Implementation Paths for Marginal Cost-Based Pricing in Urban Transport: Theoretical Considerations and Case Study Results

Abstract

While economic theory provides grounds to believe that a rapid implementation of marginal cost-based pricing would be a sensible policy strategy, in the practice of policy-making more gradual implementation paths (IPs) appear to be favoured. Arguably the most important reason why this should be the case is the existence of barriers and constraints. Surprisingly, however, little or no attention to the design and performance of policy IPs has been given in the transport literature. The purpose of this paper is to develop a structured economic approach to the design and evaluation of such IPs. A second purpose is to apply the proposed approach to analyse implementation paths in the context of urban transport. There is evidently great tension or gap between an idealised approach and what is feasible in applied modelling work using large-scale empirical network models. Four urban case studies are presented, which seek an optimal compromise between the theoretically ideal approach and a pragmatic approach (of ‘fully arbitrary’ IPs). We believe the results are indicative of what one might expect to encounter along a realistic IP, but at the same time acknowledge that the IPs presented are unlikely to represent the best possible path given the local circumstances.

The research summarised in this chapter was carried out as part of the EU Fifth Framework research project MC-ICAM (DG TREN, Contract No. GRD1/2000/25475-SI2.316057). Financial support from the European Commission and helpful comments from Catharina Sikow and from MC-ICAM external experts and partners are gratefully acknowledged. Lindsey would also like to thank the Social Sciences and Humanities Research Council of Canada for funding of the project “Road pricing in urban areas”. The opinions expressed in this paper are those of the authors and do not necessarily reflect the views of the European Commission. This paper draws from earlier, unpublished, overviews that have been presented at various MC-ICAM meetings.