Category: Essentials of Economics: Ch 07

The issue of road pricing has been simmering in the background of the environmental debate for many years and has, this month, gained greater prominence with the publication of a draft version of the Road Transport Bill that will allow local authorities to run pay-as-you-drive trials in their local areas. A number of local authorities will be interested, though all will be wary of the policy given the recent petition on the Downing Street website against road pricing that got nearly two million signatures! London Mayor, Ken Livingstone, has meanwhile extended the reach of the London congestion charge with his plans to create a low emission zone (LEZ) in the capital and charge more for older, and therefore dirtier, vehicles to enter the zone.

Draft bill starts Britain down the road to pay as you drive Guardian (21/5/06)
Livingstone to charge older, dirtier lorries £200 per day Guardian (8/5/06)


Questions
1. What are the external costs and benefits resulting from increased use of the roads?
2. Discuss the extent to which the policy of charging more for older, dirtier vehicles is likely to reduce the external costs of driving.
3. Using diagrams as appropriate, show the likely impact of pay-as-you-drive schemes on the social equilibrium in the transport market.

Ever keen to boost his environmental record, Ken Livingstone, the Mayor of London, has decided to extend the London congestion charge westwards into areas like Kensington and Chelsea. Residents are up in arms, but will the larger congestion zone help further with the management of traffic and carbon emissions in London?

Congestion zone could fuel voter revolt against Livingstone Guardian (19/2/06)
London congestion zone (interactive map) Guardian
London congestion zone (podcast) Guardian
London C-charge zone spreads westwards Times Online (19/2/06)
Livingstone praises congestion zone extension Guardian (19/2/06)
Bigger new congestion zone launched Guardian (19/2/06)
London’s Lefty Mayor Fights Traffic Guardian (18/2/06)
Leafy Kensington shows its anger BBC News Online (17/2/06)

Questions

1. Using diagrams as appropriate, show the impact of the extended congestion zone on traffic levels in London.
2. Discuss whether the implementation of a larger congestion zone will help move closer to a socially optimal position in this market.
3. Assess other measures that the Mayor of London could introduce to meet emissions targets for the city..