depends on the level of fees that are set. • RP can have both regressive and progressive impacts and it does not necessarily have to hurt the poor and have negative impacts on mobility and thus lead to social exclusion. CEDR

28. Conclusions • The acceptability of RP has a clear connection to its impacts: acceptability increases when the actual impacts are similar to what was predicted. • Although road management in Europe is usually funded from the general State budget, road user charges are becoming increasingly important in the regulation of traffic and the funding of road management. • Vehicle and fuel taxes are effective instruments only for obtaining funding, but are very ineffective in producing other impacts. CEDR

29. Thank you! kristin.h.sigurbjornsdottir@vegagerdin.is anton.goebel@finnra.fi CEDR