Returns on Roads

Optimising road investments and usage with 'the user pays principle'

Virtually throughout the economy, supply and demand are mediated and matched via 'the user pays principle'. In the case of the everyday product 'road travel', and more specifically road infrastructure, this does not hold, however, leading to severe road congestion. The Dutch Finance ministry therefore asked CE to examine how 'the user pays' principle might be used as a point of departure for funding new roads (theory) and what effects such a system might have on congestion and transport mobility (practice). In collaboration with the Free University of Amsterdam and environmental consultants 4Cast we succeeded in developing a coherent charging and investment regime based on this principle and made a rough assessment of its impact. At the core of the system is a highly differentiated congestion charge (or 'free flow premium'!) and a rule for deciding on when to invest in road capacity expansion, based on charge revenues. These initial results are promising: a drastic decline in congestion, little reduction in travel and in all likelihood fairly limited new investment in new capacity. Additional calculations are required before hard and fast conclusions can be drawn on future investments, however.