Analytical Explanation for the Effects of Working from Home on Optimal Environmental Road Pricing

Abstract

The COVID-19 pandemic has had a significant impact on weekly commuting activities through the promotion of remote work, especially from home. This “new normal” has the potential to alleviate the congestion and transportation externalities associated with commuting. In the literature, optimal first-best road pricing has been identified as a complementary strategy for reducing traffic congestion. However, the relationship between optimal road charges and work-from-home (WFH) arrangements is typically considered only with respect to the direct environmental and time costs borne by road users. The indirect effects of WFH on other road users, such as reduced vehicular emissions, time lost in traffic, fuel consumption, and wear-and-tear costs per mile, are often overlooked. This study developed a simple analytical model to analyze the impact of WFH on optimal environmental road pricing, taking into consideration its positive effects on other road users. The results showed that the potential reduction in road charges associated with WFH arrangements was due not only to the direct time and environmental costs imposed on others while in traffic, but also to the corresponding decreases in environmental damage and wear-and-tear costs for other road users resulting from alleviated congestion and traffic density. This study demonstrated that WFH can serve as a policy tool to reduce road congestion and charges, benefiting not only individuals who choose to work remotely but also other road users at the same time. In addition, promoting WFH policies may improve environmental quality and reduce travel time for both remote workers and the wider community.