Urban Road Pricing Schemes Have a Clear Advantage over Diesel Car Bans in Cities

Policy measures such as diesel car bans, the phasing out of cars using internal combustion engines or free public transport have been the focus of recent debates on transport policy. These proposals are, however, not advisable from an economic point of view. If cities want to tackle transport-related problems such as air pollution and congestion, they should instead consider introducing a road toll, or congestion charge, that is linked to traffic volume and local pollution levels. At the same time, policy-makers should also place a stronger focus on the EU emissions trading scheme as a means of reducing CO2 emissions in the transport sector in a cost-effective way.

This is the finding of an analysis conducted by the Mannheim Centre for European Economic Research (ZEW) in collaboration with the Leibniz Institute of Ecological Urban and Regional Development (IOER) in Dresden, and the Leipzig University of Applied Sciences (HTWK Leipzig). 

Traffic-related air pollution in city centres caused by local emissions can be solved efficiently through the introduction of an urban road pricing scheme. In this regard, a road toll should be based exclusively on the varying levels of pollutant emissions – regardless of the type of fuel or technology used. In addition, it should reflect the negative effects of driving a car in a visible way and ensure that it is the polluters who bear the costs of abatement. Vehicles with higher emissions should also be obliged to pay higher toll charges. This also means that the road toll increases when traffic levels – and thus pollution levels – are high. The important point is, however, that those affected by the toll charge would have a choice; they can decide if travelling into the city by car is worth the cost, or if it might be preferable to look for other alternatives. 

Urban road pricing is an efficient and transparent tool

Introducing an urban road pricing scheme would create incentives for drivers to change their transport behaviour. In addition, it would maximise the steering effect of the road toll, since decision-makers can use variable pricing to signal when driving is particularly harmful to human health and the environment. 

Imposing a ban on cars, on the other hand, could result in consequences that are both costly and unfairly distributed among drivers. Although diesel car bans can indeed be beneficial in terms of certain local environmental effects to some extent, they do e.g. not create incentives for those who drive standard petrol cars to reduce the number of journeys they make. Such bans would also trigger a significant drop in the resale value of diesel cars, including those that are never, or only rarely, driven in cities.

Though it is true that an urban road pricing scheme still puts the burden on individual households, it is still an efficient and transparent tool for improving air quality and traffic flow in our cities in the long term. From an economic perspective, road pricing schemes are also clearly superior to the current widely discussed ban on diesel cars because they are able to improve air quality at limited social cost. To ensure that conditions remain the same in the long term, the government should be striving to harmonise regulations governing exhaust emissions across all modes of transport.

Emissions should be reduced where it is cheapest to do so

As well as local air pollutants, policy-makers should be looking at CO₂ emissions in the transport sector, which are also damaging to the environment. Of course, when it comes to tackling global climate change, reductions in CO₂ emissions can be made in any industry. Therefore, from an economic perspective, it makes sense to reduce emissions in those industries where it is cheapest to do so. Currently, the marginal abatement costs for CO₂ appear to be comparatively high in the transport sector. In order to be cost-effective, therefore, climate policy should focus more heavily on reducing CO₂ emissions in the sectors included in the EU Emissions Trading Scheme (EU ETS) or try to integrate the transport sector into the EU ETS.

For more information please contact

Dr. Martin Kesternich, Phone +49(0)621 1235-337, E-Mail martin.kesternich@zew.de