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Chapter 3 | Congestion charging as an alternative strategy

The ‘demand management’ aim seeks to encourage road users to either shift the

time or the mode of their travel or to forgo the trip. This terminology they may share

with economists. However, economists focus on changing the incentives facing road

users so that they better align with those facing the community. The outcome is the

observable result of changing the incentives. In contrast, the ‘demand management’

advocates tend to focus on achieving a specified outcome, with congestion charging

being one of many options with which to pursue that outcome.

Put another way, the approach of

the engineers and environmentalists

generally involves a preconceived notion

of an appropriate level of motoring

activity—generally lower than that

occurring in congested situations. In

contrast, economists are more concerned

Economists advocate congestion charges

that internalise the congestion costs

that each motorist imposes on others,

ensuring roads are not over-used.

to ensure that the motorists face the price signals that incorporate the costs they impose

on others, whether or not this brings about a behavioural change.

The distinction is illustrated by a common (and understandable) complaint by

environmentalists that ‘even if you increase the price, people still want to drive’. The

economist’s response is that as long as road users pay the social cost of their activity,

then how much they drive is not an issue since the outcome reflects an efficient level

of road use. In economists’ reckoning, paying the ‘marginal social cost of road use’

(to use the economic term) ensures that individuals act in the community interest. 37

The infrastructure financier, with serendipitous support from both economists

and environmentalists, will regard congestion charging as a promising scheme for

funding or recouping the cost of the infrastructure. 38

In addition to the primary role of internalising the congestion externality, economists

value two other features of congestion charging: as a potentially efficient revenue

source while providing a litmus test for any expansion of the infrastructure. Economists

are probably alone in regarding congestion charging in this light:

Those associated with the environmental movement tend to see pricing as purely

a demand-side mechanism. In contrast, mainstream economists like to stress the

validity of priced roads as providing a test for investment in new road capacity just

as profitability and return on capital justify capacity investments in other areas of the

economy (Samuel 2003).

The CfIT (UK) similarly concluded that ‘there are a variety of different objectives

behind the introduction of road pricing in a given area’. The Commission noted that

the London scheme was promoted purely on the grounds of congestion reduction

while the Rome scheme was justified on environmental considerations (CfIT

(UK) 2006). An important point to note, then, is that schemes that seek to reduce

congestion can aspire to different ‘downstream’ objectives—in Rome the reduction

in local pollution was important.

37. Critics have likened this to ‘buying indulgences from the Pope’ and in this context it is easier to understand the

environmentalists’ objections.

38. The environmentalist’s support for the financing objective is based on the congestion charge being additional to

current road-use charges and not an alternative way of paying for road use, as proposed by the discussions on the

national schemes in Britain and the Netherlands.

45

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