Hussein Dia, 16 December 2015

Fixing our cities’ transport woes remains one of the biggest challenges facing policy makers in Australia. Traffic congestion, transport emissions and booming urban populations are increasingly putting more pressures on governments’ budgets to deliver the infrastructure we need to meet our economic and mobility needs.

Traffic congestion impedes economic growth. The avoidable cost of congestion in capital cities alone is estimated to be around $16.5 billion for 2015, up from about $12.8 billion for 2010. The Bureau estimates the cost will increase if the current trends are not controlled and the most likely scenario is that it will blow out to around $30 billion by 2030 if nothing changes. Transport is also one of the major sources of emissions related to the combustion of fossil fuels in Australia. In 2010, transport contributed 83.2 Mt CO2 or 15.3% of Australia’s net emissions with road transport accounting for 71.5 Mt CO2 or 86% of national transport emissions. Passenger car usage in urban areas was the largest transport source, contributing 8.5% of Australia’s net emissions and accounting for around 39.7 Mt CO2.

Last week, the Australian government was urged by international leaders meeting at the COP21 conference in Paris to take more decisive action on climate change. At the same time, the government was lampooned by the local media for its continued refusal to support a communiqué to end government subsidies for fossil fuels at the Paris climate change conference.

These events have once again ignited debate on tax reform and the need to rethink how we pay for transport infrastructure. The current funding model, which is largely based on collecting revenue from fuel excise, vehicle registrations and license fees, is inequitable and is unlikely to generate enough funds to meet our infrastructure expenditure requirements. This model will be under more stress in the future when revenue from fuel excise declines as consumers move towards electric vehicles and more fuel-efficient cars.

Congestion pricing has been proposed by planners, economists, policy makers and peak bodies as a likely solution to address the shortfalls of the current system. It is also the most likely solution to curb transport emissions in congested urban areas. Through this approach, drivers would pay directly, through a user charge, for travel into congested areas (a road user driving in a regional area and not contributing to congestion in the city would not pay). The charge can be dynamic and would change to reflect the current congestion levels (higher charges would apply during peak hours). This would be part of an overall tax reform that would remove or reduce other transport taxes (e.g. vehicle registration which is essentially a ‘property’ tax as it is not a charge related to the amount of travel).

The scheme would also provide incentives for carpooling, car sharing and other strategies to encourage people not to drive into congested areas. Measures would also be put in place to provide more public transport and improve services. The revenue generated from the user charges would go towards maintaining and operating roads and transport services, and improving the travel options available for travellers.

Overseas, a recent report by the Royal Academy of Engineers in the UK identified congestion pricing as the single best option to tackle road congestion. In Australia, road pricing has been paraded as a key approach to fix our transport problems over the past few years. The Henry tax review in 2009, the Productivity Commission review of public infrastructure in 2014, and the Harper Review in 2014 all urged governments to consider road pricing as a matter of priority. These studies also recommended that governments conduct pilot studies to demonstrate the benefits to road users.

A number of cities overseas have already implemented congestion pricing. These include London, Stockholm and Gothenburg in Sweden, and Singapore.

The benefits reported for these cities are compelling. In the 12 years since London started the scheme, traffic congestion was reduced by around 10% in the central city area. This included a 34% drop in private cars entering the area, and 28% increase in cyclists. The scheme also resulted in a 16% reduction in emissions within the charging zone, amounting to 30,000 tonnes annually. A recent study has also found that the program resulted in reducing traffic collisions by 40% between 2000 and 2010. In addition to saving money and lives, congestion pricing is also reported to raise more than $300 million every year which would go towards improving the city’s transport services.

In Stockholm, the congestion pricing scheme removed 20% of peak hour vehicles. In the densely populated city centre, emissions decreased by around 10-14%. Sweden’s lesser-known congestion charging program in Gothenburg is also reported as a big success. The scheme was effective in reducing traffic by 12% during the peak hours, with many travellers switching to public transport.

Singapore’s experience with congestion pricing dates back to 1975. This was in the form of an Area License System (ALS) which was based on a flat rate charge. The ALS reduced traffic by 45% and vehicle crashes by 25%. The ALS was replaced by an electronic road pricing system in 1998 resulting in a further 15% decrease in traffic.

There are some encouraging signs from the Turnbull government which recently announced it will accelerate work with the states and territories to investigate the benefits, costs and potential next steps to introduce road pricing for all vehicles. This is a good start and an acknowledgement that the current road funding model is both inequitable and unsustainable. It is also a recognition of the potential benefits for governments, taxpayers and road users in moving towards a user-pay system.

The overseas success stories provide a unique insight into those cities’ remarkable journeys to implementing congestion charging. Although the schemes initially proved to be decisive and controversial, more people have gradually become accepting of the approach particularly as the benefits became more visible.

In Australia, the implementation of an effective congestion pricing scheme should now transcend this debate and move quickly towards real-world trials and extensive consultation and engagement with road users. This sort of approach will give our cities an opportunity to reduce congestion, modernise their infrastructure and help drive economic growth and create jobs for the 21st century.

Extracted in full from Gizmodo.