A city-wide trial in Melbourne shows how road use charges can reduce traffic jams

Traffic in Melbourne. Image: Getty.

Road congestion in large Australian cities is estimated to cost more than A$16bn a year. Economists have long argued the best way to improve traffic flow is to charge drivers for their contribution to road congestion. We have now analysed data collected from 1,400 drivers across Melbourne to see whether road user charging can change their behaviour in ways that ease congestion.

And the answer is yes.

Because the obstacle to adopting this approach has been concern about its fairness, we also looked at driver incomes. Would congestion-based charges price the poor off the road for the benefit of those who can pay? We calculated how different systems of road use charges affected households on different incomes, and how driving patterns changed under different prices.

The evidence does not support other common policy responses to traffic congestion. Building new roads does little to relieve congestion. Placing tolls on roads can push traffic onto others.

However, even small reductions in congestion can produce large benefits. On congested roads, reducing traffic by 5 per cent can increase traffic speeds by up to 50 per cent.

The question is: what would the optimal charges be? Drivers often plan their travel ahead of time, so Uber-like surge pricing is not necessarily the best way to go. Could simpler fixed charges, based perhaps on time of day or location, be effective?

In 2015-16, Transurban Group implemented the Melbourne Road Usage Study (MRUS) to answer these questions. More than 1,400 drivers across greater Melbourne installed GPS devices in their vehicles for eight to ten months. After a period to establish baseline use, a randomly selected subset faced a series of road use charges via a system of virtual accounts. Every month participants accumulated real money from reduced charges as a result of their decisions about driving.

Well-targeted charges ease congestion

The Melbourne Road Usage Study tested three simple charges:

  • a flat distance-based charge of 10 cents per kilometre
  • a time-of-day charge of 15 cents per kilometre at peak times and 8 cents at other times
  • a distance-plus-cordon charge where drivers were charged 8 cents per kilometre at all times plus A$8 if they entered the inner city.

Our working paper, Can Road Charges Alleviate Congestion?, evaluates the raw data.

Charges that vary by time of day were most effective at reducing driving at congested times. Drivers subjected to a higher cost of driving in the weekday peak hours of 7am to 9am and 3pm to 6pm reduced travel by 10 per cent during these periods.

While a simple 10 cent charge on distance travelled did reduce driving, this was mainly outside the congested inner city and at off-peak times – mostly in the middle of the day and on weekday evenings. Most freeway congestion occurs around morning and late afternoon commutes.

London and Singapore have charges to enter the congested city centre. Further research is needed to assess the effects on inner-city traffic in Australian cities.

The evidence points towards most drivers who enter the central business district (CBD) being willing to pay higher weekday charges. But few drivers entered the cordon zone during the study. Less than 5 per cent of the drivers made over half of the trips into the area.

Access to reliable public transport matters

Public transit has a key role in getting cars off the road. Our data showed households located far from the CBD and from public transport drive more. Living 500m closer to a tram or train station has the same effect on kilometres driven each day as living 5km closer to the CBD.

Households within a 10-minute walk from public transport drive least. The largest reductions in driving from time-of-day and cordon charges come from households living 10 to 20 minutes’ walk away.

Road use charges could be fairer

Congestion-based charges can be a more progressive way to fund roads than the existing system of registration fees and fuel taxes.

The fuel excise makes up almost half of the average annual road bill in Australia. It’s essentially a distance-based fee, but more fuel-efficient vehicles pay less per kilometre travelled. Hybrid vehicle drivers, for example, contribute much less to fuel tax revenue.

Yet, although hybrids contribute less to air pollution, they increase congestion just as much as their petrol-guzzling counterparts. And congestion is a much greater shared economic cost than vehicle air pollution.

Annual vehicle registration fees make up most of the remaining road bill. These provide no incentive to reduce congestion.

Fuel taxes and registration fees put a disproportionate burden on low-income households in the outer suburbs. Our research shows these households would be better off if roads were funded more by congestion charges.


Field experiments help get the settings right

So what is the optimal congestion charge? Economic theory (Pigou 1920) tells us to price at the cost that each extra user imposes on the system.

With road use, though, the calculation is difficult. To fix rates in advance, we would need to know exactly how much longer everyone’s trip is when each extra driver joins each system. And we’d need to cost that slowdown for each individual on the road at that time (i.e. value their time and, potentially, the cost to them of being late). New research has been using clever experimental designs to identify these values.

That said, maybe it is not too important to get the price just right. For electricity, we are starting to see that households respond to there being a price, not its specific level.

Before widespread road use charges are implemented, we would like to see more field experiments like the MRUS to find answers to other questions. Would it be better to combine a time-of-day charge with targeted locations? How effective would it be to charge more for using highly congested arterial roads at peak times? Would this simply push congestion onto nearby local roads? How large a gap between peak and off-peak prices is needed to produce a strong response?

Another interesting option is the i10 model outside Los Angeles. Two lanes are for traffic willing to pay more to get to their destination faster.

Dynamic pricing ensures traffic in these lanes flows freely – if too many use these lanes and traffic slows, the price increases. Drivers can decide every few kilometres if they want to pay more to stay in the express lanes. Those who must get somewhere on time are able to, and the fee revenue can be used to reduce road costs for others.

The Melbourne Road Usage Study (MRUS) shows field experiments can help us design better road use charges. By all appearances, households took it seriously and were positive about their involvement.

The ConversationThe MRUS provides evidence that well-designed road use charges could help reduce congestion by encouraging people to drive at different times, take other routes or use other transport. This could lead to better use of existing infrastructure, thereby reducing costs, while generating revenue for infrastructure investments. Under such a system, drivers who contribute little to congestion could see substantial gains.

Leslie A. Martin, Lecturer (Assistant Professor) in economics and Sam Thornton, Master of Economics candidate, University of Melbourne.

This article was originally published on The Conversation. Read the original article.

 
 
 
 

How big data could help London beat over-tourism

Tourists enjoying Buckingham Palace. Image: Getty.

London has always been vying for the top spot of the global tourism charts. In 2016, the city’s visitor numbers first hit record levels, at 19.1 million overseas arrivals, and projections suggest that number will have increased by 30 per cent by 2025.

The benefits to the city of this booming tourism market are clear: as well as strengthening the capital’s global reputation as open and welcoming, international tourism contributes £13bn annually to the economy and supports 309,000 full-time equivalent jobs.

As tourists continue to arrive in droves, however, the question of how to sustainably manage the influx – and make sure that the city continues to reap the rewards of its global popularity – will become more pressing.

London isn’t quite on a par yet with the Netherlands, where the country’s tourist board recently announced that it would effectively stop promoting Amsterdam as a destination for international travellers in order to ward off the ill-effects of over-tourism in the city. But, looking at that 30 per cent projected increase to the UK, there may be a need to begin future proofing against the same problem.

What if, rather than redirecting tourists away from the city centre when they arrive, authorities employed methods in advance: making tourists aware of the diverse neighbourhoods to explore and cultural experiences to seek out, right across London, which would influence their decisions on where to stay and visit before they even get here?

London First has just published the first ever borough-by-borough analysis of the impact of international visitor spending and accommodation in London. Anonymised and aggregated data provided by Airbnb and Mastercard has allowed us to see clearly who is visiting: where they’re staying, shopping, eating, drinking; when they’re doing it, and why. We can see trends in the behaviours of different nationalities – tourists from China, for example, like to stick in the West End, while German and Italian visitors are keener to explore markets and restaurants outside the centre.


Speaking of the West End, a huge amount of spending (unsurprisingly) goes on in London’s tourism core. But there’s also a substantial amount being spent by tourists across the rest of the city: a ‘halo’ of 19 boroughs, roughly covering travel zones 2-3, accounts for £2.8bn of spending, supporting more than 60,000  jobs. The data showed that growing tourism by just 10 per cent annually in this area would add £250m pounds to the economy and over six thousand jobs.

The economic benefits of encouraging more visitor spending in outer city neighbourhoods and far-flung districts is clear. But what’s also made obvious by the report is the potential for authorities to leverage this sort of data to sustainably grow tourism while safeguarding their cities against its negative effects, now and in the future. With a clearer picture of where, why and when international tourists are visiting, authorities can adapt their promotion, investment and national tourism policy levers, marketing individual areas to international visitors potentially before they even arrive.

Our research, while only a first step, shows that innovative data partnerships of the kind that produced these results are worth doing – and have potential to be adopted not just at a national level in the UK but by cities globally. Facilitating data exchange between public and private partners is not always easy but could be a critical tool for London, and any other tourist destinations looking to avoid inclusion on the growing list of European cities who are scrambling too late to protect their city centres, residents and small business owners against the double-edged sword of “too much tourism”. A three-pronged approach of data exchange, innovative analytics and digital transformation must be leveraged, to help cities better manage their growth challenges, improve efficiency and support economic development.

Matt Hill is programme director at London First.