The Truth, the Myths, and the Possible in Freight Road Pricing in Congested Urban Areas



The Truth, the Myths, and the Possible in Freight Road Pricing in Congested Urban Areas

Authors

José Holguín-Veras, Rensselaer Polytechnic Institute, US

Description

The paper analyzes the evidence regarding freight road pricing, complements it with game theoretic analyses, and concludes that moving trucks to the off-peak hours require comprehensive policies targeting key components of the supply chain.

Abstract

The paper analyzes the evidence regarding freight road pricing, complements it with game theoretic analyses, and concludes that moving trucks to the off-peak hours require comprehensive policies targeting key components of the supply chain (i.e., receivers and carriers). The paper shows that a request from receivers asking carriers to do off-peak deliveries is likely to have an impact across the entire carrier industry; while road pricing only impacts specific industry segments. This suggests that the most efficient way to move truck traffic to the off-peak hours is to provide financial incentives to receivers in conjunction with freight road pricing. Should a sufficient number of receivers be willing to accept off-peak deliveries, the carriers will follow suit. The paper considers a toll surcharge to finance off-peak delivery initiatives. The paper highlights and rebukes a number of myths related to freight road pricing in urban areas.
Road pricing in urban areas is predicated under the assumption that adjusting the private costs felt by drivers to match the social costs their driving produce would move the equilibrium solution to a situation in which deadweight losses are eliminated. In the case of automobile transportation, there is ample theoretical support and empirical evidence that, indeed, show that road pricing works.
In the case of freight transportation, however, the picture is not so clear. This is because urban freight transportation exhibits a number of rather unique features that call into question the effectiveness of road pricing. These features include: market imperfections of various kinds, contractual constraints, and, more importantly, interactions between agents that dampen the effectiveness of the price signals. It is important to mention that trucking industry representatives and advocates have long been in the record highlighting some of these issues, though only know the scientific community has access to behavioral data that could confirm or deny these claims.
This paper is based on two different research projects that, by a combination of fortuitous circumstances, were conducted almost in parallel providing complementary views of the behavioral impacts of pricing on the commercial trucking sector in the New York City (NYC) metropolitan area. The first project focused on the quantification of the behavioral impacts produced by the Port Authority of New York and New Jersey time of day pricing initiative. The second project focused on the definition of comprehensive policies, i.e., targeting the entire supply chain, to induce a shift of commercial truck traffic to the off-peak hours. Taken together, these projects provide the first quantitative analyses of the observed impacts of pricing on commercial traffic; and the first stated preference analyses of policies that go beyond road pricing. To a great extent, the paper relies on previous publications (i.e., Holguín-Veras et al. 2005a, 2005b, 2005c and 2005d) to put together what seems to be the first comprehensive treatment of the subject. The findings from these projects shed light into the way forward toward new paradigms of transportation demand management for urban freight traffic.
The paper starts with a conceptual description of the fundamental interactions between the different agents involved in urban freight. The second section provides a brief description of the data collected by the two research projects, together with a summary of key findings. This is followed by a section in which myths and truths of freight road pricing are discussed. The conclusions at the end of the paper highlight the key findings. The list of myths that are debunked in the paper includes: ?All trucks are created equal,? ?All carriers are created equal,? ?All commodities are created equal? a.k.a. ?We don?t care about the cargo,? ?Truckers love to drive in congestion,? ?Truckers cannot react to pricing,? ?Road pricing is THE solution to get rid of those damned trucks.? The Truth is that: ?Comprehensive policies targeting key elements of the supply chain are needed,? while the Possible is to: ?Use toll revenues to subsidize receivers? off peak delivery programs.?
The paper puts together, on the basis of four different papers dealing with two different research projects, what seems to be the first comprehensive picture of the potential role, limitations of freight road pricing as a demand management tool in congested urban areas. The analyses, complemented with game theoretic discussions of the interactions between carriers and receivers, conclude that moving trucks to the off-peak hours require comprehensive policies targeting key components of the supply chain (i.e., receivers and carriers).
The paper shows that a request from receivers asking carriers to do off-peak deliveries is likely to have an impact across the entire carrier industry; while road pricing only impacts, and rather mildly, specific segments (i.e., carriers transporting petroleum/coal, wood/lumber, food and textiles/clothing). This suggests that the most efficient way to induce a shift of truck traffic towards the off-peak hours is to provide financial incentives to the receivers. In all likelihood, once sufficient numbers of receivers are willing to accept off-peak deliveries, the carriers will follow suit. The paper also discusses economic results that show that receivers, particularly those receiving wood/lumber, alcohol, paper, medical supplies, food, printed materials and metal, are sensitive to tax deductions for a worker assigned to do off-peak delivery work.
The paper discusses the hypothetical example of a $5 toll surcharge to trucks traveling during the day hours that would generate approximately $40 million/year (including some demand contraction). These revenues could be used to fund a variety of off-peak delivery programs. Two of the ideas discussed include the provision of incentives to large traffic generators (e.g., Grand Central Terminal, colleges, government offices); and tax incentives to restaurants in Manhattan willing to accept off-peak deliveries. It is estimated that 20% of the restaurants would accept the offer, leading to a reduction of 1.3 million truck trips/year in Manhattan at a cost of $13 million/year.
The paper highlights and rebukes a number of myths related to freight road pricing in urban areas. Separating myth from truth and identifying the possible is a necessary condition to achieve the sound policy objective of moving towards a more balanced use of the existing transportation capacity.

Publisher

Association for European Transport