Transportation's Role in Reducing U.S. Greenhouse Gas Emissions ...

Cost-Effectiveness
Transportation’s Role in Reducing U.S. Greenhouse Gas Emissions: Volume 2
Because cordon or area pricing will affect only one tenth as much urban VMT as
congestion pricing (3 percent versus up to 29 percent), but many vehicles will still need to
be outfitted with collection technology, cost-effectiveness will be lower than for systemwide
congestion pricing. Cordon pricing systems implemented in London and Stockholm
required an initial investment of $400 to $500 million, or about $35 to $50 million per
square mile covered. Annual operations and maintenance expenses of the London system
are about $170 million or roughly 40 percent of annual revenues. For the New York City
congestion pricing proposal, the “Mayor’s Plan” was projected to incur $224 million in
capital costs and $229 million in annual operating costs, representing about 35 percent of
gross operating revenues. Other plans were proposed with lower ratios of costs to
revenues (Cambridge Systematics, 2008).
The cost-effectiveness of cordon pricing if implemented on a nationwide basis (all
metropolitan CBDs and major employment and retail centers) is estimated to be in the
range of $500 to $700 per tonne GHG reduced, including direct implementation costs only.
Considering vehicle operating costs, a net savings on the order of -$600 per tonne is
estimated. (Cambridge Systematics, 2009).
Cobenefits
Cordon/area pricing has strong but very localized cobenefits in terms of improved levels
of service and improved conditions of transportation facilities and vehicles. The
transportation cobenefits are greater if revenues are dedicated to transportation
investments such as transit service, to improve mobility options for those who are priced
off the roadway. Cordon/area pricing has the potential to provide a net benefit to the
traveling public and to the regional economy, by reducing the costs to businesses and
individuals associated with congestion. An evaluation of London’s congestion pricing
scheme found that with the £5 charge the scheme generated £90 million in net welfare
benefits for a year’s operation (Transport for London, 2007). However, the level of benefit
that is achieved will depend upon the amount of congestion in the city, as well as whether
the tolls are optimized to achieve an economically efficient level of congestion. One
evaluation of Stockholm’s congestion pricing system concluded that the net social benefits
were negative (Prud’homme and Kopp, 2006) because of lower congestion levels than
London and non-optimized tolls, although another came to the opposite conclusion that
Stockholm’s system produced significant positive benefits (Eliasson, 2007). Potential
savings to businesses from reduced congestion are offset to some amount by the fees
assessed on service vehicles and goods-moving trucks serving businesses within the
cordon.
Like other pricing measures, cordon/area pricing will have mixed equity impacts. Some
travelers will be better off because travel time benefits outweigh the additional costs of
travel, or because alternative modes have been improved. Others will be worse off, if the
travel benefits do not outweigh the additional costs of travel. Unlike congestion pricing,
cordon pricing is likely to be applied primarily to an area with high-quality transit service,
and is therefore likely to have fewer negative equity impacts. The perception that cordon
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