Transcript Progress from Theory to Practice in Europe?

SECRETARÍA DE ESTADO DE INFRAESTRUCTURAS Y PLANIFICACIÓN
MINISTERIO
DE FOMENTO
DIRECCIÓN GENERAL
DE PLANIFICACIÓN Y
COORDINACIÓN TERRITORIAL
CENTRO DE ESTUDIOS
Y EXPERIMENTACIÓN
DE OBRAS PÚBLICAS
Encuentro:
“Tarificación”
Progress from Theory to Practice in Europe?
Phil Goodwin
University College London
Madrid, 25 de octubre de 2004
Tarificación y Fiscalidad
PEIT Conference Madrid 25.10.2004
Progress from Theory to
Practice in Europe?
Phil Goodwin
University College London
Background
• We pay directly for use of rail, bus, taxis,
lorries, usually indirectly for use of roads
• Normally charged for direct costs eg fuel,
wages, etc, but not for indirect costs of
congestion, pollution, economic impacts…
• Public funding for public transport is called
‘subsidy’ - but for public funding for roads
is called ‘investment’
So transport pricing is distorted
For two main different reasons:
commercial prices are distorted by subsidies
and taxes
consumer prices are distorted by the absence
of external effects (positive and negative)
Theory
• Prices equal social marginal costs gives
maximum benefit - if prices are more than
this, people are discouraged from spending
on activities that would bring benefit. If
less, then people are encouraged to ‘buy’
travel whose benefit (to them) is less than
costs (to everyone else)
• the theory is absolutely solid - but many
loopholes which allow it to be ignored...
‘YES BUT...’
• ‘yes but it’s not practical because of budget
constraints’
• ‘yes but we are not ready yet because of
imperfect knowledge’
• ‘yes but it’s only valid if all other prices in
the whole economy are equal to marginal
costs, and they are not’
• ‘yes but let’s start with another mode…’
Rebutting the buts
budget constraints
imperfect knowledge
all other prices
where to start?
Cross ‘subsidise’ or
value capture
always - but the costs
don’t go away!
never - but direction can
be calculated
This is the problem
The Key Questions
• Are external costs real or imaginary?
• Can we measure them accurately enough?
• Does charging for them have negative
effects on the economy?
• Who gains? Who loses?
• What to do with the revenue?
• Do price changes influence behaviour?
The key answers
•
•
•
•
•
•
Real or imaginary? Real
Accurate? No, but enough for action
Economy? Not charging is worse
Gains? Yes overall, but not everybody
Revenue? Must plough back
Change behaviour? Small short run, large
long run
Progress? - a mixed picture
Cited as ‘successes’
• Progress to freight
distance-based charging
• port charges Sweden, air
charges Switzerland,
road charges Norway,
London...
• rail track and operation
separation
Cited as ‘failures’
• harmonisation of fuel
tax
• slow progress of
congestion charging
• rail track and
operation separation
The thesis of 2 EU Agendas
‘Marginal cost pricing for all modes’ - but two
quite different meanings and objectives
fair competition between companies in
different countries, from the common
transport policy (often implies prices down)
reducing social costs, from the sustainable
transport policy (often implies prices up)
Caveat
This does not mean ‘economy versus the
environment’. The distinction is between
a narrow and broad definition of
‘economy’ - ie based on commercial or
social considerations. External costs are
real economic costs. Consideration only of
commercial private costs is now not a
useful basis for transport policy.
The UK Strategy, 1998
‘Enabling’ legislation - each city could
choose whether to have road pricing
If they said yes, then they could keep
the money, and spend it on transport
improvements
(We did not expect London to be first, but the
Mayor of London was an adventurer, and
London had the worst congestion and the
smallest proportion of car commuters)
The danger
• The biggest distortion is the lack of road
user charging, but the easiest pathway is to
tackle public transport charging in the short
run, roads in the long run…
• This makes things worse before they get
better, and makes the long run objective
more difficult to achieve
Some information about London
• Congestion charging started Feb 2003
Controversial, risk-taking Mayor
• 21 sq. km of central London (1579 total)
• Pay £5 (approx 7 euro) to drive in the
zone, 07.00-18.30 Mon-Fri. Pay by cash,
post, www, or SMS on mobile phone.
• Camera recognition of car numbers
Price Elasticity Greater Than
Expected
TfL Mid-point
Forecast
Outcome 1st 6
months
-20% chargeable
vehicles
+ £120m revenue 1st
year
-30% chargeable
vehicles
+£68m revenue est. 1st
year
(also because of
exemptions etc)
Lessons so far
• More successful than expected (no ‘chaos’)
• More popular than expected (no riots)
• More rapid effect on the national policy
debate than expected (controversial Mayor
invited back into Labour Party, Government
setting up more positive studies for national
application - nobody waited for the five
year monitoring results!)
Conclusion
• The issue of road charging is the most important to
solve…
• And we need to remember that price is not the
only tool of policy: there must be consistency with
planning, physical management of the system,
allocatioon of road capacity, ‘soft’ measures such
as travel plans – and investment in new
infrastructure is also distorted by wrong prices.