Road Cricing

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Recommended: What are the economic principles that underpin road pricing

Road pricing refers to the direct charging of a price for the use of roads. This is in contrast to road based taxation such as vehicle registration and fuel excise, where charges are applied for the ownership of vehicles and the consumption of fuel. The basic economic principle being that consumers demand more goods and services with scare resources to cater for the needs and wants of consumers. Thus leading to scarcity, inorder to comprehend the scarcity consumers are forced to give up one good which leads them to opportunity cost. The Need for Competitive Neutrality between Land Transport Modes, the PAYGO system, as compared to rail access charges, creates an effective subsidy for heavy. Rail access charges are determined on the principle of full cost recovery, in contrast to the PAYGO system. This places rail at a competitive disadvantage by increasing its operating costs. This competitive disadvantage is best highlighted by a breakdown of road and rail costs. Rail has a significant cost advantage in all major interstate containerized freight movements.
However rail’s cost advantage is negated by the significant differences in track access charges and road charges. This leads to a disparity in costs where rail service providers must spend up to a certain percentage of their operating costs on rail access charges while heavy vehicle operators only spend 5% of total costs on road charges. Current road tax arrangements will not meet a country’s future transport challenges. Poorly functioning road networks harm the amenity, sustainability, live-ability and productivity of society. Moving from indiscriminate taxes to efficient prices would allow a country to leverage the value of its existing transport infrastructure. Less congeste...

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... result of passenger and freight journeys. The lack of preserved transport corridors has necessitated the move towards more complex solutions such as tunnels and bridges to accommodate new road infrastructure. These solutions are prohibitively expensive, complex and not viable as a widely used solution. Induced demand for road use further restricts the effectiveness of increasing road supply. The concept of induced demand refers to the notion that the new supply of road infrastructure will actually encourage increased demand over and above existing demand for road use. In country (Australia), per capita car ownership and per capita car usage has increased with the increased supply of road infrastructure over the past 20 years, through Government programs, which have given unprecedented levels of funding to road infrastructure

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