Wednesday, May 2, 2018

The Stockholm Congestion Charge

Economists have long argued that it's very hard to build your way out of traffic congestion--regardless of whether the building means adding lanes to roads or adding mass transit. The fundamental issue is that many of the people commuting to work have three adjustments they can make: some of them can adjust the time they choose to travel; some of them can adjust the route they travel; and some of them can adjust the method of their travel (single car vs. carpool, car vs. mass transit, and the like).

When substantial traffic congestion occurs, it pushes a substantial number of commuters to travel a little earlier or later, to find alternative routes, and to travel in different ways. But then, when extra lanes of highway or mass transit investments are made, some of those who had shifted their commuting patterns will shift back again. Congestion may decline a little as a result of the building process, but the decline is often much less than desired or hoped.

Several major cities around the world have concluded that if they really want to address congestion, they need to do it with prices. F or example, London imposed a congestion charge in 2003, as described by Jonathan Leape in the "The London Congestion Charge," in the Fall 2006 issue of the Journal of Economic Perspectives (20: 4, pp 157-176). In the 1990s, the average speed of a trip across London was actually slower than it has been at the start of the 20th century. "Even in the larger area of inner London," Leape wrote,  "drivers in 1998 spent almost 30 percent of their time stationary during peak periods and more than half their time traveling at speeds of less than 10 mph."  Basically, the idea is to draw a circle around the city. Those who enter the circle during commute times pay a toll, with the money mostly going to more regular and updated mass transit service. Charges are tallied by technology that reads license plates.

In 2006, Stockholm was the second major city in Europe to start congestion charge program, so the program has now completed its first decade. A congestion charge was also imposed in the Swedish city of Gothenburg.  There, the system runs on a combination of license-plate recognition technology and electronic tags in vehicles.

Björn Hårsman and John Quigley describe the political process that led a referendum approving the Stockholm congestion charge in "Political and Public Acceptability of Congestion Pricing: Ideology and Self-Interest in Sweden" (Access, Spring 2011). Maria Börjesson and Ida Kristoffersson provide an overview in "The Swedish Congestion Charges: Ten Years On - And effects of increasing charging levels," published by the Centre for Transport Studies in Stockholm (CTR Working Paper 2017:2).  In
They write:
"When the charges were introduced in Stockholm 2006, the reduction of traffic across the cordon stabilized at approximately 20%. In Gothenburg, the reduction in traffic volume across the cordon during charged hours stabilized at approximately 12%. Travel times reduced significantly in both cities, but in Stockholm, travel time reductions occurred in a much larger part of the network than in Gothenburg. In Stockholm, the congestion was much more widespread in a larger part of the network prior to the charges, mainly because of the blocking of intersections upstream of the bottlenecks. Substantial travel time reductions were, therefore, achieved in the suburbs far from the toll cordon.The adaptation mechanisms observed in Stockholm and Gothenburg are remarkably similar: commuters diverted to public transport and discretionary travellers adapted in other ways. This result is supported by a model-based study (Börjesson et al., 2014) showing that the traffic effects and adaptations costs are surprisingly stable across different types of traffic systems."

Of course, people look for loopholes in the rules. Sweden subsidizes company cars, in part with the idea that if people have access to a shared car, they might have less need to buy an car (or a second car) their own.  But with a company car, the firm usually pays the congestion charge, not the employee, and the employee doesn't pay tax on the value of this fringe benefits. A number of employers provide free parking as well, which in an inner city is another untaxed subsidy for commuters. The authors write (citations omitted):
"In this paper, we define a company car as a passenger car owned by a legal person that is not used as a taxi. According to the Gothenburg travel survey, 8% of the citizens of Gothenburg have always access to a company car for private trips. According to a travel survey conducted in the Stockholm County in 2015, 10% of the citizens of Stockholm have access to a company car for private trips. According to 2014 registered data, company cars make up 34% of all passenger cars in Stockholm, 26% in Gothenburg and 23% in the rest of Sweden. Compared to the taxation of private cars, company cars are heavily subsidized, in particular alternative fuel vehicles. The subsidies are particularly high for commuters because the benefit of free parking at work is not taxed."
A few other points seem worth making in this quick summary.

1) In political terms, the common pattern seems to be that congestion charges are politically controversial, and are not passed into law by large margins and popular acclamation. But when they have been in place a few years, and the benefits of less traffic on the roads and improved mass transit become visible, there doesn't seem to be any substantial pressure to eliminate them, either.

2) The congestion charge isn't the only interesting aspect of transportation policy in Stockholm. It's also a city which over recent decades shifted from government ownership to private contracting. For some discussion, see "A Bid forBetter TransitImproving service with contracted operations," a September 2017 report from the TransitCenter foundation.
"Over a period of two decades, the Stockholm region shifted from government-operated transit, in which a government agency employs government employees to operate government-owned rolling stock (the standard operating model in the US), to a contracting model. Today, Stockholm contracts nearly all aspects of its public transit services, including buses, ferries, subways, commuter trains, and trams. Under this system, the region delegates most route-planning responsibilities to its bus contractors, offering a financial incentive to increase ridership."
3) The benefits of reduced traffic congestion aren't just about less time on the road. Another meaningful gain is less air pollution in cities. In a recent research paper, Emilia Simeonova Janet Currie Peter Nilsson and Reed Walker look at the Stockholm congestion charge from a different angle in "Congestion Pricing, Air Pollution, and Children's Health" (NBER Working Paper #24410, March 2018). From their abstract: "This study examines the effects of implementing a congestion tax in central Stockholm on both ambient air pollution and the population health of local children. We demonstrate that the tax reduced ambient air pollution by 5 to 15 percent, and that this reduction in air pollution was associated with a significant decrease in the rate of acute asthma attacks among young children."

4) Finally, there's a question of what this all means for the United States. In the United States, charging more for traffic at peak-load times has usually been limited to specific highway lanes, or sometimes to charging more for bridge tolls or mass transit at peak time. (Although charging extra for mass transit at peak times can bring in more money, it clearly works against inducing people out of their cars.). Although no US city has put a ring around the most dense part of the inner city and taken the full congestion charge plunge  along with London, Stockholm, Singapore, and a few others, there are current conversations about whether such a charge might be instituted for the island of Manhattan

But it seems to me that such charges are likely to come, sooner or later. Consider the implications of this figure from the 2018 Economic Report of the President. US roads haven't expanded much, but miles traveled on those roads is on a long-term upward trend. Traffic congestion  is one result, and if we want an actual answer, congestion pricing is the way. 

More Driving on the Same Roads

For a couple of previous posts on this theme, see:
"The Pricing Answer to Traffic Congestion" (July 17, 2017)
"Insights on Infrastructure" (March 11, 2016)