The congestion charging as an instrument to reduce overcrowding and its externalities

Congestion charging as an instrument to reduce overcrowding and its implications

Introduction
The rationale behind the congestion charge is based on the polluter pays principle, whereby drivers are considered responsible for paying for the negative external environmental and social costs of congestion. According to the history, the congestion pricing is corrective, or Pigouvian tax. The aimis to justify the cost of the displacement made by the users and to reallocate to the people who need it most, as a result the congestion tax try to reduce the effects on the environment, decrease the accidents and obviously reduce the congestion (Santos et al, 2010). When the negative externalities appear on the market, it is unable to reach an optimal equilibrium; some tools to achieve thisbalance are the corrective taxes and the cap-and-trade systems (Santos et al, 2010). The aim of this paper is to discuss the efficiency, applicability and distributional impacts of this corrective tax model according to the models that have been implemented up to date.
Congestion charging as an instrument to reduce overcrowding and its implications
Background: a short review
The best tool to dealwith traffic congestions seems to be the road charging. This idea was discovered by Pigou (1932), who diagnose this congestion requires an external cost, and the efficiency involves a fee equal to the marginal external congestion cost (van den Berg & Verhoef, 2011). According to Werner (2003) when the people use an additional transportation unit, can be reflected in: ecological, congestion,scarcity and accidents costs.
Efficiency: Pareto improving vs fairness
In the affirmation made by Cervero, (1998), congestion pricing has been recognized as a social inequity problem. Guo & Yang (n.a.) states that this policy is sometimes considered as elitist policy, because it favors the rich people and prices the poor off of roads. In this point we can notice there is no fairness in theapplication of the congestion charging scheme. Further explanation of the distributional impacts will be analyzed in order to understand the worse off population.
Research carried out by Cervero (1998), investigates Pareto-improving in general transportation networks, which makes every road user better off compared with the un-tolled case. The principal issue of the Pareto improving is that, when youparalleled it with the ‘’non-intervention’’ case, when the reinvestment is applied correctly reduces the net travel disutility of each individual user. For instance, the pareto-improving leaded by the policy makers make it more tolerable to the users, because at the end most people will win under this scheme (Guo & Yang, n.a)
Regarding the public roads, it is called by some authors that issuitable to change the name from ‘’public goods’’ to ‘’club goods’’, which means that the use of it is selected by the people who can afford it, that is why is comparable to a club (Coase, 1946) and (Littlechild & Thompson, 1977). They have formulated efficiency and fairness criteria, which have to be met by a cost allocation or pricing scheme that a club can sustain (Werner, 2003). This lastpoint should be taken into account because once again it demonstrates that the fairness criteria cannot be reached under the congestion charge judgments.
One clear example of the Pareto-improving is showed in a research made by Nie & Liu (2010). They observed the existence of this improving and revenue-neutral pricing scheme in a bi-modal network. The important issue in this model is that therevenues collected by the charging process clearly reflects the use in the improving the system transport as a whole system, as a result the users perceive that no individual user is worse off, becoming the roads uncongested and achieving notable timing savings.
Applicability of congestion charges, facts that must be taken into account
The first city which began the charging scheme was...