Friday, October 19, 2012

Rationing road capacity - Shanghai's success

This blog has consistently held the view that any meaningful effort to address traffic congestion has to revolve around policies that seek to explicitly ration road capacity, either through limiting vehicle ownership or restricting vehicle usage by owners. Given the lack of properly planned urban development and scarce land space available for road expansion, traffic conditions in our cities are certain to worsen in the future. In the circumstances, central to any attempt at effectively managing urban transport will be policies that can control the growth of private vehicles on these city roads and efficiently ration road carriageway among competing users.

In this context, the trends from Shanghai's license plate auctions (license plates have to be purchased in these monthly auctions before you can own a vehicle) are instructive. The graphic below shows how the city has managed to stabilize vehicle population growth. 

The rate of increase in auction prices is a reflection of how much the vehicle population would have grown in the absence of this restriction. The prices have continued to rise through 2012, recently touching 64000 yuan ($10000). 

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