By Nick Lovett, Planning Associate at Access
At Access Planning, we are dedicated to building better cities accessible to all with a focus on bringing the principles and practices of equity to our work. The idea of fair access shapes and motivates us everyday in helping cities confront the most complex and challenging problems. Transport pricing is arguably one of the most impactful and controversial policy approaches to addressing our contemporary urban challenges. It represents the confluence of financial, economic, climate, and social policy considerations and consequently, has the potential to have widespread and lasting impacts on cities.
Access Planning has worked across Canada in developing road and transport pricing strategies which is why we have closely followed the City of Vancouver’s Climate Emergency Action Plan. One of the actions within the plan is to explore transport pricing in order reduce carbon emissions by 2030. The plan is as bold as it is controversial, less than 24 hours after the Council resolution, people were already petitioning against Vancouver's plans for road tolls. This visceral reaction is understandable and has been observed in many other cities where pricing schemes are discussed.
Despite having an active and public mode share that would be enviable to most western, English-speaking cities—private motor vehicles are still the dominant mode of transport for most trips in the metro Vancouver region. For many people, owning and regularly using a car is a necessary prerequisite for accessing social, economic, cultural and recreational opportunities. Operating a car is also an expensive proposition for households in the region. In some cases, the associated costs of repayments, parking, gas, insurance, and maintenance, are costing households upwards of $15,000 per annum. Understandably, measures that further increase these costs cause worry among the public as they appear to arbitrarily penalise people who depend and rely on their cars.
Figure 1 – Graphic from the Metro Vancouver Housing and Transport Cost Burden Study illustrating residents on the urban periphery spend proportionately more on transport than inner-urban dwellers.
While many of the costs associated with car ownership are internalized there are many more external costs that are not as immediately visible and noticeable. It is in part because the internal costs are high, that there is an illusion that as motorists, we have bought and paid for the right to drive. As ‘customers’, we expect high levels of service, free flowing roads and convenient parking at our destinations. We have become accustomed to the social contract of using public funds to continually improve the performance and levels of service offered by our transportation network. This user-pays mindset has overlooked the numerous external costs society must bear such as pollution and congestion. Road pricing attempts to price-in some of the external costs associated with a particular trip and encourage people to weigh up the value of travel. The goal is to minimize or economise peoples’ travel behaviour and internalize some of those external costs produced by excessive driving.
Using tolls and prices to manage demand is an unfamiliar departure from the improved capacity and levels of service from our transport system. While the principles behind transport pricing are intuitive and used in many other sectors (telecommunications, aviation) technological impediments have been a challenging hurdle to overcome. In 1952 British Columbia’s only Noblelaurate, William Vickery, first proposed congestion pricing as a concept, although technology was not ready to dynamically price the network. With London, Stockholm and Singapore proving the concept in the twenty-first century transport pricing is beginning to look more like an inevitability. From an environmental, fiscal and geometric standpoint, unfettered vehicle movement is incongruent with a rapidly growing city. The City of Vancouver recognises this, with staff noting that:
“In terms of affordability, the individual (internal) costs of driving are already beyond the means of many. This trend will increase. There is no technological, economic, geopolitical or spatial land use trend that will cause this to reverse while reducing environmental impact.”
Essentially, automobile use is costly, and policies that seek to reduce these costs through more road spending are merely public subsidies transferred to motorists. Is that fair? What might be the impacts? And how do we define and assess fairness in a transport context?
Source: Samuel Sianipar
Is our transport arrangement entirely fair?
To advance social and economic objectives, we build and operate transport infrastructure through a combination of fees and taxes. The enduring challenge of determining which projects to fund, and how to fund them, is a delicate balance between ensuring the beneficiaries of investments contribute financially, and in turn the distribution of those benefits are spread as widely as possible. Benefits and costs are distributed very differently across socioeconomic, demographic, geographic cohorts. By this measure, our current system isn’t perfectly equitable, but it is familiar and comfortable. Any pricing system would naturally have a distributional equity impact and is unsurprisingly the central concern for policymakers and the public. We should be mindful when working to improve fairness in the transport system, that equity is matter of degree not an absolute. We are neither starting from, nor able to deliver, a perfectly equitable system.
How might we anticipate impacts of transport pricing?
On the face of it, transport pricing measures seem regressive. An enduring additional cost to households that cannot avoid it. However, people are generally good at adapting to circumstances, and will respond to incentives and seek trade-offs that maximize their utility. People already apply this kind of reasoning through spatial sorting and it is evident though differentiated housing and transport costs region.
Figure 2 – Compensating effects of housing and transport costs from the Metro Vancouver Housing and Transport Cost Burden Study
A Metro Vancouver study confirmed the compensating effects of housing and transport costs. People make trade-offs about where they live based on their transport choices, which means people that rely on walking and transit are willing to pay more to live in a place centrally located to amenities. Conversely, people that spend less on housing live further from jobs and amenities, drive more frequently, and incur higher transport costs as a result.
Figure 3 – Liner relationship between auto commuting and transport spending from the Metro Vancouver Housing and Transport Cost Burden Study
Regardless of whether it is a stated aim of a road pricing policy, an increase in transport costs will no doubt influence regional land use and location choice in the long run. The focus for policymakers should be firstly to ensure there are mitigating measures (welfare transfers) to those who are exposed to price increases, have low incomes, and have low capacity to adapt their location or travel behaviour. These would be the most vulnerable households and where compensating policies should be targeted. These transfers may not be strictly limited to transport benefits either. For example, it may be more effective to offer rent subsidies in the short term than to administer toll discounts for low-income households in perpetuity.
The more challenging question for policymakers is to ensure that various pricing schemes are assessed against a broad range of equity and fairness dimensions.
Towards a fairer system
The City of Vancouver report stated that, at its core, transport pricing is intended to contribute toward fixing the systemic inequities built into the existing transportation system. Acknowledging these issues is an encouraging first step towards improving the transport system and delivering more equitable outcomes. Critically assessing a baseline of fairness to compare scenarios will assist in overcoming our status-quo bias and identify areas to make meaningful improvements.
The word equity appears nearly 300 times in the council report, but it is difficult to pin down a definition of what that means in the context of transport funding, personal mobility and externalities.There are many dimensions of equity and fairness, so it is useful to develop framework for assessing a system should look to reconcile three categorical questions when designing alternatives:
Who decides?
Process Equity - We know that the process of shaping urban transport systems is political, so we need to ensure a range of perspectives are captured and there isn’t a sampling bias when conducting engagement.
Social Equity – Because of the political nature of transport, there is a tendency to deliver projects that are popular, but it is imperative to ensure that the allocation of funds is proportionate to need.
Who pays and who benefits?
Market Equity – Due to the interactions between transport and land use, the benefits of transport investment usually extend beyond jurisdictional boundaries. It is important to reconcile which groups contribute and which groups benefit in the exchange of public revenue and expenditure.
Justice – Sometimes known as polluter-pays, the notion recognizes that there are certain groups that cause or exacerbate the need for a transport intervention and have no incentives to change their behaviour. Identifying and targeting these groups is important to manage externalities such as pollution, congestion and road safety and deter harmful behaviours.
Intergenerational Equity- The gains and losses for an investment or transport intervention can be distributed to future, or present generations. It is important to consider how investments made or deferred today will impact communities in later years.
How, and how much to contribute?
Horizontal Equity - The consistent treatment of people at similar income levels or similar circumstances is one notion of fairness. This seeks to not arbitrarily penalise certain groups and leave others better off.
Vertical Equity - The practice of ensuring people who have more means contribute more than those with less.
Efficiency– Although it is not strictly a dimension of equity, efficiency seeks to minimize compliance and administrative costs or other distortions that create perverse incentives. Pricing something too low would be inefficient because it would not induce the desired outcome. Pricing too high would suppress socially and economically valuable travel.
Promising solutions
Many cities have had great success with implementing transport pricing to improve economic and environmental conditions in urban centres. Others have failed to rally support and never advanced past conceptual planning. This is a particular challenge in new world cities, but there are progressive leaders willing to spend political capital and move towards implementation. New York looks set to become the first North American with their Central Business District Tolling Program launching in 2022. Auckland has recently moved to their next phase of mobility pricing, endorsing a preferred option that minimizes impacts on low-income households.
No transport pricing system has been implemented without controversy or been eminently popular from the outset. Auckland and Vancouver appear to possess the requisite leadership to highlight and communicate the need for congestion pricing in their respective cities. Many people do not share the sentiment of severity or urgency of the problem road pricing is trying to solve.The key to successfully implementing a scheme will be to garner public support through trials, test and build public familiarity early in the process. Many of the barriers to implementation are not technical but political. Because of this, people need to be brought along throughout the process to build trust and confidence that the approach will deliver meaningful progress towards addressing our climate and equity goals.