What’s Happening in the World of Road Pricing?

I’ve seen quite a bit of stuff popping up over the last few weeks on road pricing, so I thought I’d quickly  summarise what’s going on.

For almost as long as cars have existed, congestion has existed. And for almost as long as congestion has existed, the concept of road pricing has existed.

For decades, road pricing has been seen as a great idea in theory, but difficult to implement in the real world. Up until recently, it’s not really been talked about as a serious option in New Zealand. But that is now changing.

First, the Auckland Transport Alignment Project recommended in 2016 that Auckland develop and implement a road pricing scheme.

Second, the Tax Working Group released their Future Tax Report  in February that said road pricing had the potential to massively improve life in New Zealand, and recommended we continue to investigate it.

Third, the Transport Agency published a piece of research on road pricing a few weeks ago. One objection to road pricing people often bring up is that they are concerned that it will be unfair (have equity impacts). This paper investigates this issue in more detail, looking clearly at who the “winners” and “losers” will be. I’d encourage you to read the whole paper, but long story short, it concludes that this objection is not valid. My paraphrase is that a road pricing system can be designed to be either unfair or fair – we can choose who the winners and losers by the way we set it up.

Fourth, Christchurch City Council passed a resolution last week that they would not accept the Northern Corridor Downstream Effects Management Plan, but would instead investigate another option. This option would likely include bus lanes and park’n’rides, but interestingly it also said Council would look into some form of congestion pricing.

Fifth, economist Peter Nunns, one of the authors of the Transport Agency research, posted this article about road pricing, which starts to move away from trying to answer “should we do it?” and more into “how should we do it?“, looking at how we’ve managed to implement similar sorts of user-pays pricing in the parking and electricity markets without massive political opposition. His 3 takeaways are:

1. It won’t happen overnight.
   “realising the (potentially large) benefits from a more efficient transport system will take decades, rather than months.“
2. There’s many different changes that all need to be made – pricing is only one piece of the puzzle.
   “Other institutional changes are also crucial – ranging from changing how decisions are made about new investments to setting up new regulators.”
3. Road pricing should completely change how we build and operate our transport networks – we need to be careful we are not fixated solely on smaller, short-term gains like fixing congestion or raising revenue.
   “price signals must inform decisions about new investments. An important long-run benefit of congestion pricing is that it will let us make better decisions about which transport infrastructure is truly needed, and which is not”
   

Sixth, engineer-come-economist Stu Donovan, another of the authors of the research, came to Christchurch on Tuesday to present his thoughts on road pricing. He talked about a lot and I will write about it separately. But one of his key points was the need to build a “social license” to implement road pricing. His view is that we don’t have a social license yet, and we are unlikely to get one by accident, so we need to start thinking about how to build it up. An important part of this will be working openly with the public to come up with a system where people are happy with who the winners and losers are.

All things considered, I think the conversation on road pricing has come a fair way in the last few years, but needs to move a lot further over the next few years if we want to see its benefits here in Christchurch.