Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

Tag: road pricing

  • Guest Post: For whom the road tolls?

    For those of who were following Architect This City during the Gardiner Expressway East debate here in Toronto, you might remember that Darren Davis (transport planner with Auckland Transport) wrote a guest post called, Three minutes that rule the world – Will demolishing the Gardiner East actually make traffic worse?

    It was an incredibly popular post at the time, so I’m thrilled that Darren volunteered to do another one on road tolls. This is a topic that I’m very interested in and have written about a few times. Road pricing, as you’ll see below, puts us in a bit of a chicken-and-egg situation. But sooner or later I think we will need to get our head around it, as will many other cities.

    I hope you enjoy today’s post. Thanks again Darren.

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    A recent post on Architect This City, The Tragedy of the Commons, raised a fundamental but all too often forgotten point about transportation: That in networks where the price of use doesn’t change when demand changes, there is no effective mechanism to manage that demand.

    Because there is no incentive to act in the public good, we often act in what we perceive to be our own personal interest, which is often the antithesis of the public interest. And remember that if we are driving, we are traffic. So often people will sit fuming in their cars in the midst of congestion with thoughts like in this cartoon. But of course with unpriced roads, there is no real price signal to these drivers to consider taking the bus.

    In a world where time is money, we are constantly berated about the economic costs of congestion. In 2011, the Toronto Board of Trade estimated that congestion in the Toronto region alone cost the regional economy $6 billion a year, rising to an estimated $15 billion in 2031 should no action be taken. More recent research by the CD Howe Institute pegs this figure at up to $11 billion.

    Given these sorts of eye-watering figures, one might be tempted to think that car drivers, and in particular the goods industry, would be flinging their wallets open at the chance to buy their way out of congestion. And in fact Toronto has the 407 Express Toll Route which has elements of variable road pricing. However, while the 407 ETR carries around 350,000 vehicles per day, price increases have been matters of controversy. It provides some ability for those who can afford it to bypass Toronto’s notorious traffic congestion, but its fundamental weakness is that it’s just one road in one of North America’s largest city-regions.

    Similar stand-alone efforts to address congestion in Metro Vancouver with tolled routes, such as the Port Mann Bridge on the Trans-Canada Highway and the Golden Ears Bridge, have fallen well short of their projected traffic volumes, while nearby untolled bridges such as the Patullo Bridge are heavily congested. We have a similar experience in New Zealand where our two tolls roads, with car tolls of $2 and $2.20 respectively, experience diversion rates of up to 30% to the alternative but substantially longer and slower free routes.

    This brings up a fundamental paradox: Congestion costs the economy a fortune and congestion is a top-of-mind frustration, yet people seem reluctant to pay even comparatively small amounts to bypass congestion.

    For example, the City of Toronto’s Roundtable on Gridlock & Traffic Congestion in February 2014 came up with the usual shopping list of “transportation systems management” responses – improved management of curbside space and construction projects; synchronized traffic signal phasing; better traveller information and improved incident response. While these are all worthwhile responses, they only improve system operation at the margins. Encouraging greater use of public transit was the very last recommendation and there was not a single mention of charging or pricing as a tool to address congestion. And the feverish activity continues with a hackathon called TrafficJam on October 2 – 4, 2015 with the goal of fixing Toronto’s traffic woes.

    The very few cities that have actually had significant success at reducing traffic congestion – notably Singapore, London and Stockholm – have done this through cordon-based congestion pricing wherein if you pass the cordon, you pay the congestion charge. Entering central London on a weekday between 7am and 6pm will set you back a cool £11.50 ($C23.30). From 2003 to 2013, about £1.2 billion ($C2.42 billion) of congestion charge revenue has been invested in public transport, road and bridge improvements and walking and cycling, of which £960 million ($C1.94 billion) was for bus improvements. These measures have included significant road space reallocation to improve conditions for pedestrians, cyclists, public transit and the urban realm.

    The latest Travel in London report states that “Over the 10-year period from 2003, total trips have increased by 11.4 per cent, with particularly notable increases of 52.3 per cent in rail trips and 32.0 per cent in Underground and DLR [Docklands Light Railway] trips, with cycle trips (as main mode) increasing by 53.9 per cent. Car driver trips decreased by 12.7 per cent over the same period” (my emphasis).

    One interesting insight is that Stockholm trialed congestion charging and then reverted to business as usual of unpriced roads in advance of a referendum on congestion pricing. This gave Stockholmers a clear sense of the difference in traffic congestion and was crucial in supporting a yes vote in the referendum.

    Stockholm has experienced a permanent reduction in traffic of about 20% across the toll cordon and congestion decreased by 30 – 50% – which demonstrates that traffic volume reductions have a disproportionately positive impact on congestion. About half of the “disappearing” drivers changed to transit, the rest to other alternatives such as different departure times and destinations and taking fewer trips.

    For more on Stockholm, I suggest reading the Tools of Change case study on Stockholm Congestion Pricing.

    Before and after congestion charge photos of traffic levels in Stockholm

    While this sounds very promising, congestion charging has significant equity implications and requires upfront investment to provide people who either choose to or can no longer afford to drive with transportation alternatives. Both Stockholm and London invested very heavily in public transit in advance of implementing congestion charging.

    And this brings up a big issue for Toronto. 

    For congestion charging to have a meaningful impact on congestion without stifling economic activity or impeding people’s ability to move around, the core capacity of Toronto’s transit system would need to be addressed first. In particular the Yonge Line capacity enhancements, Metrolinx’s Regional Express Rail and most likely the Downtown Relief Line would need to be in place to provide both capacity and choice for people who either needed or wanted a travel alternative to any congestion charge.  This would mean that Metrolinx’s Big Move might need to get even bigger.

    Disclaimer: The author of the above post is an employee of Auckland Transport, however, the views, or opinions expressed in this post are personal to the author and do not necessarily represent the views of Auckland Transport, its management or employees. Auckland Transport is not responsible for, and disclaims any and all liability for the content of the article.

  • The tragedy of the commons

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    In 1968, Garrett Hardin wrote an article where he coined the term: the tragedy of the commons. Hardin was an American ecologist who was obsessed and concerned with the prospect of human overpopulation.

    In his article, the term tragedy of the commons was used to describe a situation where individuals – all acting independently and in their own self-interest – actually end up behaving in a way that is detrimental to the larger group and that negatively impacts some sort of common resource.

    Just in case, here’s another definition via Investopedia:

    An economic problem in which every individual tries to reap the greatest benefit from a given resource. As the demand for the resource overwhelms the supply, every individual who consumes an additional unit directly harms others who can no longer enjoy the benefits. Generally, the resource of interest is easily available to all individuals.

    So what would be an example of a tragedy of the commons?

    You may not have thought of it in these terms, but I bet you that everybody reading this blog has experienced one.

    I will give you two examples.

    1. The first is that of electricity consumption. 

    In most condominiums, there are two types of ways that electricity gets billed and paid. Either the whole building gets one bill (master metering) or each individual resident gets a bill (submetering). 

    In the case of master mastering, each resident’s consumption isn’t tracked and so nobody knows who is consuming what. But in the case of submetering, each individual resident only pays for the electricity that they use.

    Not surprisingly, the data shows that submetering can cut electricity consumption by 10 to 30%. That’s because it creates a 1:1 relationship between usage and cost. There’s now a strong incentive to conserve.

    With master metering, there isn’t a 1:1 relationship between usage and cost. The additional burden/cost of consumption actually gets shared by everyone else in the building. And since each individual is looking to maximize their own benefit, they lose the incentive to conserve. As a whole, this makes the entire group worse off.

    2. The second example is that of congestion on public, un-tolled roads.

    In most cities, public roads are a resource that is “easily available to all individuals” (to use Investopedia’s terminology). They are basically free. The marginal cost of driving another kilometer to work on a road is basically nothing (other than a bit of gas and some time).

    What this does is create a situation where individuals – in their pursuit of maximum individual benefit – start to overload the road. Everybody just wants to get where they need to go and there’s no incentive to conserve the resource (i.e. the road). Once again, the result is that the entire group becomes worse off.

    That’s why building more road rarely/never works. You’re simply increasing a resource that is easily available to all individuals. What we should instead be doing is looking at submetering our roads (i.e. pricing our roads). It’s been proven time and time again to reduce road congestion basically overnight.

    I had never heard of the term tragedy of the commons before today, but I like it a lot. So the next time you’re stuck somewhere in traffic, you can now scream to yourself: What a tragedy of the commons!

  • Revisiting electronic road pricing as a way to fight traffic congestion

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    As disappointing as this week’s vote on Toronto’s Gardiner Expressway East was, there is one good thing that has come to the forefront and that is the will to explore road pricing. At this point, I have almost no confidence that this City Council would ever vote it in, but at least we’re talking about it. That’s better than not talking about it.

    If you’ve been reading Architect This City since the beginning, you might know that I’ve been a vocal supporter of road pricing. I wrote two posts on the topic: The case for electronic road pricing (which was based on an HBS case I did as part of my MBA) and More on electronic road pricing (which was a Lunch & Learn I did while I was at TAS).

    I continue to believe that road pricing is a highly sensible solution to big city traffic congestion. But I do think that an electronic/variable pricing model is preferable to and more equitable than a flat toll model. A variable model means that the price of using the road adjusts based on congestion levels and/or the time of day. I also think that we should use as much of the revenues as possible to fund continuous transit improvements.

    If you’re interested in learning more about this topic, check out the two posts mentioned above. I’d also love to hear your thoughts on road pricing in the comment section below. Would you welcome it in your city?

  • The Fundamental Law of Road Congestion

    A few days ago I wrote a post talking about what happens when you demolish an urban highway. It was a link to an article giving 5 examples of cities that have removed their urban highways and benefited.

    After I wrote the post, a number of people responded on Twitter. Some thought it was a great idea and gave examples of other cities, such as Detroit, that are thinking about doing the same. But others responded and said that I was out of line. And that while it might work in some cities, it simply isn’t a viable option in cities like Toronto.

    So as somebody who believes we should be taking down the Gardiner Expressway, I thought it would be worthwhile to revisit the topic and provide a bit more information.

    To be clear, I’m not suggesting we remove the Gardiner and replace it with nothing. My belief is that we should replace it with a broad surface street that would still move lots of cars, but that would make our waterfront much more open and accessible to everyone.

    So how is this feasible?

    Again it comes back to the concept of induced demand. Back in 2009, two economists from the University of Toronto and University of Pennsylvania – which are actually both of my alma maters – published a study called The Fundamental Law of Road Congestion.

    In it they discovered something really fascinating: there’s a near perfect relationship between new roads and highways built and the total number of miles driven. In other words, as cities increased road capacities (during their study period of 1980 to 2000), the amount of driving went up just as much.

    What this should tell you is that trying to build your way of out road congestion is usually a losing proposition. That’s why every large city has a traffic problem. Try and think of one that has solved this. And as much as it might seem intuitive to tell people at cocktail parties that your city simply needs to build more roads and highways, it’s typically not that simple. (In my view, the solution is road pricing.)

    The other really interesting thing that this study revealed is that it works both ways. When you reduce road capacity, drivers start to disappear. People choose to live closer to where they work. People choose transit. People go into the office at different times. People make all sorts of different decisions in response to this road change, just as they do when there are more free roads available to them.

    So within a reasonable band (obviously you can’t remove all roads), there is no perfect amount of road capacity. If you added another lane to your highway, it would be full. If you took away a lane, it would end up equally full. That’s why removing the Gardiner Expressway isn’t lunacy.

    Instead, it actually makes a lot of sense:

    • It’s the cheapest solution (compared to repairing it or burying it)
    • It would free up money for transit and other mobility solutions
    • It would make our waterfront more open and accessible
    • It would beautify our downtown
    • It would increase land values all along the waterfront

    And since we’re still in the early days of developing our eastern waterfront, now is the time to do it. The longer we wait, the harder it’ll get and the more expensive it’ll get.

    So I hope that the leaders in this city will think long and hard about this as opposed to immediately assuming we need an elevated highway to keep this city moving. The last time I checked, it doesn’t work so well in its current state.

    Images: Before and After the Embarcadero Freeway in San Francisco (via Gizmodo)

  • What we could do to improve traffic in Toronto

    This morning The Guardian Cities published my one-minute video talking about how much traffic sucks in Toronto and why we should be considering bold initiatives like dynamic road pricing.

    The video was shot on the sundeck of my building on a holiday Monday (meaning traffic volumes should have been less). The dirty glass makes the city look a lot smoggier than it really is, but it felt appropriate for the topic I was discussing.

    I’m sure many of you will disagree with what I’m advocting for, so let me know your thoughts in the comment section below.

  • New startup wants to solve urban congestion through data and lotteries

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    If you’re a regular reader of Architect This City, you’ll know that I’m a supporter of congestion and road pricing. Any valuable good or service, such as a road, that’s offered for all intents and purposes as free, will never be able to keep up with demand. You need to price it.

    However, the political risk associated with implementing something like this has made it such that few cities around the world have done it. London and Singapore are the two most common examples.

    The more populist solution is to simply build more roads and highways, even though study after study shows that this doesn’t work. If it did, we would have already solved the problem of traffic congestion. And we most certainly haven’t.

    Which is why I’m excited about a new startup that recently launched called Urban Engines. Their solution is twofold. It’s based on incentives and on treating people and cars in cities as sensors that feed back data into their network. Here’s a brief video. If you can’t see it below, click here.

    [youtube https://www.youtube.com/watch?v=oaCp5Tl-uAc]

    The data piece is almost a no-brainer (provided they can get the data). The more data we can collect about the way people and cars move in a city, the more they’ll be able to optimize and manage the flows. The possibilities are endless.

    But what I found really interesting is their incentives based approach. Typical road pricing methods are, one could argue, a punitive approach. As traffic increases so does the price of the road. (I like to look at it as efficient pricing.)

    With Urban Engines, their approach is the opposite: it’s to reward people–through money and lotteries–for driving during off peak times. It’s smart because selling a reward program to cities will be a lot easier than selling a new charge.

    Overall, this a great example of how startups are stepping up to solve some of our most important societal problems. For more information on Urban Engines, check out their website and this writeup on CityLab.

  • Road pricing chicken and egg

    Regular readers of this blog will know that I’m a big supporter of road pricing. I think it’s an incredibly efficient way of reducing congestion, improving regional productivity, making us more sustainable, and funding other infrastructure, like transit.

    But one of the arguments I often hear against road pricing is that it’s unfair to force a segment of the market out of their car if there’s no good alternative (ie. proper transit). And even if the revenue produced from road pricing goes towards transit, we all know that new infrastructure takes a very, long, time.

    So we end up with a chicken and egg problem: Road pricing is a great way to fund transit, but it’s difficult to implement without the proper transit in place. So what should we do? What comes next?

    I have two thoughts.

    First, road pricing doesn’t necessarily mean that you can no longer drive without paying. Effective road pricing matches price with demand. Therefore if there’s nobody else on the road, you wouldn’t be paying (or at least wouldn’t be paying much). This is what makes it efficient—it adjusts. So for somebody without the willingness to pay for peak congestion pricing, they could still have the option of driving at another time. Go in early or go in later.

    But what it does mean is that no matter what time you’re driving, the road could be priced so that it actually functions again. In Toronto today, many of our roads are completely failing. Demand greatly exceeds available supply (the amount of road we have) and so you can’t use them to get anywhere in an efficient way. So what we have is equal access to terrible non-functioning roads.

    Second, there’s no such thing as a free lunch and nobody said it was going to be easy to build phenomenal infrastructure. We all complain and say we want it, but when push comes to shove, are you willing to open up your wallet and pay for it?

    So I say forget pontificating about chickens and eggs and just do it. If we priced roads and setup other appropriate revenue tools, I’m sure there are some financial wizards in this city that could use tax increment financing or other mechanisms to ensure that we get shovels in the ground today for the new infrastructure that we so desperately need.

    These are important discussions to be having no matter what city you live in. I would love to hear your thoughts in the comment section below or on twitter.