Efficient transport pricing–why, what, and when?

Abstract

Striking a balance between societal benefits and costs of transportation lies at the heart of transport planning and transport systems analysis. Increased transport and urbanization enable the many benefits of modern socieities through specialization of labour, production and lifestyles – but these trends simultaneously increase the drawbacks of transportation, such as carbon emissions, congestion, noise and air quality problems. Technical developments and improved infrastrastructure can help reduce these drawbacks, but they do not solve the fundamental problem that those reaping the benefits of transport – travellers, firms, customers – do not perceive the full social costs of transportation. To balance transport costs and benefits, efficient pricing is necessary. Despite a wealth of theoretical arguments, technical developments and substantial practical experience, efficient transport pricing is still rare. Focusing on the example of urban congestion pricing, this paper summarizes why transport pricing is needed, lessons learnt from practical experience, and what the main obstacles are. The two most important obstacles seem to be political power struggles between different levels of governments, and that even if total social gains vastly exceed total social losses, the losses tend to be more salient; losers tend to be easy to identify, while winners tend to be more dispersed and perhaps only exist in the future.