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Implementation of market-based transportation measures could have many benefits. Reducing single-occupant vehicle trips on the streets and highways leads to less congested roads, air quality improvements, and fuel use reductions. To assess the extent of these benefits, several transportation and air quality agencies planned and funded this study to investigate the potential of transportation pricing strategies to harness market forces and reduce single-occupant vehicle trips and vehicle miles traveled (VMT). |
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The investigators reviewed previous studies and met with local and state policy-makers, agency staffs, and other interested groups to determine the main issues. From this groundwork, they developed four types of pricing strategies: traffic congestion charges, employee parking charges, fuel tax increases, and VMT and emission fees.
To estimate the impacts of these strategies, the investigators used a model for the Los Angeles, San Francisco, San Diego, and Sacramento metropolitan areas. The prices or charges were varied so that the potential effectiveness of each strategy in helping to achieve air quality and transportation goals in the state could be estimated. The investigators further examined the impacts of the pricing strategies on income groups, land use, and government revenues. To gauge acceptability of the strategies, the investigators met and discussed results with California citizens and public agency decision-makers. |
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The use of pricing strategies for managing resources is not new. Telephone companies use variable prices to manage peak loads, and airlines change ticket prices depending on season and day-of-week volume. Pricing strategies have worked well in these markets. This study found, however, that most pricing proposals made by government agencies are perceived as taxes and result in immediate resistance. It also found few existing examples of transportation pricing. Transportation pricing strategies in California seem unlikely, at least for the near future.
Demonstrations of pricing on a regional level, such as that employed on new toll roads, could provide valuable information on the effectiveness of such strategies and public acceptance based on actual experience. Each strategy is good at meeting a particular goal. If reducing congestion is the goal, a pricing strategy that targets driving during rush hours would be the most effective. If cleaning up the air is the objective, a fee that targets high-polluting vehicles would work best.
Congestion Pricing
Congestion pricing is a strategy whereby vehicles are charged a fee for traveling during peak traffic hours on congested routes. Drivers who would pay to travel on these routes during peak hours would save time because the roads would be less congested. To save money, other drivers would travel during off-peak hours, shift trips to less congested roadways, use public transit, or carpool. The investigators estimate that charging 8¢ to 19¢ per mile could reduce congestion by 5-10%, VMT by 1.5-3%, and emissions by double that amount – 3-6% – since additional benefits would be achieved by reducing stop-and-go traffic.
Employee Parking Pricin
About 90% of commuters who drive to work do not pay parking fees. Charging for parking would encourage switching to ridesharing or public transit. The investigators estimate that employee parking charges of $1 to $3 per day could reduce VMT, trips, and pollutants by 1-3%.
Fuel Taxes
Charges added to gasoline tax could induce some drivers to reduce vehicle trips or purchase more fuel-efficient vehicles. The investigators estimate that a 50¢-per-gallon addition to gasoline taxes would reduce VMT and air pollutants by about 4%. A $2-per-gallon increase would result in an 11-13% VMT/pollutant reduction. Fuel use reductions would be larger – about 9% for 50¢-per-gallon and about 30% for $2-per-gallon increases.
VMT and Emission Fees
The investigators evaluated three VMT and emission fee strategies. They estimated that a VMT fee of 2¢ per mile (an average of $250 per year) could reduce VMT and emissions by about 4%. An emission fee ranging from $40 to $400 per year based on miles driven and average emission rates could reduce VMT by about 2% and emissions by 4-6%. The investigators also estimated that a fee ranging from $10 to $1,000 per year based on actual emissions and miles driven could reduce VMT by 2% and emissions by 15-20%.
Equity and Revenues
The results of this study suggest that one of the biggest issues raised by strategies that increase the price of transportation is that, while most people would benefit from the resulting cleaner air, some would suffer increased travel costs. The investigators calculated the effects of pricing strategies on households in five income groups, from the lowest 20% to the highest 20%.
An important finding of the study is that most households in the lowest income group – the one-fifth of the California households whose annual income is less than $18,676 – would receive very little impact from pricing strategies because the people in most of these households already use transit or walk to work. The greatest impact of the pricing strategies would fall on middle income households.
One approach for avoiding adverse effects of pricing strategies on low- and middle-income individuals would be to use the revenues from the pricing strategies to provide attractive transportation alternatives.
Overcoming Barriers to Implementation
Major barriers to implementing transportation pricing measures were identified through interviews with local officials and interest groups. These barriers include a lack of broad-based support for action, the strength of the anti-tax movement, resentment over government involvement with most of the strategies, and lack of a clear precedent demonstrating overall benefits and an ability to offset inequities. Ways to reduce the barriers include addressing equity issues, obtaining support from local communities, granting implementation authority to local governments, and government financial support for new technology. |
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The results of this study show that market-based transportation pricing could help improve air quality, traffic congestion, and fuel use in California. However, the prices that would have to be used to make the pricing approach an effective air quality management tool are high. A gasoline tax of 50¢ per gallon, which would reduce emissions by 4%, is about two and a half times the current level of 18¢. For significant emission reductions of 11-13%, the tax would have to be $2 per gallon. Such tax increases might raise revenues at levels that are unacceptable to the public. Other pricing strategies investigated in this research also tend to require price increases that may be unacceptable compared to the prices paid for current strategies to improve air quality. |
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The Air Resources Board has funded these related projects (ARB contract numbers in parentheses): Indirect Sources: Vehicle Trips to Regional Shopping Centers (A032-194); Employee Responses to Vehicle Trip Reduction Incentives (A032-187); Effects of Increased Highway Capacity on Travel Behavior (92-325); Goals and Strategies for Indirect-Source Control Programs (92-348). |
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This research effort was initiated by the Statewide Working Group on Market-Based Transportation Control Measures. It was jointly funded by the California Air Resources Board, the California Department of Transportation, the Federal Highway Administration, the Los Angeles County Metropolitan Transportation Authority, the Southern California Association of Governments, and the San Diego Association of Governments. |
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