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Worksheet on Road Pricing

Step 1 - Pay for the roads? We already do!

To run a car on the roads means paying various costs. Depending on the sort of car you have, these
may be quite high! Fill in in the table below, all the general costs that have to be paid to run a car.
In each case label the cost as fixed (doesn't vary with mileage) or variable (varies with mileage).

type of cost fixed or variable?
Fuel Variable
Maintenance Fixed
Government Tax Fixed
Insurance Fixed
All of these costs are known as private costs - that is costs that you have to pay yourself.
However, by driving you also generate external costs - that is costs which affect others in society.
Try to classify each of the costs of driving below as either a private or external cost:-

type of cost private or external?
Paying for petrol Private
Insurance Private
Wear and tear on the road External
Emissions of Carbon Dioxide External
Congestion External
The costs associated with accidents Private
Noise External
Motorists pay towards these costs through two types of tax. What are the two taxes that motorists
pay? (N.B. One is a fixed amount, and one a variable amount that depends on how much you drive.

1. Tax on petrol

2. License to drive

1.Show the effect of the tax on the diagram below. Draw in the following:-

• a new supply curve
• the new equilibrium price and quantity after the tax
• the area on the diagram that represents the government's tax revenue

THE MARKET FOR PETROL

It depends on the external cost created by driving. Find the detail about the "Road Traffic Reduction Act '97" In the act there is a section outlining forecasts. the smaller the taxes should be. it is important to note that some of the traffic on (trunk and other) major roads within an area of interest to the local authority may depend very little on the characteristics of the area through which the road passes . This way taxes should be adequately cover the cost of driving but I doubt all of it. area-specific traffic forecasts can be produced for any area which is sufficiently large that it is reasonable to assume that area-specific factors influence most of the traffic found on roads in that area.uk/) and find the following:- 1. In order to take account of these sorts of factors. They have always tried to forecast what is likely to happen to traffic levels. Look under the section about the road network 3. The bigger the external cost. Step 2 . Because of this. Outline below the main forecasts for road traffic.Why has the demand curve for petrol been drawn as very inelastic? Petrol is drawn as very inelastic because petrol is a necessity for any industry to work and run on. Traffic growth on a particular road link depends on growth characteristics of the areas that the link runs between.detr. The smaller the external cost. However. suitable areas would include a large proportion of the workplaces and other destinations likely to be attractive to households in the area. Go to the section of the site on the roads 2.The Mystic Meg of the roads! The Department for Transport (DFT) is the government department that is responsible for the roads. Trying is exactly the right word here as it is a very imprecise science! Go to the DETR web-site (http://www. Because its very hard to consider all the costs of driving. the higher the taxes should be. Even though there is a high change to the price of petrol the demand for it will still be high. that is including all the external costs? Justify your answer. and how congested various parts of the network become. Thus. However. a traffic model is required.gov. how well the link connects to other road links to form a network. the demand curve for petrol has been drawn as very inelastic Do you think that these taxes adequately cover all the costs of driving.

although research suggests that these could be paid back quickly. Reducing maximum speeds is likely to be less of a factor in influencing traffic flow and capacity on the urban road network than the interurban. The Department takes the view that speed limits below 30mph . with an increase in the supply of roads.for instance.gov. we need to check again with the fount of all road wisdom .technology already in use in the Barcelona scheme and in this country to control access in private developments. we are using up space that could be use for other projects such as malls or parks. This could be used to allow access to a particular area to residents and essential vehicles only.So what do we do? For some of the possible solutions. as in any other market. Such an approach is used in a number of European cities . What problems could you foresee with this policy? As we build more roads. and significant revenues generated thereafter. Go once again to the "Road Traffic Reduction Act" and find out some of the policies they suggest. The SCOOT UTC system now includes a facility to allow the "gating" of traffic which can be used to limit the amount of traffic entering a congested area. Cambridge and Bristol.uk/). but it may have a part to play. Physical measures 10. There would be large start-up costs.This increase in demand could just be met. Speed limits 20. or the provisions of the Highways (Traffic Calming) Regulations 1993. Permit systems 9.The TRO system allows restrictions to be implemented with exemptions granted on a permit basis rather than by class of vehicle. . Pricing 13. This may help to keep through traffic out. using computer models based on London. It has the potential to be a very flexible system.the Department for Transport (http://www. Research projects. notably about administration. it would make driving a private car more convenient therefore encouraging people to drive their own cars which in turn increasing the demand for more roads creating a vicious cycle. Milan. Athens. If we build more roads. enforcement and technology. Barcelona. suggest that it could markedly reduce traffic in the charged area. What possible policies are there available? Urban traffic management and control systems 5. But there are practical issues that would need to be resolved in the detailed design of an individual scheme.Section 75 of the Highways Act 1980 gives highway authorities the power to vary the relative widths of the carriageway and footway. Rome. Step 3 .Local authorities have powers under the Road Traffic Regulation Act to make Orders setting speed limits. But if it leads to queuing. It could be made self-enforcing by the use of barriers lowered by smartcard or by transponder . could be used to create narrow "gateways" to urban centres. You may need to look at Annex C of the Act. with a variable charge structure for different types of day or types of user.generally have to be self-enforcing to be effective. it may be counterproductive in environmental terms. These.usually 20mph .Urban traffic management and control systems can play an important role in supporting a traffic reduction strategy. Research also indicates that a high level of public acceptance would be needed of any such system. The opportunity cost of that land that could be use for other projects.detr. Bologna.Congestion charging (electronic road pricing) is theoretically a highly effective restraint measure.

The insurance industry have agreed that receipt of contributions to costs as part of a car sharing scheme do not infringe the conditions of the ordinary private car insurance policy and such contributions are normally exempt from tax. Policies that promote restraint of private car use and enhancement of the alternatives will help to bring this about. employers or community groups. but they all involve cars paying for the use of the roads. Permit systems 4. There are various technical methods by which this can be done. but most possible systems would not mean the cars having to stop.B. . What advantages would road pricing have over our current system of paying for the roads? (N. They would be charged as they passed over or under electronic sensors and billed later.the one you think is most likely to reduce the amount of traffic on the roads:- 1. Physical measures 2. This would encourage long distance users to use the toll since there will be less traffic and they gain more value for money per mileage. Urban traffic management and control systems 6. powers under Section 63 of the Transport Act 1963 to take measures to promote the availability and use of public transport in their areas. Rank these policies according to how effective you think they would at reducing the growth of traffic.What about pay as you go? One solution to our traffic problems that is rapidly gaining in credibility is "electronic road pricing". or with the help of. Schemes might be organised by. private non-profit making car sharing schemes involving vehicles with up to eight seats have been exempt from the normal requirements to have a Public Service Operator Licence. Car Sharing 29. Speed limits 7. Consider the extent to which people actually pay for the mileage they use at the moment) Advantages of road pricing would be that it would encourage drivers not to use the toll for short distance trips since they pay the same price for drivers that use the toll for long distance trips. Car Sharing 5. or car pooling. This will decrease the congestion of the tolls. Projects such as "Travelwise" and "Headstart" are seeking to increase transport awareness.Encouraging alternatives to private car use 23. Local authorities already have. Pricing 3.Reducing traffic levels or their rate of growth will require changes in public attitudes and behaviour. and to appreciate the consequences. Start with no.1 . schemes may have a part to play for instance in rural areas. Research suggests that at present relatively few people see a connection between their personal transport choices and overall travel conditions.Car sharing. Since the Transport Act 1980. Encouraging alternatives to private car use Step 4 . The objective must be to encourage a greater willingness to switch to means other than the private car for journeys for which realistic and convenient alternatives exist: commuting and journeys of less than a mile might be examples. for instance. Some involve tolls. But businesses and the public need to be positively encouraged to review their current transport choices and assumptions.

Therefore the benefit of driving a private car is much more than public transports. What example of possible pricing systems do they give? Charging differently for trucks and lorries and passenger cars. Use that to answer the following questions:- (See hint by the asterix below to make this easier) Why does public transport have trouble competing with cars? Public transport have trouble competing with cars because with improving technology in road pricing.ibm. Encourage users to use the toll for long distance trips External .B.Go to the web page of the IBM . Increase in value in cost per kilometre . Private car uses will gain equal benefits for private cars if not more compare to public transport.wss Read the article on road pricing. Reduction in delays for traffic jams . Reduction in CO2 commission What disadvantages might there be? Can you give an example of a system that’s used in Jakarta? Explain it. Road pricing . Less congestion on rush hours since most driver will avoid it . They improve their cost incentives. Encourage drivers to avoid rush hour . http://www-03. The new road pricing system – Paying differently for mobility (Anders Betalen voor Mobiliteit) What advantages will there be from this form of electronic pricing? (N.com/press/us/en/pressrelease/29507. Think about both private and external benefits? Private .

Jakarta use fixed road pricing on their toll road. There is a 3-in-1 policy. . 3-in-1 During certain times on certain roads. where it’s most congested there are bus ways. To encourage drivers to use the toll road instead of the roads near the houses. mostly in the morning and the evening. Bus way In certain parts of Jakarta. This hopefully decrease the traffic near houses. so there will be other type of vehicles. decreasing the congestion and CO2 emission. where you can only use the 3 or 4 lane roads only if you have 3 person in the car. This hopefully encourage users to use the bus way than private cars since its cheaper and the bus lanes are exclusive for the bus only. This encourage drivers to share cars. making it more pleasant near the households and decreasing the traffic there since roads near houses are generally small. This will make the bus trips very short and fast.