Tuesday, August 23, 2011

Incentivizing efficient road usage - per kilometer driving tax?

Arguably the biggest challenge with traffic management in coming years would be the issue of managing demand response among private vehicle users. Congestion tax, road toll, vehicle miles travelled tax, and so on are being experimented in different cities across the world.

In this context, Times points to an experimental six-month road pricing trial conducted in Eindhoven, where a few cars were outfitted with a meter, hooked to wireless internet and a GPS, that would inform drivers in real-time of a road fee which is calculated based on the vehicles fuel efficiency, miles driven, time of road use, and the route being used. The fee is a measure of the cost to the society in the form of pollution, traffic congestion, greenhouse gas emissions and wear and tear on roads. At the end of each month, the vehicle’s owner would receive a bill detailing times and costs of usage, not unlike a cellphone bill.

The trial, which logged more than 200,000 test kilometers, showed that with the help of technology, drivers can be motivated to change their driving behavior, reducing traffic congestion and contributing to a greener environment. Its findings include,
"70% of drivers improved their driving behavior by avoiding rush-hour traffic and using highways instead of local roads. On average, these drivers in the trial saw an improvement of more than 16% in average cost per kilometer... Instant feedback provided via an On-Board Unit display on the price of the road chosen and total charges for the trip is essential to maximizing the change in behavior."
The Netherlands is debating the introduction of a new road-use charge, per-kilometer driving tax, starting in 2012 for trucks and lorries, and 2013 for passenger cars, and become nation-wide by 2016. Its objective is to reduce traffic delays and CO2 emissions and lower private vehicles road use and increase public transit use. The government was to reduce or even eliminate conventional taxes on vehicle purchases and registration and replace them with a single per-kilometer driving tax. However, political considerations have forced these plans to be atleast delayed.

Update 1 (31/8/2014)

On July 1, 2013, Oregon initiated a two-year pilot project, covering 5000 cars and light commercial vehicles voluntarily enrolled, to collect a Vehicle Miles Traveled (VMT) tax. The legislation replaced the state's gas tax with a "pay-per-mile road usage charge", whereby drivers who agree will pay 1.5 cents per mile driven instead of the 30 cents per gallon they currently pay.

As Atlantic put it, the VMT tax is radical because,
But the greatest potential of Oregon's program is its ability to change the way Americans think about the cost of driving. Right now the cost of road maintenance is hidden in the price of fuel. In a mileage-based funding system, such as Oregon's, drivers would receive monthly statements showing their driving activity and road expenses. The entire funding system becomes more like a utility—like an electricity or cable bill—enabling people to adjust their behavior in response to their expenses.
Such road pricing schemes have great flexibility in incentivizing driving behaviours. It can be used to charge congestion pricing, varying charges based on vehicle type, and so on. 

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