Jurisdictions around the world are either conducting road pricing trials or looking at potential trials, often off the back of a study into road pricing and as part of a wider road reform package. A number of states in the United States including California have undertaken, or are planning to conduct, road pricing trials. We have also seen Oregon implement a ‘permanent’ trial.
For the states running trials, the logic for them is clear: within the United States, state roads are funded through fuel tax (the gas tax). For a long time, the revenues from the gas tax have failed to provide enough funds to maintain existing roads. For the highway system alone, the repairs backlog is over half a trillion US dollars (https://www.infrastructurereportcard.org/cat-item/roads/).
Gas tax revenues have been falling in real terms due to the political difficulty of increasing the rates (even in line with inflation) and due to more fuel efficient vehicles. In the future, the revenue decline will accelerate as people transition to Electric Vehicles (EVs) and give up paying gas taxes altogether. This revenue outlook is creating the burning platform for DoTs to take action by setting up road pricing trials (see below for how the trials typically work).
It is really positive to see governments and Departments of Transport (DoTs) putting their best foot forward and trying to address demand management for their roads. It is therefore worth taking a step back and thinking about what a really good road pricing trial needs to achieve. To go from a trial to implementation, trials really need to deliver on three things:
- Meet the objectives of road pricing;
- Lay out a clear pathway for adoption; and
- Focus on the customer.
Meeting the objectives for road pricing
Most approaches to road pricing focus on one or more of the objectives of raising more revenue (e.g. congestion charges), replacing existing revenues (e.g. replacing fuel taxes) and/or managing demand on the road network in order to reduce congestion. The current trials in the US are focused on replacing gas tax revenues. Despite major congestion in places such as Los Angeles, the California trial did not have reduced congestion as a primary objective. This might be because they foresee getting people onto a PAYD scheme as a first step and introducing higher pricing for travelling in the peaks at a later point (more on this approach below). The existing trials are well placed for meeting this first deliverable.
Laying out a pathway for adoption
A well designed trial should create a clear pathway for widespread adoption. This means that it should test the feasibility of the approach and reduce the political barriers to taking it forward. In order to achieve this, ideally the trial should be a mini version of a full scheme. Assuming that the trial is broadly successful, this provides a strong basis for going from trial to full rollout simply by scaling up to incorporate more people, rather than modifying the fundamentals of the trial itself.
One of the limitations of existing trials is that they are not doing this aspect well. Any road pricing scheme currently envisaged off the back of the trials is expected to be a very different scheme from the trial. For example, one particular difference is that any road pricing scheme is expected to include (almost) everyone and probably be mandatory. However, the trials are all voluntary, very small and cannot be scaled up (as currently structured) to include the vast majority of people.
In order to make decisions easier for politicians, government agencies around the world have created pathways consisting of a number of small steps in order to get to full adoption. This is initially attractive. Unfortunately, this small step approach has yet to deliver network wide road pricing in any jurisdiction in the world. This is why congestion pricing schemes like the one in London or jurisdictions like New Zealand who have had freight road pricing since the 1970s have barely evolved since they were implemented. This is because it requires the political stars to align not just once but a number of times in order to take things forward. Given how difficult it is to get the stars to align on road pricing just once, relying on it happening multiple times amounts to wishful thinking. Ideally, a pathway for adoption would require just one major political decision not a series of decisions.
Focus on the customer
Any scheme that wants to charge drivers on a pay as you drive (PAYD) basis needs to take the community with them in order to make it politically palatable. Given that most of the community in most jurisdictions are drivers, governments and transport agencies need to think carefully about what their approach means for their customers, the drivers. They need to think about mobility services as a product – how can we get people to buy our product? It is not enough to talk about abstract benefits it needs to be more specific. Will my journey time be reduced, if so, by how much?
The messages to customers on existing trials and the need for reform are currently focused on the need to replace gas tax revenues whilst promising relatively abstract benefits – preserving and maintaining roads. This offering is very similar to the one that has been repeatedly tried (and failed) to get people to ‘buy’ increasing the gas tax over many years. Given that the offering leads on revenues, the public often perceive it purely as a tax grab. Obviously, this builds resistance to the reform and makes it less likely that politicians will want to implement a scheme.
The Next Generation of Trials
Taking forward trials for approaches to demand management is the right the way to go and the States that have taken this forward are to be commended. However, the trials are unlikely to lead to full adoption as the next step is too large a political leap. At the very least, another trial as a stepping stone will be required. Jurisdictions looking at trials should consider whether repeating the format of the existing trials is worthwhile or whether they should take a different approach. Additionally, jurisdictions looking at a multi-step approach should consider whether they will ever see the progress they envisage, especially given the burning platform as a result of the move to EVs.
How existing trials typically work
- People volunteer to get a rebate on their gas tax in exchange for going onto a Pay As You Drive (PAYD) pricing scheme. Being voluntary, no one is forced to participate.
- A flat distance-based fee is charged,with no difference between congested and uncongested roads or time of day.
- Various mechanisms have been adopted for reporting mileage, including mobile phone apps, self-reported odometer readings and connected car (OBD) devices.