# 2081

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Published on January 7, 2008

Author: Lilly

Source: authorstream.com

The London congestion charge: A Tentative Appraisal:  The London congestion charge: A Tentative Appraisal Rémy Prud ’homme Univ. Paris XII Nov. 22, 2005 Slide2:  A political success A technical success: Veh*km : -15% Speed: +17% An economic success ? Slide3:  Difficulties 1) Charge is recent 2) Charge +  bus supply 3) Causality problems 4) Zone/Rest of London —> Prudence Slide4:  Limits of London Charge Tolled zone as a share of Greater London Agglomeration in area 1.5% 0.3% in population 5.2% 3.0% in employment 26% 20% in traffic (veh*km) 1.7% 1% Slide6:  Implications Notion of optimal use & of optimal congestion 2) A function of road characteristics, and of demand 3) Can be reached with a tax or toll 4) Shows what can be gained by moving to optimum = = congestion costs = rationale for toll 5) Toll proceeds much greater than congestion costs Slide7:  Calculations We know A (before charge) and E’ (after charge) We know the charge E’B’ Which gives us B’ A and B’ gives us: D(q) = 3.54-0.00139 I(q) = 0.15 + t*v = 0.15 + v/s(q) with t = time for 1 km v= value of time (20.9/veh) s= speed = a-b*q = 0.15 + 20.9/(31.6-0.124*q) S(q) = I(q) + I’(q)*q =0.15+20.9/(31.6-0.1245*q)+0.26/(31.6-0.1245*q)2 Which makes it possible to calculate the coordinates of all the points as well as the surface of interesting areas. Slide8:  Economics of the London Charge in M. €/year) Before Present Optimal Congestion costs 74 6 - Benefit from Charge - 68 74 Charge proceeds - 162 213 Implementation costs - 172 172 Benefit minus cost - -104 -98 Slide9:  Makes it Possible to Answer 4 Questions How important were congestion costs in the tolled zone ? Small: 74 M€/year = 0.1% of GDP of tolled zone. 2) Is toll level optimal ? Nearly so. 3) Are charge proceeds larger than charge benefits ? Yes. 2.4 times larger. 4) Is the London charge economically justified ? No: implementation costs > congestion benefits Slide10:  Other Benefits from the Charge Environmental benefits: - Real: less veh*km at a higher speed = less pollutants, CO2 - But small: 4.9 M€/year 2) Benefits for bus users: -  speed 7% = 1.34 min * 356,000 bus users = 31 M€/yr -  bus =  subsidy of about 53 M€/year = an economic, welfare cost of 7 M€/year Slide11:  Summary Estimates M€/year Benefits Reduction congestion costs 69 Increase in bus speed 31 Environmental benefits 5 Total, estimated benefits 104 Costs Implementation costs 172 Welfare cost of  bus subsidy 5 Total, estimated costs 177 Slide12:  Value of Time Findings very much a function of value of time Value of time utilized: 15.6 €/hour On the high side. For Paris: 9.3 €/hour But plausible for a unique zone Value of time higher for congestion driving (G. Santos) Slide13:  Redistributive Impacts 4 groups: 1) Residents: net gainers: rich or very rich 2) Bus users: net gainers: rich, not so rich, few poors, no very poor. Time saved: for them or for their firm? 3) Those who gave up their car: loosers: the poorest (least rich) of the car users. 4) Remaining car users: a net gain for the very rich, a net loss for the not so rich. Or their firms. Slide14:  Conclusions A charge can reduce traffic to an optimal level. Theory confirmed. Economic gain of this reduction is modest, contrary to common opinion. Even in congested London. Implementation costs are high. Ignored by economists. But high in the case of London. Can they be reduced is anybody’s guess. Congestion charge scheme rejected in Edimburg Postscript: Paris Policy:  Postscript: Paris Policy At about same time: - for a larger zone (2M people) an anti-car policy without a congestion charge based on a reduction of road space (larger bus lanes, more bicycle lane, larger pavements) without increase in public transport supply Poscript: Paris Policy (2):  Poscript: Paris Policy (2) Leading to: - Less car transport (-15% between 2000 and 2004) At lower speed (- 15%) No increase in bus patronage No increase in bus speeds Increase in subway patronage (+5%) Postscript: Paris Policy (3):  Postscript: Paris Policy (3) Summary estimates (M €/year): Costs of works undertaken -10 Time cost for car users -617 Time cost for goods vehicles -117 Environmental costs: Local pollutants -72 CO2 -17 Gains for bus users 0 to +54 Total -834 to -780

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