Julien Pillot, associate lecturer in management science at the Université Paris-Saclay, discusses the possible implementation of congestion charges, which will soon be examined by the government, and their impact.
The news of possible congestion charges certainly caused a stir. The draft mobility law which will be submitted to the Council of Ministers in November, is to make it easier to implement and exploit congestion charges in cities of more than 100,000 inhabitants. An effective means of fighting pollution and congestion in urban areas for some and a tool enabling tax overkill and social exclusion for others, opinions are divided.
However, from a purely economic perspective, the efficiency of such a measure has long been proven – in fact, since the work British economist Arthur Cecil Pigou carried out on externalities almost a century ago.
Pigou, externalities and congestion charges
Pigou noted that, in some markets, the individual actions of economic agents, producers and/or consumers had an effect on society as a whole. That interdependence between the actions of some and the wellbeing of others takes the form of ‘externalities’, either positive - the vaccination of a large part of the population benefits all, as it reduces the risk of an epidemic - or negative, such as the activity of a factory releasing pollutants into the atmosphere or rivers. Congestion and pollution in urban areas are among the negative externalities generated by traffic, as well as noise pollution and road accidents.
Pigou’s solution for facing negative externalities was to quantify them and then establish the tax levels that would make it possible to cover them. However, it was not only a matter of “repairing” the damage negative externalities wreaked on the economy, but calibrating taxes well enough to incite economic agents – which internalise them individually – to change their behaviour. Pigovian taxes set at an optimal level would lead to a new balance between production and consumption, which was itself socially optimal.
Evidently, when Pigou developed his “theory of externalities”, the time was not right for the implementation of congestion charges to regulate traffic. The negative externalities generated by cars were mostly unknown, not to mention the fact that cars had been the means of overcoming the most visible negative externalities linked to urban travel at the time, namely the accumulation of horse manure. Urbanisation and its (over)population were in no way comparable to those of our time, and, in France, the debate revolved around the suppression of Ancien Régime excise duties.
Reality principle and social acceptability
However, had Pigou had to speak his mind on the implementation of congestion charges in our contemporary society, he would undoubtedly have endorsed them. He would have stated that congestion charges would reveal information on individual preferences previously unknown to the authorities (the use value each individual grants their car according to their own constraints) and gave each individual the freedom to pay the tax, or refuse. He would also most likely have concluded that traffic would be freed from all those who accorded their cars the lowest use value, or in other words, those who could most easily resort to alternative means of transport.
And yet, although Pigou’s logic is sound, it comes into conflict, as is often the case in economics, with a reality principle: in a democracy, the obvious solution is not always the most effective, but the most acceptable from a collective point of view.
In this case, the proposal for congestion charges comes in a context in which the population is already exasperated with taxes, especially motorists, who feel particularly targeted following the tax hike on fuel, rumours of a tax on car registration documents, the reinforcement of speed controls and the toughening of the ecological tax.
Sacrosanct “purchasing power”
So what if congestion charges have proven effective in other situations, and so what if the social cost of cars is mainly (very) far from being covered by the tariffs and taxes on use (see table)… The exasperation with taxes is currently pushing motorists, or the associations representing them, to react with vehemence, through petitions and blockades.
Far from trying to cool the debate, the opposition is adamantly throwing fuel on the fire to galvanise the extensive electorate against the majority.
Against such a backdrop, whether stakeholders are erring due to a lack of information or individual calculations, the defence of the sacrosanct “purchasing power” often relegates other arguments to the background. We then collectively forget that our ways of life and our (over)consumption have a social, sanitary and environmental impact that should incite us to consume more frugally, or, at the very least, more responsibly.
In search of the “right” congestion charge
Consequently, the majority is studying not so much the long-term contribution of these congestion charges as the short-term implications of their implementation, i.e., restricted access requiring an adaptation cost, which will join other constraints on purchasing power in a country that already has one of the highest tax levels in the world.
If the government wishes to avoid forcing the measure, it will have no choice but to make it socially “acceptable”. To that end, all urban stakeholders concerned could be consulted to calibrate the “right” congestion charges, and the government could opt for low, one-off tariffs targeting volumes (Oslo) or modular tariffs that are higher during rush hour (Milan, Tokyo), devise exonerations for some categories of road users depending on their professions or income levels (Rome) or even develop positive incentives that reward motorists who decide against using their vehicles during the peak period (Rotterdam and, some day, perhaps, Lille).
Whatever the solution adopted, congestion charges will be all the more easily accepted if their implementation is supported by tangible initiatives to enhance public transport networks, offering credible alternatives to private cars, and fight against solo driving - car sharing makes it possible to share costs, including congestion charges and road tolls.
The next step for the authorities will be to develop labour rights and the spatial reorganisation of the country. The best way to make congestion charges acceptable is to create the conditions that will enable motorists to elude them. Firm measures benefitting the establishment of businesses outside dense areas or, at least, the promotion of teleworking seem the only ways to combine efficiency with acceptability, as these are the only measures likely to truly reduce the need to travel to city centres… As well as the ensuing economic, environmental and social costs. To paraphrase the Quebecker author Monique Corriveau, “we don’t choose our circumstances, but we can choose how we accept them”… Or how to have others accept them.
Julien Pillot is an associate lecturer in management science at the Université Paris‑Saclay, an associate researcher in economic science at France’s National Centre for Scientific Research (CNRS) and the science director at Precepta, a company specialising in economic research (Xerfi Group).