PDF: 1832 KB - Bureau of Infrastructure, Transport and Regional ...


PDF: 1832 KB - Bureau of Infrastructure, Transport and Regional ...

BITRE | Working paper 74

While the specific level and structure of efficient congestion charges are location and

time specific, there are some general rules that can provide guidance to establishing

a set of charges that are in the long-term interest of the community. The following

draws heavily from Vickrey (1992).

5.3 General charging principles

When determining the level, structure and modulation of the charges there will

always be a trade-off between ensuring efficient price signals and cost of the charging

system, including the costs to the system operators and to the users.

Charges should reflect marginal external cost

Ideally, the congestion charge would serve to internalise the congestion externality

at the margin, i.e. it would reflect the marginal external congestion cost. However,

by its very nature, this is difficult to determine—particularly since it changes with

congestion levels.

Even if it were possible to calculate the changes in the congestion externality at,

say, one minute intervals, the charging variations could overwhelm the road user.

Hence, for practical purposes, an approximation of marginal external cost would be

the best that could be hoped for. 78 Vickrey allowed for charges above that needed to

internalise the congestion externality only to the extent of imposing tax surcharges

to be in line with others imposed elsewhere in the economy.

Charges should vary smoothly over time

Small, gradual changes to charges encourage a smoother distribution of traffic. With

large changes, drivers have a significant incentive to delay their entry to the charging

area or to rush ahead of the queue, creating mini peaks. As Ramsey observed: ‘It will

often be easier and cause less disruption to get drivers to shift the time of their trip by

10 minutes each than to get one person to shift his trip by two hours.’

A ‘shoulder toll’, between the high of the peak and the low of the off-peak, serves this

purpose. The Midpoint Bridge, Fort Myers, Florida has a half-price toll for the shoulder

period (the half-hour before and two hours after the morning peak hours). This has

encouraged a significant shift from the peak period to the discounted periods (Paniati

2006, slide 16).

London’s scheme has a very coarse charging structure: a fixed charge applies during

daytimes on weekdays, with no charge at all other times. Given the limitations of

London’s technology this charging structure might still be the most appropriate.

Nonetheless, the charge will rarely if ever be equal to the marginal congestion cost,

which will vary across locations and times with varying levels of road use. It remains

the case that ‘a single charge is likely to be either too high or too low to deal with

most locations and circumstances’ (ECMT 2007, p. 213).

78. Vickrey actually used the term marginal social cost. However, the marginal social cost is the total of the marginal

private cost (MPC) and the marginal external cost (MEC). It is the latter that has to be reflected in the charges to

ensure that road users face the marginal social cost.


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