Nova workboard

a blog from young economists at Nova SBE

Traffic congestion: Is there any feasible solution?

Congested roads are one of the worst nightmares affectingcity life. The number of cars moving through, into and out of the cities can reach dramatic levels. Consequently, whenever traffic volumesbecome greater than the road’s capacity, traffic speed slows down and the final result is congestion. Thus, trip times, car accidents and uncontrolled parking increase. From an environmental perspective, traffic leads to higher levels of harmful emission and to noise.


Local governments and administrations are thus required to take actions in order to regulate traffic congestion, introducing environmental policies that aim at modifying people’s behaviour to obtain the desired outcome. One actual policy that has been introduced in several cities is a congestion charge, whichtaxes the users of the public good in order to mitigate congestion.


A concrete example of this pricing policy is the congestion charge applied in Milan, Italy. The city counts 1.3 million inhabitants and 716.431 cars on an area of 180 km2. This policy aims at regulating traffic within the central area of the city; it has been named “Area C”, where C stands for Centre and forCongestion. Each polluting vehicle entering this area will be charged a tax of five euro. The revenues of the policy are the reduction of polluting emissions and noise, a fostered and faster public transportation system, raising money that would be invested in soft mobility infrastructures, namely cycle lanes and pedestrian zones. The whole city population can therefore enjoy an improvement in the quality of life.


According to economic theory, a pricing system will allow to reach an efficient solution, as long as the tax is paid by every pollutant– drivers in this particular case – is somehow linked to the emissions he is responsible for.

Nevertheless, some problems arise by considering the distributive effects of such a policy. In Milan the local administration had to face the opposition of the shop owners located within the Area C, who claim that the restricted access to the city centre will negatively affect their selling volumes and transportation cost and therefore their income. Furthermore, the residents of the area showed opposition towards the policy. Typically, people are more concerned about the financial burden of the fee than about the benefits that could derive from those expenses.


Some adjustments to the policy can then be made in order to reach a greater consensus. A flexible tax can be introduced, instead of a fixed fare, so that each vehicle will be charged according to its engine-power emissions. Further, whenever criticism arises, it is crucial to be transparent. The main issue with this kind of congestion charge is therefore to provide citizens with clear information about the disposal of their money; secondly, it is fundamental to share data that show the effects of the restriction on the level of emissions. An intensive investment plan in public transportation should be the priority of the local administration, in order to compensate for the restricted viability of the city centre, as well as the supply of alternative mobility vehicles: electric car sharing and free city bikes could be a desirable alternative.

The pricing mechanism appears to be a reasonable policy to cope with traffic congestion. In a real-world scenario, no policy will perfectly fit the demand and supply needs though. Governments are making efforts to come up with effective solutions to environmental problems, but the best and moreover socially accepted outcome has not been reached yet.


Mariaelena De Lio

Adrian Loeffler




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