New York City Counsel approves congestion pricing
Posted by Daniel Hall on April 1, 2008
New York City wants to move ahead with a congestion pricing plan. The plan now goes to the state legislature in Albany.
This plan to have a “cordon charge” for all drivers entering a specific zone in the city is much better than the current “no policy” alternative. It should reduce congestion and travel times, improve air quality, reduce CO2 emissions, and provide additional revenue for public transportation.
Still, a recent discussion paper from RFF scholars Elena Safirova, Sebastien Houde, and Winston Harrington suggests NYC could do much better by implementing some kind of comprehensive vehicle miles traveled (VMT) tax. Their analysis of various transportation policies for Washington, DC finds that the improvement in social welfare from a comprehensive “VMT tax” (set at the socially optimal level) would be an order of magnitude greater than the increase in welfare under an optimal “cordon charge” policy. This is largely because any cordon charge is going to affect less than 10% of vehicle miles traveled, whereas a comprehensive VMT tax affects them all.
Don’t get me wrong, this congestion pricing plan from NYC is a good idea, and should be implemented. It’s appropriate that we as a society start realizing more clearly that driving has external costs, and become more accustomed to paying for them. But the ultimate model we should be looking at involves a persistent marginal charge for every mile we drive. This could be implemented fairly easily alongside pay-as-you-drive insurance. (Maybe we could even have a meter in the car — ala taxicabs — that constantly displayed the charges we were racking up? Something for the behavioral economists to think about.)
It’s not a future that’s very likely in the near-term, but it’s where we should be headed.