Towards efficient congestion policies; flexible congestion charges

Purpose and goal

Transport demand is characterized by some variation and therefore congestion charges must be set before the transport demand is fully known. The aim of this project is to analyze whether, and if so how, the fact that the congestion charge has to be set under uncertainty affects the level of tax tax in optimum. We have also studied distributional aspects and, by analyzing the effects of changes in tax rates in Stockholm and Gothenburg, estimated how road users react to changes in the congestion charge.

Expected results and effects

We show that there are several mechanisms that affect how uncertainty influences the optimal congestion charge. This yields a rather complex relationship which depends on the curvature of the cost relationships and the risk that the tax will lead to an under-used road. Furthermore, we show how the road users can be expected to react to a change in tax rate and analyze the resulting distribution effects differ from case to case.

Planned approach and implementation

The project is based primarily on economic theory. The central reports are almost entirely theoretical. However, there is a review of congestion charges as a policy instrument of a more general nature and a less technical summary of the findings and the intuition behind them. We use data from both Stockholm and Gothenburg to estimate elasticities and analyze the distributional effects of the congestion tax.