This post was co-authored with Maureen Lackner
Last week, New York became the first American city to adopt congestion pricing—a move that should benefit both the city’s crumbling transit system and the environment.
In highly dense areas such as lower Manhattan – where valuable road space is quite limited by its urban geography — congestion pricing allows for a better management for improving vehicle traffic flow. Since the 1950s, economists and transportation engineers have advocated for this market-based measure, which encourages drivers to consider the social cost of each trip by imposing an entrance fee to certain parts of cities—in this case, Manhattan below 60th street. These fees should both discourage driving, thus reducing traffic, while—in New York’s case—raising needed funds for the subway and city buses. These pricing plans have been successful in reducing congestion in places like Singapore and parts of Europe. They have provided additional social benefits, like reducing asthma attacks in children in Stockholm by almost half and cutting traffic accidents in London by 40 percent.
New York will formally introduce this policy instrument in 2021. And while many of the pricing decisions have been deferred, 80 percent of the revenue collected will go to the subway and bus network; 10 percent will go to New York’s commuter rail systems that serve the city. Those setting rates can look to existing pricing models and research to price for success.
Cristobal Ruiz-Tagle, an EDF High Meadows Fellow, spoke with Juan Pablo Montero – a leading environmental economist, fellow Chilean and member of our Economics Advisory Council – about his research on congestion pricing, and what New Yorkers can and should expect.
CRT: What’s the best case scenario of New Yorkers with this pricing plan?
JPM: The latest report from INRIX ranked New York as the fourth most congested city in the United States. New Yorkers lose an average of 133 hours per year in congestion—just sitting in a car and not moving, or moving very slowly. The cost of congestion per year in New York is $9.5 billion—the largest cost in the country. So that’s the starting point.
To solve the problem, you need to set the congestion fee sufficiently high. In Santiago, we ran a study and found it should be around $14 per day. In New York as far as I understand, they’re proposing for passenger vehicles of around $12. It’s a little lower than what we see in London (£ 11.50), but I expect New Yorkers are still going to get most of the benefit from less congestion.
The most important element of the plan is what you do with the resources collected. The proposal here is to improve public transportation. We did a study on this in Santiago and showed that if you don’t put the money back into the transportation system, the poor will be much worse off. We’re proposing something similar in Santiago–that you use the funds to both improve infrastructure and lower fares. That’s the only way to do it without turning it into a regressive policy.
CRT: Are there other benefits to these plans besides reducing traffic and improving public transportation?
JPM: Maybe people will starting using bike lanes more frequently—or people are willing to walk more because their public transportation is better. There could be more outdoor activities. Those additional benefits are important, but they’re hard to quantify.
CRT: In addition to a congestion pricing plan, London also has a pollution fee, which started on April 8th. Do you think these kinds of fees will further reduce emissions and improve health? Or is there something else that should be considered?
JPM: They should, but it’s important to understand the local vehicle fleet—especially how old it is. The cars that contribute the most to local air pollution are very old cars. In terms of global pollutants—namely CO2—they’re roughly the same. Local pollutants—nitrogen oxides, fine particulate matter, etc., are much worse in older fleets. So if the fleet is new—younger than 10 years—you may not see as much as a reduction as if the fleet is very old or if you have ban on diesel pollution. People with lower incomes are more likely to leave their cars at home when charged for driving or with a congestion fee—and they tend to use older vehicles that emit more pollution.
CRT: The age of local fleets has been important in other parts of the world, right? Especially when cities tried non-market-based measures like vehicle restrictions.
JPM: Yes, Mexico City placed a uniform restriction on vehicles in 1989 without making any distinction between newer, cleaner cars and older, dirtier ones. You could only drive your car into the city for a limited number of days per week, so people went out and bought second cars that they could then use on the off days. And the cars they bought were older, which were dirtier. So in that way, the plan backfired.
CRT: It sounds like there are many ways to structure these congestion pricing plans:
JPM: Yes. There are ways to introduce dynamic pricing. You don’t want to keep these prices fixed forever in case the policy response wasn’t as expected. Ideally, you want to change prices based on location and time of day. This may eventually happen, but I don’t think it’s prudent to push for that today. Don’t let the perfect be the enemy of the good.
We are finally seeing this policy instrument taken seriously—and it will be very interesting to see which city is next. LA? Seattle? Washington, DC?
Congestion pricing should provide New Yorkers with a number of benefits, including cleaner air, better public health and a modernized public transit system, all while reducing that maddening gridlock in downtown Manhattan. EDF is part of a coalition of groups supporting New York’s congestion pricing plan.