This research study aims to evaluate the impact and effectiveness of different congestion pricing schemes for Melbourne road network. We have developed a state-of-the-art dynamic traffic assignment model of Melbourne and an advanced simulation-based optimization (SBO) framework to find the optimal congestion charge and study its impact on traffic distribution across the entire Melbourne network.
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What is congestion pricing?
We often see that terms like transport pricing, road pricing and congestion pricing are used interchangeably. However, to be precise each refers to a slightly different concept.
Transport pricing is one of the most effective and efficient policies for travel demand management. It serves as an economic lever to influence users’ travel choices including number of trips, mode of transport, time of day, route and longer-term decisions on workplace and residence locations. Transport pricing is a general term that refers to any form of payment for transport including public transport fare, parking fee, tolls, etc.
By definition, road pricing refers to policies that impose direct charges on road use regardless of the set of objectives or the targeted groups of users, consisting of congestion pricing and other forms of road charging such as toll roads and on-street parking fees. Congestion pricing is one form of road pricing that mainly aims to tackle traffic congestion rather than to only raise revenues for road infrastructure.
Transport pricing is one of the most effective and efficient policies for travel demand management. It serves as an economic lever to influence users’ travel choices including number of trips, mode of transport, time of day, route and longer-term decisions on workplace and residence locations. Transport pricing is a general term that refers to any form of payment for transport including public transport fare, parking fee, tolls, etc.
By definition, road pricing refers to policies that impose direct charges on road use regardless of the set of objectives or the targeted groups of users, consisting of congestion pricing and other forms of road charging such as toll roads and on-street parking fees. Congestion pricing is one form of road pricing that mainly aims to tackle traffic congestion rather than to only raise revenues for road infrastructure.
Our study provides scientific evidence with advanced modeling capabilities to inform transport pricing policies.
Different types of congestion pricing
A variety of road pricing models have been proposed in the past. In general, they can be classified into two broad categories of first-best pricing (or marginal-cost pricing) and second-best pricing.
The first-best pricing theory suggests that a toll be charged on each and every link in the network which equals the difference between the marginal social cost and the marginal private cost of driving. Essentially, this type of road use charge helps make road users aware of their travel impacts on others, thereby internalizing externalities of their trips such as delay imposed on other travelers, generated emissions, etc. Practical applications of first-best pricing are fairly limited given that a whole-of-network charge leads to high operating costs and often poor public acceptability.
Second-best pricing schemes are more feasible alternatives which seem to enjoy greater popularity in practice. In general, we can classify second-based pricing models into five schemes:
The first-best pricing theory suggests that a toll be charged on each and every link in the network which equals the difference between the marginal social cost and the marginal private cost of driving. Essentially, this type of road use charge helps make road users aware of their travel impacts on others, thereby internalizing externalities of their trips such as delay imposed on other travelers, generated emissions, etc. Practical applications of first-best pricing are fairly limited given that a whole-of-network charge leads to high operating costs and often poor public acceptability.
Second-best pricing schemes are more feasible alternatives which seem to enjoy greater popularity in practice. In general, we can classify second-based pricing models into five schemes:
- link- or facility-based charging
- zonal charging
- cordon-based charging
- distance-based charging
- travel time- or delay-based charging
What is the optimal charge?
An optimal toll price is the key to a successful road user pricing scheme and certainly helps to achieve the greatest benefits. Undercharging private motor vehicles may be ineffective in reducing traffic congestion to a desired level, whereas overcharging them may hold back network productivity and hence economic growth. While pricing models may be of help, a practical solution is to use a trial-and-error type of toll adjustment as has been adopted in Singapore. A detailed cost-benefit analysis will assist with justifying the toll price to be implemented.
In this research project, we have developed a dynamic simulation and optimization tool to assist with examining various pricing models and identify the optimal charge. So far, we have tested three main pricing schemes for the Melbourne road network including a cordon-based scheme, a distance-based scheme, and a joint distance- and travel time-based scheme. For each scheme, we have identified the optimal charge and its impact on the congestion level within the pricing area and on the entire network.
In this research project, we have developed a dynamic simulation and optimization tool to assist with examining various pricing models and identify the optimal charge. So far, we have tested three main pricing schemes for the Melbourne road network including a cordon-based scheme, a distance-based scheme, and a joint distance- and travel time-based scheme. For each scheme, we have identified the optimal charge and its impact on the congestion level within the pricing area and on the entire network.
Cordon-based pricing
We first examine a simple cordon-based pricing scheme with Melbourne CBD selected as the cordon. A limitation of the cordon toll is that the distance traveled within the cordon is not taken as a determinant. Users are equally charged regardless of their actual usage of the urban road space. The resulting social inequity may create negative public acceptability towards the cordon charge.*
Distance-based pricing
We then propose and examine a linear distance toll that keeps congestion of the specified cordon below a critical level. Users, if entering the CBD, need to pay a toll that is linearly related to their travel distance within the cordon like a pay as you go system. Since users are charged according to their trip lengths within the pricing zone, the distance toll distinguishes, for example, between a user who reaches the destination immediately upon crossing the cordon and a user who traverses the whole pricing zone, thereby creating a more equitable and efficient pricing scheme.*
Joint distance- and time-based pricing
We now test a joint distance and time charge. In a distance only based pricing, users tend to be driven into paths with the shortest distance within the cordon. Although the travel time on these shortest paths increases as a result of a larger traffic volume, the majority of users may not change their routes because the utility from paying a lower distance toll may dominate the disutility from the increase in travel time. Hence, the concentration of users into a few shortest paths within the cordon makes the congestion distribution in the city uneven and as a result reduce the network performance. Therefore, a novel solution is to charge users jointly based on the distance traveled and the time spent within the cordon. Under this scheme, users are more likely to distribute themselves into the second or third best shortest path.*
* The estimated optimal charges highly depend on the modeling methodology and the assumptions made with regard to changes in travel demand, value of time, and route choice in response to pricing. The optimal charges found in our research may be appropriate for high level strategic evaluation of pricing but certainly require further study and modeling for implementation purposes. We assumed a value of time of $15 per hour in our calculations. However, we expect that in reality the value of time for the morning commute is closer to $25 per hour. Therefore, the optimal charges are likely to be higher than what we have estimated in the modeling practice here.
You can find more about the methodology and results of the study in our published papers.
Optimal distance- and time-dependent area-based pricing with the Network Fundamental Diagram
https://doi.org/10.1016/j.trc.2018.07.004
A bi-partitioning approach to congestion pattern recognition in a congested mono-centric city
https://doi.org/10.1016/j.trc.2019.10.016
Surrogate‐based toll optimisation in a large‐scale heterogeneously congested network
https://doi.org/10.1111/mice.12444
A Simulation-Based Optimization Framework for Urban Congestion Pricing Considering Travelers’ Departure Time Rescheduling
https://ieeexplore.ieee.org/abstract/document/8916910
https://doi.org/10.1016/j.trc.2018.07.004
A bi-partitioning approach to congestion pattern recognition in a congested mono-centric city
https://doi.org/10.1016/j.trc.2019.10.016
Surrogate‐based toll optimisation in a large‐scale heterogeneously congested network
https://doi.org/10.1111/mice.12444
A Simulation-Based Optimization Framework for Urban Congestion Pricing Considering Travelers’ Departure Time Rescheduling
https://ieeexplore.ieee.org/abstract/document/8916910
Findings
Our findings generally support the recommendations of the Infrastructure Victoria's 30-year strategy plan and Transurban road usage study that a type of road pricing is needed to mitigate congestion in Melbourne given today's and future conditions. We specifically evaluated different congestion pricing models with the objective of reducing congestion in the CBD. We found that indeed a cordon-based charge would improve traffic conditions in the selected cordon. However, a dynamic distance-based pricing is shown to perform better in terms of traffic alleviation and distribution in the city. Our results indicate that a dynamic joint distance- and travel time-based pricing can even produce more effective outcomes.
What's next?
We are currently working on the optimal cordon problem, developing a methodology to design a cordon that can maximize the effectiveness of a cordon-based congestion pricing scheme with a focus on Melbourne road network. We are also trying to improve our modeling methodology to include demand elasticity. So, users can shift to public transportation in response to pricing. A comprehensive assessment of different pricing policies requires a fully integrated dynamic traffic assignment model with a travel demand model, ideally an activity- or agent-based model (ABM).
We welcome any collaboration and co-development with government and industry partners. If you are interested, please get in touch with us.
We welcome any collaboration and co-development with government and industry partners. If you are interested, please get in touch with us.