The time is ripe for road pricing in New Zealand

Road charges based on distance, time and location are an effective tool to improve the lives of commuters, the safety of our roads, and the productivity of the economy

“With a little ingenuity, it is possible to devise methods of charging for the use of the city streets that are capable of adjusting the charge in close conformity with variations in costs and traffic conditions,” wrote William Vickrey, Nobel Laureate and the father of road pricing theory, in 1963. Little did he know that it would take more than 50 years for the technology to catch up to his vision.

But that time has come. Recent innovations in information and communications technology (ICT) systems are now widely available to revamp how cities manage and fund land transport use.

The science behind road pricing is well established, proving the power of markets to adjust transport demand towards an efficient, equitable and transparent system.

New Zealand should follow international best practice and perhaps take the global lead into a brave new world of land transportation in the decades to come.

A road pricing primer

Road pricing is a beneficiary-pays system where users are charged in proportion to their use of road infrastructure based on three elements: distance (mileage travelled), time (peak and off-peak periods) and location (different roads would have different fees, if any).

Government levies based on distance are currently the most common form of road pricing. The longer the mileage travelled, the higher the impact on the wear and tear of roads – and the higher the road tax dues, the argument goes.

In New Zealand, such distance-based pricing since the 1970s has been partially captured by a fuel tax per litre on all petrol-powered cars (as a proxy for mileage travelled) and a proper mileage-based road user charge on vehicles running on diesel.

The other two elements of road pricing – time and location – refer to congestion charges. These charges may be levied whenever and wherever drivers add their vehicles to overcrowded roads, such as during peak times in the city centre.

The sole aim of congestion charges is to induce an orderly use of roads. Congested streets are by definition a toll on the mobility of community and commerce, leading to lost productivity, a worse safety environment, and increased pollution- related health problems. In other words, unlike Soviet-style rationing of road space by widespread queuing, congestion charges harness the power of markets to adjust the demand for road use.

Back in 1963, Professor Vickrey wrote: “… in no other major area are pricing practices so irrational, so out of date, and so conducive to waste as in urban transportation … In nearly all other operations characterised by peak-load problems, at least some attempt is made to differentiate between rates charged for peak and for off-peak service … resort hotels have off-season rates; theatres charge more on weekends and less for matinees. Telephone calls are cheaper at night … But in transportation, such differentiation as exists is usually perverse. Off-peak concessions are virtually unknown in transit.”

The slow adoption of congestion charges

Despite firm consensus among transport experts that time-and-location road pricing is the single most viable and sustainable method to deal with traffic bottlenecks, congestion charges are resisted for two main reasons.

First, road pricing based on time and location has been widely misunderstood and feared by the public as ‘just another tax on us’. Drivers usually attack congestion charges, claiming that users already pay for roads through (distance-based) fuel taxes.

In doing so, they fail to understand that while distance-based charges are meant to finance transport infrastructure, congestion charges are designed purely to deal with road use demand – that is, different tools for different objectives.

The challenge for road-pricing proponents is to explain to commuters that they already pay the price for congestion through wasted hours idling in traffic. The ultimate trade-off relates to how many dollars drivers would be willing to pay to spend less time in clogged roads.

Additionally, to gain public trust, the government should not use congestion charges as a means to boost public coffers. Instead, it should revert any net revenue to offer travel alternatives in the affected community.

The second reason for the slow adoption of congestion charges concerns technology barriers. The lack of available – or affordable – fit-for-purpose ICT systems has prevented a fully flexible, network-wide implementation of road pricing. But as technology innovations have advanced, so have road pricing schemes around the world.

Road pricing around the world

Singapore is set to launch a network-wide, satellite-based urban congestion pricing scheme as early as next year

Singapore was the first country to implement a paper-based scheme in 1975, followed by an electronic road pricing system using overhead gantries throughout the city-state’s busiest districts in 1997.

Several other countries – including the United States, Britain, Canada, Germany, Japan, Sweden and Norway – followed suit, implementing some form of road pricing under different technologies, showcasing both success stories as well as lessons.

The good news is that recent improvements in automatic number plate recognition (ANPR) and global navigation system by satellite (GNSS) mean a new era for road pricing is underway. Singapore, for instance, will launch a network-wide, satellite-based system as early as next year.

London introduced a congestion charging zone in early 2003 – the current zone covers the area within the London Inner Ring Road and includes the City of London and the West End

We shape our tools, and then they reshape us

The role of technology in reshaping human experience is undeniable: from the control of fire, to agriculture, to the printing press, to modern computers. Ultimately, our inventions end up reinventing who we are and how we live. A similar eureka moment for road pricing is ours for the taking.

Truly revolutionary developments are reinventing the way we commute. In particular, smartphone technology and GPS-tracking devices – not to mention the upcoming rollout of a 5G network enabling the internet of things (IoT) and autonomous driving vehicles – mean road pricing implementation is becoming increasingly cheaper and more accessible.

For example, the cost of reliable, secure and private GNSS devices has fallen from around $1000 in 2005 to less than $100 now. Progress in smartphone prices and applications now means real-time information is available for drivers to make decisions on their best use of road transport.

Such technological breakthroughs are vital for the next generation of road pricing schemes, allowing data-driven, flexible pricing adjustments to maximise optimal traffic flow at the lowest cost.

The way it works is that novel, small and affordable gadgets attached to each vehicle make use of GPS technology and the mobile network to process information on distance, time and location, while seamlessly collecting road pricing payments. (A similar system already exists in New Zealand for most commercial heavy vehicles under the distance-based eRuc platform.)

Privacy matters

Some car owners might be anxious about the government having precise information about their driving patterns, even though such geographic information is already frequently collected by private companies – and often unbeknown to users – through their mobile apps.

Regulatory checks and balances can promptly fix such Big Brother fears, from secure encryption methods to automatic server data deletion after road pricing dues are processed (and paid). But it is still crucial to have a national conversation about the extent of government access to traffic data, particularly regarding law enforcement and safety.

Although New Zealand drivers might be reluctant – for good reasons – to allow the state to automatically temper unlawful road speeding (as the European Union is likely to do from 2022), there is still room for other types of data use.

For instance, should the police be able to obtain a court warrant to determine which car was at a hit-and-run crime scene? Should encrypted data be used in evidence-based research on road safety and optimal traffic management? Should driving history be linked to the government’s all-knowing integrated data infrastructure? Should insurance companies be given consent to access individual driving patterns (as already happens under ‘usage-based insurance’ contracts)?

These are relevant questions when devising the next generation of road pricing regimes. The main takeaway at this point, though, is that whatever the final decisions on privacy matters are, current technology can adequately accommodate them.

Pricing our way out of congestion

Widespread congestion in our urban centres is the new normal all year round, clogging “the lifeblood of community and commerce” as William Vickrey said.

Auckland, according to the Tomtom Traffic Index, is ranked among the top 40 congested cities in the world, with each driver idling on average an extra 45 minutes per day (or 172 hours per year) on busy roads.

Sluggish trips also frustrate commuters in Wellington (43 minutes per day in extra travel time), Christchurch (29 minutes), Hamilton (27 minutes), Tauranga (23 minutes) and Dunedin (21 minutes).

The New Zealand Transport Agency quotes traffic jams as costing our economy billions of dollars per year, while also contributing to higher levels of pollution and road crashes.

Appropriately done, road charges based on distance, time and location are an effective tool to improve the lives of commuters, the safety of our roads, and the productivity of the economy. What New Zealand needs now is the political will (and courage) to implement the changes. A brave new world awaits us – but only if we transport ourselves in the right direction.

 Dr Patrick Carvalho is a research fellow at The New Zealand Initiative, with extensive international experience in public policy across academia, public organisations and the private sector