Every time you fill up your car with petrol a fairly significant amount of that cost is petrol tax – although by international standards we actually tax our petrol quite lightly. Petrol tax is something of a road-user charge, as it’s spent on transport activities to make life better for you as a road-user (at the moment it can’t be spent on rail infrastructure even though such projects create significant road-user benefits, but that’s a whole different argument). For diesel vehicles the fuel doesn’t have a tax applied to it at the pump, but rather a “road user charge” is paid on a per kilometre basis: with the heavier vehicles paying a much higher rate as they cause much more road damage.
Both these systems have some strong advantages:
- The collection of the tax is pretty cheap. I suspect that each of the main companies write the government a pretty big cheque each month with the exact amount depending on the level of fuel sold.
- It is relatively fair, in that the more you drive the more you pay. This compares with the very unfair vehicle registration system where you pay a set amount no matter how much you drive – even though your likely need for ACC insurance is strongly related to how much you drive.
- Bigger vehicles, generally those that pollute more, take up more road space and cause more road damage, pay more because they’re less fuel efficient.
- The road-user charge system is able to charge large trucks a lot more per kilometre travelled than a regular car – once again because they use more space, pollute more and cause more road damage.
However, the petrol tax and road-user charge system has one pretty big problem with it. And that is that you pay the same amount per kilometre whether you drive along a quiet road at 2am on a Monday morning as you would driving along a highly congested motorway at 5.30pm on a weekday evening. At peak times the demand for roadspace exceeds its supply, but because we do not have the ability to increase the pricing of that roadspace under our current system, it gets over-used leading to big delays and everyone loses time.
To try to alleviate this problem, many transport experts have come up with the idea of congestion pricing. At its most basic level, congestion pricing seeks to increase the cost of travelling at times or in places where demand for road space significantly exceeds its supply. It is effectively a more nuanced version of the petrol tax we have now – but the primary goal is not really to raise transport funds but rather to price the value of roadspace at such a level where enough traffic will be dissuaded from driving – and therefore congestion will be avoided (or at least reduced). This has many advantages:
- Often the economic cost of being in congestion is higher than the congestion charge would be – so for many people they will be better off through enjoying reduced congestion – even if they have to pay for the privilege.
- Pricing higher during peak periods is likely to shift people to public transport.
- Lower traffic flow and congestion will reduce pollution and other adverse impacts of high traffic volumes.
- Those who mainly drive during off-peak quiet times may pay less, if the congestion charge offsets general petrol tax.
One of the strong arguments for congestion pricing is that other industries do very similar things. If you want to catch a flight on the first morning of the school holidays, chances are it will be more expensive. Similarly, very early morning flights are often cheaper because they’re less popular. Many public transport systems around the world also charge higher rates at peak times, and – perhaps most obviously – the cost of many things like fruit and vegetables bounces all over the place dependent on the level of demand and supply at that particular time. It’s not like we forcibly keep the price of fruit exactly the same all the time – resulting in people queuing up for limited stocks at times and watching the stuff go rotten at other times.
Turning to Auckland now, a reasonable amount of research was undertaken into options for road pricing in Auckland a few years back – although nothing really ever came of it. Five schemes were looked at:
Single Cordon – This scheme would charge vehicles travelling into Auckland that cross a single, defined cordon: essentially the Auckland isthmus. Vehicles travelling exclusively within the cordon would not be charged. Vehicles would be charged $6 at the Harbour Bridge or $3 at other charging points – the maximum charge would be $6 per day. The cordon would have a total of 15 charging points.
Double Cordon – This scheme would charge vehicles that cross either of two cordon rings into Auckland. The western section of the outer cordon would fall inside the completed State Highway 20, otherwise it would follow the same boundary as the Single Cordon above. Travel that is entirely within either cordon would not be charged. Drivers would be charged $6 at the Harbour Bridge (where the cordons intersect) or $3 for crossing each of the two cordons. The maximum charge for this scheme is also $6 per day. This scheme would use 50 charging points.
Area Charge – This scheme would charge all vehicles entering or travelling within a defined area: the Auckland city CBD and inner suburbs. (The Area Charge scheme is similar to the London Congestion Charging Scheme.) Trips would be charged at $5 (this would also be the maximum charge per day).
Strategic Network – The Strategic Network scheme would charge congested links of the motorways and some limited access arterial roads would be charged. Motorists would be charged per kilometre travelled up to a maximum of $6 per day. Uncongested links would be free of charge.
Parking Levy – This scheme would charge for parking on both public and private property (e.g. parking buildings or businesses) within the Auckland/Newmarket, Manukau, Henderson and Takapuna CBDs. The charges modelled were $10 per day, in addition to any parking charges already in place. The scheme is similar to Wellington’s Coupon Parking scheme, albeit more comprehensive, as private and public car parks would be required to pay the charge.
In the end I think the idea failed because none of these proposals actually do what’s really necessary – increasing the price of being on the road at peak times. The cordon schemes are likely to kill off the CBD as an attractive place to do business – already something that’s enough of a struggle to make happen. The area charge would have done the same. The strategic network idea would have just shifted huge amounts of traffic off the motorways and onto local roads – perhaps the most perverse outcome of the lot. The parking scheme – unless comprehensive enough (and preceded by huge public transport investment) would probably also lead to dire consequences for the CBD, although it is probably my choice as “least flawed”.
A much better solution would be to forget about pricing areas, but instead focus on distance and time. Price on a per kilometre basis according to the time of day the travel happens. The idea is not to shift people from more congested roads to less congested roads (because the last thing we want is to clog up local streets), but rather to encourage people to not drive at all during peak times. Perhaps between 7am and 9am, each kilometre you drive costs you $1, during shoulder-peak, inter-peak and weekend afternoon times it might be 50c per kilometre and at other times it might be reduced to nothing at all. You would probably need to have units in each car that match up the distance you’ve travelled with the time of day you travelled – so you can work out the cost. But I guess that’s possible in the longer term.
There are of course many advantages and disadvantages of such a scheme. It would be costly to implement, although potentially quite cheap to actually operate (especially compared to administering cordon schemes). There is a social equity issue, in that for people on lower incomes who work in areas not well served by public transport (which is typical – blue collar work tends to be quite distributed) they would be hardest hit, which those with lots of money who continue to drive will gain the most benefit. On the advantages side though, if it did replace all (or at least a big chunk of) petrol tax then those travelling outside the peak times will probably be better off than they are now.
Whether or not it’s feasible to implement such a scheme in Auckland any time soon is moot point though. There’s a pretty good argument that we need to improve our public transport first (particularly PT that serves the distributed employment of those who would be hit hardest by congestion pricing) and there are questions about how one could implement such a scheme, both practically and politically. I don’t know what the answer is to the question of “when will Auckland be ready for this?” but I do think that if we ever do congestion pricing this is probably the best way to do it.
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I think a key thing to focus on here is the concept of negative externalities, i.e. the ‘costs’ of an individuals activities that are ‘paid’ by other people.
When a person drives on an empty road, they pay personally in terms of their time, their petrol, the wear and tear on their vehicle etc.
However when a person drives on a congested road the biggest cost isn’t their own time or their gas, it’s actually the fact that they contribute to congestion and slow down everyone else. While it doesn’t seem like much (‘what’s just one more car on the motorway?’), the cumulative effects are huge. If one extra driver joins the southern motorway at peak they might slow down the trip of every other driver on the motorway by two seconds. But if you add this up for say 2,000 drivers, that one extra driver has cost a total of 1.2 man-hours of wasted time across everyone else. If we want to put a price on that of say $20 dollars an hour, then that extra driver is responsible for $24 dollars of externalised cost each time they make the trip at peak hour.
The problem is currently people only pay their personal costs. Sure the amount of time and gas used might go up in peak traffic, but they are never required to pay for the effects they have on other drivers, or for that matter local residents, the environment etc. Therefore people never consider their effect on congestion when making travel choices (negative externalities), they only ever consider the effect of congestion on them (internal cost). This is quite obvious, people talk about being stuck in traffic, but they simply never talk about causing traffic! People say “I’ll wait for traffic to die down so I don’t waste my time”, they never say “I’ll wait for traffic to die down so I don’t waste everybody else’s time”.
If we actually charged them this $24 dollars, or whatever it may be, then all of a sudden people start factoring in the true costs of their trip into their decision to travel. The real goal of congestion pricing should be to put an appropriate price on the negative externalised costs of driving, this could be very high during the peak, and almost nothing in the off peak.
I don’t think that it is the right time to try to introduce a congestion charge of some kind. We are just starting to see Aucklanders accept the need for PT and call for improvements and I feel that trying to force something like this through will see the roading lobbys to really chime up and could swing the pendulum back the other way again, especially in areas with poor PT services. I would like to see the PT support continue for another 3 or 4 years first to really get a PT improvement culture firmly embedded in the city.
This is an issue I think the government will need to address shortly however, by their own words and actions they believe that more fuel efficient and electric cars will solve the issue of environmental problems caused by using petrol and that people will still drive. At the moment though if you had an electric car you wouldn’t be paying any fuel tax yet more efficient cars as the government just wanting to take more money as many don’t realise what else fuel tax is used for. I think it should be replaced by some kind of RUC charge based on distance to make it fair and keep a smaller tax on petrol and diesel to cover the environmental issues they specifically cause. Introducing a national standard for congestion charging at the same time as revamping the fuel tax issue will be much easier and enable it to be collected in other cities as well.
Ultimately I think the best way to help change behavior would be to have some system that could actually show how much you are paying in tax for each trip you take, the best example of this is a taxi ride where as you travel along you see the meter going up and up. If there was some similar kind of system for cars I think it would really change peoples minds about driving everywhere. Using this it could then be quite possible to have a website where people can put their journey in and see what it would cost them for the time of day they want to travel on so they can accurately compare what it would cost to drive compared to taking PT (actually this is something that MAXX could do in some way now)
The electric car exemption RUC expires in 2013, prior to that legislation being passes (2009) they had to pay the same RUC’s as a light diesel (and any car using fuel other than LPG or petrol).
Matt is correct, in the future it is likely NZ’s fleet fuel efficiency will likely increase, and as such tax must be increased to maintain government revenue to maintain our transport system. Personally I prefer increased petrol tax rather than a RUC system on petrol cars, firstly because it’s more invisible, and secondly because it dis-proportionately taxes those with inefficient polluting cars.
Other cities have congestion charging. How has it worked for them? I have the impression, but no hard facts, that in London there was a giant outcry, but it’s working nicely. Is that model applicable to AKL?
rob
At the moment I think it would be political suicide to implement. Petrol tax is rather invisible to those who are uninformed. Congestion charging, in order to be effective must be very visible, and as such easier for people to get annoyed at.
I think a perfectly good scheme that National dumped was the petrol surcharge councils could charge to allow the funding of PT. This would have the affect of pushing forward PT and at the same time would make driving slightly more expensive. Doesn’t get to the route of what you’re talking about, to do that would more or less require all cars to be fitted with a GPS and constantly monitored and from a privacy point of view would also never be allowed to happen.
Thanks for linking to the ARPES study. Never realised it was available online.
I think congestion pricing should be introduced in a few years, would be good extra revenue to offset the cost of the CBD tunnel. However all of the schemes described above have big flaws, and a mix of the cordon scheme and area scheme would be much better.
The introduction needs to be staged in terms of both coverage and price. $6 a day is too steep for a day 1 introduction, and should be initially more like $3 day as longs as operational costs are covered.
Initially the scheme should only cover the CBD as defined by the motorways. Therefore there would be about 20 charge points at the motorway off-ramps and where vehicles pass over/under the motorway to get to the CBD.
I don’t think this would hurt the CBD at all as the charge is less than most PT fares.
Over-time the coverage could be extended to cover everyone travelling along the motorways surrounding the CBD, then further out to having gates at Smales Farm, Pt Chev and Greenlane.
To make the system easier and fairer the charging period would be 7am – 6pm Monday to Friday. Would also allow about 3 free visits a month, this would save costs chaisng up those who live out of town and only visit occasionally.
GPS would be better than paying a congestion charge every time you take the boat out or mow the lawns. I don’t have a problem with it, as it would also solve lots of other issues (locating stolen vehicles included).
I like Luke’s idea of introducing for the CBD only initially. Once people are used to the idea, it can be extended outwards over time. The main thing to be careful of here is that the charges don’t begin to act as a disincentive for businesses to locate/remain in the CBD, and move out to some sprawling vehicle only access office park somewhere else. As per the UK and Europe, a strong district plan should be able to deal with this.
Congestion charging the whole isthmus is problematic as this is the only road access between Northland and the rest of New Zealand. I don’t think it would be fair to penalise a whole region of the country like that. I might be wrong on this, but I don’t think in any of the other cities worldwide where congestion charging is in place that this situation exists – no one is forced to go through London to get from one region of the UK to another for instance.
GPS is obviously the fairest, but the big brother/privacy implications are pretty immense.
I don’t think it will kill off the CBD. Keep in mind free flowing roads carry more traffic than congested roads. It could in fact do the opposite and revitalise the CBD.
My answer to Joshua’s question is, “no”. The reason is not technical but an aspect of things I can only call “cultural”.
London and Singapore are very much the exceptions in terms of effective road pricing. In London congestion pricing was brought in when traffic had got to the stage it was somewhere between impossible and diabolical. It does work; traffic flows at peak time are slowish but not too bad, even if you are in a bus. On a point-to-point basis, the bus is sometimes faster than the tube. In Singapore it was brought in, (a) because the island has four million residents in the area of Lake Taupo and the thought of most of them having cars was too much; and (b) because Singapore’s culture is such that the Government could move in that way and not face overmuch opposition.
Which is the complete opposite of Auckland. Politicians know that people actually like their cars, and like being able to use them. When using a car, even at the peak – and especially outside it – is the fastest means of getting anywhere, then people will stick with their cars – even if there is a public transport alternative available. It is only under limited and specific circumstances that people will find public transport to be the faster option. And even then – people don’t like restrictions on car use, of any sort, as recent debates on the drink-drive limit have demonstrated. Politicians also know that while people don’t like paying for any part of a ‘local share’, they will be extremely unhappy if asked to provide that local share through rates, or more rates. That was brought out in an NZTA paper that Joshua posted here recently, and in some recent Christine Fletcher comments.
In response? The solution we are looking for is not just about more kit or better kit, though that matters. It’s about working for hearts and minds, so that we can work to create a consensus in which people want to use public transport, even if it takes them longer. Europeans are ahead of the British in this respect; who are ahead of the Canadians; who are miles ahead of the Americans. (New Zealand comes somewhere after the Canadians, but the relative per capita use numbers for public transport aren’t too bad when compared with various American cities). How do we get there? 🙂
Sorry, I wasn’t as clear as I could have been. Trying again: how do we build a consensus in the community which would accept the validity of congestion pricing for the roads network? We do have time-sensitive pricing in many other areas of the transport sector (notably airfares), and in fields as disparate as electricity pricing and telephone use.