1. Transport
January 23, 2023

Despite problems with congestion charges, urban infrastructure benefits

There are few urban policies as contentious as a congestion charge – do they work and are they serving the wider public?

By Gary Lai

Even with the best public policies, there are critics. In the UK, road pricing has not been universally embraced, exemplified by Edinburgh’s 2006 referendum result on a congestion charge. Across the Atlantic, a New York Post editorial called congestion charging “part of the… elite’s endless crusade against cars, even as they zip around in them… and also refuse to do anything about making the subways safer so that people might actually want to ride them”.

congestion charge
A congestion charge sign is displayed in London, England. London is expanding its Ultra-Low-Emission Zone (ULEZ), in which drivers whose cars fail to meet certain emission standards are charged. (Photo by Hollie Adams/Getty Images)

That is to say, the scheme’s effect on traffic in a city like New York will be minimal; the transport department predicted a decrease of 3.1% in Manhattan. The $400m generated each year in the City of London, moreover, is a drop in the bucket in the budget of a big city like New York

Beyond that, the impact of road pricing on driver behaviour seems to be little. Ian Parry, a former fellow at Washington-based Resources for the Future, reported that a tariff’s deterrence effect on commuters may be cancelled out by those who now drive because of the time saved on the road. The Daily Mail added that the number of cars entering the congestion zone in July 2022 was now higher than pre-pandemic. In the first eight months of 2022, 16.8 million cars paid to travel within the charging zone.

However, Moshe Givoni from Oxford University was quick to note that traffic level and congestion do not always correlate: “[T]raffic… is not necessarily, it appears, the main factor determining the level of congestion. Trying to find out what are these other factors is extremely important.”

In addition, there are other, practical shortcomings. Combustion engine cars need a place to go for disposal. There is also perennial politics – bickering between stakeholders and between policymakers and the people. Olivia Crowe and her colleagues, of London-based Climate Strategies, and Georgina Santos, of Cardiff University, pointed it out as an enormous obstacle in Central European countries and, to a lesser degree, London. Santos, however, is confident that environmental groups will “undoubtedly” support emissions-related charging. Givoni suggested earmarking revenues from congestion charging explicitly for improving public transportation would lead to greater public acceptance of the scheme.

Scalability to other cities, across various geographies, also matters, considering the high cost of implementing the Automatic Number Plate Recognition (ANPR) system and the need to move to other technologies based on global positioning systems (GPS) and microwave scanners. Jonathan Leape, of the London School of Economics, warned against generalising the London experience to other cities because the social costs and benefits vary substantially in other metropolises. It also has well-maintained public transport in place to replace passenger rides. But these “practical problems… are not insurmountable… [C]ongestion charging can yield significant economic benefits [to other cities] by inducing a more efficient use of scarce road space”.

One store’s problem – or the whole retail sector?

There was one classic study of congestion charging’s impact on the retail sector. Mohammed Quddus of Imperial College London and his colleagues studied retailers in central London and found the congestion charge had a mixed effect in the charging zone. While one large department store, John Lewis, which owns the Waitrose brand, saw a significant change post-scheme, the retail sector in the district did not suffer. By the end of the first year of the programme, 76% of London’s businesses reported lower revenues. According to the London Chamber of Commerce and Industry, their owners blamed the congestion charge more than any other reasons, including the temporary closure of the London Underground’s Central Line, the overall economy and increased competition.

Quddus, using weekly business data, had demonstrated before that John Lewis’ only Oxford Street location inside the charging zone experienced a large decline in year-on-year sales, compared with the chain’s other locations. He also noticed that those retail stores to which customers are more likely to travel by car, like the higher-end John Lewis, will be more influenced by the congestion charge. They compared the Oxford Street store with other retailers in central London, using the London Retail Consortium’s monthly Central London Retail Sales Monitor Index. As it turns out, there was a statistically significant, 7% decline in sales at the Oxford Street store post-scheme. But there was a statistically insignificant correlation between the charge and the sales among other retailers in central London.

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Other factors affect congestion more than the charge

Another study, by Peran van Reeven of Erasmus University Rotterdam, found that pricing car usage (which the scholar stated as fuel costs but includes “other usage-related costs such as tolls and parking charges”) is a weak, but statistically significant, determinant of the demand for driving in the long run, compared with stronger correlates like per capita income of drivers and the demography (the working population and the aged).

One reason is that the response to congestion pricing is quite inelastic; some car owners dread switching so much that they may refuse a free bus or metro ride. However, this reluctance may actually make the policy futile in raising funds for providing better public transport, implementing car-free zones, and other creative and sustainable strategies. In any case, rising wealth and inflation sometimes make up for the costs associated with road pricing, although after a saturation point car ownership seems to slow and may even decline. Van Reeven concluded that “rising incomes quickly undo pricing measures”.

As an aside, the ageing population of Europe – which will increase from 20.8% of the EU in 2021 to more than 30% by 2100 according to the World Economic Forum – seems to indicate that fewer people will drive in the future. Although Van Reeven found that, in 15 high-income European countries, the elderly drive 43% less than younger adults, car usage will continue to increase – until 2050 in the UK and Sweden and until 2060 in France, Norway and Luxembourg.

Givoni observed that there was an increase in bus passengers immediately after the scheme; Van Reeven, however, noticed that five years after London’s congestion charge zone was created, the level of congestion rebounded to its initial level. This is consistent with his previous findings. Transport for London (TfL) explained that the increased traffic was “a longer-term trend and is caused by reductions in the effective capacity of the road network”. Van Reeven, as with many other critics, conceded that while the car pricing itself probably did not have any “perceptible” effect on London’s congestion, the tremendous amount of money the scheme raised, which funnelled into building roads and improving infrastructure, likely did.

[Read more: London congestion charge has been a huge success. It’s time to change it.]

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