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7. How we’ll get there

We think there are three steps to building social acceptance of transport network pricing.

  • Firstly, identify the objective as reducing congestion. Overseas experience has demonstrated that focusing on congestion-busting as the primary objective has been effective in building social acceptance for change.
  • Secondly, make the case for transport network pricing as an effective solution to reduce congestion, and assist the community to understand and accept that pricing reform is a necessary complement to building more infrastructure.
  • Thirdly, deliver and demonstrate the benefits of the reform. Expanded public transport and reforming existing charges will help to demonstrate benefits to the community of a change in how we pay.
  • By making the case for transport network pricing as an effective and fair solution for congestion, then delivering and communicating the resulting benefits, governments can build community acceptance for a change to how we pay for transport.

There are now several examples of successful transport pricing reform. We draw on these to suggest three steps to developing social acceptance for introducing transport network pricing in Victoria and to highlight policies that enable and complement it.

The first step is to specify the main objective of the reform. The second step is to provide the best solution to achieving that objective. Because our proposed solution is about changing behaviour rather than accommodating it, the third step is to credibly deliver the benefits from the reform.

The measures discussed in this section draw on the conditions identified by the community panel and the BehaviourWorks Australia (BWA) forum (see Section 4), along with the experiences of successful – and unsuccessful – reforms overseas (see Section 3).

There are several dimensions to the problem that we will not address – not because they are not important, but because they have been thoroughly analysed elsewhere. First, one of our principles is that all costs be priced. This includes any negative externalities such as carbon emissions or the contribution to road trauma. There is a well established methodology for doing this (see for example Parry and Small, 2005).

Second, there are important privacy issues as transport network pricing requires greater information on when, where and how individuals travel to provide benefits for behavior change.

Privacy issues and suggestions on how to address these legitimate concerns have been extensively analysed by the National Transport Commission (2019) and Terrill et al. (2019b).

To improve and support the move to a new transport network pricing system, there may be significant governance and regulatory issues that need resolving. While these have been addressed during the implementation in other jurisdictions, Infrastructure Victoria is carrying out ongoing research on the Victoria-specific dimensions of this issue.

Third, if there is substantial diffusion of mobility-as-a-service (MaaS) and autonomous vehicles, there could be substantial though variable implications for the pricing of transport infrastructure. Autonomous vehicles are analysed extensively in Infrastructure Victoria’s report Automated and Zero Emissions Vehicles Infrastructure Advice (2018).

Transport network pricing reform ahead of this development would leave us better equipped to handle any potential negative outcomes e.g. due to traffic proliferation. Similarly public transport network pricing reform could include measures that support getting the most of MaaS by enabling private and public sectors to more easily interact, and could also ensure that pricing of MaaS is complementary and doesn’t undo the efficiency benefits of transport network pricing reform. It is not possible to be more concrete until the nature and extent of the diffusion of these technologies becomes more definite.

Fourth, the focus on congestion means that the focus is also mainly on transport around greater Melbourne. There are important issues around public transport pricing in regional Victoria – these will be subject to more extensive analysis in ongoing work at Infrastructure Victoria.

Finally, there may also be significant technological requirements of a new system. Some of these are also addressed in Terrill et al. (2019a) but this is a rapidly developing area best addressed in future work. It is worth noting for now that the technology exists to implement the systems we have considered in this paper.

Reducing congestion is the objective

In Section 2 we outlined three key problems facing Melbourne’s transport network: congested roads and public transport, ineffective solutions, and lack of choice and equity

The approach presented in this paper addresses each of these problems. However, to improve the community’s acceptance of transport pricing reform, it is important to focus public communications on a single clear and important objective. That objective should be reducing congestion. It is the main problem facing the transport network now and it is only going to get worse.

Reducing congestion was the main objective associated with the successful introduction of road pricing in London, Milan, Singapore and Stockholm. Melbourne’s parking levy was also motivated as part of a way to address congestion in inner Melbourne. The BWA forum also saw congestion as the sort of problem a political party could seek a mandate on, with a set of solutions included in an election campaign.

Making reducing congestion the objective of reform supports making the transport system more adaptable as supply and demand change. If congestion reduces more than expected, prices can be reduced. If congestion reduces less than expected, prices and/or services and infrastructure need to be increased.

Data collected in congestion pricing will help us make more efficient decisions about investment in transport. Singapore has used average speed targets to refine its road pricing over time and space. San Francisco has used vacancy rate targets in setting parking prices. This led to average parking prices falling – outside of peak times, prices could be lowered to make more efficient use of parking.

Finally, it is also worth noting that the need to fund the transport system has been used as an alternative argument to support transport pricing reform. This was the motivation for the pilot road pricing scheme in Oregon and the proposed congestion pricing system for New York City.

Once generally accepted, funding has been part of the motivations for further reforms to the Stockholm congestion charge (Eliasson, 2014).

Infrastructure Partnerships Australia has argued for applying a distance-based charge to electric vehicles to complement the fuel excise for general revenue paid by petrol and diesel driven vehicles (Infrastructure Partnerships Australia, 2019).

To date, there are no examples of transport pricing reforms motivated by financial constraints proceeding to full scale. Indeed, for Victoria, most pricing reforms, such as eliminating the distance-based elements on metropolitan public transport and introducing the free tram zone, have probably increased the financial support metropolitan public transport needs from general revenue. And this revenue is collected, in part, from people who do not use the system.

The funding argument would probably be stronger if the revenue collected was solely returned to the transport system. But most of the revenue collected from travellers goes to general revenue rather than being hypothecated to the transport system.

Returning revenue to the transport system requires significant governance reform, which is the focus of ongoing work at Infrastructure Victoria.

Transport network pricing reform is a necessary, effective and fair way to achieve this objective

We have already shown that transport network pricing is a necessary, effective and fair way to reduce congestion. Our modelling suggests an inner Melbourne cordon charge would substantially increase average travel speeds in inner Melbourne. International experience also shows introducing road pricing reduces congestion.

However, it is not enough for transport network pricing reform to be one way to reduce congestion. It has to be accepted as the best way. In Victoria, the alternative with popular support, is the expansion of the road network (new freeways or adding lanes to existing ones) or public transport. This is encouraged by major projects often being described as `congestion-busting’.

As we argue in Section 3, economic theory and empirical evidence suggests adding capacity alone does not significantly reduce congestion beyond the short run. Investment in transport infrastructure and services need to be complemented by pricing reform for congestion to be reduced.

An interesting similarity across cities that have successfully reformed transport network pricing is that large expansions of the road network or, to a lesser extent, public transport would have been either physically impossible or prohibitively costly. There is very little space for new freeways through central London or Milan. Melbourne faces the same challenges of valuable, limited space above ground.

Trials

One approach that has been shown to help convince people that transport network pricing is a necessary, effective and fair solution to reducing congestion is a full-scale trial.

There are several international examples of how this can work. Milan already had experience with a pollution control scheme that had similar effects to congestion pricing. In Stockholm, a full-scale trial was very effective as part of gaining social acceptance for transport network pricing reform (Eliasson, 2014). Winslott-Hiselius et al. (2009) show that before the trial, media coverage was largely negative, but after the trial it was overwhelmingly positive.

The full-scale trial was followed by a referendum, which voted for congestion pricing. Referendums without preceding trials were held in Edinburgh and Manchester; these were not successful.[13] This may have been because, without a full-scale trial, people could not see the benefits.

The community panel also highlighted ‘real-world’ trials as one of the conditions under which they would support transport network pricing reform. The City of Melbourne has also called for a trial of road pricing, noting that such trials have been used in many cities around the world and give ‘all stakeholders an opportunity to test new ways of doing things in the city and evaluating the benefits before committing to long-term change and investment’ (City of Melbourne, 2019).

Oregon and San Francisco also began with pilot schemes of distance-based road user charging and demand-responsive parking pricing (Pierce and Shoup, 2013). The Oregon trial was opt-in, while the San Francisco pilot was conducted across a small set of locations. San Francisco’s parking pricing program was eventually fully rolled out. Although Oregon’s road pricing program has not proceeded to full scale, other states such as California and Washington also conducted trials of distance-based charging.[14]

The Melbourne Road Usage Study provides a Melbourne-specific example of how trials can help build social acceptance of transport network pricing reform. As described earlier, at the start of the study 85% of participants said they were comfortable with the current funding system. After experiencing alternative road-charging options, 60% said they preferred a user-pays system (Transurban, 2016).

[13] See www.theguardian.com/politics/2008/dec/12/congestioncharging-transport22
[14] See www.sfmta.com/blog/san-francisco-adoptsdemand-responsive-pricing-program-make-parking-easier, www.usa.streetsblog.org/2017/06/26/oregons-pay-permile-driving-fees-ready-for-prime-time-but-waiting-forapproval/, www.waroadusagecharge.org/ and www.caroadcharge.com/en-us/Resources/Ongoing-Research

Delivering benefits from transport network pricing

Even if people accept that transport pricing is a necessary, effective and fair solution to congestion, they will be more likely to support its introduction if they believe there will be social or even personal benefits that will flow from its adoption.

While the discussion below focuses on economic benefits, examples of more general benefits include more time with family, better health and environmental outcomes, and easing some of the negative side effects of population growth (Kunstler et al., 2020).

A credible promise that sufficient benefits will flow from transport network pricing is the third part of achieving social acceptance. The feasibility of doing this is shown by the examples of civic leaders in political parties being elected in London and Stockholm with congestion pricing as part of their policies (Eliasson, 2008; Leape, 2006).

A key component of this step is identifying the type of travellers who will be directly impacted by the change to transport network pricing (Kunstler et al, 2020). This includes those who will change their behaviour and those who won’t, potentially paying higher prices.[15]

Social acceptance requires that a substantial number of these travellers benefit from the reform. Benefits and the way the policy is communicated should be targeted at this group (Kunstler et al, 2020). It is also important that the broader community doesn’t perceive that they will be worse off.

How do we know that there are people out there who will respond to transport network pricing and change their behaviour? International experience, described earlier, shows that enough people respond to the introduction of congestion pricing on roads to achieve significant reductions in congestion. But what about Melbourne?

Polling conducted by Infrastructure Victoria found that a quarter of those surveyed could change the time of their journeys, or avoid at least some journeys taken during peak times. Furthermore, about a third reported they could choose another mode of transport than driving during peak times (Quantum Market Research, 2017). In addition, when the Tullamarine Freeway was shut, analysis showed about 20 to 40% of commuters must have been able to change their behavior (Kunstler et al, 2020).

A first step in communicating the benefits of transport network pricing is demonstrating that it works. As we have discussed, a full-scale trial is a potentially effective way to do this.

Not only does it show how the reformed system will work, this demonstration targets the travellers that will use this reformed system. The remainder of this section focuses on other ways to benefit those affected by transport network pricing as part of building social acceptance. There are also a number of other changes, that address other problems, which might also help with social acceptance.

[15] Hau (1992) shows the reason for this for the case of introducing road pricing

Delivering benefits through expanding and reforming public transport

One way to deliver benefits to increase public acceptance is to package transport network pricing with other benefits that also improve the efficiency of the system. Expanding and reforming public transport is the most important element of this. This is an example of targeting benefits to those whose behavior can change in response to reform (Kunstler et al., 2020).

If we are to reduce driving to reduce congestion, travellers need confidence that there are satisfactory alternatives for their journeys to work, school and other activities. Our modelling shows that road pricing encourages greater use of public transport. Having a transport pricing system accompanied by public transport improvements was one condition the community panel required for accepting transport network pricing.

In London and Stockholm, increased demand for public transport from introducing congestion charging was anticipated and increased services were provided. In Stockholm, as well as conducting a trial, there was also a significant expansion of public transport explicitly linked to the congestion charge. Adding extra services as part of a trial of pricing reform could also send an important signal to the community that any shift to full network pricing would be accompanied by service improvements.

Expansion of the public transport system would require expenditure, but as it is for high demand periods and locations it would also deliver some funding over time.

Reforming public transport pricing also has an important role to play in creating other benefits through providing more choice with respect to price. For example, making buses on average cheaper than other modes creates opportunities for Victorians to save money travelling while making more efficient use of the network.

Adopting demand-responsive parking pricing will also change demand for public transport. Our modelling shows that introducing peak pricing results in increased demand for off-peak services. Introducing pricing at train station car parks could increase the demand for feeder public transport services as well. With all this in mind, it is clear that reforming transport network pricing is likely to require complementary changes in the level and even type of public transport services provided.

There are several reasons why pricing reform could proceed in public transport ahead of road pricing reform. First, travellers are used to paying for public transport and so are likely to be more accepting of more targeted public transport pricing.

Second, it is likely that public transport pricing reforms will not significantly affect road use because relatively few trips are made using public transport.

Having peak pricing on public transport before beginning road pricing could reduce initial costs of transitioning to full reform. Smoothing the peaks of travel consumption reduces the need for additional peak public transport services for those substituting away from private motor vehicles. To the extent there is substitution across different modes in response to differential pricing, additional services for particular modes may be required e.g. more frequent bus services.

One limitation of reforming public transport prices first is that it is likely that public transport prices will need to change again when road pricing is introduced. Nevertheless, Victorians will be better prepared to adjust to road prices as congestion on public transport will be reduced and they will also be used to responding to more sophisticated incentives when making transport choices. The BWA forum also highlighted the importance of staging the introduction of transport network pricing.

Packaging with other reforms and investments

While the primary focus on transport pricing reform is to reduce congestion, this reform can also occur in a way that addresses the lack of incentive to change behaviour and unfairness in the existing system.

We have identified several ways to create supporters for reforming transport pricing by targeting compensation for those most directly affected. The first example, most applicable to congestion pricing associated with particular areas, is to return the funds to improve the affected area. The congestion pricing revenue could be used to fund more transport or general improvements to the area.

Shoup (2005) argues, and illustrates with case studies, for returning parking revenue to improve the surrounding neighbourhoods (commercial or residential). This approach could be applied to wherever demandresponsive pricing of parking is introduced. This was also highlighted by the BWA forum – in particular linking it to the provision of additional transport infrastructure. A similar approach was taken with London’s Ultra Low Emission Zone.

Another approach applies to reforming public transport pricing. Ideally, compensation for introducing congestion pricing on public transport would target existing commuters. In this case, they can be identified as this information is captured by myki. For example, with the introduction of congestion pricing all those who had done at least a year of regular trips on public transport during peak hours could receive a fixed sum of money. Doing this for road travel would be more challenging.

Transport network pricing reform provides an opportunity to shift to a more user-pays system which also enables more targeted incentives to reduce congestion. The Victorian government could replace registration, TAC and stamp duty fees with a distance-based charge as one way of doing this. Those who currently do not drive often or far would benefit from this change as highlighted in our modelling.

Similar benefits could also go to those making short trips if we move to distance-based pricing for public transport.

The application of a distance charge could be made simpler and fairer if, with the cooperation of the Commonwealth Government, the fuel excise was replaced with direct road user charging. Fairness would be improved if the concessions already available to low income and vulnerable Victorians for water and energy could be extended more comprehensively to road transport.

More generally, a similar pattern of incentives, associated with distance and time of day, could be included in road user pricing but at lower levels.

An example of a reform in a related area that could support the introduction of transport network pricing on roads is reforming the fuel excise in response to its decline with the diffusion of electric and low fuel consumption vehicles. This was a central motivation for the pilot of distance charging in Oregon, where a fuel excise directly funds roads. Infrastructure Partnerships Australia has recently argued for a distance-based charge to be applied to electric vehicles in Australia in anticipation of declining general revenue from the fuel excise.

Indeed, if combined with replacing the fixed charges, distance-based charging for electric vehicles could be extended in a similar form to hybrid vehicles voluntarily on an opt-in basis.

More generally, making participation voluntary can assist with social acceptance by, at least initially, limiting participation to those that benefit. In other words, to begin reforming transport pricing more generally without creating losers, one strategy is to make participation voluntary. Any person who chooses to switch to a new form of transport network pricing must have perceived that they will be better off than under the existing form of pricing.

However, opt-in approaches have several limitations if it is not possible to target incentives only to those who will change their behaviour. For example, travellers who would have travelled off-peak anyway will switch to a system with cheaper off-peak fares without any change in their travel patterns. For reduced congestion, enough travellers in peak must change their behaviour.

One way to encourage a switch is to begin with opt-in participation and then switch to opt-out participation in the new system. That is, after some time, transport network pricing becomes the default option, so travellers must choose to remain on the current system. For example, existing myki cards could be opt-in but any new myki card will be opt-out.

While there has been no trial of opt-in/ opt-out transport network pricing, research in the energy sector (Nicholson et al., 2018) suggests that making a package opt-out rather than opt-in increases its uptake. [16]

The final example of how transport network pricing could be packaged with other reforms is to link it with major service changes or infrastructure investments (Kunstler et al, 2020). For example, a large-scale bus reform, as proposed in Infrastructure Victoria’s Five Year Focus report, coinciding with the opening of Melbourne’s Metro Tunnel, could be the ideal time to introduce an inner Melbourne congestion charge.

The service improvements associated with the Metro Tunnel could reduce the potentially negative impacts of the charge. A second example is applying charges to new car parking at railway stations of park-and-ride stops along with improvements to bus services connecting to these stations.

[16] For an even more striking example with respect to organ donation see www.independent.co.uk/news/long_reads/ spain-leads-world-organ-donation-organ-transplant-healthscience-a8417606.html

A future where electric vehicles are also charged – with more than just electricity

Modelling and analysis in the Infrastructure Victoria report Automated and Zero Emissions Vehicles Infrastructure Advice – Transport Modelling Infrastructure Victoria (2018) suggests electric vehicles could contribute more to congestion than petrol vehicles due to their low running costs. Hence, there is a greater risk of more road congestion as their numbers rise.

In addition, as highlighted in Infrastructure Partnerships Australia (2019), the fuel excise would be less effective as a tax reducing the general revenue collection.

A distance-based charge on electric vehicles, as recommended by Infrastructure Partnerships Australia, would raise revenue, complementing the declining fuel excise, though not directly addressing congestion at first.

This proposal is similar, in some ways, to a small-scale trial of distance-based road charging under favourable conditions – there are less likely to be equity concerns associated with a full-scale trial and electric vehicles are more likely to be compatible with the latest technologies for implementing road pricing.

Our work, applying the economic principles presented in Table 2, suggests any distance-based charge for electric vehicles be set at a lower rate than for internal combustion vehicles. This is because electric vehicles feature environmental benefits of less air, carbon and noise pollution. Rates could also be set lower for vulnerable and lower income travellers, reducing the main source of unfairness in a distance-based charge. Efficient adoption and use of electric vehicles would be additionally encouraged by reducing or removing the fixed registration and stamp duty charges for these vehicles.

As highlighted by our community panel, transparency is important and would be improved by the charges going not into general revenue but to a state transport authority, similar to the roads fund in New Zealand.

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