The Impact of Transforming a Road Financing Toll Scheme to a Congestion Charging Scheme - The Case of Oslo

Abstract

The current Oslo toll ring system was implemented in 1990 to generate funds for road investments in the larger Oslo area. Currently, about 60% of the toll income is being used for investments and maintenance of public transport. The use of a large share of toll income on public transport may be seen as strategy to induce people to use public transport. However, congestion in peak periods is still a major problem in the Oslo area and has attracted public attention. Congestion imposes a major social cost. All else equal, congested traffic produces more air pollution, increases travel time and consumes more energy than smooth traffic flow. Given that the Oslo toll ring with flat rates is already in place, planners have started to address the question of whether the system in place can be converted to a marginal cost-based scheme to reduce the prevalent congestion. In this paper we examine the benefits of converting the already existing Oslo toll ring with flat rates to a congestion-based charging scheme. To do so, we first develop a theoretical model along the lines of Arnott et al.(1993). The theoretical model is then combined with a more practical and empirical model for estimating the optimal tolls and assessing the effects of a congestion scheme. The findings show that transforming the current toll ring system into a congestion-pricing system, where peak traffic is charged a higher toll than off-peak traffic, holds great potential for easing traffic congestion and improving the environment. Further, it will improve the efficiency of both public and private transport while at the same time it can raise more revenues compared to the current situation. Thus, such a move will not be in conflict with the current road financing toll. These results have direct policy implications in that they should appeal to decision-makers and hence are relevant for the marketing of congestion pricing.