Mobility and Transport Connectivity Series Urban And Interurban Road Pricing Navigating the changing landscape of mobility management and infrastructure financing August 10, 2023 Urban and Interurban Road Pricing ii © 2023 World Bank International Bank for Reconstruction and Development/The World Bank 1818 H Street NW, Washington DC 20433 Internet: http://www.worldbank.org/transport Standard Disclaimer This work is a product of the staff of The International Bank of Reconstruction and Development/ World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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World Bank shall not be liable for any content or error in this translation. Adaptations If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank. Cover image: Adobe Stock https://stock.adobe.com/in/images/aerial-view-of-road-interchange-or-highway-intersection- with-busy-urban-traffic-speeding-on-the-road-junction-network-of-transportation-taken-by- drone/404489267 Urban and Interurban Road Pricing iii Table of Contents Acknowledgment.............................................................................................................................................vi 1. Introduction................................................................................................................................................... 1 2. Theoretical Framework................................................................................................................................3 2.1.  Pricing and Economic Efficiency.............................................................................................................. 4 2.2.  Pricing and Social Equity........................................................................................................................... 9 2.3.  From Theory to Practice.......................................................................................................................... 15 3. Practical Application of Road Pricing in Interurban Environments....................................................21 3.1.  The Traditional Concession Toll.............................................................................................................22 3.2.  Tolls For Efficient Management Of Interurban Mobility: The Case Of The European Union...32 3.3.  Impacts of Interurban Pricing................................................................................................................52 4. Practical Application of Road Pricing in Urban Environments........................................................... 62 4.1.  Practical Cases of Urban Tolls................................................................................................................63 4.2.  Highways in Metropolitan Areas...........................................................................................................76 4.3.  Effects of Urban Pricing..........................................................................................................................84 5. Trends In Toll Pricing................................................................................................................................. 98 5.1.  Interurban Context................................................................................................................................... 99 5.2.  Urban Context.......................................................................................................................................... 99 Bibliography.................................................................................................................................................. 102 Image Credit...................................................................................................................................................113 Urban and Interurban Road Pricing iv Figures 2.1. Marginal Cost Pricing: First-best��������������������������������������������������������������������������������������������������������������� 5 2.2. Optimal Toll, Given the Externalities�������������������������������������������������������������������������������������������������������� 6 2.3. Pricing with Positive Externalities������������������������������������������������������������������������������������������������������������� 6 2.4. Average Cost Pricing������������������������������������������������������������������������������������������������������������������������������������ 7 2.5. Comparison between Optimum Toll and Toll that Ensures the Infrastructure Is Financed�������� 8 3.1. Fees applicable to variable pricing in Austria. Year 2021������������������������������������������������������������������36 3.2. German Toll System for Heavy Vehicles Based on a Public-Private Collaboration Model���������39 3.3. Hungary’s Toll System for Heavy Vehicles�������������������������������������������������������������������������������������������� 41 3.4. MLFF Systems in Europe���������������������������������������������������������������������������������������������������������������������������42 3.5. Basic Operations of the Free-flow Satellite/GPRS System��������������������������������������������������������������44 3.6. Process for Recording Travel Information and Sending It to the Authorities in the Swiss Tachograph-based System�����������������������������������������������������������������������������������������������������������������������45 3.7. System Operations Using Post-Payment and Pre-Payment (Specifically in the Case of Germany���������������������������������������������������������������������������������������������������������������������������������������������������46 3.8. Interoperable TOLL2GO System Between Austria and Germany����������������������������������������������������48 3.9. Customer Satisfaction Index in Austria—Components and Evolution�������������������������������������������53 3.10. Heavy Vehicle Traffic through the Swiss Alps�������������������������������������������������������������������������������������56 3.11. Changes to Road Freight Vehicle Traffic in Switzerland, by Emissions Category�����������������������59 3.12. Registration of New Heavy Vehicles in Switzerland and Germany in 2006, by Emissions������ 60 4.1. Cordon Toll System Implemented in Stockholm��������������������������������������������������������������������������������� 68 4.2. Layout of the Different Zones Included in the London Congestion Charge�����������������������������������70 4.3. Central Cerchia dei Bastioni Payment Zone for Ecopass/Area C����������������������������������������������������75 4.4. Main Urban Concessions in Santiago, Chile����������������������������������������������������������������������������������������� 80 4.5. Map of the Costanera Norte Highway in 2020������������������������������������������������������������������������������������82 4.6. Evolution of User Behavior in Managed Lanes�������������������������������������������������������������������������������������93 Tables 2.1. Variables to Consider When Evaluating Equity������������������������������������������������������������������������������������ 12 2.2. Indicators to Evaluate the Equity of an Activity�����������������������������������������������������������������������������������17 Urban and Interurban Road Pricing v 2.3. Influence on the Equity of Road Pricing������������������������������������������������������������������������������������������������� 18 2.4. Road Pricing Winners and Losers������������������������������������������������������������������������������������������������������������ 19 3.1. Criteria for Establishing Tolls in New Concessions in Europe�����������������������������������������������������������24 3.2. Toll Structures and the Concessionaire Companies to Which They Apply������������������������������������28 3.3. Toll Variation Based on Vehicle Type���������������������������������������������������������������������������������������������������� 30 3.4. Main Characteristics for Establishing Concession Tolls in Various Countries������������������������������ 31 3.5. List of European Countries That Have Adopted a Variable Pricing System for Heavy Vehicles���������������������������������������������������������������������������������������������������������������������������������������������35 3.6. Criteria Considered by Different European Countries in Setting Tolls�������������������������������������������37 3.7. Toll Road System in Each European State That Has Applied a Pay-per-use Model������������������ 38 3.8. Main Aspects of Variable Pricing Systems in Europe������������������������������������������������������������������������ 50 4.1. Revenue Collected in Phase 2 of the Oslo Cordon Toll������������������������������������������������������������������������64 4.2. Urban Concessions in Santiago, Chile Tendered to Date������������������������������������������������������������������� 81 4.3. Vehicle Categories, Factors, and Equivalencies in Santiago’s Urban Concessions����������������������82 4.4. Sources of Costs and Revenue of London Congestion Charging Fiscal Year 2007–08������������� 88 4.5. Uses of London Congestion Charging revenue Fiscal year 2007/2008���������������������������������������� 88 4.6. Whatcom County Rush Hour Traffic Effects on HOT and HOV Lanes�������������������������������������������92 4.7. Emissions Reduction in Stockholm in the Pricing Trial Period��������������������������������������������������������� 95 4.8. Percent Growth in Traffic and Employment in Oslo Corridors�������������������������������������������������������� 96 Images 3.1. Worker with Gloves and in Helmet arranging Curbs on the Street�������������������������������������������������27 3.2. Omdurman, Khartoum, Sudan, Nubia��������������������������������������������������������������������������������������������������� 36 3.3. End of a Traffic Jam on the Motorway in Germany��������������������������������������������������������������������������� 40 3.4. Urbanisation�������������������������������������������������������������������������������������������������������������������������������������������������49 4.1. A car travel along the road on hills��������������������������������������������������������������������������������������������������������� 66 4.2. Asphalt being Laid on Freeway Construction Project������������������������������������������������������������������������ 69 4.3. Typical Bridge in Giri-junction, Abuja, Nigeria��������������������������������������������������������������������������������������74 4.4. Fare on the Toll Road����������������������������������������������������������������������������������������������������������������������������������78 4.5. Busy Toll Road with many Cars Queuing up to Pay the Highway Toll�������������������������������������������� 91 Urban and Interurban Road Pricing vi Acknowledgment Technical Team This document was prepared by José Manuel Vassallo (Centro de Investigación del Transporte— TRANSyT). Contributors include Juan Gómez, Laura Garrido, and Álvaro Aguilera García. The study was led by Daniel Benitez and Lincoln Flor from the World Bank. Chapter 1 Introduction Urban and Interurban Road Pricing 2 Introduction Road pricing, including the implementation of vignettes, tolls, and congestion charges, is a widely adopted approach by governments. It serves multiple policy objectives, ranging from conventional goals such as cost recovery and traffic management to the internalization of externalities and the allocation of toll revenues for public transportation. However, the utilization of road pricing schemes poses significant challenges that necessitate careful consideration. These schemes affect both efficiency and equity, impacting not only road users but also non–road users. While many roads are presently toll-free, tolls are being increasingly applied in interurban, urban, and metropolitan areas globally. To support their implementation, governments have embraced new technological developments, leading to highly sophisticated systems. It is imperative to comprehend the impacts of various schemes and technological solutions and assess their alignment with policy goals to ensure successful implementation. While numerous publications delve into detailed studies of specific pricing applications, there is a limited and incomplete body of literature that comprehensive solutions across the board. However, drawing comparisons among various tolling experiences can greatly assist public decision-makers in formulating transportation policies that promote sustainable mobility. The objective of this document is to offer a comprehensive perspective that intersects theory and practice in the realm of road pricing across different cases. Consequently, this document aims to provide a set of guidelines that support decision-makers in adopting the most appropriate policies and investments. The recommendations primarily focus on the initial decision-making stage of road pricing. Furthermore, this document presents an overview of the theoretical framework of road pricing and discusses the evidence from selected cases. Particular attention has been devoted to countries with extensive experience in urban and interurban road pricing, as well as major cities that have implemented urban tolls. The document is structured into five chapters. Chapter 2 provides a comprehensive overview of the theoretical framework surrounding road pricing. It outlines the fundamental principles and characteristics of road pricing, while exploring the relationship between social equity and road pricing. Additionally, it addresses potential implementation challenges that may arise. The subsequent chapters offer summaries of international experiences in interurban pricing (Chapter.3) and urban pricing (Chapter 4). In the case of interurban pricing, a broad spectrum of approaches is examined, including traditional methods, concession tolls, and the latest trends in variable pricing within the European Union. Lastly, Chapter 5 highlights the key trends in road pricing and provides recommendations based on the evidence presented throughout the document. This chapter serves to offer valuable insights for decision-makers, drawing from the comprehensive studies presented within the document. Chapter 2 Theoretical Framework Urban and Interurban Road Pricing 4 Theoretical Framework This chapter provides a dual perspective on road pricing, first examining its relationship with economic efficiency and subsequently analyzing its connection to social equity. It delves into the implications of pricing on economic efficiency and explores how road pricing can contribute to optimizing resource allocation and improving overall economic performance. Furthermore, it analyzes the relationship between road pricing and social equity, taking into account the potential impacts on different socioeconomic groups and addressing the need to ensure fairness and inclusivity in the implementation of pricing schemes. It explores potential measures to mitigate any adverse effects on vulnerable populations and promote equitable outcomes. Additionally, this chapter addresses the challenges associated with bridging the gap between theoretical concepts and practical implementation. It assesses the complexities of translating theoretical frameworks into effective policies and strategies, considering the practical considerations, stakeholder engagement, and implementation challenges that may arise. 2.1. Pricing and Economic Efficiency The relationship between economic efficiency and optimal pricing in infrastructure can be analyzed from both an allocative and a technical perspective. Allocative efficiency pertains to a scenario where prices align with the marginal cost of production, leading to an output allocation that maximizes social welfare. Meanwhile, technical efficiency is attained when production is optimized by utilizing inputs to achieve the highest output at the lowest cost. This section will primarily focus on allocative efficiency, specifically examining three key aspects: marginal cost pricing, the inclusion of externalities in the cost function, and the self-financing of road infrastructure. Marginal cost pricing involves setting prices that align with the incremental cost of producing additional units, thereby ensuring efficient allocation of resources. By considering the externalities associated with road usage, such as environmental impacts and congestion, the cost function can be adjusted to reflect these factors and promote more socially desirable outcomes. Finally, the concept of self-financing explores mechanisms to fund road infrastructure through the revenues generated from pricing schemes, thereby reducing the burden on public finances. 2.1.1. Marginal Cost Pricing: First-Best Marginal cost pricing is an economically efficient approach where users are charged based on the additional costs they impose on the road system. This method maximizes social welfare by aligning prices with the marginal charges derived from road usage. In figure 2.1, the C’ curve represents the marginal costs caused by congestion imposed on other users. The CMO curve illustrates the average operational costs incurred by users, such as fuel and travel time. Two demand curves are depicted. During periods of low demand, when congestion is absent, drivers do not impose externalities on others, eliminating the need for congestion pricing. However, under high demand and congestion scenarios, implementing a pricing mechanism can mitigate these effects and enhance economic efficiency. The figure illustrates the imposition of a congestion price (RU) to alleviate congestion. Failing to do so results in a social loss represented by the shaded area (RTS). When the demand intersects with the CMO curve (S), the marginal cost (C’) remains above the efficient equilibrium, leading to inefficiencies. Urban and Interurban Road Pricing 5 Figure 2.1. Marginal Cost Pricing: First-Best $/V h x km Hi h d m nd (p k) T C’ Low d m nd Cmo (off-p k) R S U Tr ffic Source: Izquierdo and Vassallo (2001). 2.1.2. Inclusion of Other Externalities in the Cost Function Transport activities give rise to both positive and negative externalities. An instance of a positive externality is the increase in land value resulting from improved accessibility, which stimulates economic activity. Conversely, negative externalities encompass air pollution, environmental degradation, and increased congestion. These negative externalities often necessitate government intervention to rectify the imbalances and enhance system efficiency. Similar to the scenario depicted in figure 2.1, implementing a toll fee that reflects the marginal cost imposed on other users or affected economic agents can restore an efficient equilibrium. Figure 2.2 illustrates the cost (C’ and CMO) and demand curves. Additionally, the curve C’S represents the aggregate of costs associated with congestion (C’) and other externalities caused by drivers, such as noise, environmental pollution, accidents, and more. Figure 2.2 diverges from the previous example by introducing the marginal social cost curve, C’S, which encompasses not only congestion but also other externalities. In the absence of a toll fee, the equilibrium point is S, where demand intersects with average operating costs, resulting in a social loss. Implementing a fee equal to the difference between marginal costs (excluding externalities) and average operating costs leads to a fee of RU and incurs a social loss, LWR, due to the existence of externalities. To achieve maximum efficiency in the presence of externalities, the fee should be set as the difference between marginal social cost and average operating costs, resulting in a fee of LV. This approach transfers a portion of the cost of external effects to the user, achieving overall efficiency. Figure 2.2 illustrates the negative externalities caused by the road. However, it is important to note that roads also generate positive externalities, such as the increase in property value for land located near the infrastructure. Urban and Interurban Road Pricing 6 Figure 2.2. Optimal Toll, Given the Externalities $/V h x km Hi h d m nd (p k) C’s W C’ Cmo L R S V U Tr ffic Source: Izquierdo and Vassallo (2001). Figure 2.3. Pricing with Positive Externalities €/V n x km De m an d C’ C’s Cmo R S U Tr ffic Source: Izquierdo and Vassallo (2001). In figure 2.3, an additional positive externality is incorporated into curve C’S, which accounts for the assumption that property value is directly influenced by traffic on the road. As depicted, curve C’S lies below the marginal cost curve. Consequently, the fee imposed should be lower to reflect this positive externality. 2.1.3. Average Cost Pricing One of the primary concerns for governments when implementing road tolls is to achieve cost recovery and avoid deficit-based infrastructure financing. Striking a balance between efficiency and financing the infrastructure is a challenging task. Figure 2.4 provides a graphical representation of this dilemma when the equilibrium point occurs where the average cost surpasses marginal cost. In Urban and Interurban Road Pricing 7 this scenario, curve CM represents the total average cost, including construction, maintenance, and operation expenses of the road, along with the costs assumed by users (CMO). Figure 2.4. Average Cost Pricing €/V n x km De m an d C’ CM W Y CMO R X S V Z Tr ffic Source: Izquierdo and Vassallo (2001). If the primary objective is infrastructure financing, the toll price should cover the total cost of construction and maintenance. This occurs at the intersection of the average cost curve (representing construction, maintenance, and operations) and the demand curve (point W). At this point, users must pay toll WZ, which covers the average cost of construction and maintenance. However, at point W, the average cost exceeds the marginal cost, indicating that the established toll equilibrium is not economically optimal and results in a social loss of WXR. To achieve the economic optimum, the toll should equal RV, the marginal social cost, which leads to equilibrium at point R, where the demand curve intersects with the marginal social cost curve. This maximizes the sum of consumer and producer surpluses and represents the economic optimum. Nonetheless, toll RV does not guarantee the coverage of the infrastructure’s average cost (YV), making it unfeasible to finance the infrastructure. Figure 2.4 is often used for interurban roads with minimal congestion issues and insignificant externalities, where the average cost exceeds the marginal social cost at the equilibrium point. To simultaneously achieve both the objectives of marginal cost pricing and self-financing, the demand, average cost, and marginal cost curves must intersect at the same point. Figure 2.5 illustrates this scenario, where the price ensuring maximum social well-being (MN) is the same price that allows for the financing of construction and maintenance without any subsidy. Urban and Interurban Road Pricing 8 Figure 2.5. Comparison between Optimum Toll and Toll that Ensures the Infrastructure Is Financed €/V n x km De m an d De 2 m an d 1 C’ CM N CMO W R M X Z Tr ffic Source: Izquierdo and Vassallo (2001). According to economic theory, when the equilibrium point is reached with an average cost lower than the marginal cost, it signifies that the infrastructure is oversized for the demand it serves (figure 2.4). From an economic perspective, the optimal toll fee to collect would be higher than what is necessary to adequately finance the infrastructure. Consequently, the road would accommodate more traffic than it logically should, resulting in higher marginal costs and a need for increased capacity. As demonstrated, achieving both objectives simultaneously is challenging since the user’s assumed average cost must equal the marginal cost, while also being able to finance the costs of construction and maintenance. This requires the road to be designed precisely to meet the demand, which is practically difficult as road capacity expansions are discrete and incremental (for example, expanding from 1 to 1.15 lanes is not feasible, but rather expansions occur lane by lane). 2.1.4. Cost Recovery and Efficiency in Price Determination Various solutions have been proposed to finance all the costs associated with roads. However, setting a fixed price equal to the average cost leads to economic inefficiency. A compromise is often suggested to reconcile the objectives of marginal cost pricing and self-financing. For instance, Hotelling (1938) proposed that the financial deficit resulting from this dilemma should be covered by the government or taxpayers through cross-subsidization, while Allais (1947) suggested establishing prices directly proportional to the marginal cost, a practice commonly adopted by electrical companies for fee setting. However, neither of these solutions achieves the economic optimum outlined by the theory of marginal social cost. To reconcile marginal cost pricing and self-financing in the road system, the theories put forth by Ramsey (1927) and Boutiex (1956) can be applied. These theories assume the existence of several independent demands and propose a price that allows for infrastructure financing while achieving an economic optimum. According to these theories, the increase in the price of a good i above its marginal cost of production (MCi) should be inversely proportional to the elasticity of demand for that good. Urban and Interurban Road Pricing 9 Note: Pi Price of good i MCi Marginal cost of production for good i ei Elasticity of demand for good i λ Constant The pricing of roads has been extensively studied by researchers, particularly in the context of toll roads and free alternative roads. These studies have explored the efficiency and pricing considerations in such scenarios. Some notable research in this area include Verhoef, Nijkamp, and Rietveld (1996) ; Liu and McDonald (1998), Light (2009), Koster et al. (2018); and Ortega, Vassallo, and Pérez-Díaz (2018). One key aspect analyzed is the impact of having both a toll road and a free alternative road. This configuration affects the overall demand for transportation in two ways. First, some users may opt for the free road when faced with toll charges, leading to a shift in travel behavior toward a more efficient option. Second, there are users who effectively distribute their travel between the toll road and the free road in an efficient manner. This situation represents a choice between two substitute goods, where the alternatives are interchangeable. The research in this area has yielded two main conclusions:: i. It is impossible to achieve first-best or Pareto optimality when a free alternative road is available alongside the toll road. The best possible solution lies in the concept of second-best, which depends on the specific ii.  characteristics of the road network under consideration. These findings highlight the complexities involved in achieving optimal pricing and efficiency in road systems, particularly when toll roads coexist with free alternative routes. 2.2. Pricing and Social Equity The relationship between pricing and social equity is multifaceted, and different perspectives exist on how to approach and define equity. It is important to recognize that equity is a relative concept and can vary depending on the definition employed. Moreover, anticipating and addressing potential political and bureaucratic challenges in achieving equity can be complex. Traditionally, equity is assessed from horizontal and vertical perspectives. Horizontal equity suggests that individuals with similar needs and abilities should be treated equally. Vertical equity, on the other hand, focuses on fairness and often involves favoring those who are most in need, employing positive discrimination measures. Within vertical equity, considerations may be made based on income, social class, needs, and abilities. It is important to note that these definitions of equity are not exhaustive, and other interpretations exist. Urban and Interurban Road Pricing 10 Levinson (2010) introduced the concepts of opportunity equity and outcome equity. Opportunity equity pertains to the fairness of access to the planning and decision-making process, whereas outcome equity refers to the perceived fairness of the consequences resulting from decisions. In addition to horizontal and vertical equity, outcome equity encompasses dimensions such as: • spatial or territorial equity, which focuses on equitable resource distribution across different areas • generational equity, which considers the balance of benefits and losses across different generations • market equity, which addresses the proportional allocation of benefits and losses based on the price paid • social equity, which entails distributing impacts in proportion to individual needs These various definitions and dimensions of equity underscore the complexity of incorporating social equity considerations into pricing strategies. Achieving equity requires careful assessment and consideration of multiple factors, including access, consequences, spatial distribution, intergenerational impacts, market dynamics, and individual needs. Ungemah (2007) introduced five distinct forms of equity that address specific aspects of fairness: Geographic equity. This form of equity assesses whether improvements made in a project are i.  logically, rationally, and objectively distributed across a geographical area. It examines whether the distribution of benefits and impacts is fair and equitable based on a consistent criterion applied to the entire region. • Income equity. Income equity explores whether the least privileged segments of society are negatively affected by the project’s improvements. It also considers whether there are adverse consequences on economic vitality or dynamism in specific states or regions, particularly those with lower income levels. Participation equity. Participation equity focuses on whether individuals from disadvantaged ii.  social strata have meaningful involvement in the decision-making processes related to the project. It examines whether there are mechanisms in place to ensure their voices are heard and perspectives considered. Opportunity equity. This form of equity examines whether the decision-making criteria for the iii.  project are influenced by secondary effects, such as economic status. For example, if the cost recovery strategy for the project considers the economic status of users, it would affect the decision-making process and potentially result in inequitable outcomes. • Modal equity. Modal equity investigates whether the project’s improvements align with public perception and opinion regarding the promotion of a modal shift. It considers whether the project adequately addresses the preferences and needs of different transportation modes, aiming to achieve a fair and balanced allocation of resources and support for various modes of transportation. These five forms of equity provide a comprehensive framework for assessing fairness in different dimensions of a project. By examining geographic distribution, income impacts, participation opportunities, decision-making criteria, and modal considerations, a more holistic understanding of equity can be achieved, enabling policymakers to address potential inequalities and promote more inclusive and equitable outcomes. Urban and Interurban Road Pricing 11 Another way to examine the concept of equity is offered by Done and Tong (2009), indicating four approaches to equity. The first is human health and safety, and a sample measure may be air quality using air pollution models. The second point of view is economic development, land prices, and property values, where transportation access plays a key role. This might include evaluating employment and productivity, capital gains from properties, and so on. The third point of view is social and cultural strata, such as community cohesion and support of certain cultures. This may be evaluated using transportation demand models, models of activity to be carried out and transportation used, transportation and systems simulations, and so forth. The fourth and final method of measuring this is in the natural environment. Acoustic models can be used to evaluate some elements, such as noise and visual occupancy. As demonstrated, equity is a broad concept. This makes analyzing it very complex, since an analysis depends not only on how people are categorized, the impacts taken into account, and how they are measured, but also how often there is involvement from different factors and different types of equity that often overlap or conflict (see table 2.1). For example, horizontal equity requires users to assume the costs of transportation facilities and services, but vertical equity often calls for subsidies for disadvantaged people. As a result, transportation planning often involves making concessions between the different objectives of equity (Litman 2021). Done and Tong (2009) presented four approaches to examining equity, each focusing on different aspects of the concept: • Human health and safety. This approach considers equity in terms of the impact on human health and safety. Measures such as air quality, assessed through air pollution models, can be used to evaluate the effects of transportation on human well-being. • Economic development and property values. This perspective focuses on equity in terms of economic development, land prices, and property values. It examines how transportation access influences factors such as employment, productivity, and capital gains from properties. Evaluations of economic impacts often play a significant role in assessing equity. • Social and cultural strata. This approach considers equity from a social and cultural standpoint, considering factors like community cohesion and support for specific cultures. It may involve using transportation demand models, activity-based models, and transportation simulations to analyze how different segments of society are affected and whether their needs are adequately addressed. • Natural environment. This perspective examines equity in relation to the natural environment. It involves assessing the impact of transportation on elements such as noise and visual occupancy. Acoustic models and other tools can be used to evaluate and mitigate environmental impacts. The complexity of equity analysis arises from the presence of various dimensions and factors. Categorizing people, measuring impacts, and considering the involvement of different equity perspectives all contribute to the complexity. Additionally, conflicts and overlaps among different types of equity can further complicate the analysis. For example, horizontal equity may call for users to bear the costs of transportation facilities and services, while vertical equity may require subsidies for disadvantaged individuals. Transportation planning often involves navigating these trade-offs and finding compromises among different equity objectives. In summary, equity analysis in transportation planning is a multifaceted task that requires considering different approaches, an understanding the interplay of various equity dimensions, and making trade-offs to address conflicting equity objectives. Urban and Interurban Road Pricing 12 Table 1. Variables to consider when evaluating equity Types of Equity Impacts Measurement Categorization Horizontal Public facilities and Per capita Demographics Equal treatment of services Per adult Age and lifecycle stage equals Facility planning and Per commuter or Household type design peak-period travel Race and ethnic group Vertical with respect to Public funding and Per household income and social class subsidies Income class Quintiles Transport affordability Road space allocation Per unit of travel Public involvement Poverty line Housing affordability Per vehicle-mile/km Lower-income areas Impacts on low-income Per passenger-mile/km communities User costs and benefits Per trip Ability Fare structures and Mobility and accessibility discounts Per commute or peak- People with disabilities Taxes, fees, and fares period trip Industry employment Licensed drivers Service quality in Service quality lower-income Per dollar communities Quality of various modes Location Per dollar user fees Congestion Jurisdictions Per dollar of subsidy Vertical With Universal design Neighborhood and Cost recovery street respect-to need and ability Urban/suburban/rural External impacts Universal design Congestion Special mobility services Mode Crash risk Disabled parking Pedestrians Pollution Service quality for Bicyclists and non-drivers Barrier effect motorcyclists Hazardous material and Motorists waste Public transit users Aesthetic impacts Community cohesion Industry Freight Economic impacts Public transport Economic opportunities Vehicle and fuel Employment and business activity Trip type Regulation and Emergency enforcement Commutes Traffic regulation Commercial/freight Regulations and Recreational/tourist enforcement Regulation of special risks Source: Litman (2021). Urban and Interurban Road Pricing 13 The implementation of transportation policies can have various social repercussions and equity can be evaluated from different perspectives. For instance, Leck et al. (2008) examined the impact of reduced travel time on economic equity between central and peripheral regions. They explored whether transportation improvements could lead to socioeconomic benefits such as wage convergence. In Israel, reduced travel time was utilized to decrease inequalities and enhance equity. Conversely, Feng, Zhang, and Fujiwara (2009) focused on equity differences based on accessibility and travel time, without considering the purpose of travel. They assessed equity in terms of just distribution of impacts, both in costs and benefits, using different indicators to analyze the required investment for achieving a certain degree of equity. While the impact on equity using specific indicators may be the same, the necessary investment can vary depending on the indicator used. Di Ciommo and Lucas (2014) employed a generalized accessibility cost measurement that considered travel time and transportation cost, examining the economic burden of a hypothetical road pricing system in Madrid on different road users in low- and high-income zones. Their findings indicated that pricing would disproportionately affect unskilled and lower-income individuals residing in the southern area of metropolitan Madrid, resulting in reduced accessibility, increased generalized costs, and longer travel times. Equity in transportation is also explored through other perspectives, including traffic accidents (Anbarci, Escaleras, and Register 2009; Anderson 2010), noise pollution (Brainard et al. 2004; Neitzel et al. 2009), air quality (Schweitzer and Zhou 2010; Zuurbier et al. 2010), the link between accessibility and social exclusion (Scott and Horner 2008), and the connection between accessibility and road pricing strategies (Ramjerdi 2006; Souche, Mercier, and Ovtracht 2016). Regardless of the specific definition and indicators used, equity principles must be considered when making decisions and planning transportation infrastructure (Laube, Lyons, and Allan 2007). Public policies lacking an equity approach risk failure for two main reasons. First, even if measures are economically efficient, they may face societal resistance and be perceived as unsympathetic. Second, avoiding injustice in public policies is crucial in all circumstances. Imposing road pricing against public will is rarely viable; however, acceptance can be enhanced if the purpose and benefits of the policy are clearly communicated, the system aligns with civic concerns like the environment, and revenue is reinvested in the transportation sector. Achieving a perceived sense of equity can be facilitated through reasonable revenue allocation and appropriate compensation for those facing losses (Bueno et al. 2017). The following section provides a brief explanation of the three most significant types of equity to consider when pricing a road. 2.2.1. Equity Across Income Levels In addition to the complex equity considerations surrounding toll implementation, there are several aspects that suggest tolls could have certain advantages from an equity perspective: • Users with higher incomes tend to travel more frequently and on longer trips compared with users with lower incomes. By implementing tolls, the cost burden of road usage would be distributed more proportionally among users based on their higher per capita income. This means that individuals with higher incomes would contribute more to funding the road infrastructure they utilize more extensively. Urban and Interurban Road Pricing 14 • Users with higher incomes often place a higher value on their time and are more likely to choose to use toll roads, which are typically faster and more convenient. On the contrary, individuals with lower incomes may not prioritize saving time as much. Thus, they could have the option to utilize non-toll routes that are funded through taxes. This ensures that individuals with lower incomes are not disproportionately burdened with the costs of constructing and maintaining high-capacity road networks they utilize less frequently. • Retired or disabled users, who generally have lower incomes, tend to use roads sporadically while still contributing through taxes. Implementing tolls ensures that the fees collected for road usage benefit these individuals considerably, as they only pay for infrastructure when they actually utilize it. This can be seen as a fairer distribution of costs compared with the general taxation approach. Additionally, in large cities, implementing tolls can help reduce road congestion, resulting in improved functioning of public transportation systems. This is particularly beneficial for the lower-income social stratum, which heavily relies on public transport. The tolls paid by wealthier individuals contribute to funding road improvements, indirectly benefiting the less affluent classes through enhanced public transportation services. Overall, these points highlight potential equity advantages of toll implementation, where the cost burden is more closely aligned with usage patterns and individuals with higher incomes bear a greater share of the costs. However, it is important to carefully consider the specific context and potential impacts on different income groups to ensure a fair and balanced approach to tolling. 2.2.2. Equity Between Domestic and Foreign Users The issue of toll-free roads raises a significant contradiction where infrastructure is funded by taxpayers but can be extensively utilized by individuals who do not contribute to that tax base. This situation leads to an inequitable scenario where free roads are predominantly used by vehicles from other countries, placing a burden on the infrastructure without any financial contribution. This disparity represents one of the key equity challenges associated with toll-free road systems. To address this inequity, many countries and regions are considering the implementation of tolls or fees for infrastructure usage, driven by equity concerns rather than solely aiming for tax collection or efficiency. These governments recognize that charging for infrastructure usage promotes fairness among citizens who pay taxes, compared with international or nonlocal users who do not contribute financially. In essence, implementing tolls allows the region where the infrastructure is located to reduce its financial burden since taxpayers within that region are no longer solely financing it through their taxes. However, it is important to note that a significant portion of the funding for the highway is likely to come from users who do not pay taxes within the region. By implementing tolls, countries and regions can strive for a more equitable distribution of costs and ensure that those who benefit from the infrastructure also contribute to its maintenance and development. This approach acknowledges the importance of fairness and seeks to alleviate the burden on local taxpayers by sharing the costs more broadly among users, including those from outside the region. Urban and Interurban Road Pricing 15 2.2.3. Intergenerational Equity Intergenerational equity is a principle that aims to distribute the costs of an asset to the generations that will benefit from it. Toll systems can play a role in achieving intergenerational equity as an economic objective. Transportation infrastructure entails substantial upfront investment and carries risks during the construction phase, while the ongoing costs of maintenance and operation are relatively lower. It would be unfair to burden taxpayers in the year of construction with the entire cost, as it does not account for future beneficiaries who may or may not enjoy the benefits. Chile’s highway concession program includes a variable that relates to gross domestic product (GDP) growth to attempt to capture intergenerational equity. From the perspective of intergenerational equity, it is ideal to attribute the costs of infrastructure, including construction and maintenance, to the potential beneficiaries. These beneficiaries could be users and individuals in a future society who will reap the economic advantages resulting from the commissioning of the road. However, public budgets typically allocate revenue collected each year to the corresponding expenses and investments, making it challenging to assign the significant construction costs to future users. While mechanisms like shadow tolls and availability payments have been devised to distribute road expenses over the asset’s useful life, traditional toll systems remain a preferred means of transferring the financial burden of construction to future users. Tolling is considered a suitable instrument for achieving intergenerational equity, ensuring that the generations benefiting from the infrastructure contribute logically to its financing. 2.3. From Theory to Practice This section examines the practical challenges faced by planners when implementing toll systems. It emphasizes that transportation projects inevitably have diverse consequences, making it difficult to achieve an optimal outcome without winners or losers. Key problems include distributional effects, political acceptance, implementation costs, and technological infrastructure. By addressing these challenges, planners can enhance the success of toll implementation while minimizing negative impacts. 2.3.1. Implementation Issues Prud’Homme (1998) highlighted the practical impossibility of charging at marginal social cost due to various reasons. First, achieving optimal marginal cost pricing requires all related systems to follow the same pricing approach, which is often not the case. Further, accurately determining marginal costs for roads is challenging, and this pricing method may not even generate sufficient revenue to finance the infrastructure. As a result, many researchers have focused on analyzing alternative approaches such as traffic restrictions or toll-free alternatives. Another challenge lies in effectively informing users about pricing changes. Given that prices fluctuate continuously in both first-best and external cost pricing, providing clear, simple, and concise information becomes crucial for the success of pricing programs1. The complexity arises from the significant reconciliation challenges of satisfying all economic requirements of a road through tolling, as multiple conditions must be simultaneously met. Therefore, compromise solutions that address some of the proposed objectives become necessary. When considering social equity alongside economic efficiency, the solution becomes even more intricate. See for instance De Corla-Souza (2009). 1 Urban and Interurban Road Pricing 16 For instance, Horner and Widener (2010) examined the interplay between efficiency, equity, and socioeconomic characteristics in the context of post–Hurricane Katrina reconstruction in New Orleans. They found that by solely prioritizing efficiency criteria in planning, the issue of equity was overlooked, leading to planning errors. Anggraini, Arentze, and Timmermans (2009) compared the concepts of efficiency and equity from a different perspective. They studied mode choice based on household heads’ activity patterns, such as dropping off children at school or commuting to work. Their research revealed a strong relationship between travel decisions and household characteristics, indicating that different family types exhibit varying levels of efficiency and equity in transportation choices. Laube, Lyons, and Allan (2007) proposed a theoretical approach to transportation planning that aims to achieve both quality projects and equity. They suggest a staged planning method with a strong emphasis on coordination among relevant public entities involved in the planning process within the jurisdictional area. The key elements for effective planning, considering efficiency and equity, are outlined as follows: • Identifying and prioritizing regional needs. Understanding the transportation requirements of the region and determining priorities based on those needs • Regional policy instruments. Utilizing instruments that provide information on current and future land use policies, ensuring alignment between transportation infrastructure and land use plans • Analysis of user behavior. Conducting data collection, developing tools, and forecasting demand to gain insights into user behavior and preferences • Environmental considerations. Considering environmental factors and conducting assessments to minimize negative impacts and promote sustainability • Project financing. Addressing the financial aspects of the projects, including identifying appropriate funding sources and mechanisms to support the implementation of transportation infrastructure By incorporating these critical elements into the planning process, transportation projects can be designed to meet regional needs while considering efficiency and equity concerns. One of the challenges in achieving more efficient activities is that they often come at the expense of equity, leading to a trade-off between the two objectives (Geurs, Patuelli, and Ponce Dentinho 2016; Heyndrickx, Vanheukelom, and Proost 2021). When implementing tolls, it becomes crucial to find a method that can reconcile these conflicting goals. Martens (2009) conducted a theoretical study to explore the advantages and disadvantages of different methodologies in this regard. Martens highlighted that the traditional cost-benefit analysis (CBA) used to evaluate transportation infrastructure projects does not consider equity at all. It fails to analyze the distribution of benefits and losses, the parties that benefit or loses, and the extent of these effects. To address this gap, there is a need for a new methodology that incorporates equity considerations. Three key equity questions need to be answered: i. How are benefits and burdens distributed through government intervention? ii. How do different segments of society experience these benefits and burdens? iii. What constitutes a fair distribution in society? Urban and Interurban Road Pricing 17 To tackle these questions, Martens proposes a response framework and indicator, as outlined in table 2.2. This approach aims to provide a more comprehensive assessment that considers both efficiency and equity aspects, enabling policymakers to make informed decisions about transportation projects. Table 2.2. Indicators to Evaluate the Equity of an Activity Objective of the Equity Analysis Division for Each Stratum of the Population Net benefit By income Benefits from improved mobility By income and vehicle ownership Individual costs and benefits By relevant criteria for cost/benefit Source: Martens (2009). Martens and Di Ciommo (2017) proposed changes to the CBA to address its bias toward transportation improvements that primarily benefit the majority population and neglect the disadvantaged groups. They suggested replacing the traditional measure of travel time savings, which tends to favor affluent groups, with accessibility gains that prioritize the needs of vulnerable social groups, regardless of travel rates. While the study acknowledged that complete equity effects cannot be entirely avoided, it identified a more equitable measure of well-being. In a comprehensive review of methods for evaluating the sustainability of transportation infrastructure projects, Bueno et al. (2015) found that existing tools often fail to incorporate social factors, including equity. However, the study highlighted the multi-criteria decision analysis (MCDA) as a suitable approach for evaluating sustainability, which can be complemented with other tools for a more comprehensive assessment. Kuehn’s study (2009) emphasizes the importance of analyzing the cumulative effects of pricing on lower-income and minority households. By considering factors such as average travel time, reliability, cost of travel, and operational impacts, a better understanding of equity impacts can be achieved. Regular monitoring and validation of hypotheses on traveler behavior are crucial in this regard. Litman (2011) examined the considerations of economic efficiency and equity in road pricing programs. The study highlights the ease of quantifying economic efficiency, as it focuses on maximizing social wellbeing without specific distributional concerns. Equity is examined through vertical and horizontal definitions, considering different stakeholders and their impacts. Table 2.3 provides a detailed analysis of equity considerations in the study. Urban and Interurban Road Pricing 18 Table 2.3. Influence on the Equity of Road Pricing Type Description Horizontal Equity Vertical Equity Non-drivers People who cannot drive Although this group Although this group due to age, disability, or would pay little in tolls, includes people who low income. Tend to use they deserve to share are economically, car as passengers, but the revenue if there are physically, and socially use congested roads very compensations for the disadvantaged, most infrequently. externalities of drivers. of the revenue from the system should benefit this group, which is fully justified. Drivers with People who can drive This group pays a This group, by low income and have access to a car, relatively low percentage definition, is but whose decisions are of tolls, but incurs costs disadvantaged, so the heavily influenced by the from changes in their use of road pricing to costs they would incur. trips and provides the benefit them is justified. They will often choose system a major part non-toll options. of the benefits due to congestion reduction. They deserve to share part of the revenue as compensation. Drivers with People who drive These drivers pay a Since this group is not medium and have a car. Their large part of the total disadvantaged, there income decisions are influenced revenue and have is no reason related to moderately by the costs net losses to their vertical equity for the involved. Sometimes they wellbeing. They deserve use of the revenue to will opt not to use the to be compensated by benefit them. highway due to pricing the system based on and their total benefit horizontal equity, but will be reduced. only after all the external costs have been offset. Drivers with People who drive These drivers enjoy Since this group is not high income and have a car. Their net benefits from the disadvantaged, there decisions are not reduction of congestion. is no reason related to impacted by the costs They deserve to share a vertical equity for the they will incur. They will part of the revenue, but use of the revenue to benefit from pricing due only after all the external benefit them. to the general reduction costs have been offset. in congestion. Source: Litman (2011). Urban and Interurban Road Pricing 19 Finally, with regard to political acceptability, the author highlights the complexity of establishing a price for using the infrastructure due to the high number of winners and losers (see table 2.4). Table 2.4. Road Pricing Winners and Losers Direct Winners Direct Losers • Drivers with greater purchasing power, who • Drivers with less purchasing power, who pay value their travel time more than paying a toll. the toll because there is no alternative, but do not value time saved as much as the toll. • Buses and travelers who share a vehicle and enjoy improvements from congestion • Drivers who change to other roads to avoid reduction and economies of scale. paying the toll. • Beneficiaries of toll revenue. • Users of toll-free roads that experience increased congestion. • Drivers who stop making trips due to the toll. • Drivers who change mode of transport and share a car due to the toll (although the improvement in service due to economies of scale makes some of them net winners in the system). Source: Litman (2011). Kristoffersson, Engelson, and Börjesson (2017) analyzed the balance between equity and efficiency in the design of congestion pricing systems in Stockholm. The study evaluated different pricing designs and found that the most efficient system tends to be less equitable, favoring higher-income users due to the unequal distribution of workplaces and residential areas. This conflict between equity and efficiency, resulting from city structure and income segregation, is likely to be applicable to most cities today. The study also examined the impact of four revenue strategies—one-time payment, general cost reduction for all car trips, cost reduction for public transportation, and a reduction in income tax—on costs and benefits across income groups. It revealed that the income tax reduction strategy primarily benefits the high-income group, while the distributional effects of the other three strategies are similar, as there is little variation in car trips and public transportation usage across income groups. Additionally, there is a lack of homogeneity in pricing and taxation across different modes of transportation, leading to unfair intermodal competition, particularly in interurban areas. Rail operators are required to pay distance-based fees for the entire European Union (EU) rail network, whereas road pricing falls under the jurisdiction of the individual Member States, despite recommendations by the European Commission. Furthermore, road transportation is subject to a higher number of specific taxes compared with railways, reducing subsidies and exemptions. Schroten et al. (2019) conducted a study on efficiency in various transportation modes and found that taxes and fees imposed by EU Member States do not fully internalize external costs and cover transportation infrastructure expenses. The current taxation and fee structures do not adequately address variable and external costs, or infrastructure costs. Marginal social cost pricing is not widely implemented in the EU, and there are disparities in the fees for rail transport that reflect the variable costs and taxes/fees for road transportation. Urban and Interurban Road Pricing 20 2.3.2. Integration with Other Modes and Cross-Subsidies When implementing a pricing system, it becomes challenging to fulfill all desired conditions, such as an economically optimal toll that covers costs, addresses externalities, and avoids social inequality. Compromise solutions are necessary, and cross-subsidization plays a crucial role in making the system function effectively and gain public acceptance. However, cross-subsidization is not the only possible option. In urban development, pricing should be considered a part of a comprehensive plan aimed at achieving sustainable mobility. Basso et al. (2011) studied the efficiency of different urban transportation policies, using a model that is similar to the real world. In this model, buses and cars share the road; the user can choose a bicycle as a means of transportation; and the number of stops, frequency, size, and occupancy of buses are not fixed. The study demonstrated that when a single measure is implemented in isolation, bus lanes are more efficient than congestion pricing techniques or subsidies for public transport. In addition, the subsidies for public transport often cause the ticket price to be negative, which would imply paying users for this mode of transport. Finally, in the case of public transport subsidies and congestion pricing as a whole, the study identified that revenue from these fees due to congestion was always sufficient to cover the subsidy needed. Cross-subsidies between modes can be justified when one mode has positive externalities and the other has negative externalities. For instance, by allocating a portion of fees from an unsustainable mode to cross-subsidize modes with positive externalities, which contribute to congestion reduction. This approach is often seen in cities like London, where pricing is part of a broader package of transportation system improvements. The collected revenue from vehicle pricing is invested in measures such as promoting public transport through lower prices and improved frequency, as well as developing bicycle lanes or rental systems. Cross-subsidization can also be justified within the same network for reasons of efficiency and equity. It ensures network coverage to capture demand efficiently and addresses equity concerns in areas with lower-income populations, typically located in peripheral regions with less traffic. This cross-subsidy model is implemented in Chile’s interurban roads, where the roads with higher traffic finance those with lower demand. The most profitable highway concessionaires commit to annual payments to the Government, whereas highways with deficits receive funds from public sources. This approach maintains similar fees across the entire network, preventing regional inequalities. An alternative concession model proposed by Vassallo (2019) promotes territorial equity and efficiency in the transportation system through the homogeneous pricing of the road network, decoupling user tolls from concessionaire payments and cross-subsidies. In this model, toll concessions for the main road network are competitively awarded to private companies. The concessions receive payments from the government based on quality indicators, while the government establishes fees for all roads based on road type, vehicle type, and time of day. These fees can be collected by the concessionaires and used to compensate them, cover the electronic payment system costs, and improve the transportation system. It ensures that the wealthiest regions finance necessary work in regions with lower purchasing power, maintaining road quality throughout the area. Additionally, separating concessionaire payments from user payments allows for pricing solutions aligned with marginal cost principles, leading to enhanced social welfare. Chapter 3 Practical Application of Road Pricing in Interurban Environments Urban and Interurban Road Pricing 22 Practical Application of Road Pricing in Interurban Environments The previous chapter provided a theoretical overview of road pricing, exploring its fundamental principles and examining its essential features. To complement this theoretical perspective, the following two chapters present an overview of international experiences with the practical implementation of road infrastructure pricing, both in urban and interurban settings. Through this review process, the main impacts of pricing will be identified. This chapter focuses on the various pricing systems that have been implemented internationally in interurban environments. The summary encompasses a range of approaches, starting from the traditional toll concession model and extending to the latest developments in variable pricing within the EU. An examination of these diverse experiences provides insights into the different strategies and their outcomes in interurban contexts. 3.1. The Traditional Concession Toll Throughout history, various conceptions of the toll system have been commonly employed (Izquierdo and Vassallo 2001). Their use has typically been driven by the need to acquire funding for the construction or maintenance of road infrastructure. Initially, tolls were implemented to establish rights of way, but governments later adapted their structure to partially or fully cover the costs associated with managing public works. Given the substantial investments required, the state often could not bear these expenses entirely on its own. The traditional toll model has facilitated large- scale projects through the development of indirect infrastructure management systems, particularly concessions, which might not have been feasible otherwise. The traditional concession system is well established and widely understood, with a significant body of scientific literature available on its general principles and characteristics (Yescombe and Farquharson 2018; Hodge, Greve, and Biygautane 2018; Sarmento and Renneboog 2021; Cui et al. 2018). This section delves into specific aspects of the concession toll model, summarizing the various methodologies proposed for its establishment, update, and variation. 3.1.1. Criteria for Establishing Tolls Determining the toll amount plays a pivotal role in the success of a concession as it directly impacts the economic and financial viability of the project. The responsibility of setting the toll can lie with either the government or a regulatory authority, and there are two primary approaches to its establishment: contractual arrangement or concessionaire autonomy. The following sections delve into each of these cases to provide a comprehensive understanding. Toll established by government Countries with government-set tolls typically determine prices based on political considerations. Japan serves as a notable example of a country following this toll-setting model. In 2005, the Government “privatized” the concession system by creating private companies with full public capital (Vassallo, 2008). Alongside this, they established JEHDRA, an independent entity responsible for owning the infrastructure and negotiating concession agreements with publicly funded companies. Urban and Interurban Road Pricing 23 Through JEHDRA, the Government determines the toll amounts for its highways based on two key principles: i. The revenue generated from tolls should cover the costs associated with the infrastructure, including the costs of construction, maintenance, usage, and expropriations, within a set timeframe. Specifically, the Japanese Government aims to ensure a return on the debt incurred from financing the highways within 45 years from 2005. The principle acknowledges the possibility of cross-subsidies between highways, aiming for ii.  self-financing of the entire network. This approach has facilitated significant expansion of the Japanese highway network, as revenues from heavily trafficked roads have been used to finance the construction of less economically viable corridors (Vassallo, 2008). Notably, Japan applies a uniform toll fee across its entire highway network, with the toll amount determined based on the overall revenue and costs associated with the highways. The public capital concessionaires are responsible for the construction work, preservation, road usage, and toll collection. The collected revenue is then transferred to JEHDRA after deducting the costs of highway maintenance and operations. This arrangement provides limited profit-making opportunities for companies and offers little incentive to enhance their competitiveness. Toll established by concessionaire Unlike the previous model, there are cases where the concessionaire has the unilateral authority to establish the toll amount. This is the current practice in countries like Canada and the United Kingdom. For instance, in the United Kingdom, the M6toll, the only traditional toll highway, does not operate under a regulated toll system (ASECAP 2006). Consequently, the operator is able to determine tolls based on market forces, with the primary goal of maximizing profit. However, the Government has limited toll adjustments to a maximum of twice per year. In Canada, the 407 ETR highway forms a semi-ring around the city of Toronto. The concession agreement allows the operator to freely set tolls, as long as the demand volume remains above certain thresholds established by the Government. This arrangement enables tolls to be set at levels that maximize the operator’s profitability, while adhering to predetermined traffic limitations. It is important to note that both these methods involve significant competition. In the case of the M6toll, there is an alternative toll-free highway (M6) that offers high capacity. Similarly, the 407 ETR has multiple toll-free alternatives, including other highways (403 ETR, 401 ETR, and so on) and metropolitan roads. If a monopoly situation existed without viable alternatives, granting the concessionaire such freedom in managing the infrastructure would not be appropriate. Contractually established toll The most common approach for determining tolls is through contractual agreements. This process is a part of a larger framework where a concession agreement is established to define the rights and responsibilities of managing and operating the infrastructure, as well as guiding the relationship between the government and the private company. While the specific mechanisms and variables (such as concession period, net present value, and government subsidies) for awarding these concessions may vary by country, the toll value typically serves as the primary economic parameter for granting the contract. Urban and Interurban Road Pricing 24 From an economic perspective, tolls serve two distinct functions within the highway concession system, although some functions may be considered more important than the others. First, tolls allow for the recovery of infrastructure-related costs, including construction, maintenance, and operation. Second, tolls can be used to regulate traffic demand and mitigate congestion and overcapacity on the roads, thus promoting allocative efficiency (Albalate and Fageda 2007). While the first factor heavily influences the establishment of tolls, the second factor may be considered when determining toll variability. As a result, it is common practice to establish tolls during the bidding process, enabling the private operator to recover costs over the concession’s lifetime while also generating profit. Table 3.1 provides an overview of the costs considered when determining tolls in various European countries. It has been observed that tolls established through government-concessionaire agreements are often linked to the private sector’s investment, as well as the costs associated with maintaining and operating the infrastructure. Table 3.1. Criteria for Establishing Tolls in New Concessions in Europe Country Criteria for Establishing Toll Austria Financing costs, investments, operating costs, and environmental costs Croatia Costs of construction, operation, maintenance, and development of the system, also taking into account the GDP Spain Financing costs, investments, operating costs, concession terms, environmental costs, and returns on investment France Investments, depreciation, road performance, traffic forecasts, operating costs, and financing costs Italy Investments and operating costs Portugal Based on average toll for national toll highway networks United Kingdom The concessionaire unilaterally sets the toll based on the market Slovenia Capital costs, average cost of construction, maintenance costs, and operating costs Greece Operating costs Hungary Construction costs, maintenance costs, and commercial policy Source: Albalate and Fageda (2007) and ASECAP (2014). Note: GDP = gross domestic product. Different countries employ diverse systems for setting tolls within their concession frameworks. Spain, for instance, establishes price caps in the bidding documents, ensuring that the concessionaire offering the lowest toll wins the bid. Mexico has set maximum average tolls to ensure affordability for users. Similarly, Chile has designed a system that incorporates cross- subsidies among highways, allowing those with high traffic to financially support those with lower demand. Concessionaires of profitable highways commit to paying a predetermined amount to the Government, while sections that face deficits receive subsidies. The objective is to maintain similar and accessible toll levels across the entire network. Urban and Interurban Road Pricing 25 In Italy, tolls are primarily seen as a means to recover the costs of infrastructure construction and maintenance. The regulatory framework for Italian concessions explicitly states that tolls should offset these expenses. Consequently, the inclusion of the “toll offered” variable as an assessment criterion in the bidding processes is limited. Thus, the variation in tolls across Italy’s highways primarily reflects differences in costs among different sections. Argentina follows a similar approach, setting tolls as a means to recoup investments. Brazil strictly adheres to cost coverage, directly rejecting any offers requiring Government subsidies. Toll setting occurs through two main approaches (i) in some cases, research estimates the investments to be made by the concessionaire, followed by a feasibility analysis of the toll And (ii) alternatively, a progressive toll system is adopted, which is proportionate to the concessionaire’s performance and the completion of actual works. These examples illustrate the diverse approaches countries employ when determining tolls within their concession agreements, considering factors such as affordability, cost recovery, and infrastructure investments. 3.1.2. Criteria for Updating Tolls Concession agreements for transportation infrastructure typically span long periods, emphasizing the importance of establishing the value of tolls and their evolution over the project’s lifespan. Since tolls play a vital role in determining revenue, it is necessary to define criteria that ensure the economic feasibility of the concession throughout the agreement’s duration. For toll highways, a common practice is to update tolls based on specific formulae within the framework of maximum price regulation. In most countries, these formulae primarily reflect the general price index. However, there are variations in toll update approaches depending on the maturity of pricing systems. Countries with more established concession models tend to employ more intricate toll update formulae, whereas countries with less prevalent pricing systems often opt for bilateral renegotiations with the government or linking toll increases to inflation (Albalate and Fageda 2007). Although the general price index is the most commonly used parameter for toll updates, additional criteria such as traffic evolution, productivity, or quality of service, may be considered. The following discussion on toll update mechanisms in France, Spain, Chile, and Italy highlights the unique aspects of each country’s approach. In France, the toll update process consists of two stages. Initially, the Government and concessionaire agreed on toll levels for the first five years of the operating period. This ensures that prices evolve for the concessionaire during the initial years, while also setting commitments for investment, maintenance, road safety, and environmental considerations. After this initial phase, tolls are adjusted according to inflation. However, in practice, new negotiations between the Government and concessionaire often take place, allowing for updates to exceed the planned value by incorporating additional objectives related to investment or improved service quality. In Spain, the update approach for national highway tolls underwent a reform in 2001. The current model considers the evolution of the general price index, but includes traffic criteria, specifically the difference between forecast traffic (IMDp) and actual traffic (IMDr). These formulae were established pursuant to Article 77 of Law 14/2000: Urban and Interurban Road Pricing 26 It is clear, therefore, that the tolls (T ) are updated according to the evolution of the consumer price index and the value of parameter X, which considers deviations in traffic compared with the figures forecast in planning. Significantly, some concessions have received approval for special fee increases over those stated in Law 14/2000 through royal decrees to modify the concession. Article 77 of Law 14/2000 was repealed by Law 2/2015 to de-index the Spanish economy, which seeks to remove the link between the consumer price index and the revision of prices for goods and services in the public sector. By royal decree, the law enables the establishment of the cost components that may be included in fee revision formulae. However, only essential costs that are significant to the activity and whose evolution cannot be predicted may be taken into account; variations in financial costs, amortizations, general expenses, and structural expenses may not be indexed. This change in legislature applies to all concessions tendered from its entry into force. In Chile, tender specifications establish a system for adjusting tolls that is equal to 100 percent of the increase in the consumer price index from the previous year. Added to this is the annual increase for road safety improvements (coefficient PS ), which allows for the maximum toll to be increased by up to 5 percent (Vassallo, Baeza, and López 2009). This seeks to incentivize the concessionaire to decrease accidents by improving their manageable factors such as keeping the road surface in good condition, overseeing the condition of signage, quickly removing objects from the road, and so on. The cost of road safety improvements thus falls directly on the users, who are the true beneficiaries of these improvements. The old model of toll evolution in Italy, which was in place since the mid-1990s, has been modified on several occasions. Initially, the update formula was as follows: Note: ΔT toll increase ΔP inflation expected increase in rate of productivity X, which considers the depreciation of planned ΔX  investments, expected traffic increase, compensation for differences in inflation forecasts, and profit recognized by the operator. X is established for a period of five years (after which there are renegotiations) and it is a benchmark figure for all concessions but is modified if there are specific important characteristics (relevant new investments, temporary crises, and so on) ΔQ  increase in service quality–level parameter, which considers the state of the pavement and accident rate ß coefficient dependent on initial quality level Urban and Interurban Road Pricing 27 This model was criticized by various authors (Ragazzi 2005; Beria and Ponti 2009), who pointed out the lack of transparency of the concessionaire’s productivity as a parameter X. In practice, this parameter was not tied to specific objectives, and allowed for bilateral negotiations between the government and each concessionaire. The evolution of laws and the lack of independent market regulatory authority (until relatively recently) have resulted in six different fee dynamics structures coexisting in the Italian highway sector (see table 3.2). The key elements of these structures are as follows: (i) Inflation rate P, which is considered the forecast inflation rate or real inflation rate; the latter is included in the calculation of the fee update at a percentage that may be less than 100 percent (for example, 70 percent) (ii) Coefficient X, which in some structures, actually represents the expected productivity or efficiency rate (pursuant to the purpose of the price cap), whereas in other structures, it is sometimes a mere rebalancing factor or does not exist (iii) Coefficient K; this coefficient, if present, is intended to compensate for new investments (iv) Quality factor ΔQ; this factor, when present, is the percent variation of an indicator, which may be simple or composite, of quality of service Image 3.1. Worker with Gloves and in Helmet arranging Curbs on the Street Source: Adobe Stock. Urban and Interurban Road Pricing 28 Table 3.2. Toll Structures and the Concessionaire Companies to Which They Apply Fee Structure Formula for Fee Revisions Concessionaire Company Number Autostrada del Brennero S.p.A 1. ΔT ≤ ΔPprog - Xprod + ßΔQ Consorzio per le Autostrade Siciliane 2. ΔT ≤ 70%ΔPreale - Xinv + Kinv Società Autostrade per l’Italia S.p.A. Autostrada Brescia-Verona-Vicenza-Padova S.p.A. Tangenziale di Napoli S.p.A. Raccordo Autostradale Valle d’Aosta (RAV) S.p.A. Società autostrada Ragusa-Catania S.r.l. Autovia Padana S.p.A. Autostrada Tirrenica (SAT) S.p.A 3. ΔT ≤ ΔPprog - Xrieq + Kinv + ßΔQ SATAP S.p.A., A4 branch Autostrada Asti-Cuneo S.p.A. Società Autovie Venete S.p.a. Autostrade Meridionali S.p.A. SATAP S.p.A., A21 branch Strada dei Parchi S.p.A. Autostrada Torino-Ivrea-Valle d’Aosta (ATIVA) S.p.A. 4. ΔT ≤ ΔPprog - Xprod + Kinv + ßΔQ Milano Serravalle - Milano Tangenziali S.p.A. Concessioni Autostradali Venete (CAV) S.p.A. SALT S.p.A., Autocisa branch 5. ΔT ≤ aΔPreale - Xrieq + Kinv Autostrada Campogalliano-Sassuolo S.p.A. Autostrade Valdostane (SAV) S.p.A. Autostrada dei Fiori S.p.A., A10 branch SALT S.p.A., Ligure Toscano branch 6. ΔT ≤ aΔPreale + Kinv Autostrada dei Fiori S.p.A., A6 Torino Savona branch Società Italiana per il Traforo Autostradale del Frejus (SITAF) Source: Delibera n. 16/2019, Relazione ilustrativa degli Uffici. Note: ΔT = variation in weighted fee; Pprog = forecast inflation rate; Preale = real inflation rate; Xprod = expected productivity rate; Xinv = payment from investments granted by the 4th Additional Agreement to the Agreement signed in 1997; Xrieq = rebalancing factor; Kinv = compensation from new investments; ΔQ = percent variation of an indicator, also composite; ß = coefficient dependent on starting quality level; a = 70%. Urban and Interurban Road Pricing 29 After being given new powers by the Legislative Decree 109/2018, the Transportation Regulatory Authority (ART) has promoted standardization of fee structures by applying a single maximum price model. In the exercise of these powers, ART must ensure that the dynamics of these fees are fully justified by the investments made and quality standards achieved, likewise guaranteeing adequate compensation for the concessionaire. ART has already passed the resolutions to approve the toll fee system for nonexpired concessions. However, the actual adjustment to fees has been postponed until the economic-financial plans of the concessions are updated (Bianchi 2021). As mentioned above, these four cases can be considered exceptional within the international framework, since most countries link toll changes solely to inflation. This is the case for concessions awarded till 2009 on the federal highways of Brazil. Starting in 2012, contracts began adopting a maximum price regulation to incentivize efficiency and share productivity earnings obtained by concessionaires with users. The adjustment index is established based on the consumer price index, minus the ‘efficiency factor,’ X (IPC – X). Factor X is null at the start of the contract and increases by 0.25 percent at the end of each five-year period (Brochado and Vassallo 2014). However, in some states such as Paraná and Río Grande, the toll evolves based on a weighted formula that takes into account the National Civil Construction Index (INCC) and the General Market Price Index (IGP-M) (IPEA, 2012). Finally, if the concessionaire is free to set tolls, certain restrictions for doing so are also established. For the M6toll in the United Kingdom, the concessionaire may establish the toll as they see fit to maximize their profits, but they are only authorized to modify tolls up to two times per year. On Canada’s 407 ETR, the concessionaire may modify tolls successively, although fee changes must be reported to the Administration four weeks in advance. However, if the traffic flow in a given year does not reach the thresholds previously set by the Government, the fee must be adjusted by 2 percent annually based on a pre-established value in the contract. 3.1.3. Variation of Tolls The traditional toll concession system incorporates variable tolls based on different criteria, with the aim of ensuring fair payment by users according to the social costs they impose. Alongside the distance traveled, which serves as the base parameter for determining tolls, other factors are taken into consideration. The primary criterion for varying tolls is the type of vehicle. This differentiation seeks to account for the varying structural damages that different vehicles may cause to the road. While the extent of variation in toll levels differs among countries, it is common practice to establish greater differentiation between light and heavy vehicles. Within the category of light vehicles, motorcycles and passenger cars are sometimes separated into different subcategories. For heavy vehicles, variations are often made primarily based on the number of axles. The relationship between toll levels for light vehicles and heavy vehicles varies depending on the country. Brazil, for instance, exhibits significant differences, with tolls for heavy vehicles being up to six times higher than those for passenger cars. However, countries like Spain (closer to 2x) and Portugal (around 2.5x) have lower differences. France, Chile, and Colombia fall in between, with tolls for heavy vehicles typically being around three to four times higher than those for passenger cars. The specific relationship between tolls for light and heavy vehicles is typically established in concession agreements. Urban and Interurban Road Pricing 30 Table 3.3 provides information on toll variation by vehicle type in various countries worldwide. Generally, Latin American countries tend to have a greater number of vehicle type categories compared with Europe. Table 3.3. Toll Variation Based on Vehicle Type Country Number of Categories Differentiation Criteria Argentina 7 Height of vehicle, number of axles Brazil Up to 13 Number of axles, axle configuration Chile 7 Number of axles, total weight Colombia 7 Number of axles, total weight Spain 3 Number of axles, total weight France 5 Height of vehicle, number of axles, total weight Italy 5 Height of vehicle, number of axles Japan 5 Vehicle type Mexico 13 Number of axles, total weight Portugal 4 Height of vehicle, number of axles Source: World Bank data. Traditional toll concessions often consider vehicle type as the primary parameter for toll differentiation. However, congestion-related factors and time-based differentiations are commonly included as well. For instance, in France, toll systems have incorporated time-based variations since 1992. Highway A1 (Paris-Lille) was the pioneer in introducing toll variations, reducing tolls by 25 percent during off-peak hours and increasing them by 25 percent during rush hours. The aim was to influence driver behavior, alleviate congestion, and optimize infrastructure utilization. This approach has been adopted in other countries as well. In the United Kingdom, tolls are reduced by 10–20 pence during off-peak hours on workdays (5:00–7:00 a.m. and 7:00–11:00 p.m.) and by nearly 40 percent at nighttime (11:00 p.m.–5:00 a.m.). In Spain, travel on toll highways is free between 1:00 a.m. and 5:00 a.m. Variations in tolls can also be based on the type of day, distinguishing between workdays and holidays or weekends. In Brazil, certain concessions charge tolls up to 66 percent higher on weekends and holidays compared with workdays. Similarly, on the Andes Highway in Chile, tolls are 50 percent higher at specific times on holidays and weekends. However, tolls may not necessarily be higher on holidays than on workdays. In some highways in inland Spain, tolls are approximately 15 percent lower on weekends and holidays to attract more traffic. The M6toll in the United Kingdom also offers a weekend toll that is 15 percent less than on workdays. Furthermore, toll variations can occur based on the time of year, typically resulting in increased tolls during the summer season. In Spain, certain highway sections near the coast may apply tolls that are 60–80 percent higher during holiday seasons such as Holy Week and June–September. Similarly, Urban and Interurban Road Pricing 31 in Chile, tolls increase by around 50 percent from December to March, with variations ranging from 15 percent to 200 percent based on the vehicle type. In some cases, tolls may also differ depending on the direction of travel. In addition to vehicle type and timing, toll concessions may include reduced tolls based on user frequency (for regular clients making a certain number of trips within a specific period) or payment method (automatic/remote or manual). However, it is important to note that traditional toll concessions generally do not consider environmental criteria such as vehicle energy efficiency or emissions when determining toll variations. 3.1.4. Summary Table Lastly, table 3.4 presents a summary of the key features of traditional toll concessions in several countries worldwide, focusing on the establishment, updating, and variation of tolls. Table 3.4. Main Characteristics for Establishing Concession Tolls in Various Countries United France Spain Italy Chile Brazil Japan Kingdom Government Establishing Private tolls operator Contract Inflation Traffic Fulfillment of Updating investments tolls Contractual agreement Road safety Other Vehicle type Varying tolls Timing Source: World Bank. Urban and Interurban Road Pricing 32 3.2. Tolls for Efficient Management of Interurban Mobility: The Case of the EU In recent decades, an alternative approach to traditional concession tolls has emerged in the EU, reflecting a broader strategic framework, and serving as a key instrument in transportation policy. This approach goes beyond the mere economic and financial viability of projects and focuses on the implementation of a pay-per-use system. The primary objectives of this system, proposed by the EU, are to internalize social costs associated with road transportation, promote the use of more environment-friendly vehicles and modes of transport, optimize transportation system management, and ensure a stable source of funding for transportation infrastructure. The upcoming sections delve into the EU’s legal framework for road pricing along with the proposed pricing system itself, and provide a summary of practical experiences in the major countries involved. 3.2.1. Legislative Framework Since 1992, the EU has recognized the importance of implementing a pay-per-use infrastructure to internalize the externalities of road transportation and generate funds for financing. It has issued various documents emphasizing the benefits of a pay-per-use strategy, focusing initially on establishing a legal framework for pricing systems. This ongoing work has led to the most significant document in this context, Directive 1999/62/CE, also known as the Eurovignette Directive.2 The Eurovignette Directive currently applies to heavy vehicles weighing up to 3.5 metric tons, and there is an intention to extend it to light vehicles in the future. It is important to note that the Directive does not mandate EU Member States to adopt the pricing system but instead, outlines the conditions to be met if a country decides to implement it. The implementation of pricing on heavy vehicles is crucial for promoting the efficient management of interurban mobility and environment- friendly transportation systems. The Eurovignette Directive proposes a variable pricing system based on distance traveled, typically expressed as euros per vehicle kilometer (eur/veh-km). The toll level is determined by the vehicle’s emissions category, which follows standardized EURO categories within the EU. The Eurovignette Directive has undergone several revisions, with the most recent taking place in 2011. The updated version emphasizes environmental aspects even more, allowing for the explicit inclusion of external costs such as air and noise pollution in the pricing structure. Additionally, the EURO emissions category becomes a fundamental parameter for toll calculation, replacing its previous optional status. At the time of writing, further modifications to the Directive were being considered, including charging all types of heavy vehicles, accounting for congestion costs, and transitioning from timing-based systems to distance-based systems for charging light vehicles. In Europe, variable pricing systems have sometimes coexisted with traditional concession tolls on the roads of certain Member States such as Germany or Poland. The Directive specifies that in such cases, concessions can continue until their contracts are revised. Subsequently, the maximum toll charged should be equal to or lower than the calculation based on the methodology established by the EU. The Eurovignette Directive initially applies to the road network of supranational interest, including the Trans-European Road Network, as well as additional sections of highways not covered by it. Member States, however, have the right to impose tolls on any section of their network as long as 2 The European Parliament and the Council of the EU: Directive 2011/76/EU of the European Parliament and of the Council of 27 September 2011 Amending Directive 1999/62/EC on the Charging of Heavy Goods Vehicles for the Use of Certain Infrastructures. Official Journal of the European Union. Strasbourg, September, 27 2011. Urban and Interurban Road Pricing 33 it does not discriminate against international traffic. Furthermore, the implementation of a pricing system does not prevent Member States from charging additional tolls for specific sections such as bridges, tunnels, or mountain passes. As shown in section 3.2.3, several countries within and outside the EU have adopted the pricing system proposed by the Eurovignette Directive for their road networks, indicating a trend toward a harmonized European pricing model. This convergence reflects the recognition of the benefits associated with internalizing costs, promoting environmental sustainability, and ensuring efficient transportation management. 3.2.2. Infrastructure Tolls and External Cost Tolls The structure proposed by the EU in the Eurovignette Directive is based on the principle of full or partial recovery of costs created but not assumed by the user, including infrastructure costs and external costs. The Directive aims to adhere to the EU’s principles of “user pays” and “polluter pays.” The toll consists of two elements: An infrastructure fee, which is intended to recover costs related to building the road and its i.  ordinary and special maintenance, operations, toll collection, and so on. With regard to costs of construction, the toll can be used to recover not only future costs but also the nonamortized portion of infrastructure built up to 30 years before pricing was implemented. Special maintenance activity costs from before pricing can be included, provided the user can continue to enjoy the results at the time of adopting the pay-per-use system. In any case, the Directive indicates that only the infrastructure costs for the sections of road being charged for can be recovered. The objective of this infrastructure fee is to generate extra-budgetary resources for financing the road network. ii. An external cost fee, which is levied on vehicles for the damage they cause to the environment. The external cost fee includes an atmospheric pollution fee and/or a noise pollution fee. Compared with the infrastructure cost recovery approach (which leads to the infrastructure cost being calculated at average cost), the external cost fee uses marginal cost, establishing certain limits. As such, the Directive includes some specific formulae for calculating the two components of the external cost fee. It also includes tables with maximum permitted values for the external cost fee; these values cannot be exceeded even if a calculation of the formula results in a higher number. As such, the EU ensures that the external cost fee will not exceed certain values that are deemed reasonable. The air pollution fee, which is the first element of the external cost fee, is related to the release of particulate matter, nitric oxide, volatile organic compounds, and so on, into the atmosphere. Its value is established based on the vehicles’ emissions levels and the financial costs of a series of pollutants. The noise pollution fee, meanwhile, considers the impact that noise caused by traffic has on the population. Its value varies according to variables such as vehicle type, level of population exposed, time period (day/night), traffic level, and so on. The proposed fee structure is designed according to the principle of strict cost recovery. Likewise, the Directive allows for the establishment of variation in the infrastructure fee to alleviate congestion, establishing rush and off-peak hours. However, to fulfill the objective of rigorous cost recovery, the revenue from this variation cannot be greater than that which would be obtained from an invariable toll. As such, congestion is simply considered a variation criterion so that the system does not internalize the additional costs it produces. This solution was chosen for political reasons, Urban and Interurban Road Pricing 34 compared with the alternative in which congestion is included as another element in the external cost fee. As mentioned, the 2017 draft of the Directive does consider the possibility of including an explicit congestion fee. The Eurovignette Directive offers Member States the opportunity to simultaneously apply the infrastructure fee and external cost fee, only one of them, or neither of them, since, as indicated, the States are not required to adopt a pricing system for their roads. The result of implementing this structure is that charges are based on distance traveled, expressed in euros/veh-km, instead of the origin-destination payments of traditional toll concessions. For its part, the evolution of this variable toll is completely different from the mechanism used in traditional tolls. Although in the traditional approach, the toll was updated based on the evolution of certain parameters (normally inflation), with the new approach, the toll should enable the recovery of the costs associated with the infrastructure. Therefore, countries are able to vary tolls periodically, under the condition that they are adapted successively to the incurred costs. Every two years, each Member State must send a report to the EU detailing the fees applied on their road network and the associated costs. This way, European authorities can verify that the cost recovery principle was strictly adhered to. If a State is found to have attained additional profit by applying pricing, it will be required to modify its tolls or calculation structure in the subsequent years. 3.2.3. Analysis of Practical Experiences The EU’s regulatory and legislative framework on pricing has resulted in diverse practical experiences across European countries. Since the release of the Eurovignette Directive in 1999, several European countries, including non-EU members like Switzerland, have implemented variable pricing systems for heavy vehicles. These countries can be categorized based on their level of implementation: 1. Consolidated implementation: Some countries successfully implemented the pricing system many years ago. Examples include Switzerland, Austria, Germany, Czech Republic, Slovakia, and Poland. 2. Recent implementation: Another group of countries introduced the variable pricing system relatively recently. These countries are in the process of implementing and refining their systems. Examples include Hungary, Belgium, Slovenia, and Bulgaria. 3. Planned implementation: A third group of countries has plans to introduce the pricing system in the near future. These countries, such as Sweden, Lithuania, and the Netherlands, are in the process of developing and preparing for implementation. Urban and Interurban Road Pricing 35 Table 3.5 provides a list of European countries that have adopted the variable pay-per-use model, along with the respective year of implementation. Table 3.5. List of European Countries That Have Adopted a Variable Pricing System for Heavy Vehicles Year of Adoption of Variable Pricing System Country 2001 Switzerland 2004 Austria 2005 Germany 2007 Czech Republic 2010 Slovakia 2011 Poland 2013 Hungary 2016 Belgium 2018 Slovenia 2020 Bulgaria Source: World Bank data. Nevertheless, despite sharing common transportation policy principles, each country has interpreted and implemented the EU’s proposals in its own unique way. The subsequent sections delve into the specific adoption of the variable pricing model by each country, focusing on key factors such as fee structure, network coverage, payment systems, enforcement mechanisms, and more. Although there are certain aspects that require coordination and adherence to mandatory European legislation, each country has the flexibility to tailor its approach according to its specific circumstances and priorities. 3.2.3.1. Fee structure The presence of a common legislative framework for pricing has facilitated significant harmonization among countries in terms of determining differentiated tolls. The Eurovignette Directive provides guidelines that mandate charges for heavy vehicles to be based on factors such as distance traveled and the vehicle’s emissions category (EURO category). Additionally, countries have considered the varying levels of structural damage caused by different types of vehicles, leading them to differentiate tolls based on “vehicle type” as an additional parameter. Typically, the number of axles on the vehicle and their configuration (rigid/articulated) are considered when making this distinction. To illustrate, figure 3.1 presents the toll structure adopted in Austria. Urban and Interurban Road Pricing 36 Figure 3.1. Fees Applicable to Variable Pricing in Austria (2021) Distance-dependent toll including surcharges for air pollution and noise pollution for vehicles over 3.5t GVW EURO emission class/ Category 2 Category 3 Category 4+ type of drive 2 axles 3 axles 4 and more axles Day Night** Day Night** Day Night** Drive type E/H2* 0.09810 0.09850 0.13797 0.13889 0.20657 0.20773 EURO emission class 0.20010 0.20050 0.28077 0.28169 0.41702 0.41818 EURO VI EURO emission class 0.20980 0.21020 0.29435 0.29435 0.43399 0.43515 EURO V and EEV EURO emission class 0.21670 0.21710 0.30401 0.30401 0.44503 0.44619 EURO IV EURO emission class 0.23730 0.23770 0.33285 0.33285 0.47799 0.47915 EURO 0 to III Tariff in EUR per kilometer, excluding 20% VAT, valid from January 1, 2021 * Thedrive type E/H2 comprises pure electric drive and hydrogen fuel cell drive ** The night tariff applies between 10:00 p.m. and 5:00 a.m. Source: ASFiNAG (http://www.asfinag.at/). Note: EEV3 = enhanced environment-friendly vehicle ; GVW = gross vehicle weight; VAT = value added tax. Image 3.2. Petrol gas station Source: Adobe Stock. EEV: Enhanced environmentally friendly vehicle is an European emission standards for “clean vehicle” > 3.5 tonne - between the 3 levels of Euro V and Euro VI. Urban and Interurban Road Pricing 37 Additionally, table 3.6 shows the parameters considered by the different countries in setting fee levels. Keep in mind that Switzerland does not belong to the EU and, although it has proposed a structure with many similarities to the other countries, it is not required to follow the precepts of the Eurovignette Directive. Table 3.6. Criteria Considered by Different European Countries in Setting Tolls Switzerland Germany Hungary Slovakia Republic Slovenia Bulgaria Belgium Austria Poland Czech Distance traveled Vehicle type Emissions category Maximum weight of vehicle Time of day Type of a b road Source: World Bank data. a. Increased tariffs apply to route toll sections and the A12 Inntal Autobahn. b. Brussels differentiates between highways and urban areas (local and regional roads that are not highways). 3.2.3.2. Scope of the network Although the common legal framework on pricing has facilitated harmonization in terms of rate structures among different countries, significant differences exist in other factors where the Eurovignette Directive allows for flexibility. One such area is the network on which pricing is implemented. Countries like Austria and Slovenia have chosen to adopt the pricing system exclusively on their main highways and expressways. In contrast, Switzerland has implemented pricing across its entire road network, which includes local roads, resulting in a total network length of 71,555 km. There are intermediate approaches taken by countries such as Slovakia and Belgium, where pricing applies to high-capacity roads as well as certain secondary and regional road sections. Table 3.7 provides information on the toll road system in each country, outlining the extent of implementation. Urban and Interurban Road Pricing 38 Table 3.7. Toll Road System in Each European State That Has Applied a Pay-per-use Model Country Toll Road System Switzerland 71,555 km, of which:   1,859 km are national highways and roads;   17,816 km are secondary or regional roads Austria 2,223 km of highways and expressways Germany 52,000 km of national roads and highways Czech Republic 1,472 km of first-class roads and highways Slovakia 2,400 km of first-class national roads and highways 15,000 km of secondary and tertiary roads Poland 3,660 km of select national roads, highways, and expressways Hungary 6,500 km of highways, expressways, and some national roads Belgium 6,778 km of secondary roads and highways (highways of Flanders and Wallonia and all roads in the Brussels region) Slovenia 623.3 km of highways and expressways Bulgaria 3,115 km of highways, expressways, and first-class roads Source: World Bank data researched in 2020. It is important to mention that the EU initially proposed its structure for high-capacity itineraries of supranational interest, although it gives Member States the freedom to charge tolls for any section of road they deem appropriate. 3.2.3.3. Institutional framework and revenue management European countries that have introduced pricing on their road network have a solid regulatory framework. In addition to the formal limitations set out for the community by the Eurovignette Directive, different national legislation may establish in detail how responsibility is distributed for each party involved in the system. This indicates which party retains ownership of the infrastructure, and which party operates and maintains the roads, and performs toll collection, surveillance work, enforcement, and so on. Although each country has its own organizational structure, some basic aspects can be considered common to all. Thus, ownership of the infrastructure is retained by the government in all cases analyzed. Likewise, work such as construction or maintenance of the roads is normally entrusted to the private sector. However, there are different approaches to road operations tasks, and, especially, toll payment system management. In some countries, this work is done directly by the public sector (by its own means or through public companies), whereas in others, it has been awarded to private companies through a bidding process. Urban and Interurban Road Pricing 39 In Switzerland, the Government plays a prominent role in the operation of the pricing system. The infrastructure is owned by the Administration, and the system is primarily managed by the Federal Customs Administration (FCA). The FCA directly operates the infrastructure and oversees the payment system, as well as the associated infrastructure and logistics systems. In Austria, the Autobahn and highway financing stock corporation (ASFiNAG) was established prior to the implementation of pricing. The ASFiNAG is a fully public company owned by the Ministry of Transportation and is responsible for managing, maintaining, and expanding the road network. The company receives revenue from various sources, including the fees charged to road users. The Ministry of Transportation is responsible for infrastructure ownership, planning, and toll setting. The ASFiNAG manages road operations and the toll payment system through its subsidiary, ASFiNAG Maut Service Gmbh. Construction and maintenance work are often outsourced to private companies. Germany awarded the installation and operation of the toll payment system to a private consortium called Toll Collect (see figure 3.2). Payment oversight is shared between Toll Collect and the Federal Office for Goods Transport (BAG). Toll Collect is responsible for automatic controls and fee collection in case of violations, while BAG conducts other road oversight and resolves toll evasion violations. The Government retains ownership of the infrastructure and has the authority to determine which roads are tolled and set toll levels through regulations. The German Highway Agency (IGA) is responsible for planning, building, operating, maintaining, financing, and managing the highways. It also distributes revenue generated from pricing, which is received from Toll Collect. After the concession agreement ended, Toll Collect was acquired by the German Government. Figure 3.2. German Toll System for Heavy Vehicles Based on a Public-Private Collaboration Model Public Private Toll Charger Toll Operator Contract Funding Toll Fee Return NGE CHA A EX Electronic Collection Collection DAT Bag Team Manual Control Enforcement Respective Roles Penalty Payment ≥7.5t Provide regulation and fiscal · Build, operate and maintain the · framework system infrastructure Invest during the build up phase · Define contract conditions · Collect toll fee · Return over investment · Provide enforcement and collect fines · Carry out toll network extension · Source: 4icom and Steer Davies Gleave (2015). In Czech Republic, the Ministry of Transportation owns the roads, while operations fall under the jurisdiction of the General Directorate of Highways and Roads (ŘSD ČR). However, the implementation and effective operation of the toll system were awarded to a consortium led by the Austrian company, Kapsch Telematic Services (KTS), which operated the system until 2020. The current operator is a Czech-Slovakian consortium formed by CzechToll and SkyToll, which has Urban and Interurban Road Pricing 40 launched a new electronic toll system using Global Navigation Satellite System (GNSS) technology. Toll collection controls are performed by the system operator in collaboration with the Customs Administration (GŘC ČR). Fees are set according to Regulation 240/2014 of the Czech Government. The electronic toll system functions according to Decree 470/2012 of the Ministry of Transportation. In Slovakia, the fundamentals of electronic toll collection are regulated by Law 474/2013 of December 21. For its part, based on Decree 475/2013, the Ministry of Transportation, Construction, and Regional Development establishes which road sections are subject to electronic toll collection, as well as the method for calculating fees and the discount structure (Regulation 497/2013). Slovakia’s public sector has a large presence in managing the road network. Infrastructure is owned by the Slovakian Ministry of Transportation, while the National Highway Corporation (NDS) is responsible for collecting tolls. However, the electronic toll payment system (MYTO) is operated under a concession granted in 2008 to the company SkyToll, which had previously developed and implemented the system. Similarly, in Poland, the General Directorate of National Highways and Roads (GDDKiA) owns infrastructure, while ViaTOLL, which is owned by the company, Kapsch, operates the payment system. Periodically, the Regulations of the Ministry of Transportation, Construction, and Maritime Economy make updates to the roads or sections subject to pay-per-use, as well as the amount of applicable fees. Image 3.3. End of a Traffic Jam on the Motorway in Germany Source: Adobe Stock. Urban and Interurban Road Pricing 41 The Government of Hungary appointed the public company, National Toll Payment Services PLC (NÚSZ Zrt.), to operate and maintain the toll system for the country’s toll road network (see figure 3.3). The company is responsible, on behalf of the Government, for collecting tolls and overseeing and managing all toll rates and fees and provides support for enforcement activities related to collecting tolls in the country. Similarly, the public highway corporation of the Republic of Slovenia, DARS, is in charge of managing the toll system for highways and expressways. Likewise, the company conducts construction, management, and maintenance work on the high-capacity network, almost entirely financed by resources obtained from collecting tolls. In Bulgaria, there is a National Toll Administration, which is a specialized unit of the Road Infrastructure Agency. It is authorized to operate and maintain the electronic toll system, perform oversight, and collect fees (tolls and vignettes) for the roads. Figure 3.3. Hungary’s Toll System for Heavy Vehicles Public Private Toll Charger/Toll Operator Bound Toll Service Provider 22 Toll Declaration Operators Contract and Data Exchange TDO # 1 TDO # 2 Toll Free TDO # 3 Electronic Collection Collection Data Exchange Manual Police TDO # 4 ... Control Enforcement Respective Roles Penalty Payment ≥3.5t Build, operate and maintain the · system infrastructure Collect Data Reporting from · · Provide regulation and fiscal 22 Toll Declaration Operators Provide OBUs and other customer · framework Transfer toll fee from TDOs to · services · Provide enforcement and Toll Charger collect fines Source: 4icom and Steer Davies Gleave (2015). Note: OBU = on board unit; TDO = toll declaration operator. Managing revenue The allocation of revenue generated from pricing varies among different European countries implementing the pay-per-use model. While the Eurovignette Directive does not establish specific limits on how these funds should be used, countries have generally adopted the principle of using the resources to benefit the transportation sector and avoid diverting them for unrelated purposes. Some countries allocate the revenue entirely to the road sector. Austria, for example, uses the funds to cover the costs of maintaining, operating, and expanding the road network, as well as repaying debts incurred in previous road projects. The system in Austria is designed to be self-financing without relying on additional public funds. In Germany, the initial distribution of revenue included 50 percent for roads, 38 percent for railways, and 12 percent for waterways (Vassallo and Lopez, 2009). However, over the years, the percentage allocated to roads has increased, and since 2011, all revenue has been dedicated to road projects (Doll, Mejía-Dorantes, and Vassallo, 2016). Urban and Interurban Road Pricing 42 Other countries choose to allocate the revenue to transportation funds that finance various transportation projects, including roads, railways, and waterways. In Switzerland, one-third of the revenue goes to regional governments (Swiss cantons) for financing road projects, whereas the remaining two-thirds are used in an intermodal fund that primarily supports railway projects but also includes other types of projects (Vassallo, Gomez, Saldaña, Sierra and Di Ciommo, 2012). In Czech Republic, the revenue collected is allocated to the State Transportation Infrastructure Fund (SFDI), which finances the construction, maintenance, and modernization of domestic roads, highways, railways, and waterways. 3.2.3.4. Payment and enforcement systems One of the main objectives in implementing pay-per-use is the extra-budgetary contribution to financing infrastructure by users. For the strategy to work, reliable technology must be used so that collections are exhaustive, without disturbing the flow of traffic if possible. As such, European countries have mostly used the free-flow payment system (see figure 3.4), which automatically collects tolls, and therefore, allows users to pay without having to stop, reduce speed, or get into a specific lane. There are three main technology solutions used in Europe to collect tolls: i. satellite (GNSS/Global Positioning System [GPS]) ii. Dedicated short-range communication (DSRC) toll plazas iii. tachograph The tachograph is used in Switzerland, where there are tolls on all roads, although the country occasionally uses other technologies (GPS and DSRC). Figure 3.4. MLFF Systems in Europe HGV Toll collection system Germany GNSS Austria DSRC Czechia DSRC >> GNSS* Hungary GNSS Slovakia GNSS NATIONWIDE Slovenia DSRC Belarus DSRC Poland DSRC Belgium GNSS Bulgaria GNSS Switzerland Mileage Toll only HGV. Norway DSRC Toll HGV and LV. CONCESSIONS Concession. HGV and LV. Portugal DSRC * DSRC until 2020 Source: Kapsch (2021). Note: DSRC = dedicated short-range communication; GNSS = global navigation satellite system; HGV = heavy goods vehicle; LV = light vehicle; MLFF = multilane free flow. Urban and Interurban Road Pricing 43 In addition to Europe, the free flow tolling system has been successfully implemented in other countries worldwide. The most common method utilized is the DSRC toll plaza, which can be found on highways in various countries, including: • Canada: The ETR407 in Toronto utilizes the DSRC system for toll collection. • The United States: Examples of DSRC toll plazas include SH-160 in Austin and Houston Metro, as well as the Dulles Greenway in Virginia. • Australia: The East Link in Melbourne implements the DSRC technology for toll collection. • Israel: The Cross Israel Highway employs the DSRC system for tolling. Furthermore, as discussed in the subsequent chapter, Chile has also adopted the free-flow system on urban concessions in Santiago. For the free-flow system to operate, users need to have a transponder installed inside their vehicles to facilitate payment. This model enables automatic toll collection, allowing for both prepayment and postpayment options. However, manual payment methods may also be available. Each of the three tolling technologies used in Europe is discussed below, providing insights into their implementation in different countries. Additionally, information regarding the payment methods accessible to both regular and occasional users in various countries is explained. Lastly, the main enforcement mechanisms employed to ensure payment compliance are discussed. DSRC toll booths The free-flow tolling solution using DSRC technology relies on a connection between the transponder or on-board unit (OBU) installed in the vehicle and a network of antenna-receivers positioned at toll booths along the highway. These toll booths are equipped with complex electronics systems that allow for vehicle identification and personalization. The OBU contains vehicle-specific data such as the registration number, vehicle type, and emissions category, and is usually associated with a bank account for automatic payment. As a vehicle passes under a toll plaza, the OBU device communicates with the toll booth using DSRC technology, allowing for the recognition of the vehicle and automatic charging of the corresponding toll amount for the specific section of the road. To prevent fraud, toll plazas often incorporate an automatic number plate recognition (ANPR) system, also known as video tolling. This system uses cameras to read license plates and verifies them in case of potential violations. This way, each toll control point or toll plaza replaces the need for a traditional toll station. Satellite technology (GNSS) The free-flow tolling system utilizing satellite technology requires vehicles to be equipped with a transponder or OBU that utilizes the global system for mobile communications (GSM) or general packet radio services (GPRS) technology. The OBU receives data from satellites and sends it to a data center for analysis and processing. The data center calculates the number of kilometers traveled on toll roads and sends a receipt to the vehicle user. Figure 3.5 provides a visual representation of this system. Urban and Interurban Road Pricing 44 Figure 3.5. Basic Operations of the Free-flow Satellite/GPRS System POSITIONING MATCHING TOLL DETECTION RATING TRANSMISSION The OBU’s integrated ALGORITHMS The OBU detects Being on a chargeable A set of CDRs are GNSS receiver The matching whether the road segment or virtual securely trasmitted provides information algorithms identify segment or virtual gantry, the toll to the central system on position, speed, the correct road gantry are part of charge is calculated, for billing, from the orientation and segment or virtual a chargeable road creating a charge vehicle to the TSP degree confidence. gantry on a netwwork. data record (CDR). and subsequently digital map. to the TC. TOLL SERVICE TOLL PROVIDER CHARGER GNSS PROXY BACK END GNSS Satellites Mobile network operator (Galileo, GPS, GLONASS, BeiDou) GNSS OBUs Source: European Global Navigation Satellite Systems Agency (2015). Note: GNSS = global navigation satellite system; GPS = global positioning system; OBU = on-board unit; TC = toll charger; TSP = toll service provider. There are two fundamental advantages to the satellite system over DSRC technology:: i. The reliability of the OBU ensures that approximately 99.9 percent of electronic transactions are performed correctly. ii. The scope of satellite coverage allows for practically 99.9 percent of the toll road network to be accessible. The second factor means that unlike with DSRC toll booths, the network can be successively expanded without additional investments in toll infrastructure. Once the satellite infrastructure is in operation, the only requirement is for vehicles to have the OBU device necessary to make the sender/receiver transaction. Tachograph In the case of Switzerland, where the satellite technology is used for tolling, drivers are required to have an OBU installed in their vehicles. This OBU is permanently connected to the tachograph, a device that records various data related to the vehicle’s operation. Since the entire road network in Switzerland is tolled, the OBU is used to determine the total kilometers traveled by the user. The OBU in Switzerland contains a storage chip that holds the main data of the vehicle. It also includes a motion sensor and GPS technology to accurately determine the vehicle’s position and ensure that the tachograph signal has not been manipulated intentionally. Urban and Interurban Road Pricing 45 Additionally, the OBU enables DSRC communication for oversight purposes and for activation or deactivation when crossing borders. This allows for the effective monitoring of toll payment compliance and facilitates seamless tolling operations when traveling across different regions or countries. Figure 3.6. Process for Recording Travel Information and Sending It to the Authorities in the Swiss Tachograph-based System Source: Federal Department of Finance (2017). Each user must send their OBU reader data to the FCA monthly, either online or on a card in the mail (see figure 3.6). The payment manager enters the readings into its database and performs the necessary checks to prevent fraud. Then, the amount the user must pay is calculated and charged to the account each driver must have with the system manager; this is a requirement to obtain an OBU. The user receives the corresponding bill in the mail periodically. The system also has a series of DSRC toll plazas on the border that allows the OBU to be activated/ deactivated when the vehicle enters or leaves the country. This allows the tachograph to count only the kilometers traveled in Swiss territory, the value on which payment is applied. Payment methods All three methods described above require the user to obtain an OBU, which must be installed inside the vehicle. They must also have credit to be able to travel in the toll road system. There are two possible payment mechanisms: prepayment and postpayment. In a prepayment system, the user adds money to the balance on the device periodically. With postpayment, the OBU is associated with a bank account or credit card from which the toll system manager then charges the toll. In either case, the system automatically deducts the amounts corresponding to sections traveled by the vehicle. Figure 3.7 shows a payment system operations structure used in Germany. Urban and Interurban Road Pricing 46 Figure 3.7. System Operations Using Postpayment and Prepayment (Specifically in the Case of Germany) Truck toll coll ction in G rm n Autom tic lo -on GPS S t llit D stin tion (Glob l Positionin S st m) 6. On-Bo rd Unit c lcul t s toll ch r s 5. Enforc m nt (st tion r /mobil ) 3. Position d t ct d vi GPS 2. Ent r 4. On-Bo rd Unit d t cts toll ro d On-Bo rd Unit v hicl d t 1. Inst ll on-Bo rd Unit Tr nsport 7. Toll is s nt vi mobil r dio (GSM) Comp n TOLL COLLECT to th toll coll ction c nt r 8. Toll coll ction c nt r ch r s toll f s to th tr nsport comp n ’s ccount M nu l bookin on th int rn t or t th toll st tion t rmin l D stin tion 2. V hicl nt rs on toll ro d 3. Enforc m nt (st tion r /mobil ) @ Tr nsport 1. Lo -on vi innt rn t TOLL COLLECT Comp n or toll st tion t rmin l 4. For int rn t lo -on, th toll coll ction c nt r ch r s toll f s to th tr nsport comp n ’s ccount Source: Future of Identity in the Information Society (2009). Sourc : FIDIS (2009) Urban and Interurban Road Pricing 47 OBUs are required for heavy vehicles (typical limit of 3.5 metric tons) in several countries, including Austria, Belgium, Czech Republic, Poland, Slovenia, and Slovakia. In countries such as Switzerland, Germany, and Hungary, use of an OBU is recommended for heavy vehicles when they frequently use toll roads, but there are other alternative payment methods as well (Fritz et al. 2020). As such, methods vary by country. In Switzerland, where the entire network is toll roads, users who do not have an OBU must obtain a form at the border station to record the key features of the vehicle and tachograph readings when entering and leaving the country. Upon departure, the driver must stop again at the border and make the payment. In Germany, users can register and make the payment either online or manually at toll station terminals, which are generally located at specific points (interchanges, rest areas, service stations, and so on). The registration process at the toll station terminal is similar to purchasing a ticket. The driver enters all the relevant data of the vehicle, start date of the trip, and beginning and end points of the trip. Using these data, the toll station terminal calculates the corresponding fee for the shortest route within the road network with mandatory tolls. In Hungary, the ticket used depends on the section traveled (Relational Ticket). It can be paid at the point-of-sale cash station. Finally, there are new payment methods that use mobile communications. Phones can be used for different purposes, such as paying the toll during the trip, updating the user’s personal account, changing the payment method, selecting a fee modality, and so on. It also gives the manager of the infrastructure greater flexibility when installing toll stations, since the physical payment infrastructure is substantially reduced compared with other technologies. Currently, payments can be made by cell phone at traditional toll stations as a substitute for a credit card. However, the integration of cell phones with electronic toll systems is being tested, and they are expected to play a key role in Europe’s electronic toll system in the near future. Interoperability As mentioned, three payment technologies – DSRC, GPS, and tachograph – are used currently to implement variable pricing in the EU. As such, an interoperable community-level system would be desirable so that the user could, with a single contract linking them to a single payment operator, travel freely throughout the European territory without having to use a different OBU in each country. Interoperability is one of the biggest issues facing European authorities, since they are aware that the success of implementing this system is dependent on harmonization among countries. Across different documents, the EU has proposed establishing a single European payment system manager, which would interface, in turn, with the different operators in each country. This structure would enable the setting up of just one contract per user and one OBU per vehicle, which would be valid for any section of the toll road network in Europe. Likewise, the manager of Europe’s network would verify that service was the same in each country, so that there would not be discrimination based on the nationality of the payment operator, user, or vehicle. Despite different countries finding the idea of implementing a harmonized model favorable, the establishment of interoperability has been delayed more than initially expected. According to the Association of Electronic Toll and Interoperable Service (AETIS),4 there are currently more than 100 electronic payment systems in use across the EU and Norway, and only a few electronic toll systems offer cross-border interoperability. Austria and Switzerland were the first countries to establish 4  See https://www.aetis-europe.eu/about-eets/#registred. Urban and Interurban Road Pricing 48 an interoperable system in both directions, in 2004, so that a Swiss OBU can be used in Austria and vice versa. In 2011, an interoperable service was launched between Austria and Germany (TOLL2GO) for DSRC and GNSS technologies. This service allows users to pay the tolls for both countries using a single OBU but requires them to have separate contracts with the two toll operators (one with the German operator and another with the Austrian operator). Toll collection by the two companies is completely independent (see figure 3.8). Figure 3.8. Interoperable TOLL2GO System between Austria and Germany CUSTOMER Toll Coll ct OBU GPS GSM Toll Coll ct OBU ct ASFINAG GO-Box Co tr nt r DSRC Con ct TOLL COLLECT ASFINAG ASFINAG GO-Box Int rop r bilit A r m nt Source: Dionori et al. (2014). Note: DSRC = dedicated short-range communication; GPS = global positioning system; GSM = global system for mobile communications; OBU = on-board unit. In 2013, Austria reached an agreement with Scandinavian countries (Denmark, Sweden, and Norway) to establish an interoperable toll service called EasyGo+. This service not only covers road tolls but also includes ferry routes, such as those connecting Denmark to Germany. The European Electronic Tolling Service (EETS) was introduced in 2015, with the French company Axxès being the first EETS provider to register. Since then, nine other companies have entered the market to provide EETS services. These companies are actively developing services that initially cover certain Member States but aim to offer interoperability of toll payment services throughout the EU. For instance, Toll4Europe was approved as an EETS provider in 2018 and currently offers interoperable services with a single OBU valid in several countries, including Belgium, Germany, France, Spain, Portugal, Austria, Bulgaria, and Hungary. This allows tolls to be charged to heavy vehicles traveling in these countries using a single contract. There are plans to expand the network to include Italy (currently in a pilot phase), Switzerland, Scandinavian countries, and other countries in southern Europe. These initiatives reflect the growing recognition that a future variable pricing model can only be effectively implemented with a globally interoperable system. The aim is to establish a seamless and unified toll payment system that enables vehicles to travel across different countries without the need for multiple contracts or OBUs, ultimately enhancing efficiency and convenience for road users. Urban and Interurban Road Pricing 49 Enforcement Enforcement strategies for toll collection vary across countries but generally involve a combination of static enforcement toll plazas, video tolling technology, fixed controls, and mobile controls. The goal is to identify possible violators and ensure that all users pay their tolls. Here is an overview of the enforcement mechanisms commonly used: Special enforcement toll plazas: These toll plazas, in addition to the regular payment toll plazas, 1.  are equipped with video tolling technology. They verify whether vehicles subject to tolls have been recorded correctly in the system. For vehicles with transponders, the DSRC toll plaza checks whether the OBU is installed and functioning properly. For vehicles with manual toll records or other toll-paying vehicles, the license plate is captured by toll booth cameras, and the data are compared with the information stored in the control center. If a vehicle is found to be unregistered, the enforcement manager investigates and may charge the toll retroactively. If the record is correct, the vehicle data are immediately erased. Fixed controls: Fixed controls involve sending the data of suspected violators to mobile patrols 2.  stationed at rest areas near the control booths. The patrols stop and check the identified vehicles, resolving any discrepancies on the spot or initiating penalty procedures for toll evasion. Mobile controls: Mobile controls are typically conducted by national security forces or dedicated 3.  enforcement officials. These patrols ensure comprehensive oversight of the toll road system, particularly on sections where fixed controls may not be present. Mobile patrols use DSRC technology to detect vehicles using the automatic toll system via OBU and verify the accuracy of the vehicle data entered into the OBU. If a vehicle is not using the automatic system, the patrol compares the license plate with the manual records in the central database. If a potential violation is identified, the vehicle is directed to pull over at the next rest area. The patrol charges the toll and initiates the necessary penalty procedures if required. Mobile patrols can also conduct surprise check-ins and border surveillance to ensure compliance with toll payment requirements. These enforcement mechanisms, including video tolling, fixed controls, and mobile patrols, aim to ensure that tolls are paid correctly and deter toll evasion. The responsibility for enforcement may lie with public authorities or private entities, depending on the country’s regulations and practices. Image 3.4. Urbanisation Source: Adobe Stock. Urban and Interurban Road Pricing 50 3.2.3.5. Summary Table Table 3.8 summarizes the main aspects characterizing the variable pricing systems of each applicable European country. Table 3.8. Main Aspects of Variable Pricing Systems in Europe Manager Parameters Year of Applies Toll Road Technology of Country Used to Set Implementation to System Used Payment Toll System Switzerland 2001 Heavy Entire Distance Tachograph Public vehicles network traveled, >3.5 emissions metric category, tons maximum weight of vehicle Austria 2004 Heavy Highways Distance DSRC Public vehicles and traveled, >3.5 expressways vehicle type, metric emissions tons category, time of day (day/night), road type Germany 2005 Heavy Highways Distance GNSS/GPS Public vehicles and federal traveled, (initially >7.5 roads vehicle type, private) metric emissions tons category Czech 2007 Heavy Highways Distance GNSS Private Republic vehicles and first- traveled, >3.5 class roads vehicle type, metric emissions tons category, road type, time of day Slovakia 2010 Heavy High- Distance GNSS Private vehicles capacity traveled, >3.5 roads and vehicle type, metric sections emissions tons of the category, secondary road type and tertiary networks Urban and Interurban Road Pricing 51 Manager Parameters Year of Applies Toll Road Technology of Country Used to Set Implementation to System Used Payment Toll System Poland 2011 Heavy High- Distance DSRC Private vehicles capacity traveled, >3.5 roads and vehicle type, metric select emissions tons national category, roads road type Hungary 2013 Heavy Highways, Distance GNSS Public vehicles expressways, traveled, >3.5 and some vehicle type, metric national emissions tons roads category, road type Belgium 2016 Heavy Highways Distance GNSS Private vehicles and traveled, >3.5 secondary vehicle type, metric roads emissions tons category, road type Slovenia 2018 Heavy Highways Distance DSRC Public vehicles and traveled, >3.5 expressways vehicle type, metric emissions tons category Bulgaria 2020 Heavy Highways, Distance GNSS Public vehicles expressways, traveled, >3.5 and first- vehicle type, metric class roads emissions tons category, road type Source: World Bank data. Note: DSRC = dedicated short-range communication; GNSS = global navigation satellite system; GPS = global positioning system. It is common practice to impose toll charges on heavy vehicles weighing 3.5 metric tons or more, particularly on high-capacity roads. The toll amount is typically determined based on factors such as the distance traveled, vehicle type, and emissions category. However, there is a lack of harmonization when it comes to the technology employed for toll collection and the type of payment system manager utilized. Different countries have the autonomy to choose their own toll collection technologies, which can include options like DSRC, GPS, or tachograph systems. Similarly, the management of payment systems can vary between countries, leading to a lack of consistency and interoperability. This lack of harmonization poses challenges for achieving a unified approach and seamless travel experience across different countries. Recognizing the importance of standardization and interoperability, the EU has expressed the objective of establishing common standards and frameworks. Urban and Interurban Road Pricing 52 3.3. Impacts of Interurban Pricing Interurban pricing has economic, social, and environmental impacts of different kinds. Given below are the main effects observed upon a general analysis of international experience regarding pricing. 3.3.1. Public Acceptability Ensuring public acceptability is a crucial aspect of implementing a pricing system and determining its success. Initially, the introduction of tolls often faces strong social resistance due to the traditional absence of charges for infrastructure usage. Therefore, evaluating acceptability helps determine whether users and society understand the rationale behind the pricing system and perceive it as “fair” (Di Ciommo, Monzón, and Heredia 2011). European countries that have implemented variable pricing systems offer valuable insights into public acceptability. These countries have transitioned relatively quickly from free travel to a pay- per-use system. Generally, public acceptability of pricing for heavy vehicles is positive, particularly in countries like Germany, Austria, and Switzerland where a significant portion of road traffic comes from foreign vehicles (McKinnon, 2006). Consequently, societies in these Central European countries view the revenue generated from tolls favorably. These funds contribute to road maintenance, infrastructure development, and mitigating the environmental impact of road transportation. Austria and Switzerland provide noteworthy examples in terms of public acceptability. In Switzerland, the successful implementation of road pricing hinged on obtaining public approval through a referendum, despite opposition from transportation companies represented by ASTAG, the Swiss Association of Road Transport Operators. Presenting the toll charge as part of a comprehensive package that included other measures, such as increased maximum tonnage for trucks and a railway revitalization plan, helped raise awareness and gain public acceptance. Transparency regarding the allocation of revenue from pricing and the ease of managing OBUs further improved social perception of the pricing system. In Austria, the management company, ASFiNAG, recognizes the critical role of public acceptability in the success of the pricing system. To gauge customer satisfaction, ASFiNAG conducts annual surveys, both over the phone and in person, to collect feedback on various aspects such as tolls, rest areas, road safety, and traffic information. The information gathered is used to assess customer orientation and satisfaction indexes, which have consistently been in the 70–80 percent range in recent years (see figure 3.9). By prioritizing public acceptability and regularly evaluating customer satisfaction, countries can foster a positive perception of pricing systems and increase their chances of successful implementation. Urban and Interurban Road Pricing 53 Figure 3.9. Customer Satisfaction Index in Austria—Components and Evolution 75.9 Customer Satisfaction Index (CSI) 79.5 79.2 72.4 Customer Orientation Index (COI) 75.5 75.6 76.5 Safety 83 81.6 78.6 Road operations 78.9 76.3 65.5 Roadway availability 78.1 79.2 66 2019 Roadworks 64.8 2017 64.2 2016 73.8 Traffic information 72.8 74.1 76.4 Tolling 70.7 71.1 74.2 Rest areas 82.6 83.3 Touchpoints 73.4 0 20 40 60 80 100 Source: ASFiNAG (http://www.asfinag.at/). The survey results serve as a valuable source of information for ASFiNAG to identify areas for improvement and meet customer needs (ASFINAG Annual Report 2019). In Austria, the ease of payment, with no need for stopping or reducing speed, and the simplicity and reliability of the OBUs have been significant factors contributing to the success of the pricing system (ASFiNAG Annual Report 2022). Similarly, in Switzerland, the detailed allocation of revenue from pricing has allowed citizens to assess the appropriateness of the implemented pricing policies (Di Ciommo, Monzón, and Heredia 2011). Generally, the countries in Central Europe that have implemented pricing systems have achieved high levels of acceptability (ASFiNAG Annual Report 2022). This can be attributed to their strategic position along major freight corridors, resulting in a significant portion of infrastructure financing coming from foreign traffic (Di Ciommo, Monzón, and Heredia 2011). Additionally, the perception of efficient system operations and appropriate allocation of generated revenue has contributed to public acceptance (Di Ciommo, Monzón, and Heredia 2011). France, however, stands as an exception in Central Europe, as it has not applied the Eurovignette Directive to its road network. The French Government’s attempts to impose an “eco tax” on heavy vehicles faced opposition from transportation companies and farmers, leading to its suspension in 2014 (Vassallo, Ferrer, Ortega, Gomez, and Heras-Molina, 2015). Discussions regarding the implementation of a tax on heavy vehicles are currently underway, allowing regions to establish specific taxes based on road freight transport (French Ministry of Transport 2022). Peripheral countries, such as Spain, experience fewer congestion issues and less traffic from foreign vehicles, but they heavily rely on freight transport for economic development (Doll, Mejia-Dorantes, Vassallo, and Wachter, 2017). The introduction of tolls on heavy vehicles in these countries has encountered low acceptability due to concerns over increased transportation costs and decreased competitiveness of exported products (ASFiNAG Annual Report 2022). Despite ongoing discussions, Urban and Interurban Road Pricing 54 the Spanish Government has faced opposition to pay-per-use systems from transportation sector associations and other vested interests (Spanish Ministry of Transport 2022). Recent developments in toll highway network reversals have reignited the debate on pricing, and the “Plan for Recovery, Transformation, and Resilience” proposes the implementation of a pay-per-use system on the state high-capacity road network, although the specific pricing system has yet to be defined (Spanish Government, 2021). Research indicates that vehicle pricing, both for heavy vehicles and in general, is often met with public opposition (Link and Polak 2001). However, studies on perceptions and attitudes toward road pricing have primarily focused on urban contexts (see Chapter 4.3.1), with limited research in the interurban context (Gomez, Papanikolaou, and Vassallo 2017). The few studies conducted have explored the influence of socioeconomic factors and trip-related factors on acceptability or attitudes toward road pricing, yielding diverse and inconclusive results (Gomez, Papanikolaou, and Vassallo 2017). Attitudinal factors, such as perceptions and beliefs about road pricing and context-specific variables, may have a stronger impact on acceptability than socioeconomic factors (Gomez, Papanikolaou, and Vassallo 2017; Bueno et al. 2017). Moreover, studies have shown that acceptability levels can vary based on specific road characteristics and regional differences within a country (Gomez, Papanikolaou, and Vassallo 2016). Regions with a higher proportion of toll roads or more expensive tolling infrastructure tend to have more negative perceptions of road charges (Gomez, Papanikolaou, and Vassallo 2016). 3.3.2. Reliability of the Payment Systems Traditional toll concessions, typically equipped with barrier devices, make payment evasion practically impossible but require vehicles to stop. However, in free-flow systems, where vehicles can circulate without disruption, the reliability of payment systems becomes even more important. Countries that have opted for free-flow systems have carefully chosen the most reliable technology (such as DSRC, GPS, or tachographs) based on their objectives, and have implemented rigorous violation monitoring (Donori, Manzi, Frisoni, Vassallo, Gomez, Orozco, Perez, and Patchett, 2014). DSRC technology, widely used for pricing in both interurban networks and metropolitan areas, tends to reach towards 100 percent effectiveness in OBU-toll gate transactions (Donori, Manzi, Frisoni, Vassallo, Gomez, Orozco, Perez, and Patchett, 2014). This technology is often complemented with ANPR or video tolling systems, which further enhance the accuracy of electronic transactions. For instance, the pricing systems in Czech Republic, Poland and Slovenia achieve over 99 percent successful transaction processing (Heras-Molina, 2019; Donori, Manzi, Frisoni, Vassallo, Gomez, Orozco, Perez, and Patchett, 2014). The implementation of additional enforcement measures has resulted in very low payment evasion rates in several countries, such as Austria, where it is less than 1 percent (ASFiNAG Annual Report 2022). Satellite technology, another reliable system, demonstrates an accuracy rate of around 99 percent in transaction processing (Donori, Manzi, Frisoni, Vassallo, Gomez, Orozco, Perez, and Patchett, 2014). Switzerland employs a tachograph model, which records data related to vehicle usage, and has achieved payment evasion rates of less than 1 percent (Balmer 2006). By employing robust payment systems and implementing effective enforcement measures, countries have been able to minimize payment evasion and ensure the reliability of their pricing systems. Urban and Interurban Road Pricing 55 3.3.3. Use of Revenue Traditionally, the revenue generated from pricing systems has been utilized to recover the operator’s costs and generate profits over the lifespan of the infrastructure. However, with the transition from traditional toll concessions to variable pricing systems, there have been notable changes in this approach. The current trend indicates that, as part of a comprehensive transport policy strategy, pricing revenue is being utilized to cover infrastructure costs and promote the competitiveness and sustainability of the system. In practice, there are two main approaches to revenue allocation. The first approach involves using pricing revenue to finance intermodal transport funds, with a significant portion of the budget allocated to railway projects. This approach is adopted by countries like Switzerland and Czech Republic. The second approach involves allocating the entire revenue to the road sector. This group includes countries such as Germany and Austria, which have implemented variable pricing, as well as the majority of traditional toll concessions. Notably, Japan and Chile have implemented a system of cross-subsidies with different characteristics, allowing high-traffic highways to partially finance those with lower demand. This approach enables the extension of the infrastructure network beyond strictly profitable corridors from an economic and financial perspective. Furthermore, the utilization of revenue is closely linked to the acceptability of the pricing system among users. As previously mentioned, countries like Austria and Switzerland achieved successful implementation of pricing systems by precisely defining the use of revenue from the outset. The pricing measure was not merely implemented to generate isolated revenue but was presented as an instrument that was seamlessly integrated into an overarching transport policy strategy. This coherent integration of pricing with broader policy objectives contributed to its acceptability and effectiveness in these countries. 3.3.4. Effect on the Demand for Transport and Transfer to Other Modalities The implementation of a pricing system for road transport results in an increase of the overall transportation costs. Consequently, various effects on transport demand can be anticipated, including modal shift, traffic rerouting to alternative routes, and a potential reduction in the total transport demand. Modal shift, whereby transportation modes such as railway, waterway, or coastal transport are favored over road transport, is a likely outcome of toll-based road usage. The significance of this modal shift is influenced by the availability and quality of alternative modes. In the case of freight transport, where competitiveness is a crucial factor, the extent of modal shift is closely tied to the frequency and reliability offered by road alternatives. An analysis of the impact of pricing on interurban modal transfer was conducted in Switzerland. Despite initial expectations of a substantial shift of freight traffic to railways, the effect was ultimately less pronounced (Federal Office for Spatial Development [FOSD] 2015). Road transport experienced notable productivity improvements, partly due to the parallel increase in the maximum weight of freight vehicles from 28 to 40 metric tons. As a result, the shift toward railways remained relatively moderate, despite Government measures to strengthen the railway sector and enhance its infrastructure. Similarly, in Germany, Broaddus and Gertz (2008) concluded that the reduction in road freight traffic and the modal shift toward rail were achieved only to a limited extent. Urban and Interurban Road Pricing 56 The introduction of pricing also leads to the redistribution of traffic across the road network, resulting in two potential effects. First, there may be increased traffic on existing toll roads. This can be viewed as a positive outcome, as it allows for better traffic distribution between toll-free and tolled roads, leading to improved network capacity utilization. Second, it is likely that there will be increased traffic on toll-free secondary roads as an alternative to toll roads. This phenomenon has negative implications for congestion, accident rates, and the maintenance and operating costs of these secondary roads. For instance, after the introduction of pricing for heavy vehicles in Germany, where initially only highways were tolled, there was an average growth of 7.6 percent in heavy vehicle traffic on secondary roads. It is estimated that 85 percent of this increase was attributed to the introduction of the pay-per-use system (Gustafsson, Cardebring, and Fiedler 2006). However, these traffic detours were localized, primarily occurring on well-performing secondary roads that ran parallel to high-capacity roads. Similarly, in Austria, where only high-capacity roads are tolled, a growth of 2–3 percent in heavy vehicle traffic was observed on secondary roads (Transporti e Territorio [TRT] 2008). Furthermore, according to de Jong et al. (2010), the average distance traveled per metric ton of goods decreased by approximately 3 percent in Austria after the introduction of the pricing policy. In Germany, the average distance stabilized in 2005 following a 10-year trend of annual growth of around 3 percent, and even decreased from 2008, though this decrease may also have been influenced by the economic crisis (de Jong et al. 2010). It is important to highlight the impact of pricing on total transport demand. A significant case of decreased traffic demand was observed in Switzerland. Prior to the introduction of pricing in 2001, heavy vehicle traffic through the Alps experienced an annual growth rate of approximately 7 percent. Following the implementation of pricing, there was a change in this trend in 2001 and 2002, with a subsequent stabilization from 2003 onward. According to the FCA, if a pay-per-use system had not been implemented, heavy vehicle traffic in 2009 have been 23 percent higher than the observed levels (Transport & Environment [T&E 2017). The altered traffic trends in the Alps resulting from the introduction of a pricing model in Switzerland can be observed in figure 3.10. Figure 3.10. Heavy Vehicle Traffic Through the Swiss Alps H v Goods V hicl s p r 1000 1500 1200 Introduction of LSVA 900 600 300 0 1981 1985 1990 1995 2000 2005 2010 2013 Source: Adapted from Federal Office for Spatial Development (2015). Note: LSVA = road tax on freight carriers for trucks weighing more than 3.5 tons. Urban and Interurban Road Pricing 57 However, a recent study conducted by Gomez and Vassallo (2020) examined the impact of heavy vehicle pricing policies on road freight volumes and modal split in 12 European countries. The study revealed a lack of strong evidence, indicating that these policies have significantly influenced these factors. Furthermore, the results suggested that any limited effects of pricing policies were offset to varying degrees by changes in other variables such as economic growth and the expansion of high-capacity networks. Additionally, the implementation of tolls on roads can have implications for light vehicle demand and travel patterns. Users may respond to tolls by altering their trip origin or destination, reducing their mileage, opting for toll-free routes, or switching to alternative modes of transportation (Litman 2013). Several studies have explored the demand elasticity of interurban toll highways in different countries, including the United States, Norway, and Spain. For example, Huang and Burris (2015) found statistically significant results for the elasticity of light vehicle demand in response to toll rates on toll highways in the United States, with a mean elasticity of -0.30. In Norway, Odeck and Brathen (2008) calculated short-term toll elasticities for 19 toll roads, nine of which were interurban arterial roads, and found values of around -0.40 and -0.48. In Spain, Gomez, Vassallo, and Herraiz (2015) analyzed 14 Spanish interurban toll roads between 1990 and 2011 and observed relatively stable toll elasticities ranging from -0.20 to -0.41. Moreover, several studies indicate that toll elasticities tend to be higher than elasticities for other generalized costs, such as fuel (Huang and Burris 2015; Álvarez et al. 2007; Gomez, Vassallo, and Herraiz 2015). This suggests that users perceive toll charges to have a greater impact than fuel costs. On the other hand, implementing variable tolls based on congestion criteria, such as increasing tolls during peak hours and reducing them during off-peak periods, has proven to be an effective tool for managing transport demand and optimizing the use of existing infrastructure. In France, some highways have implemented significant variations in tolls based on congestion levels. For instance, the A1 highway (Lille-Paris) has experienced a 4 percent reduction in traffic during rush hours and a 7 percent increase during off-peak hours, leading to improved operational efficiency of the infrastructure. 3.3.5. Effects on Logistics Applying a pricing system to heavy vehicles can lead to a notable increase in the productivity of freight transport, since they will seek to make better use of vehicles and restructure the fleet. In relation to the first point, implementing a toll results in a tendency to increase the average load carried by vehicles and to reduce empty returns, as carriers try to adjust route plans and the size of their vehicles to actual needs. In addition, the improved efficiency of the freight transport sector may result in reductions to the cost per metric ton-kilometer, thereby offsetting the increase caused by the toll. Also, in the long run, it is to be expected that production will be reorganized so that transport is used less, for example, by establishing manufacturing centers closer to consumption points. In any case, the extent of this effect will depend on factors such as the toll charge, the ability to reorganize the business sector, and the macroeconomic effects on transport demand. International experiences show that in general, by implementing pricing for heavy vehicles, it has been possible to transport more goods with fewer vehicles and less pollutants, thereby also reducing each vehicle’s mileage. Specifically, in Germany, empty trips were reduced by 1–2 percent following the implementation of pay-per-use (T&E 2017). In Switzerland, between 2001 and 2005, 16.4 percent more goods were transported with a 6.4 percent reduction in the number of kilometers Urban and Interurban Road Pricing 58 traveled by heavy traffic (vehicle-km) (FOSD 2015). Transport costs also decreased by 18 percent, partly due to the Swiss Government’s decision to allow an increase in the maximum vehicle weight (Balmer 2003). Additionally, after pricing was introduced, there was a tendency to replace vehicles between 12 and 28 metric tons with higher capacity vehicles (28–40 metric tons), and therefore more efficient vehicles (Källström 2007). In addition, by implementing a pricing system, it is likely that the road freight transport sector will become concentrated to take advantage of economies of scale. This inevitably leads to a decrease in fragmentation of the sector and, ultimately, encourages the creation of stronger and more efficient transport companies. However, experience also shows that the transport sector tends to adjust based on the limits imposed by pricing policies, for example, by adapting the fleet according to the type of vehicles exempt from pricing (TRT 2008). In the case of Germany, where initially heavy vehicles under 12 metric tons were exempted from tolls, there was a sharp increase in the number of newly registered trucks between 10 and 12 metric tons. In Switzerland, carriers tried to optimize their fleets by switching from larger to smaller vehicles, as the total permissible gross vehicle weight has a significant influence on the final cost of the toll. In addition, part of the change was to vehicles with a total gross vehicle weight of less than 3.5 metric tons, as these vehicles are not subject to tolls (TRT 2008). This highlights the need to assess the possibility of pricing all types of freight vehicles in greater detail, regardless of their technical characteristics. 3.3.6. Environmental Effects Road transport is a major contributor to CO2 emissions and the production of pollutant gases, and its emissions have been steadily increasing due to the growth in transport demand outweighing improvements in vehicle energy efficiency. Pricing can have a dual positive effect in addressing these environmental challenges. First, as discussed earlier, it can encourage more efficient use of vehicles, leading to a reduction in transport demand. This, in turn, yields several benefits such as reduced congestion, lower accident rates, decreased pollutant emissions, and lower energy consumption. Second, by varying toll rates based on environmental criteria such as vehicle emissions category, there is an expectation of a gradual transition to less polluting and more energy-efficient vehicle fleets. This incentivizes the replacement of older, more polluting vehicles with newer, cleaner ones. Figure 3.11 illustrates the changes in road freight vehicle fleets in Switzerland based on emissions categories following the introduction of the variable pricing system in 2001. Within just four years, there was a significant shift in the distribution of EURO categories, with a substantial reduction in the most polluting classes (EURO 2 and below). The notable growth in the EURO 3 category can be attributed to its toll pricing level being 15 percent lower than other classes’, encouraging the adoption of vehicles in this category. By implementing pricing mechanisms that consider environmental criteria, countries can promote the adoption of cleaner and more efficient vehicles, leading to a reduction in overall emissions and an improvement in air quality. Urban and Interurban Road Pricing 59 Figure 3.11. Changes to Road Freight Vehicle Traffic in Switzerland, by Emissions Category Import/Export Int rn l Tr nsit 100 75 EURO 4 vkm in % EURO 3 50 EURO 2 EURO 1 EURO 0 25 0 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 Y r Source: Adapted from Källström (2007). The replacement of fleets in Switzerland has resulted in a significant reduction in pollutant emissions from road transport. From 2000 to 2005, there was a 10 percent decrease in particulate matter emissions, a 6 percent decrease in CO2 emissions, and a 14 percent decrease in Nox emissions (FOSD 2015). However, it is important to note that the effectiveness of these measures in addressing environmental concerns is closely tied to the specific pricing policies implemented. Figure 3.12 provides insights into the registration of new heavy vehicles in Switzerland and Germany in 2006, categorized by their emissions standards. It is evident that Switzerland had a much higher rate of acquisition of vehicles with cleaner technologies, with 80.4 percent of the total being EURO 4- and EURO 5-compliant. In contrast, Germany had a lower adoption rate of cleaner technologies at that time, with only 33.4 percent falling into these categories. This difference can be attributed to the Swiss system’s stricter penalties for higher-emission technologies, incentivizing the use of cleaner vehicles. However Germany witnessed an increase in the use of more environment-friendly trucks following the introduction of tolls, particularly from 2007, aided by Government subsidies for fleet renewals (TRT 2008; Gustafsson, Cardebring, and Fiedler 2006). These examples highlight the importance of designing pricing policies that effectively incentivize the adoption of cleaner technologies and reward vehicles with lower emissions. Such measures can play a crucial role in reducing pollutant emissions and improving environmental outcomes in the road transport sector. Urban and Interurban Road Pricing 60 Registration of New Heavy Vehicles in Switzerland and Germany in 2006, Figure 3.12.  by Emissions Category Swit rl nd G rm n Euro 4 Euro 5 Euro 4 29.0% 51.4% 11.5% Euro 5 21.9% Euro 3 Oth rs 19.1% 1.9% Euro 3 Euro 1 Euro 2 64.4% Euro 2 0.0% 0.0% 0.2% Euro 1 Oth rs 0.0% 0.5% Source: Adapted from Transport Research Institute (2008). 3.3.7. Macroeconomic Effects The implementation of a pricing system in the transportation sector can have various macroeconomic impacts. First, it can contribute to reducing the public deficit. If the funds generated from pricing are used to increase budget revenue, it leads to a reduction in the deficit as public revenue increases. Alternatively, if the revenue is allocated to finance infrastructure, it frees up public funds that were previously used for this purpose, also contributing to deficit reduction. A reduced public deficit is beneficial for the economy as it helps maintain low interest rates, encouraging economic growth and investment. The impact of pricing on public Investment levels is closely tied to the allocation of revenue. If the funds are directed to general budgets, it is not guaranteed that they will be used to increase public investment. However, increased budget allocations generally lead to indirect increases in public investment. If the revenue from pricing is specifically allocated to public investment, the impact on investment levels will be direct. Overall, pricing tends to have a positive influence on public investment, allowing for an increase in public capital stock and improving the competitiveness of the economy. Implementing a pricing system for heavy vehicles can also have an impact on inflation. The introduction of tolls increases transport costs, whether vehicles travel on toll roads or opt for toll-free alternatives. In the latter case, the cost of transport also increases due to longer distances and higher operating costs. These increased costs translate to higher final product prices since transportation is involved in bringing products to the market. As a result, there may be a short-term rise in inflation. However, there is no reason to believe that pricing would lead to further inflation increases in the long run. Urban and Interurban Road Pricing 61 In Switzerland, the introduction of pricing resulted in a marginal increase in inflation of only 0.11 percent.5 Similarly, Germany experienced a modest increase of only 0.15 percent. A study in Spain, funded by the European Investment Bank (EIB), estimated that introducing toll rates between €0.08/km and €0.12/km for vehicles over 3.5 metric tons would lead to an increase in the consumer price index (CPI) between 0.14 percent and 0.21 percent. However, this increase would only occur in the year of toll implementation, with prices remaining constant thereafter (Vassallo and López 2009). The impact of heavy vehicle pricing on a country’s trade balance is influenced by increased transport costs, which affect the cost of products and can lead to a reduction in both imports and exports. The direction of the impact on the trade balance depends on whether imports or exports increase more. Additionally, the impact can be affected by the policies implemented by neighboring countries. Studies have shown that transport prices increased in Germany by 5–7 percent and in more peripheral countries like Sweden or Hungary by 6–10 percent with the introduction of pay- per-use tolls (Mészáros 2007). However, transport companies have generally passed on most or all of the toll costs to customers, minimizing the impact on their operations. Moreover, transportation costs typically represent a relatively low percentage of total production costs, resulting in negligible effects on actual product prices. For instance, in Germany, a 15 percent increase in toll costs would only lead to an average 0.5 percent increase in the overall product costs (T&E 2017). In conclusion, implementing a pay-per-use pricing system can bring about greater efficiency in highway transport, optimize vehicle capacities, reduce road freight traffic, promote environmental improvements, and generate additional funds for infrastructure investment without affecting public spending. However, it should be part of a comprehensive transport policy package with specific objectives to gain broader public support and achieve its intended positive effects. See https://www.bfs.admin.ch/bfs/en/home.html. 5 Chapter 4 Practical Application of Road Pricing in Urban Environments Urban and Interurban Road Pricing 63 Practical Application of Road Pricing in Urban Environments The primary goal of urban and metropolitan pricing is to reduce vehicle numbers within cities, effectively managing demand to alleviate congestion and enhance the urban environment. This chapter presents various pricing types and schemes that are currently in practice. Specifically, it explores practical examples of urban tolls implemented in significant cities, including Oslo, Stockholm, London, Singapore, and Milan. Additionally, it analyzes toll roads in metropolitan areas, such as the managed lanes in the United States and urban concessions in Santiago, Chile. The intention is to highlight the distinctive features of each model and their respective contexts. Lastly, the chapter discusses the effects that toll implementation has on urban areas. 4.1. Practical Cases of Urban Tolls As previously mentioned, there are various schemes available for implementing urban pricing. The rates charged can either remain constant throughout the day or vary between peak hours and off-peak hours. Alternatively, the rate structure can offer even greater flexibility by incorporating variable prices based on traffic conditions, time of day, and vehicle type. Urban pricing can also be applied to specific zones, such as historic city centers, or to larger areas encompassing multiple districts. While the primary objective has been to reduce the number of vehicles in urban centers due to the rapid increase in motorization rates, the implementation of tolls in urban areas is increasingly driven by environmental concerns. 4.1.1. Toll Rings in Oslo 4.1.1.1. Background and rationale for tolling Norway has a rich history of utilizing tolls as a funding mechanism for the development of new infrastructure, including bridges, tunnels, and roads, spanning over 70 years. Presently, the country boasts approximately 40 toll road projects, with a primary focus on financing fjord crossings. The major cities of Norway, such as Oslo, Trondheim, and Bergen, have implemented similar urban toll systems. For the purpose of illustration, this section delves into the case study of Oslo. The Oslo metropolitan region primarily encompasses the municipalities of Oslo and Akershus. Oslo, serving as the capital, is home to around 660,000 residents, while Akershus has a population of nearly 575,000. Encompassing an area of 5,400 square kilometers, the region acts as the main hub for Eastern Norway, accommodating approximately 2 million individuals, equivalent to approximately 25 percent of the national population. Between the 1970s and the late 1980s, the number of vehicles circulating in and around Oslo experienced a significant surge (Pozueta Echavarri, 2008). However, the funding for road infrastructure did not keep pace with this growth and coupled with the country’s environmental conditions, the roads deteriorated rapidly. Faced with this predicament, the Government embarked on exploring alternative methods of financing due to the scarcity of public funds. The concept that emerged was the implementation of a cordon toll around Oslo, referred to as “Package 1” or “Phase 1,” which commenced in 1990. This toll system did not restrict all access to the city but rather aimed to generate funds for infrastructure investments. Once the project was underway, it was decided that 20 percent of the total toll revenue collected would be exclusively allocated to public transportation infrastructure investments (see e.g., Pozueta Echavarri, 2008; Lian 2008). Urban and Interurban Road Pricing 64 The introduction of tolling facilitated substantial investments in the road network within the Oslo region. However, a new challenge emerged due to the rapid and higher-than-expected growth in the motorization rate during the 1990s. Insufficient investment in public transportation infrastructure further exacerbated the issue, endangering the efficiency, safety, and environmental friendliness of the transport system—elements deemed vital for the region’s development. In 1996, the Norwegian Parliament encouraged local authorities in the Oslo region to develop a new public transportation plan, co-financed by local and national entities. This plan, referred to as “Package 2” or “Phase 2,” commenced in 1998 and received definitive approval from both the Parliament and local authorities in 2001. The revised plan was considered an extension of the original project, with a stronger focus on public transportation investments. As a result, toll rates for single trips were increased by €0.25, culminating in a final toll of €1.90 for light vehicles and nearly €4.00 for heavy vehicles weighing over 3.5 metric tons. Discounts were introduced for monthly, quarterly, or annual subscriptions, with the annual subscription for light vehicles costing €520 and €1,040 for heavy vehicles. The additional revenue generated from the increased tolls was exclusively earmarked for investments in public transportation infrastructure. Furthermore, the cost of public transportation for single trips saw an approximate €0.10 increase, with the revenue from this hike dedicated entirely to the acquisition of new rolling stock. The development of Package 2 necessitated collaboration between the two counties comprising the region, as well as various agencies and organizations. Forecasts for this phase projected a doubling of investments in public transportation. Over the initial four-year period (2002–2005), 60 percent of the investments were allocated to railways, 20 percent to a new metro line, and 11 percent to terminals and stations, with the remaining 9 percent designated for other priority measures. Co-financing for this package involved extraordinary federal funds, as well as funds from public-private partnerships (PPPs) dedicated to the refurbishment of the old Oslo airport. Revenue data from this phase are presented in Table 4.1. Package 2 was slated for completion in 2007. However, prior to its conclusion, two different alternatives were explored: (i) abolishing the toll system, as was the case in the city of Trondheim at the end of 2005 and (ii) implementing “Package 3” or “Phase 3” of the urban toll system. Ultimately, the second alternative was chosen, ensuring the continuation of the successful toll system albeit with a series of modifications. Table 4.1. Revenue Collected in Phase 2 of the Oslo Cordon Toll Euros (Millions) Source Ordinary Extraordinary Total Ordinary funds from local and federal governments 950 950 Revenue collected from the cordon toll 190 190 Increased income due to the rise in public 200 200 transportation Public-private partnership 20 20 Extraordinary federal funds 410 410 Additional requirements for financing the system 120 120 Total 950 950 1,900 Source: Bekken and Norheim (2007). Urban and Interurban Road Pricing 65 Many negotiations with local stakeholders were necessary to implement Package 3. Planning for the third phase started late and the plans were presented by a working group in May 2006. After lengthy negotiations, most of the political parties accepted the items presented. During this exchange of opinions, the political parties mainly focused on the use of the revenue. Subsequently, the definitive plan was submitted to Parliament in two different stages. The first stage focused on the rate increases, new toll plazas, and eliminating some discounts, and the main new factor was the possibility of using a portion of the revenue to finance public transportation operations. This new toll system was approved by the Norwegian Parliament in March 2008, and was implemented the same year in two different phases; one in July and the other in October. The second stage was presented to the Parliament between March and April 2009, focusing on the overall organization of the third package and investment plans. This stage is expected to be completed in 2027. At present, the toll ring around Oslo is priced differently depending on the time of day and type of vehicle. Specifically, it is more expensive to go through during rush hours, that is, Monday to Friday from 6:30 a.m. to 9:00 a.m. and from 3:00 p.m. to 5:00 p.m. Also, it is more expensive for diesel autos and vehicles over 3,500 kg, and it is cheaper for electric cars. There is an intermediate price for gasoline and hybrid vehicles. Finally, tolls in Oslo are organized around three beltways. In the outer loop, the user pays only when going toward the city. In the two inner loops, the user pays each time they go through them. In addition, the rates for crossing the innermost loops are slightly lower. 4.1.1.2. Objectives As shown, the objectives of each of the different packages have varied, but in no case has their primary objective been efficient traffic management. Instead of using funds to promote more efficient mobility, they have been allocated entirely to financing infrastructure. In Package 1, the main objective was to finance new roads and investments in public transportation infrastructure. Other more long-term objectives were road traffic restrictions, although congestion reduction was not an objective per se. In Package 2, the two main objectives were new and improved infrastructure, and the acquisition of new rolling stock for the cities of Oslo and Akershus. These projects and acquisitions were financed primarily from the aforementioned toll and rate increases for public transportation. Therefore, the purpose of the first two packages was quite similar. However, in Package 3, the objective of using revenue for the operation of public transportation was added on top of the classic objective of financing new infrastructure. 4.1.1.3. Pricing and payment technology The toll system offers users the option of manual or electronic payment by means of OBU and the use of the Autopass system, which means that no vehicle must stop at a toll booth to pay. Toll points are located between 5 and 8 kilometers from the city center. It should be noted that the system has hardly undergone substantial changes since 1990, but rather successive adjustments. The most notable adjustment is the current differentiated pricing structure, based on time of day and type of vehicle, since previously there were no rush hour or off-peak periods in the pricing scheme. Currently, all vehicles must pay the toll, with the exception of buses in regular service, emergency vehicles, motorcycles, hydrogen vehicles, and vehicles for people with disabilities. This way, electric vehicles must pay the toll, whereas initially they were exempt. Finally, it should be noted that the Oslo toll rings must be considered within a political and organizational context, in which a planner’s vote is worth the same as a driver’s or that of a citizen living in the city. Thus, this type of tolling is far from what is considered the economic optimum. Urban and Interurban Road Pricing 66 However, it has contributed to more efficient traffic and an improved public transportation system. In addition, a dynamic system that was created with the successive packages has evolved toward a more efficient use of resources. For example, increased investment in transportation infrastructure has managed to slightly offset the increase in vehicles. 4.1.2. Congestion Charge in Stockholm 4.1.2.1. Background and rationale for tolling Stockholm, the capital of Sweden, has a population of about 750,000 in its city limits and 1.9 million inhabitants in the metropolitan area. About one-third of the city center is covered by water, and the urban landscape is completely fragmented with bridges that connect the islands of the city with the Swedish peninsula. The road structure is radial and combined with high traffic levels; it makes the transport system very vulnerable. On a daily basis, about 500,000 vehicles enter or leave the city and 70 percent of users traveling to the urban center during the morning rush hour do so on public transportation (Franklin et al., 2010; Eliasson, 2014). Additionally, traffic in the Stockholm urban area has grown rapidly in recent years. Due to the concerning situation of the transportation system, between January 3 and July 31, 2006, a complete pilot project was carried out to implement a congestion charge or tax in the city. In September, a referendum was held on the future of the system and the result was that 53 percent of Stockholm’s citizens accepted it. The toll testing project covered a 35 km2 area and at the same time, a series of measures was carried out, such as converting some streets into pedestrian use areas and introducing better quality public transportation. The package of improvements to public transportation consisted mainly of adding new dedicated bus lanes that would connect the city center with the outlying neighborhoods. Park and ride lots were also promoted. During those six months, public transportation usage increased by 7 percent (see Hugosson and Sjöberg, 2006; Eliasson et al., 2009). The final decision was to permanently establish the system implemented as of August 2007. The pricing model was designed as a cordon toll in which the price varies depending on the time of day. During the same testing period, the number of vehicles entering and leaving the city center decreased by 20 percent (Franklin et al., 2010; Eliasson, 2014). On the other hand, traffic in the area surrounding the toll ring has not had clearly defined behavior, as there have been areas where it has decreased and areas where it has increased. Image 4.1. Highway or Tollway checkpoint in city Source: Adobe Stock Urban and Interurban Road Pricing 67 In this particular case, the Swedish Road Administration is responsible for collecting tolls and system management, and the city of Stockholm is responsible for monitoring the impacts caused by tolls. 4.1.2.2. Objectives A notable aspect of the Swedish case is the distinct objectives set for each stage, namely before and after the referendum. During the initial stage, the overarching goals focused on alleviating congestion, enhancing accessibility, and promoting environmental improvements in densely populated areas. Alongside these primary objectives, several significant secondary objectives were outlined: • Reduce traffic volume on the busiest roads by 10–15 percent. • Improve traffic flow on streets and roadways • Reduce both CO2 and polluting gas emissions • Improve the city inhabitants’ perception of the environment • Provide funding to finance public transportation and other infrastructure By permanently implementing this system, the objectives changed entirely, and the revenue began to be allocated mostly toward infrastructure improvements and building new roads. 4.1.2.3. Pricing and payment technology As shown in figure 4.1, there are vehicle checkpoints on the access and exit roads to and from the toll area. In this case, all access to the restricted area is controlled, which is very simple since it is an island. Vehicles are automatically recorded, both when entering and leaving the 35 km2 area, and the flow of traffic is not affected as there is no need to stop or slow down when going through the checkpoints. There are two ways of identifying vehicles. The first way is to photograph the vehicles’ license plates and the second is by means of on-board equipment. The toll system in Stockholm operates during specific hours, from 6:30 a.m. to 6:29 p.m., and the toll amount varies depending on the time of passage through the cordon line. Notably, the toll system is temporarily suspended in July to account for vacation periods. Additionally, tolls are not applicable on Saturdays, Sundays, official holidays, or the day before a holiday. It is important to note that payment cannot be made at the checkpoints; instead, it must be completed after transit. Payment options include direct debit, electronic invoicing, or monthly bill payments. Following the testing phase, user feedback prompted adjustments to the system. One such modification was the introduction of a monthly payment option, significantly reducing transaction costs. Certain vehicles, including emergency and official vehicles, are exempt from toll payment, while taxis are required to pay. Furthermore, exemptions for environment-friendly vehicles such as electric or hybrid cars have been eliminated. It is worth mentioning that toll payments are tax-deductible. Urban and Interurban Road Pricing 68 Figure 4.1. Cordon Toll System Implemented in Stockholm E4 E 18 Norrtälje Giltig fr.o.m. 2016-01-01 Sundsvall E 18 Oslo 0 0,5 1 km © Trafikverket oktober 2015 Lilla Värtan Brunnsviken 21 22 23 277 Lidingö 26 E4 Norra länken E 20 277 Solna 24 Lilla Värtan E 20 14 25 13 Ulvsundasjön 10 12 Norrmalm 11 Östermalm 9 e - leden 275 Vällingby 8 Kungsholmen Stockholm i ng E ss Djurgården 7 Riddarfjärden 6 Mälaren Saltsjön Södermalm 222 1 E4 E 20 5 222 Gustavsberg 3 Nacka Årstaviken 4 2 Järlasjön E4 260 75 75 Helsingborg E 20 Göteborg 75 73 Nynäshamn Source: https://transportstyrelsen.se/globalassets/global/bilder/vag/trangselskatt/karta_trangselskatt_sthlm.pdf. The total cost of implementing the toll system, including the testing phase, amounted to approximately €180 million. Two-thirds of this amount were allocated to start-up costs, investments, and studies, while the remaining one-third was utilized for enhancing public transportation, establishing park and ride facilities, and improving information dissemination. The annual operating cost, inclusive of reinvestments, ranges from €14 to 22 million. A CBA conducted on the system projected annual social gains of around €76 million (Eliasson and Mattsson 2006), indicating a four-year amortization period for the investment costs. The annual reports demonstrate substantial revenue, with recent figures exceeding $200 million.6 The annual reports can be viewed on this website: https://www.transportstyrelsen.se/sv/Om-transportstyrelsen/Finansiering-och-   6 budget/arsredovisningsarkiv/. Urban and Interurban Road Pricing 69 Stockholm’s experience highlights the importance of public acceptance in the success of urban pricing systems. It is crucial for those affected by the system, or at least a portion of them, to perceive value in the tolls paid and have confidence that the funds collected are used effectively. Furthermore, as discussed in section 4.3, the reduction in traffic volume and the increase in public transportation usage in Stockholm surpassed that of Oslo. This disparity can be attributed to the differing approaches of the two transport systems. Stockholm’s approach strongly prioritized public transportation through pricing mechanisms and significant investments, whereas Oslo focused on utilizing the system primarily as a means to finance new infrastructure construction. 4.1.3. Congestion Charging in London 4.1.3.1. Background and rationale for tolling London, the capital of the United Kingdom, holds a prominent position as a global hub for business, finance, and culture. It also serves as a significant tourist destination, attracting visitors from around the world. The city’s population has experienced notable growth in recent years, driven by its robust economic development. Consequently, this population and economic expansion have had a substantial impact on traffic within London. The congestion charge was first introduced in London on February 17, 2003, as a daily supplementary fee for traveling within the central ring of the city. After evaluating the outcomes achieved, the authorities made the decision to expand the charge zone farther west on February 19, 2007. Initially encompassing an area of 22 square kilometers, the toll-paying zone increased to 42 square kilometers with the extension. However, the extension was repealed in January 2011 for two primary reasons: (i) the extension coincided with ongoing construction projects in the city center, resulting in a perceived reversion to the traffic conditions prior to the system’s implementation; (ii) a nonstatutory consultation was conducted among the public regarding the extension, and the majority expressed opposition to its continuation. Figure 4.2 illustrates the current congestion charge zone and the previous extension zone. Image 4.2. Asphalt being Laid on Freeway Construction Project Source: Adobe Stock. Urban and Interurban Road Pricing 70 Figure 4.2. Layout of the Different Zones Included in the London Congestion Charge Source: Lehe (2019). 4.1.3.2. Objectives According to the program, the objectives at the time of planning the system were as follows: • Reduce congestion • Make significant improvements in bus-related services • Improve travel time reliability for light vehicle users • Achieve more efficient urban freight delivery 4.1.3.3. Pricing and payment technology Strategically, the implementation of the congestion charge aimed to reshape traffic patterns in central London. The system operates from 7:00 a.m. to 6:00 p.m., except on weekends and holidays. Similar to other cases studied, specific vehicle types are eligible for discounts, including vehicles of residents of the area, vehicles of authorized officials, and certain environment-friendly vehicles such as hybrids or electric cars. In response to the COVID-19 pandemic, temporary changes were made to the toll system on June 22, 2020, extending the operating hours to 7:00 a.m. to 10:00 p.m., seven days a week, and raising the daily charge from £11.50 to £15.00 for a one-year period. Urban and Interurban Road Pricing 71 The technology employed to identify vehicles involves closed-circuit television cameras and ANPR technology, which captures license plate information. During payment hours, the cameras capture images of vehicles and their license plates. The license plate details are then converted to text for database comparison, identifying vehicles exempt from payment, those that have already paid, and those subject to penalty charges. Proper identification is crucial for vehicles to travel within the designated area; failure to comply results in penalties. In the initial phase, the payment hours extended slightly from 7:00 a.m. to 6:30 p.m., with a daily charge of £5. When the payment zone was expanded in 2007, the toll increased to £8, and the payment hours were shortened to 7:00 a.m. to 6:00 p.m. Subsequent adjustments included increases in the charge, such as £10 in 2011 and £11.50 in 2014. Additionally, the criteria for reduced rates for low-emission vehicles became more stringent in 2013. Notably, the system offers varying prices depending on the chosen payment method. By signing up for the “Auto Pay” system and pre-registering the vehicle, the toll is reduced by £1. Conversely, if payment is made by midnight on the day following the trip, a minor penalty applies. Penalties for nonpayment can be halved if paid within 14 days of the violation. Multiple payment methods are available to users, including automatic payment, online transactions, SMS, phone payment, automated phone systems, authorized stores, and even postal mail if the payment is made in advance. Facilitating continuous bus movement is a key aspect of the system, as it contributes to improving public transportation and reducing traffic congestion. Bus lanes are clearly marked with road lines and signs, indicating the hours during which other vehicles are prohibited from using those lanes. It is worth noting that light vehicles face penalties for stopping, parking, or driving in these designated bus lanes. As with roads classified as very important for traffic flow, any stopping or parking would cause delays and traffic jams in the system. Violators may receive penalties for this reason. There are also other punishable violations such as: • Parking on single yellow lines during controlled times • Parking on double yellow lines at any time • Parking over 50 cm away from the curb and not within a parking zone, for example double parking • Parking an unauthorized vehicle in a Blue Badge parking zone Other violations considered minor or secondary, but which also carry a penalty, are • Parking next to a parking meter or in a pricing zone without paying • Returning to the same parking place during the time period in which re-parking is not allowed • Failure to park correctly within the signs of the zones or marked spaces From the London case study, it is worth noting the exhaustive control of vehicles entering or leaving the paid zone. Another key factor in the success of this experience is that the objectives of the plan were clearly defined and were previously presented to the different social groups, councilors, and political parties. Finally, there is a great deal of public information, and the opinion of users is taken into consideration, as was demonstrated with the elimination of the 2007 extension. Urban and Interurban Road Pricing 72 4.1.4. Singapore’s Urban Toll 4.1.4.1. Background and rationale for tolling The Republic of Singapore, a small island city-state with a population density second only to Monaco, serves as a major financial center and prominent destination for tourism and international trade. Spanning an area of 730 km2, Singapore boasted a population of 5.8 million people in 2019. Over recent decades, it has experienced exceptional economic growth, reaching up to 14.5 percent per year, with a GDP per capita comparable with that of developed nations. However, these favorable circumstances have also led to significant congestion issues within its road network. Efforts to address this challenge date back to as early as 1975. Various measures have been implemented since the 1970s to manage the rising number of vehicles on Singapore’s roads effectively. These include vehicle and fuel taxes, parking fees, the Area Licensing Scheme (ALS), the Road Pricing Scheme (RPS), incentives for off-peak vehicle usage, and the introduction of a vehicle quota system (VQS). However, the effectiveness of these measures has varied considerably. For instance, in 1972, taxes on imported vehicles were raised from 30 percent to 45 percent, with an additional fee equal to 25 percent of the car’s value imposed on passenger car buyers. Despite these efforts, the measures did not yield significant reductions in vehicle demand (Goh 2002). In 1975, the authorities took the next step by implementing a congestion charge within a designated area known as the restricted zone (RZ). This measure aimed to encourage a shift toward public transportation and alter user behavior. Initially, a license was required to access the zone, which could be obtained from various locations such as gas stations or post offices. During the operating hours of the toll system, vehicles were required to display the license on their windshields and present it to the police before entering the RZ. This system, known as the ALS, successfully reduced traffic within the zone by 45 percent, surpassing the expected reduction of 25–35 percent. However, congestion outside the chargeable hours increased, prompting modifications to regulate traffic primarily in the financial district. Despite these measures, authorities found it necessary to adopt more drastic actions to combat the exponential growth in traffic. In 1987, the Mass Rapid Transit (MRT) system, a heavy rail rapid transit system, was introduced to enhance passenger transportation. The following year, road taxes and parking fees for public housing doubled, and fuel taxes witnessed significant increases. However, these measures failed to adequately address the mounting problems associated with the escalating number of vehicles, largely due to robust economic growth. Therefore, in 1990, a quota system, known as the VQS, was implemented to limit the number of vehicles allowed on the roads. Acquiring a certificate through a pre-bid process became necessary to purchase and own a new car within the subsequent decade. The authorities aimed to restrict the supply of new vehicles on the roads. However, the exorbitant prices reached through these auctions made it challenging for a significant portion of the population, particularly the middle class, to afford new vehicles. Since previous measures did not yield the desired results, a variable pricing system based on congestion, known as the RPS, was introduced in June 1995 to regulate traffic on expressways. To familiarize people with the new system, it was initially implemented on the airport access road, the East Coast Parkway. The RPS system proved successful in reducing traffic during rush hours, leading to its subsequent implementation on the Central Expressway and the Pan Island Expressway in 1997. Urban and Interurban Road Pricing 73 However, the RPS system encountered criticism as it inadvertently resulted in increased congestion on adjacent and nearby roads. Additionally, the system relied on human operators and was susceptible to errors and weather conditions during enforcement at the gates. Its capacity to differentiate prices based on travel time, congestion levels, and road conditions was limited. Furthermore, the use of vouchers for unlimited trips on the three expressways and access to the RZ exacerbated congestion problems. The difficulty of charging the most economically optimal rate, which requires equalizing marginal social costs and benefits for maximum social welfare, was a significant contributing factor. The RPS system can be considered the true predecessor of the variable electronic road pricing system (ERP), which was implemented in the financial district in 1998. This automated system- controlled traffic flow into the zone without requiring vehicles to stop, utilizing electronic gates surrounding the toll area. Tolls varied depending on the vehicle type and time of day, with higher rates implemented when congestion levels surpassed predefined limits. Notably, tolls were not applicable when exiting the zone. Consequently, Singapore’s urban toll system can be viewed as a combination of congestion charging and a more typical highway pricing system. Lastly, the Land Transport Authority (LTA) adjusts tolls based on target speeds that maximize traffic flow, aiming for 20–30 km/h on roadways, including the downtown area, and 45–65 km/h on highways. When traffic speeds surpass these ranges, tolls are reduced, while the opposite occurs when speeds fall below the specified thresholds. This approach effectively manages congestion by encouraging rerouting and rescheduling. 4.1.4.2. Objectives The primary objective of all the measures detailed thus far has been to reduce congestion. During the first few years, this was accomplished by raising taxes and as the system changed, different transportation policies were added in combination. The country also employed dynamic tolling to achieve the optimal use of roads and highways by controlling the speed and flow of traffic. 4.1.4.3. Pricing and payment technology The electronic payment mechanism used in Singapore requires the installation of a small device on the vehicle’s dashboard (in-vehicle unit [IU]), which functions like a miniature version of the electronic turnstiles in metro stations. Drivers insert a prepaid card into the vehicle’s OBU and when they go under the ERP gates, the card is activated using radio frequency identification (RFID) technology. Then the toll amount is deducted from the driver’s card. These cards can be reloaded at kiosks, post offices, authorized retailers, and online. Currently, it is also possible to directly insert a debit or credit card without having to worry about reloading a card. This system has several advantages over the original one. It makes the flow of traffic much more efficient, as the card is charged directly and the price can be easily adjusted to traffic conditions (traffic speed and congestion levels). Besides, tolls for each entry to the area are more efficient than the previous fixed tolls with certain types of vouchers and discounts. New tolls can also be introduced quickly and easily for additional vehicle types. In fact, tolls fluctuate based on the time of day, vehicle type, and the road they are driving on. All vehicles must pay, except for emergency vehicles. On top of that, the pricing system is being adjusted. For example, rates decreased in October 1999 at various points when the traffic speeds reached higher levels than the target speed. Finally, rates are always less during school vacation periods due to lower traffic flow, which is from May to June, and between November and December. Urban and Interurban Road Pricing 74 As shown, Singapore’s case is significant as it represents the evolution of transport pricing policies from increasing vehicle taxes to the definitive implementation of an advanced electronic tolling system, in which classical theory and practice tend to converge. In this sense, the Singaporean authorities’ objective is to make the island intelligent by using technology, and for it to be considered as a worldwide reference. It is currently being migrated to an even more advanced technology based on the GNSS network to ensure more accurate precision. The aim of this technology is to notify drivers about vehicles, rates, and so on in real time using a single payment method. This technology would also eliminate the need for physical toll gates. The new infrastructure is expected to be completed in 2023. 4.1.5. Milan Area C 4.1.5.1. Background and reasoning for the toll Italian cities have generally implemented limited traffic zones to restrict vehicle access, typically by prohibiting private vehicles during weekdays, except for residents. However, Milan has faced a persistent pollution problem stemming from high vehicle and motorcycle usage, compounded by weather conditions. Situated in the Po Valley, the city experiences minimal wind circulation, exacerbating its pollution challenges. Recognizing the severity of the situation, the Italian Government declared a state of emergency in 2001 due to pollution issues, tasking the mayor of Milan with addressing the city’s traffic problems. Image 4.3. Typical Bridge in Giri-junction, Abuja, Nigeria Source: Adobe Stock. Urban and Interurban Road Pricing 75 Against this backdrop, Milan commissioned a study to explore the implementation of a congestion charge. However, local opposition resulted in the suspension of the plan. Subsequently, in 2005, the EU established emission limits that Milan consistently exceeded. As a response, in 2006, a pricing system was proposed for the central Cerchia dei Bastioni zone, known as the Zona a Traffico Limitato (ZTL), meaning a restricted traffic area (refer to figure 4.3). This time, the proposal gained traction, and after two years of deliberations and preparations, the city launched the “Ecopass” program on January 1, 2008. The program relied on automatic license plate recognition cameras to enforce a daily permit system. The Ecopass aimed to incentivize the use of less polluting vehicles (meeting Euro 3 and Euro 4 or higher standards) by implementing a payment structure for polluting vehicles while providing free access to the zone for cleaner vehicles. However, as cleaner vehicles became more prevalent, the majority of vehicles accessing the zone were exempt from tolls. Consequently, the number of vehicles subject to the fee dropped significantly, resulting in limited revenue generation. Initially introduced as a trial program for one year, the Ecopass was extended multiple times. Eventually, it concluded on December 31, 2011, and was replaced by a new scheme called “Area C,” which commenced on January 16, 2012. The geographic coverage of Area C mirrored that of the Ecopass (refer to figure 4.3), but it transitioned from pollution charges to a conventional congestion pricing system with a significant emphasis on environmental considerations. Figure 4.3. Central Cerchia dei Bastioni Payment Zone for Ecopass/Area C Source: Lehe (2019). 4.1.5.2. Objectives The main objective is to reduce emissions both of pollutants such as CO2 as well as particulate matter (PM10) emitted by vehicles. Initially, the purpose of the Ecopass program was to encourage replacement of older vehicles. Later on, the intention for Area C was to reduce traffic in the city, similar to the programs implemented in London and Stockholm. Another objective for Area C was to promote public transportation. All net revenue from the system is used to promote public transportation and sustainable mobility. Urban and Interurban Road Pricing 76 4.1.5.3. Pricing and payment technology The restricted traffic area, known as the ZTL, encompasses an 8.2 km2 section of Milan, specifically the central Cerchia dei Bastioni, which is home to approximately 80,000 residents. To regulate access to the area, 43 checkpoints equipped with license plate reading cameras were installed. The pricing system imposed a fixed daily charge on all vehicles entering the ZTL zone on weekdays, from 7:30 a.m. to 7:30 p.m. However, starting September 2012, entry to the ZTL zone became free of charge from 6:00 p.m. on Thursdays to encourage shopping and cultural activities. Area C has three categories of users: residents, commercial vehicles, and standard vehicles. All standard vehicles entering the ZTL zone are required to pay €5.00, regardless of the vehicle type or pollution level. However, if parked for four or more hours in specific parking lots within the ZTL zone, the fee can be reduced to €3.00. Commercial vehicles must pay a flat rate of €3.00. Residents, however, receive 40 free entry permits per year and are subject to a reduced rate of €2.00 beyond the allotted permits. Certain vehicles, such as Euro 3 or below, Euro 0 gasoline vehicles, and private vehicles exceeding 7 meters in length are prohibited from entering the ZTL zone. Conversely, electric vehicles, motorcycles, public utility vehicles, police and emergency vehicles, buses, and taxis are exempt from the payment requirement. Hybrid, CNG, and LPG vehicles were also exempt until the end of 2016. Payment for entry can be made at banks, parking meters, online platforms, ATMs, or in designated stores. Following payment, the transaction must be activated and linked to a specific license plate number for the intended day, which can be done through phone, SMS, online channels, or at municipal offices. Payment must be completed by midnight on the day following entry into the ZTL zone, although advance payment is also an option. Users can also register their vehicles in the Telepass app, enabling automatic payment when their license plates are scanned by the cameras. 4.2. Highways in Metropolitan Areas 4.2.1. Managed Lanes in the United States 4.2.1.1. Reasoning for the toll and objectives Managed lanes are dynamic toll lanes added to major US roads and highways for the purpose of efficiently providing greater capacity and traffic volume. These lanes have a toll charge that depends on traffic congestion to maintain minimum speeds in toll lanes. Drivers are informed in advance of the toll charge for managed lanes, which increases as demand increases, so that they can make their decision. This way, traffic is much faster and more comfortable, and a steady traffic speed is maintained in these lanes. This system was adopted because of the structural features of many American cities, where there is large urban sprawl. Also, public transportation networks are generally lower in quality than European ones. As a result, there is serious congestion on access roads to cities, which has been a problem for over 30 years. Therefore, it was necessary to develop a toll system for highways in metropolitan areas, with a twofold function (De Corla-Souza and Muriello 2009). Th first was to try and change high private vehicle usage during rush hour to another mode of transportation. The second was to try and change some trips made during rush hour, since there would be some elasticity (unnecessary trips during those hours). Urban and Interurban Road Pricing 77 These changes in user behavior have increased road speeds and vehicle performance (in terms of improved occupancy rates), reduced delays and costs for both light and heavy vehicles, lowered energy consumption and pollution and contributed to improved productivity in the economy by reducing the cost of transport. Therefore, by charging tolls that vary according to congestion levels, the limited capacity of road usage is rationalized, making users aware of its capacity limitations (De Corla-Souza and Muriello 2009). These types of projects have been carried out on existing highways by converting general use lanes and service roads along a corridor, and by constructing new dynamic toll lanes that are fully electronic and barrier-free. In some cases, these projects have been carried out with help from the private sector, through PPPs. This way, the public sector has opened up its development to new sources of financing. Private investors are granted a concession to build, maintain, and operate the managed lanes for a period of 30–50 years. Examples of recent projects include the I-66 highway in Virginia, Texas highways (such as LBJ TEXpress, North Tarrant Express 3A/3B, and North Tarrant Express 35W), the I-680 Southbound Express Lane in northern California, the I-85 Express Lane in Georgia, and the I-77 highway in North Carolina. Outside the United States, there is the recent project carried out on the Jerusalem-Tel Aviv highway, from near the international airport to the central highway in Tel Aviv (Cohen-Blankshtain, Bar-Gera, and Shiftan 2020). Finally, there is the differentiation between high occupancy toll (HOT) and high occupancy vehicle (HOV) lanes. Loudon (2009) provided a good definition of these lane types and highlighted some key aspects to their successful implementation. The following section details the features of these types of lanes. Finally, the pricing and payment technology of managed lanes is discussed in more detail. 4.2.1.2. HOV and HOT lanes HOV lanes are dedicated high-occupancy vehicle (HOV) lanes. This category includes passenger cars with several occupants (carpools or vanpools), buses, and in some cases, motorcycles, even though they are not specifically high occupancy vehicles. It has also recently included hybrid vehicles since they pollute less. The objectives are to provide better travel times for HOV vehicles, make travel time more reliable for HOV vehicles, motivate single-occupancy vehicles (SOV) to use public transportation or carpool, and finally, to allow for more efficient road use. HOT lanes are toll-free or very low toll lanes for high-occupancy vehicles and have higher tolls for single-occupancy (SOV) vehicles. The objectives of these lanes is to provide reliable travel times to all users who need to use the highway, by providing advantaged and reliable travel times to HOV vehicles. This way, toll revenue is obtained from all users paying for that advantage in exchange for travel time reliability, and making the capacity of these lanes more efficient in comparison with HOVs. The factors that determine successful use of these lanes are future demand for the corridor, demand for HOV vehicles, travel time gains for different use levels of the lane by HOV vehicles, the times of day when HOT lane usage provides a true time advantage, the design and cost, and the execution and net costs of execution. HOV and HOT lanes have very similar features but with one difference in regard to potential users. While only vehicles with more than one occupant can travel in HOV lanes, vehicles with only one occupant can travel in HOT lanes provided they pay the corresponding toll. As for the capacities of HOV and HOT lanes, it is estimated that HOV lanes can reach 1,300 passenger car equivalent (PCE)/ hour and HOT lanes can reach 1,600 PCE/hour (Loudon, 2009). Urban and Interurban Road Pricing 78 Schemes designed to address congestion problems tend to convert existing and underutilized HOV lanes into HOT lanes, restricting access to both drivers willing to pay a toll and high-occupancy vehicles. In fact, conversion of HOV lanes to HOT lanes is very common. Examples of conversions include the I-680 Southbound Express Lane in northern California, the I-85 Express Lane in Georgia, and the I-95 Express Lane in Florida. Currently, the schemes designed to increase revenue and relieve congestion generally are set up as HOT lanes initially. 4.2.1.3. Pricing and payment technology One of the key factors contributing to the success of HOT lanes is the dynamic pricing system that adjusts according to demand, which is influenced by time savings and increased reliability. Toll rates vary dynamically based on congestion levels in the toll-free lanes, also known as general purpose lanes. If the general purpose lanes are uncongested, the toll price remains low. However, if congestion occurs, the toll price increases. This ensures that the HOT lanes maintain a satisfactory level of service. It is crucial for users to understand that the dynamic toll payment is established based on the traffic conditions in the free lanes. This pricing strategy aims to influence user behavior (Song and Smith 2009) since each user values their travel time, travel requirements, and willingness to pay. The successful implementation of these measures has demonstrated the importance of user comprehension regarding transportation policies, planning, and the overall transport network (Holguín-Veras et al. 2009). To provide an example of dynamic tolling pricing, Xie et al. (2020) collected data from the 13.3-mile corridor on I-635 and I-35E in Dallas, where toll prices ranged from $1.90 to $8.25, depending on the time of day and vehicle type. Regarding payment technology, the specific method employed depends on the case studied. However, all payment systems prioritize facilitating the flow of traffic in the managed lanes. In many cases, DSRC payment technology is utilized, which can be supplemented with video tolling for enforcement purposes. Additionally, police patrols are often deployed to monitor and regulate traffic flow within these lanes. Image 4.4. Fare on the Toll Road Source: Adobe Stock. Urban and Interurban Road Pricing 79 4.2.2. Urban Concessions in Santiago, Chile The urban pricing system implemented in the city of Santiago differs significantly in its features and approach compared with previous cases. The primary objective of this system was to generate funds for financing urban highways within the city. To achieve this, a system similar to the one employed on interurban roads was proposed. As a result, the Urban Concessions Program was established in Santiago, Chile, following a successful tender process that was conducted nationwide (Vassallo et al..2020). 4.2.2.1. Background and rationale for tolling During the 1990s, Chile experienced a period of robust economic growth, with consistent annual growth rates of around 7 percent. This economic expansion had a profound impact on the capital city of Santiago, which emerged as a significant economic and industrial center. The city witnessed rapid development across vast stretches of land, with approximately 25,000 new homes being added each year. Concurrently, the number of vehicles on the roads grew at an annual rate of 10 percent (PIAPPEM 2009), leading to a substantial increase in the demand for transportation. Weekday trips surged from 7.6 million in 1991 to 13.1 million in 2001 (United Nations 2009), and nearly 70 percent of these journeys were made by motorized vehicles. However, the existing road infrastructure in Santiago proved inadequate to meet the rising demand. The geographical features and microclimate of Santiago further exacerbated the transportation challenges. The metropolitan region is situated in a basin, surrounded by imposing mountain ranges that impede the flow of air and hinder its circulation within the city (Vassallo, 2018; Vassallo et al., 2020). During periods of atmospheric stability, pollutants become trapped in the basin, exacerbating the issue of air pollution. This situation necessitated urgent measures to improve air quality, a concern that persists to this day. In response to these circumstances, the Chilean Government, toward the end of the 1990s, launched the Urban Roads Concessions Program as part of a broader strategy to address the country’s infrastructure needs. This program aimed to build upon the successful national concession plan and initiate substantial investments in collaboration with the private sector. The objective was to expedite the development of essential arterial roads in Santiago by financing the infrastructure through toll payments from road users. 4.2.2.2. Objectives The implementation of urban concessions in Santiago aimed to achieve several key objectives, including increasing the capacity of urban roadways, reducing travel times and congestion, improving road safety, and lowering operating costs for users. These measures were integral to the Santiago Decontamination Plan, which recognized that the project could contribute to fuel savings and emissions reduction, thereby addressing the city’s pressing environmental issues. The program encompassed the construction and operation of various urban highways, including the East-West System (Costanera Norte), Autopista Central (central highway), Vespucio Sur, and Vespucio Norte Express highways. These highways formed a network spanning over 150 km and fell under the jurisdiction of the Ministry of Public Works and the Ministry of Housing and Urban Development. Designed with three lanes in each direction and intended for speeds ranging from 80 to 100 km/h (PIAPPEM 2009), they constituted a system of divided highways. Additional sections Urban and Interurban Road Pricing 80 such as the Acceso Nororiente a Santiago (northeast access to Santiago) or the Avenida Kennedy turnoff could be integrated into this network. For a visual representation of the layout of urban highways in Santiago, refer to figure 4.4, which illustrates the three primary corridors. Table 4.2 provides an overview of the urban concessions tendered thus far in Santiago. Figure 4.4. Main Urban Concessions in Santiago, Chile Source: Vassallo et al. (2020). Urban and Interurban Road Pricing 81 Table 4.2. Urban Concessions in Santiago, Chile Tendered to Date Concession Length Year Current Concession Urban Highway Period (km) Awarded Status Began (years) East-West System, 42.7 30 2000 In operation 2003 Costanera Norte Acceso Nororiente a 21.5 40a 2003 In operation 2004 Santiago (northeast access to Santiago) Acceso Sur Vial Arturo 2.3 40a 2008 In operation 2010 Merino Benítez (southern road access to Arturo Merino Benítez airport) North-South System, 61.2 30 2000 In operation 2001 Autopista Central Américo Vespucio South 23.5 30 2001 In operation 2002 System Américo Vespucio 28.5 30 2002 In operation 2003 Northwest System Variante Av. El Salto–Av. 4.1 32 2004 In operation 2005 Kennedy Route 78 to Route 68 road 9.0 45a 2018 Under 2018 connection construction Américo Vespucio East 9.1 45a 2014 Under 2014 System, El Salto—Príncipe construction de Gales Section Américo Vespucio East 5.2 45a 2017 Under 2018 System, Príncipe de construction Gales—Los Presidentes a. Variable term based on the present value of the total concession revenue. 4.2.2.3. Pricing and payment technology The urban concessions in Santiago implemented an open payment system, which is currently in operation. This system utilizes a series of payment points strategically positioned along the highway. Each payment point corresponds to an entire section of the road, meaning that when a vehicle passes through, it is required to pay for the full length of that particular section. To visualize this arrangement, refer to figure 4.5, which displays a map of the Costanera Norte highway, indicating the different checkpoints (depicted in blue) situated along the route. Urban and Interurban Road Pricing 82 The decision to employ an open payment system was made based on the tender specifications. It was deemed more practical and cost-effective compared with a closed payment system that would have necessitated the identification of the precise number of kilometers traveled by each vehicle. Implementing such a system would have required the installation of a more elaborate and expensive toll gate infrastructure, thus leading to the adoption of the current approach. Figure 4.5. Map of the Costanera Norte Highway in 2020 Autopista Enlace Padr Autopista Nororiente e Arte Pad Ar sa Autopista en túnel Entrada en ntr en da La Av Vespucio tr ad Costanera Norte e la Pa De . La D a aga re te Norte Express ce dr Autopista en trinchera Salida sa a lid e he Túnel en nla a Ar aga San Cristóbal tr Acceso Vial AMB Ca te ad e S e nt ag Río Mapocho Pórtico de cobro a ag a Sa n F c al Ruta 68 n lo ehe Av. Américo sa Fr an a / Autopista a lid Sentido túnel Kennedy: poniente - oriente Lo Barnechea Vespucio Sa nc isc sa r Central a en ce an a n is Gr tra Gr Ví Fr Eje General Velázquez co c an d en an en lid Lo C ro sa la en da ran ro c Ví a G o is ce lid tr a G sa sa lac a ra Santiago la Gr V co en da en en ali a / a lid e Ta Lo n V la P0 tr Pa ba a La c a Cu ía s e dr Vespucio Sur La D e P1 Autopista del Sol a n n cu rr e De he Lo Cu d Ví o Ar ra a he sa a ur te C Lo a í ur sa ag en a Acceso Sur tr San rr ad o a Santiago ía a en da ada a Mar Fra sa en Sa Club de golf Sant la Ve Ruta 5 Sur li in ncis ce sp Cen Sport Français P2 tG Ce uc te .1 eo Huechuraba c tr nt io na od rg Aeródromo e e na ur io en de Vitacura ra eA sa cu ri la Es o ita s lid e S sís ce ata to .V a nt alt ril Es Av P7 A. ra Vitacura Hu to r Las Be da y ri ed en l sa llo C nn Ke la lid / st Av. P2 sco Su sa . de ce P. an a ruta Independencia en lid C .2 o A Ri e P. es tr l e ra a órd H sa ad V. o ur nd 5 Nor or s e a ta en al N va Aeropuerto Co rt .D or tú P. Hurtado id do la No Internacional as .W te ne a en tra ce te A. Merino Benítez r V. en .L o lL Av N la da ci G. Recoleta Av Su o ce M pu de Sa r Renca Acceso Vial AMB M an s en ld Al Ve sa an qu es de t lid en r qu eh Av. ad Av. Recoleta en ra re en a tr eh ue a te la a Gr ad Av. Ind t Ke ue ce Ve al a d nn Viva .V sco epe Lo Ve sp Rie Las Condes ed el s sp uc en P. en ás Co Av. y nde ceta uc io la la qu sa nq ce io ce lid ez ui nci en O Lo en st Do ri a tr en Sa ad P6 Ke en la a s rs ad al P6 ce ld te or .1 al la nn id SB a enl Quinta es .2 es ce Ca a M ac ed Parque pu an e Am en el iva Pe rr en y Normal as Metropolitano u V e tr Ro ce t la er nt Peters éric ad dr ta ca ce en en se e P9 P5 en l a ígu en Av. Ca P la Ve n tr Vi e .R tr o rras tr ce ad s P3 sa va z ad Cerro Navia ca ie A pu ad en Ve l a en W l ce sc v. T id a a ci H al la spu Pu a ta o ob ue sa Ba EP o r ke ce a Su Be Po rí lid lé qu rM Ae si lla cio n n a ed m ie ro ar vi L aner a nt ala a an pu tí st Co e ne a o er ba nc z to tanera P4 Pudahuel Cost EV ep sa ci Estación sa Me sa lid ón sa ec Ce lid rc lid Mapocho a en lid ole nt a ad a Nueva Cos tr sa sa R o L a ad os lid lid Pu a sa a Av. M C a Pedro de Vald a ra rí tú lid o Av. W. Martínez Co Lo / Av. Los Leones si nq t ra ne cu a ins La Concep m st / A s ún Av Nva. de ui tú Higg lL Co e a ita a anue st B. O’ ne . B . Vicu n o t nq l S el ad Av. L. .V Sa l Lo Espinoza Sue ra ell ui . C Sa or ld Av Su o st ri l Mon es n es cia ad st Providencia ña M r Lyon Cr Sa P ruta 5 Sur en ción or óba i ivia lid . Z st la es l P8 ób tt a ujó ce acke .0 pu v a ruta 68 P8 l Ru en ic .2 ta te nna 68 en P8 P8 tr .1 sa ad .0 en P8 lid a .1 la Sa a ce Ke nt Lo a nn M Sa ed ar ld y ía es P8 .3 en tr en ad tr a Sa ad Co lid a st a Vi an pu ta er cu en a ra te Su P. r Ri es co Source: Costanera Norte (https://web.costaneranorte.cl/wp-content/uploads/2020/11/CN_mapa_2020.pdf). Similar to the interurban concessions, the variable tolls on Santiago’s urban highways are established based on the following variables: • Distance traveled: As mentioned, each payment point is associated with the entire length of a certain road section. When a vehicle passes by a toll gate, it must pay for the entire section. • Type of vehicle: There is a segmentation to account for the differences in structural damage that some vehicles cause to the pavement compared with others. The tender specifications set out three different categories, each one having an equivalence factor as shown in table 4.3. Trucks are assigned double the rate of light vehicles, and trucks with trailers are tripled. Table 4.3. Vehicle Categories, Factors, and Equivalencies in Santiago’s Urban Concessions Category Vehicle Type Factor 1 Motorcycles and scooters 1.0 Cars and pickup trucks Cars and pickup trucks with trailers 2 Buses and trucks 2.0 3 Trucks with trailers 3.0 Source: Tender specifications. East-West System (Ministerio de Obras Públicas 1999). Urban and Interurban Road Pricing 83 • Time of day: To regulate demand for transport and reduce congestion, the system differentiates between three types of rates. • TBFP: Base rate in off-peak hours. • TBP: Base rate during rush hour. • TS: Rate during rush hour in congestion/saturation conditions. The tender specifications establish a series of time slots for each section in which the concessionaire may apply the rush hour and congestion tolls. For the congestion toll (TS) to be applied, vehicle speeds must be less than 50 km/h in at least one section of the highways of the highway sectors. In general, the toll amount during rush hour is 1.9 times higher than during off-peak hours. This factor goes up to 2.9 for tolls in congestion conditions. • Traffic direction: The timetable that establishes rush hour for each section of the highway also sets out differences based on the direction of the traffic. This way, it is possible to more accurately identify where congestion occurs and the traffic flows that cause congestion. Toll rates may be revised according to the speed and congestion levels in each section and timetable. Such revisions can be done every 180 days and are always based on the provisions of the concession contract. Updates to toll rates are regulated in the tender specifications. The model is similar to that seen in most interurban concessions since toll updates are generally based on general changes in prices. Thus, updates to urban concession tolls were established on the basis of CPI increases, plus applying a fixed annual growth rate, which in many cases has been 3.5 percent. The purpose of doing that is to control congestion caused by the predictable changes in demand over time, peoples’ increased income, and growing acceptance of the system (Vassallo, 2018). According to the Ministry of Public Works of Chile (MOP, 1999), the system used on the Costanera Norte highway is given as an example7: Tt = Tt-1 · (1 + IPCt-1) · (1 + RRt-1) (7) Note: • t: year of operation variation in the CPI from the last rate adjustment to December 31 in the year t-1. • IPCt:  • RRt-1:  maximum annual actual rate adjustment that can be applied by the concession company, such that 0 ≤RRt-1 ≤ 0.035. The Urban Concessions Program introduced significant technological innovations, notably the implementation of a fully automated payment system. The highways within the program utilize free-flow technology, allowing users to pay tolls without the need to stop or slow down their vehicles. The Ministry of Public Works included the requirement for an electronic payment system in the tender specifications to ensure uninterrupted traffic flow and enable interoperability among different toll collection operators. This interoperability allows users to travel seamlessly across the entire network of toll roads, regardless of the specific toll operator involved. Sistema de tarifas en autopistas concesionadas de Chile: una breve mirada: https://lyd.org/wp-content/uploads/2021/01/ 7 TARIFAS-AUTOPISTAS.pdf. Urban and Interurban Road Pricing 84 The payment system operates using DSRC technology. Users are required to have a transponder, commonly referred to as a “tag,” installed in their vehicles. The tag contains the vehicle’s information, such as license plate number and vehicle type, and is associated with a bank account from which the corresponding toll amount can be deducted automatically at a later date. A key advantage of the system is its interoperability, enabling users to pay tolls for the entire network using a single transponder. For occasional users, a “day pass” must be purchased to access the urban highway network. The day pass allows for travel throughout a calendar day and includes a tolerance period of 2 hours before and after the day of use. There are two types available: the prepaid “single day pass” and the postpaid “late single day pass.” With the prepaid pass, users pay the corresponding amount, provide their vehicle’s information, and specify the day of use to register it in the system. When using the day pass, license plate images are captured at checkpoints and compared with the authorized user database by the central system. Prepaid passes can be purchased up to 30 days in advance or up to two days after traveling on the network, while postpaid passes allow payment up to 20 days after network usage. The toll prices differ between prepaid and postpaid passes, with the latter potentially being up to 40 percent more expensive than the former (Vassallo 2018; Vassallo et al. 2020). Day passes can be obtained from authorized points of sale, such as service stations, or through online platforms. The introduction of the electronic free-flow system has significantly reduced travel times. The toll payment system infrastructure is designed to facilitate high-speed operation, eliminating the need for users to decrease their speed when passing through toll plazas. Moreover, the system boasts a high level of data reliability, which is further explored in section 4.3.2. The payment system’s operational functions are organized into three hierarchical levels: payment point, operations center, and customer service (MOP 1999). The payment point level serves as the fundamental component, incorporating vehicle detection devices, violation identification, transaction processing, and more. Information collected from various payment points is transmitted to the operations center, where tasks such as violation processing, rate tables, and private client account statements are validated. The operations center computers also provide necessary information to the payment points for their efficient operation. Lastly, the customer service level handles tasks such as invoicing, promotion, and distribution of transponders, and collection of violation payments. Communication among these hierarchical levels is facilitated by a dedicated communications system, which also manages aspects like emergency telephone lines and traffic management. In summary, the Urban Concessions Program has extended Chile’s experience with the concession model beyond interurban settings. The program encompasses several noteworthy aspects, with the commitment to interoperability among different private concessionaires being particularly significant. 4.3. Effects of Urban Pricing After examining the distinctive features of each urban pricing case study and their respective contexts, this chapter delves into the primary effects of implementing an urban pricing system. It focuses on seven key aspects that hold great significance when considering the adoption of such measures: Urban and Interurban Road Pricing 85 i. public acceptance ii. reliability of payment systems iii. utilization of toll revenue iv. reduction in private vehicle usage v. shift toward public transportation vi. environmental impact vii. effects on urban development, housing prices, and commercial activity. These aspects play a crucial role in evaluating the outcomes of urban pricing systems. 4.3.1. Public Acceptability Introducing tolls in urban areas where none existed before brings about a significant change in the daily habits of many citizens. It is natural for there to be a widespread resistance to urban tolls. However, the key to gaining public acceptance lies in defining the payment structure. Users must perceive that the service of accessing cities by car is not free and must be paid for. Furthermore, they should experience improvements in their quality of life, such as enhanced infrastructure, better public transportation services, reduced travel times, and improved air quality. Oslo provides an example of high public acceptability, mainly due to two factors. First, there were substantial infrastructure improvements. Initially, people were opposed to the introduction of tolls, but as they were informed that the toll revenue would be used to enhance the transport network, public acceptance gradually increased. Second, all stakeholders were involved in the decision-making process, ensuring that no group was left without a voice. Consequently, the positive attitude toward cordon tolls increased from 30 percent of the population in 1989 (prior to implementation) to 49 percent in 2006.8 In the case of Stockholm, similar to Oslo, there was initial rejection of the project. However, once the system was implemented, public opinion changed significantly. Following a pilot project, a referendum was conducted, resulting in an acceptance rate of 53 percent by Stockholm citizens (Hook, 2006; Nordstrand, 2006), despite lacking majority support before the pilot. Subsequently, in autumn 2007, when people were asked to opine on the permanent system, 48 percent responded positively or very positively, while 27 percent viewed it negatively or very negatively. Stockholm’s experience highlights the importance of public acceptance in the success of urban pricing systems. The population realized that the toll was not merely a revenue-collecting taxation system. The referendum in Stockholm played a vital role in this process and conducting it after the initial testing phase contributed to increased public acceptance. In London, prior to implementing the system, there was considerable uncertainty surrounding the project, and it faced strong opposition from local authorities and retail businesses. Notably, no consultation was held to introduce the urban toll. However, after a year of operation, confidence in the toll increased by over 30 percent, and the acceptance level among residents within the affected area exceeded 50 percent. However, perceptions of the system changed after expanding the pricing zone to the west, leading to the retraction of the expansion. 8  See www.prosam.org. Urban and Interurban Road Pricing 86 Singapore exemplifies how technology can contribute to the success of implemented measures. By adopting a more reliable system like variable ERP, the population perceived it as fairer compared with the previous rudimentary methods. Additionally, shifting from high taxes on vehicle ownership to charging drivers for the use of congested roads improved acceptance of the system. In Milan, only a referendum was conducted to introduce “Area C” since the “Ecopass” did not effectively reduce congestion. The referendum took place on June 12, 2011. Almost all political parties indirectly or directly supported the Area C system (Beria 2016). Specific measures, financed by toll revenue and parking charges, were proposed, including doubling pedestrian areas and extending the night metro. These promised compensation measures contributed to a “yes” vote of 79.12 percent and a turnout rate of 48 percent. Besides communication campaigns, the population’s awareness of the city’s pollution problems explained this result (Beria 2016). The referendum served as political legitimacy for implementing the new congestion pricing scheme. Moreover, public transportation users and city residents did not experience negative effects since they did not regularly use vehicles in the central area of the city. The case of managed lanes in the United States differs significantly. Numerous studies have shown that the key to success lies in achieving reduced travel times for users, both in managed lanes and general-purpose lanes (Ungemah and Swisher 2006; Casady, Gómez-Ibáñez, and Schwimmerc 2020). Users’ willingness to pay depends on the reliability of travel times, although psychological factors may also influence travelers’ behavior (Burris et al. 2012; Green et al. 2021). Higgins (2009) emphasizes that a sense of fairness among users with lower income levels, who are theoretically the most disadvantaged, is crucial for societal acceptance of these measures. Finally, maintaining toll- free lanes alongside managed lanes has generally been well received. Regarding the implementation of an urban concessions system in Santiago, Chile, it initially had positive acceptance (Vassallo et al. 2020). Public opinion perceived it as a progressive system to improve the quality of life. During the implementation phase, the Government provided concessionaires with free tags, distributing 1.5 million tags to users. Subsequently, the concessionaires sold the tags directly to the public. Initially, the pricing scheme was introduced with low rates, facilitating public acceptance (Vassallo 2018). However, growing dissatisfaction has been observed due to increasing congestion levels (Vassallo et al. 2020) and higher payment rates resulting from revisions to the system and recurring saturation rates. These factors pose a threat to the future viability of the system (Vassallo 2018). 4.3.2. Reliability of the Payment Systems The viability of the system relies heavily on the reliability of the payment systems. First, having the necessary technology such as toll plazas, video cameras, and staff to collect payments and prevent fraud is essential. Second, if a large number of users perceive that they can avoid payment without penalties, it will logically lead to noncompliance with the toll and a sense of injustice among other users, resulting in decreasing acceptance. This imbalance between finances and public acceptability can severely disrupt the system. In Stockholm, reliability is exceptionally high due to the use of license plate imaging. At each checkpoint, there are three gates and a roadside booth. Some locations have barriers instead of gates. The first gate is equipped with a checkpoint sign and a camera that captures the time, date, and the rear license plate of the vehicle. The middle gate has antennae and laser detectors for vehicles with on-board technology. Finally, the third gate has an additional set of cameras to capture images of the front license plates of vehicles. These measures are in place to combat fraud effectively. Urban and Interurban Road Pricing 87 There were initial issues with violations and coding errors among users who had registered for the system after implementing the congestion charge in London. To improve the payment systems and enhance user compliance, several adjustments were made. These included introducing easier forms of payment, allowing payment within 24 hours after traveling, providing more options for acquiring a blue card, and implementing additional verifications of payment data both in the central payment management system and at stores. These improvements resulted in a high level of user compliance with the system requirements. In Singapore, maintaining good reliability of the system involves ensuring that vehicles do not exceed a speed of 100 km/h. Cameras are installed to send images to the central control for verification of vehicle license plates in cases of fraud. Prepaid cards also store information on the last 30 trips, enabling users to prove whether or not they have paid if they receive a fine. On the first day of operation, the video cameras captured 236 violations, including drivers without prepaid cards or sufficient funds on their cards. The ERP technology has made the system highly reliable. The most commonly used electronic payment systems for managed lanes in the United States are DSRC technology and RFID. In cases of fraud or failures in variable toll pricing, there is a loss of toll income and reduced benefits in mitigating congestion. Measures such as video tolling and police patrols are available to pursue offenders and minimize fraud and income loss. Various technologies have been developed and tested to automatically detect vehicle occupancy and reduce violations, proving effective in controlling fraud and ensuring the system’s integrity. In the context of urban road pricing, the urban concessions system in Santiago, Chile stands out. Its free-flow charging model allows users to pay tolls without stopping or reducing their speed on the highway network. To achieve this, the system utilizes DSRC technology, and users must have a transponder, or tag, installed in their vehicles. Choosing highly reliable technology is crucial. The DSRC portal model in Santiago demonstrates an impressive level of reliability, with 99.9 percent of transactions being carried out correctly. The license plate capture system also exhibits a reliability of over 99 percent, with more than 70 percent of captures being automatic. However, there has been a decline in license plate capture reliability in recent years due to offenders employing new methods to evade identification (Bull 2006; Vassallo 2018; Vassallo et al. 2020). 4.3.3. Use of Revenue In Oslo, the toll revenue initially covered the cost of the system itself, with any surplus being invested in enhancing public transport and various transportation infrastructure as part of a comprehensive package. These investments included renovating rolling stock, developing new public transportation infrastructure, constructing new stations and interchanges, and even rehabilitating the airport. Approximately 60 percent of the revenue was allocated toward investments and maintenance of public transport, aiming to encourage the use of more efficient modes of transportation. During the trial period in Stockholm, the revenue was 14 percent lower than projected, primarily due to a higher-than-expected proportion of exempt traffic. However, over time, revenues have increased while operating costs have decreased, particularly since 2016. Unlike Oslo, the use of revenue in Stockholm differed. From August 2005 to July 2006, toll revenue was utilized to build 14 new express lanes for buses, extend the service of 18 bus lines, and acquire 197 new buses, regional trains, and longer subway trains. With the system now permanently established, the annual revenue is invested in the road network. Urban and Interurban Road Pricing 88 In London, the utilization of revenue has been identified as a crucial factor in the proper functioning of the system. Toll revenue has been directed toward initiatives such as creating more bike lanes and improving bus services, aiming to reduce the number of vehicles on the roads, lower pollution levels, and enhance traffic flow and signaling. Each year, the revenue is consistently allocated to improving transport in London, with a particular focus on bolstering the bus service. Detailed breakdowns of revenue sources and uses for the 2007–08 fiscal year can be found in tables 4.4 and 4.5. It should be noted that these data represent the most recent available breakdown. Notably, the proportion of revenue derived from sanctions is considerably higher in London compared with Stockholm. Currently, congestion charging revenue accounts for approximately 4 percent of Transport for London’s (TfL) budget (Lehe 2019). Table 4.4. Sources of Costs and Revenue of London Congestion Charging Fiscal Year 2007–08 Costs Millions of £ Operations, advertising, and enforcement 91 Other costs: TfL staff, traffic management, TfL core costs 40 Total costs 131 Revenue Daily standard transfers (£8) 146 Vehicle fleets (£7 per car per day) 37 Resident vehicles (£4 per week) 12 Enforcement revenue 73 Total revenue 268 Net revenue 137 Note: TfL (Transport for London) is similar to a city transport consortium. Table 4.5. Uses of London Congestion Charging Revenue Fiscal Year 2007–08 Use of Revenue £ millions Improvements to the bus system 112 Support for studies of municipal plans 2 Rehabilitation of bridges and roads 13 Road safety measures 4 Testing of hydrogen-powered buses 2 Support for new initiatives for pedestrians and cyclists 4 Total 137 Note: TfL (Transport for London) is similar to a city transport consortium. Urban and Interurban Road Pricing 89 In Singapore, the LTA is responsible for maintaining the electronic payment system and determining rate variations every four months. However, it is the Government that collects and manages the revenue. Although the revenue flows into the general government fund, it only represents a small fraction of it (Lehe 2019). One criticism of the electronic system’s implementation was that it reduced the flow of revenue to the state due to the variable price adjustments and the decrease in the number of vehicles. In 1999, for instance, $39.5 million was collected, which was 33 percent less than the previous year when the price variation system was manual. Operating costs have accounted for approximately 20–30 percent of the revenue (Chin 2010). Compared with the other cases discussed, Milan collects less revenue as its system is more limited. A preliminary postimplementation CBA of the Ecopass by Rotaris et al. (2011) sheds light on this. Additionally, a lack of transparency in the use of the collected revenue was one of the main criticisms of the Ecopass. However, with the transition from Ecopass to Area C, revenue has increased due to fewer exemptions from payment. It should be noted that detailed financial data are not available, despite promises of greater transparency with the implementation of the new Area C. In terms of revenue utilization, reinvestment has primarily focused on public transport and sustainable mobility policies. For instance, the supply of public transport has been expanded, and new bike-sharing stations have been installed. In the case of managed lanes in the United States, revenue is primarily used to finance the construction of new highway lanes in congested urban areas and cover the system’s costs (Casady, Gómez-Ibáñez, and Schwimmerc 2020). Once the costs are recovered, the remaining funds are typically reinvested in the transportation system. De Corla-Souza (2009) recommended achieving cost recovery through rush hour tolls, while the rest of the funds can be dedicated to improvements in public transport, as well as carsharing and carpooling programs. Furthermore, user charges are often separated from the concessionaire company’s income, as seen in the concession of the I-595 highway in Florida, United States. In this arrangement, the administration establishes the user fee, while the concessionaire receives income from the administration based on different quality indicators, such as the condition of the highway surface. As per the signed contract, the concessionaire is responsible for implementing necessary improvements and maintaining and operating the road in good condition. The urban highways of Santiago, Chile serve as a global model for successful public-private ventures in infrastructure provision. Revenue generated from Santiago’s road pricing system is used, as is customary in concession models, to recover the operator’s infrastructure costs (Vassallo et al. 2020) and generate profits for the concessionaire. With a growing rate review system and occasional relocation of toll booths, revenue has outpaced traffic growth over the years. The increased congestion has also led to the more frequent application of the saturation rate (Vassallo et al. 2020). According to Vassallo (2018), revenue increased by an average of 8.2 percent (ranging from 6.7 to 12.2 percent) between 2010 and 2015, while traffic growth averaged 5.8 percent (ranging from 5.1 to 8.1 percent). Consequently, the concession system has been a financial success, allowing for the completion of numerous infrastructure projects in a short time frame with minimal public budgetary contribution. 4.3.4. Effects on Traffic and Decreases in the use of Private Vehicles Imposing tolls has a direct effect on increasing the cost of using private vehicles. In response, users have several options available to them. They can choose to accept the new cost and maintain their mobility patterns unchanged. Alternatively, they can attempt to reduce the cost of their trips by Urban and Interurban Road Pricing 90 carpooling, traveling during off-peak hours, or utilizing public transport. Lastly, those users whose travel is not strictly necessary may decide to abstain from making the trip altogether. Regardless of the choice made, these options collectively contribute to a more efficient transportation system. In Oslo, despite experiencing significant population, employment, and economic growth, the city witnessed a lower increase in traffic compared with the national average. Between 2003 and 2004, traffic actually decreased by 0.4 percent. Removing the cordon toll is estimated to result in an increase in vehicular traffic between 8 and 10 percent. However, the average speed of travel during morning and afternoon rush hours has remained largely unchanged since 1990. While slight improvements were observed in morning trips, there was no significant change in evening trips (Lian 2008). The effects of toll implementation in Stockholm have been varied. Traffic decreased by 22 percent in the area immediately outside the cordon during toll hours, while the reduction within the cordon was less pronounced. Studies forecast a decrease in traffic no greater than 16 percent. Additionally, traffic has remained relatively stable since the system’s implementation, despite Stockholm’s growth (Lehe 2019). The effects on traffic were immediate and permanent. Congestion delays were reduced by 33 percent, but the redistribution of traffic outside of rush hour did not meet expectations. Initially, alternative vehicles in Stockholm (electric, hybrid, and so on) were exempt from tolls until January 2012. Between 2006 and 2009, the number of alternative vehicles increased from 3 to 14 percent. Approximately 25 percent of the total number of vehicles passing through checkpoints were exempt, including motorcycles, emergency vehicles, buses, and electric vehicles. However, after 2012, the exemption for alternative fuel vehicles ended, resulting in a decrease in the percentage of exempt vehicles to approximately 15 percent. In London, after the first year of the congestion charge, the number of circulating cars decreased by approximately 33 percent, while the number of taxis increased by 18 percent according to TfL’s annual reports. The system also resulted in a 17 percent increase in speed, a 14 percent decrease in travel time, and a 30 percent reduction in congestion-related delays. Prior to the congestion charge, the average speed in the area was 14.6 km/h, which increased to 17.6 km/h after implementation. However, the speed dropped back to 15 km/h in 2006, similar to pre-implementation levels. Without the congestion charge, the average speed would have been around 11 km/h. Congestion levels and average speed have remained stable since 2006, attributed to changes in the road network, such as bus lanes, lower speed limits, and safety measures for pedestrians and cyclists. In Singapore, the effects on the number of vehicles have been diverse due to the various measures implemented. For instance, with the extension of variable tolls on expressways in 1997, approximately 16 percent (7,000 vehicles) of expressway users ceased using them during rush hours (7:30–9:30 am). Around 3,000 vehicles opted for other road types, while the remaining users adjusted their travel times to before or after the rush hour, utilized public transport, or engaged in carpooling or refrained from unnecessary trips. These results aligned with the objectives of introducing variable pricing. Furthermore, with a combination of measures implemented between 1975 and 1995, traffic speed in the financial district doubled to 36 km/h, and the volume of traffic decreased by 45 percent. However, increased congestion on toll-free roads was one of the negative effects. In the case of Singapore’s introduction of variable ERP, immediate results were observed. For example, on the first day of operation, traffic on one of the most congested roads during morning rush hours (7:30 a.m.–9:30 a.m.) decreased by 17 percent, from 16,203 vehicles to 13,451. Studies Urban and Interurban Road Pricing 91 had predicted a traffic decrease between 10 and 20 percent. The system also led to a more even distribution of traffic throughout the day, reducing congestion on expressways and main roads. During rush hour, circulation speed in the financial center slightly decreased, while on expressways, it increased from 45 km/h to 65 km/h. Although the number of vehicles entering Singapore’s financial district decreased by approximately 15 percent per day and 16 percent during morning rush hours due to electronic tolls, only around 2 percent of commuters canceled their trips. This reduction primarily resulted from a decrease in repeated trips, as well as route changes and rescheduling. Under the previous system of licenses for access to the restricted area (ALS), unlimited entries were allowed on the same day. Around 23 percent of trips were repeated trips made by the same vehicle, such as those by workers using cars for lunch breaks or meetings. In Milan, the introduction of the Ecopass led to a significant reduction in the number of vehicles in the central area where the pollution pricing system was implemented. Vehicle entries decreased by 14 percent. However, as cleaner vehicles became more prevalent, the proportion of vehicles exempt from tolls increased, reducing the number of vehicles paying the fee (Croci and Ravazzi 2015). Traffic increased in 2011 due to the rising number of exempt vehicles. The subsequent transition to Area C in 2012 effectively reduced traffic and increased the number of vehicles subject to tolls. During the first year of implementation, there were 41,000 fewer vehicles per day (31 percent) in the limited traffic area, and Milan’s overall traffic decreased by almost 7 percent between 2011 and 2012. Image 4.5. Busy Toll Road with many Cars Queuing up to Pay the Highway Toll Source: Adobe Stock. Urban and Interurban Road Pricing 92 Managed lanes, such as the case of entries to I-5 in Whatcom County, have resulted in decreased congestion (see table 4.6). In New York, the introduction of variable pricing (managed lanes) led to changes in behavior for 7.5 percent of light vehicle users. The price elasticity of demand for light vehicles ranged from -0.1 to -0.24, similar to values found in other US studies (Holguín-Veras et al.2009). Table 4.6. Whatcom County Rush Hour Traffic Effects on HOT and HOV Lanes RUSH HOUR. NORTHBOUND Initial Net Reduction Reduction Reduction of Reduction in in Free Lanes Resulting of HBW Passenger-veh Free Lanes (Passenger- Capacity in Vehicle in Free Lanes (Passenger-veh veh Free Lanes Trips (%) (%) Equivalent) Equivalents) Baseline No effect No effect No effect No effect 1,200–2,600 scenario HOV lane 5%–10% 450–1,300 250–750 6%–18% 1,000–2,300 HOT lane 5%–10% 550–1,600 300–870 7%–21% 950–2,200 Lane reserved No effect 160–460 80–300 2%–6.5% 1,100–2,450 for heavy vehicles RUSH HOUR. SOUTHBOUND Initial Net Reduction Reduction Reduction of Reduction in in Free Lanes Resulting of HBW Passenger-veh Free Lanes (Passenger- Capacity in Vehicle in Free Lanes (Passenger-veh veh Free Lanes Trips (%) (%) Equivalent) Equivalents) Baseline No effect No effect No effect No effect 1,200–2,150 scenario HOV lane 5%–10% 500–1,000 450–820 7%–20 % 950–2,000 HOT lane 5%–10% 750–1,600 480–950 12%–32% 800–1,900 Lane reserved No effect 200–500 120–400 3%–12% 1,100–2,050 for heavy vehicles Source: Loudon (2009). Note: HBW = home-based work; HOT = high occupancy toll; HOV = high occupancy vehicle. Urban and Interurban Road Pricing 93 Figure 4.6 shows user behavior in the HOT lanes of the I-394 highway in Minneapolis, Minnesota. This behavior varies depending on price and on traffic flow. At rush hour, there is an increase in demand, so the price increases. The use of single-occupancy vehicles (SOVs) also increases. Finally, it can be observed that during rush hour, traffic speed in HOT lanes is clearly higher, whereas this is not the case at other times. As a result of this reduction in congestion, travel time for users has been significantly reduced, which has been key to the success of managed lanes (Ungemah and Swisher 2006; Casady, Gómez-Ibáñez, and Schwimmerc 2020). Casady, Gómez-Ibáñez, and Schwimmerc (2020) carried out a study with seven cases, observing time savings of four to five minutes in road segments that took around 15 minutes to travel before the construction of managed lanes. Time savings were also observed for users of the general use lanes (one–two minutes). Figure 4.6. Evolution of User Behavior in Managed Lanes mph $,% 70 30 60 25 50 20 40 15 30 10 20 10 5 0 0 6:01 6:16 6:31 6:46 7:01 7:16 7:31 7:46 8:01 8:16 8:31 8:46 9:01 9:16 9:31 9:46 Source: Song and Smith (2009). Note: GP = general purpose; HOT = high occupancy toll; SOV = single-occupancy vehicle. Finally, in the urban highways of Santiago, Chile, a toll system was established with a certain degree of demand management, as it included a saturation rate for times of congestion. However, it has proven ineffective at preventing road congestion as the rate was not set dynamically (Vassallo 2018). The congestion pricing scheme implemented on these highways is designed to optimize infrastructure, discouraging its use during periods of high congestion and saturation. Also, the use of an electronic free-flow system has led to optimal operation at high speeds since it is not necessary for users to reduce their speed when passing through the toll plaza. Thus, highways managed to handle existing traffic during the first years of implementation. Congestion was rare and was generally associated with bottlenecks at certain highway entry points. However, this concession system began to experience high levels of congestion due to traffic growth starting in 2007 (Vassallo et al. 2020). Contrary to what was originally expected, the congestion pricing scheme has not been able to guarantee free flow on highways, which has led to growing criticism of the system and could jeopardize its acceptability (Vassallo 2018). It has been essential to find synergies with public transport to ensure that the highway concession system in this city functions properly. Urban and Interurban Road Pricing 94 4.3.5. Transfers to Public Transport As previously mentioned, the introduction of tolls increases the cost of travel for private vehicle users, prompting changes in their mobility patterns. One option available to these users is to switch to public transport, but for this shift to occur, public transport must offer reasonable fares, reliable schedules, and competitive travel times. In Oslo, toll revenue was invested in a fully connected metro system and dedicated bus lanes, resulting in a slight increase in public transport usage in the urban center. However, the opposite trend was observed in outlying areas (Lian 2008). In Stockholm, alongside the congestion charge, a series of measures was implemented to improve public transport. This included the addition of dedicated bus lanes connecting the city center with outlying neighborhoods, as well as the promotion of park and ride lots. As a result, public transportation use increased by 7 percent during the six-month toll trial. London experienced an increase in bus passengers following the introduction of the congestion charge. Approximately 50 percent of deterred car trips were transferred to buses, according to estimates by TfL. In the first year of implementation, the number of bus passengers traveling to the toll zone in the morning increased by 38 percent. This increase can also be attributed to general improvements made to the bus system. Additionally, there was a noticeable rise in the use of environment-friendly modes of transport, such as bicycles. The long-term impact on public transport service improvement is difficult to assess due to the city’s overall economic boom. In Singapore, the combination of dedicated lanes for mass passenger transport and the implementation of electronic tolls (ERP) resulted in a 14 million increase in public transport passengers in 1999. However, according to Lehe (2019), there was no significant additional shift to public transport compared with the previous system of access licenses (ALS). In Milan, the introduction of Area C led to a significant reduction in traffic in the city center, consequently improving the speed of public transport. Revenue generated from the toll was reinvested in sustainable transport options, which had been widely utilized by city residents in the past for commuting to the central area. Managed lanes in the United States, particularly those used by express bus services, have proven effective in reducing congestion and improving travel times. Bus lines have also increased their reliability in terms of travel time, attracting more users (Pessaro, Turnbull, and Zimmerman 2013). For instance, in entries to New York, 45 percent of users who modified their mobility patterns shifted to public transport. Unfortunately, the urban highways in Santiago, Chile, have not achieved positive results. There has been insufficient coordination between highway construction and public transport systems (Vassallo 2018). Furthermore, overcrowded subway lines discourage their use and may lead to potential transfers to private vehicles (Tironi and Palacios 2016). According to mobility surveys in Santiago, public transport usage decreased from 32.9 percent in 2008 to 29.1 percent in 2012. Therefore, addressing this issue requires a combination of measures aimed at improving the existing public transport infrastructure and services, such as extending the subway system (Vassallo et al. 2020). Urban and Interurban Road Pricing 95 Ultimately, the goal of urban tolls is to reduce the number of cars on city access roads, particularly during congested rush hours. As demonstrated, toll implementation has two main effects on urban mobility: a decrease in circulating cars and an increase in public transport usage. However, to facilitate the shift to public transport, it is crucial to introduce improvements that make it more appealing to users. 4.3.6. Environmental Effects Many urban toll systems aim to promote more sustainable mobility and incentivize the use of clean vehicles. In Oslo, the environmental impact has generally been positive. Infrastructure improvements, particularly the construction of tunnels, have allowed main roads to accommodate increased traffic volume, preventing congestion on local roads and in the city center. In Stockholm, assessing the environmental improvements experienced by citizens is challenging. Air quality measurements are highly sensitive to weather conditions and can vary day by day and throughout the year. Moreover, air quality depends on various factors, not solely traffic. Table 4.7 illustrates the effects of the toll on pollutant and greenhouse gas emissions during the trial period. These effects were calculated using an air quality measurement model that analyzed traffic data before and after the toll’s implementation. The results demonstrate a significant impact in the city center, but the effect diminishes as the designated area expands to cover the entire region. Table 4.7. Emissions Reduction in Stockholm in the Pricing Trial Period Municipality of City Center Area of 35 km2 Stockholm Pollutant Type 1,000 kg 1,000 kg 1,000 kg % % % per Year per Year per Year NOx 45 -8.50 47 -2.70 55 -1.30 CO 670 -14 710 -5.10 770 -2.90 PM10 21 -13 23 -3.40 30 -1.50 Volatile organic 110 -14 120 -5.20 130 -2.90 compounds (VOCs) Benzene, C6H6 3.4 -14 3.6 -5.30 3.8 -3.00 CO2 36,000 -13 38,000 -5.40 41,000 -2.70 Source: Hugosson and Sjöberg (2006). In the City of London, traffic emissions of nOx, PM10, and CO2 decreased by 13–15 percent after the first year. Since then, these emissions have remained relatively stable, with changes primarily stemming from technological advancements rather than other factors. Urban and Interurban Road Pricing 96 Regarding Milan, the environmental effects of the Ecopass introduced in 2008 have been examined. Percoco (2013) highlighted that the impact on air quality is negligible since motorcycles are exempt from the toll, and the covered area is too limited to benefit the entire city. However, with the implementation of Area C, emissions did decrease due to reduced traffic and fleet improvements. In the first year of Area C’s activation, PM10 levels decreased by 8 percent citywide and 18 percent within the toll zone. Additionally, CO2 emissions decreased by 35 percent in the toll area during the first year. 4.3.7. Effects on City Expansion, Housing Prices, and Commercial Activity The implementation of an urban toll is expected to reduce the number of vehicles in the area and the overall influx of people. It is possible that commercial activities may shift to nonpenalized areas as the cost of accessing the toll zone increases. However, reducing the number of cars does not necessarily lead to a decrease in mobility. Instead, the road can be optimized to its maximum capacity through increased trips outside of peak hours or the utilization of public transport. Therefore, the impact of the toll on city expansion, housing prices, and commercial activity is not clear-cut and depends on the specific design and accompanying measures implemented alongside the toll. In the case of Oslo, the growth in traffic and employment varied among different corridors of the city. Table 4.8 displays the growth rates observed during the first package period. Interestingly, the lowest growth occurred in the area where the toll was not implemented, indicating that these economic indicators are influenced by multiple variables. Table 4.8. Percent Growth in Traffic and Employment in Oslo Corridors Corridor Traffic at the City Limits 1990–2002 Employment West 8 15 Northeast 35 40 South 35 31 Source: Lian (2008). In Stockholm, the effects of the toll on disadvantaged groups were smaller compared with those with higher purchasing power. Moderate effects were observed in both local and regional trade. When studying London, several factors must be considered in assessing the economic effects of the toll. It is challenging to attribute impacts solely to the toll as economic developments depend on various factors. Employment growth in the area was higher after 2003, but this trend was also observed in other areas due to the city’s’ economic cycle. Positive indicators were noted following the dot-com crisis in 2002. Additionally, indicators related to business and financial services, hotels, restaurants, and retail experienced stronger growth in the toll area compared with other parts of the city. Housing prices follow cyclical patterns and are influenced by various factors, while commercial property values in the area do not appear to have been negatively affected by the congestion charge. Urban and Interurban Road Pricing 97 Regarding Milan, empirical assessments have been conducted to determine the effect of the Ecopass on the housing market. Percoco (2014) observed a decrease in housing prices within the payment zone, ranging from €60.6/m2 to €182.3/m2. However, D’Arcangelo and Percoco (2015) reported a 0.75 percent increase in housing rent during the 2007–12 period. It should be noted that the analyzed time frame is relatively short, and a more comprehensive study of price dynamics in the medium and long term is necessary. In the case of the urban concessions system implemented in Santiago, Chile, several issues stand out. Some projects were designed with low urban integration standards, resulting in a barrier effect and the disruption of the urban fabric (Vassallo 2018). For example, the Costanera Norte isolated the community of Independencia from the center of Santiago, leading to increased congestion on bridges crossing the Mapocho River and further segregating the community from the rest of the city. Moreover, the city has not achieved a balanced distribution of land use and economic activity, with job concentration in the center and northeast, while the majority of the population resides in the south and west (Vassallo et al. 2020). This imbalance in transport flows contributes to the overall inefficiency. Chapter 5 Trends in Toll Pricing Urban and Interurban Road Pricing 99 Trends in Toll Pricing 5.1. Interurban Context The analysis in Chapter 3, covering traditional toll concessions to the latest modular schemes in the EU, provides valuable insights into future trends in interurban road pricing. It could be expected that toll-free usage of highway systems will gradually decline. While the pay-per-use approach currently applies mostly to heavy vehicles in Europe, it is likely to be extended to light vehicles in the near future. This shift will enable users to contribute to the societal costs generated by their driving. Toll systems have become variable, explicitly based on the distance traveled by each vehicle. Moreover, advancements in technology have paved the way for electronic payments, minimizing disruptions to traffic flow. The ongoing development of a fully interoperable system will allow users to pay tolls using a single device, providing seamless access throughout the network, regardless of the charging operator. Currently, a significant portion of vehicle taxes is unrelated to road use, including road taxes and registration fees. Variable pricing, facilitated by electronic payment systems, allows for a more accurate reflection of road usage. This approach promotes efficient vehicle utilization, reduces overall transport demand, and contributes to a more sustainable mobility model. However, expanding this practice poses challenges such as data protection, which is crucial for system success and user acceptance. Furthermore, the trend is for tolls to incorporate the social costs borne by users. These costs encompass not only infrastructure-related aspects such as construction, maintenance, and operation but also external factors such as air and noise pollution, congestion, and more. Additionally, in the future, there may be a greater separation between toll pricing and the remuneration of infrastructure operators. Demand risk transfer agreements with concessionaires may become less prevalent, while systems that incentivize private operators based on quality or sustainability indicators are likely to gain preference. In summary, road pricing will play a pivotal role in promoting the use of environment-friendly vehicles and fostering sustainable mobility. Its importance may further increase with the anticipated emergence of autonomous and connected vehicles in the coming decades, leading to potential mobility expansions. 5.2. Urban Context The analysis of various urban and metropolitan pricing schemes and typologies, such as congestion charging, variable tolls, and managed lanes, helps identify emerging trends in road pricing for large cities in the future. The unrestricted movement of vehicles in the centers of large cities is gradually becoming the exception as urban areas adopt measures to promote sustainable mobility. These measures contribute to improved air quality, reduced congestion, and enhanced urban environments. Chapter 4 presents diverse practical approaches to implementing this policy. However, it is crucial to note that any chosen pricing model must be accompanied by improvements in the public transport system. Experience has shown that people are more receptive to restrictions on private vehicle use when reasonable alternatives are available to meet their mobility needs. Urban and Interurban Road Pricing 100 Image 5.1. Car passing through toll gate Source: Adobe Stock. From the case of urban concessions in Chile, it can be seen that tolls alone do not provide a long- term solution to congestion if they are not complemented by policies that promote public transport and encourage people to use their private vehicles only when strictly necessary. To address this challenge, it is reasonable for public authorities to promote integrated transport solutions that combine public and private modes, optimizing their usage. In these schemes, cross-subsidies from modes of transport with greater externalities, such as metropolitan highways, to more sustainable alternatives like public transportare effective solutions (Vassallo 2018). The success of this cooperation necessitates the leadership of a central authority that integrates the management of mobility policies in the metropolitan area. Setting tolls optimally requires consideration of the competition and complementarity between private vehicles and other means of transport, particularly public transport. This strategy can be facilitated through suitable modal exchange policies, such as the development of dissuasive car parks that encourage private vehicle users to park on the outskirts of the city and utilize public transport, thereby alleviating congestion in the city center. In countries with extensive experience in urban tolls, there is a tendency to establish prices aligned with environmental and social objectives, primarily centered on congestion prevention and the reduction of noise and pollution. As a result, prices fluctuate based on vehicle emissions and the potential impact of noise on neighboring communities. Furthermore, to mitigate congestion, prices vary significantly throughout the day and week. In line with this flexibility, many countries are introducing tolls that reflect the marginal social cost. Dynamic tolls that ensure an optimal flow of traffic at appropriate speeds have been implemented successfully, such as in Singapore, where tolls are periodically reviewed to maintain consistent circulation speeds on the network over time. Combining variable pricing with improvements in public transport and the promotion of active mobility will contribute to a more rational utilization of urban road capacity. Urban and Interurban Road Pricing 101 Regarding social acceptance, it is imperative to ensure that the revenue generated from urban tolls is utilized for measures that are viewed positively by users and society as a whole. Proper communication of the benefits derived from these measures to the population is also essential. Urban road users must be able to perceive the improvements that the system brings. Additionally, urban tolls should be coordinated with overall mobility management and closely related policies, including those pertaining to the environment and social aspects. Currently, the most widely used electronic payment systems for tolls are the DSRC and license plate recognition systems. However, there is a growing inclination to implement systems based on GNSS technology, which reduces the need for toll plazas solely for enforcement purposes. Effective monitoring for nonpayment is also pivotal to the success of urban toll policies. 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