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Abstract:
The theory of road pricing developed for single links suggests time and location varying charges equal to the marginal congestion cost at the efficient level of traffic. The second-best network counterpart is derived, but would be infeasible to implement. Cordon tolls are feasible, and their optimal level computed for eight towns. A cost-benefit study showed that with a suitable choice of location, all schemes were socially profitable, though with wide variations across towns. The environmental benefits of cordon tolls are measured and shown to correlate with optimal congestion tolls, but to be modest in size and not to affect the optimal toll.

Road Traffic Congestion, Road Pricing, Congestion Charging, Cordon Tolls, Environmental Taxes

Abstract:
Economists wishing to analyse road congestion and road pricing have usually relied on link-based speed-flow relationships. These may provide a poor description of urban congestion, which mainly arises from delays at intersections. Using the simulation model SATURN, we investigate the second-best proportional traffic reduction and find that linear speed-flow relations describe network flows quite well in eight English towns, though the predicted congestion costs and charges overstate those apparently required in our second best model. We then confront the results with feasible optimal cordon charges, and find them reasonably correlated, but imperfect predictors.

Traffic congestion, road pricing, efficient charges, congestion tolls

Abstract:
The LCCS has had positive impacts. This was despite the considerable political influences on the charge level and location. It is difficult to assess the impacts of the increase of the charge from £5 to £8, which took place in July 2005, because no data have yet been released by Transport for London. The proposed extension of the charging zone does not seem to be an efficient change on economic grounds, at least for the specific boundaries, method of charging and level of charging that is currently planned. Our benefit cost ratios computed under different assumptions of costs and benefits are all below unity. Overall, the experience shows that simple methods of congestion charging, though in no way resembling first-best Pigouvian taxes, can do a remarkably good job of creating benefits from the reduction of congestion. Nevertheless, the magnitude of these benefits can be highly sensitive to the details of the scheme, which therefore need to be developed with great care.

This paper assesses the original London Congestion Charging Scheme (LCCS) and its impacts, and it simulates the proposed extension which will include most of Kensington and Chelsea. It also touches upon the political economy of the congestion charge and the increase of the charge from £5 to £8 per day. The possibility of transferring the experience to Paris, Rome and New York is also discussed.

This paper assesses the original London Congestion Charging Scheme (LCCS) and its impacts, and it simulates the proposed extension which will include most of Kensington and Chelsea. It also touches upon the political economy of the congestion charge and the increase of the charge from £5 to £8 per day. The possibility of transferring the experience to Paris, Rome and New York is also discussed.

The LCCS has had positive impacts. This was despite the considerable political influences on the charge level and location. It is difficult to assess the impacts of the increase of the charge from £5 to £8, which took place in July 2005, because no data have yet been released by Transport for London. The proposed extension of the charging zone does not seem to be an efficient change on economic grounds, at least for the specific boundaries, method of charging and level of charging that is currently planned. Our benefit cost ratios computed under different assumptions of costs and benefits are all below unity. Overall, the experience shows that simple methods of congestion charging, though in no way resembling first-best Pigouvian taxes, can do a remarkably good job of creating benefits from the reduction of congestion. Nevertheless, the magnitude of these benefits can be highly sensitive to the details of the scheme, which therefore need to be developed with great care.