What kind of regulations on private vehicles are best suited to a city in reducing congestion?

As such, policy is needed to manage demand for private transport. There are two ways in which policymakers can incentivise citizens to switch to public transport use:

  1. Putting an additional price on private transport. This can be done by imposing a quota on car ownership and allowing users to bid over user-rights, as seen in Singapore. This can also be done through congestion charges and parking fees that impose an additional private cost on driving.
  2. Quantity restrictions on vehicle ownership or usage. This can include vehicle license restrictions, high occupancy vehicle restrictions that regulate the number of people in a car, and ‘odd-even’ policies that only permit certain vehicles to use roads on particular days.

Monthly changes in new vehicle registration in Beijing, 2010 – 2011.

Since 2011, vehicle licence plates in Beijing have been restricted and allocated to drivers based on a public lottery. (Source: Yang et al., 2014)

Though both types of restrictions have proved effective at limiting congestion across cities, financial restrictions are advantageous in three main ways. By allowing an open market to determine who is willing to pay to use their vehicles, user-rights are efficiently allocated to those who are most willing to pay. Financial disincentives also raise revenues for governments, enabling a win-win situation where restrictions on private use can be used to fund public transportation systems. The revenues from private vehicle auctioning in Shanghai, for example, were approximately USD$700 million in 2011 – roughly enough to cover the cost of all public subsidies for public transport systems in 20126. At the same time, quantity restrictions that limit the use, rather than the ownership, of cars, have in many cities had limited long term effects on overall vehicle use and congestion in cities. In Mexico City, for example, the introduction of an odd-even restriction on cars actually increased vehicle emissions in the city 7.

The revenues from private vehicle auctioning in Shanghai, for example, were approximately USD$700 million in 2011 – roughly enough to cover the cost of all public subsidies for public transport systems in 2012

While congestion pricing systems in London or Stockholm involve costly and complex technology to track and fine car usage, this doesn’t have to be the case. In Singapore in 1975, a low-cost paper license system was introduced to restrict car usage in the downtown area during rush hour. Colour coded tickets made enforcement of this system easy to implement. Financial restrictions may be seen as overly burdensome on poorer section of society – but it is important to note that in practice, more wealthy households are also able to overcome quantity restrictions such as odd-even policies by buying additional cars.

Footnotes

  • 6 Jun Yang et al., ‘A Review of Beijing׳s Vehicle Registration Lottery: Short-Term Effects on Vehicle Growth and Fuel Consumption’, Energy Policy 75 (2014): 157–66, https://doi.org/10.1016/j.enpol.2014.05.055.
  • 7 Francisco Gallego, Juan-Pablo Montero, and Christian Salas, ‘The Effect of Transport Policies on Car Use: Evidence from Latin American Cities’, Journal of Public Economics 107, no. C (2013): 47–62.