The State and Future of Congestion Pricing in China

by |November 14, 2013

By Guo Dong

Harbin, the capital city of China’s northernmost province, last month reported an Air Quality Index score of 500, the maximum reading. The index for NYC on the same day was 47. Visibility was reduced to 10 meters, and the smog closed schools, paralyzed traffic and grounded airplanes. It was dubbed “airpocalypse” by international media. Automobile emissions are a major cause of deteriorating air quality in major cities; and to combat urban air pollution and traffic problems, some propose congestion pricing as a cost-effective policy to reduce pollution and improve productivity through improved travel speeds. Cities in China could implement this policy and ameliorate some of the negative effects of congestion-caused pollution.

Can charging commuters during times of high congestion help solve China's air pollution problem? Photo: Wikimedia commons.

Can charging commuters during times of high congestion help solve China’s air pollution problem? Photo: Wikimedia commons.

To internalize the negative social and environmental costs due to congestion, an economist would argue the most efficient way is to introduce a “fee” that is paid by drivers, which would equate to the monetary value of the externality, and mitigate demand for road space. Like any charge imposed by the government, congestion pricing can be considered regressive, and therefore garner political opposition. Cities like London and New York City, that have attempted successfully and unsuccessfully (respectively) to implement this policy have faced challenges gaining support. Unlike other countries, China has the political clout to implement more aggressive sustainability policies. So why is congestion pricing dead on arrival in China?

Traffic jams are ubiquitous in major Chinese cities. Traffic causes two main issues – air pollution and delays – and these issues have rippling effects on society.  Air pollution causes asthma and other health effects, and the World Health Organization estimates 1.3 million deaths each year globally are related to air pollution. Travel delays from traffic reduce productivity and increase the cost of doing business, which could deter businesses from locating in otherwise up-and-coming cities.

In China, to combat congestion, local governments are much more willing to use draconian policies, such as a License Plate Lottery and the End Number License Plate Policy (cars with plates ending in a certain number are prohibited from driving in the city center bound by the 5th Ring Road for a pre-specified weekday) to artificially limit road space demand, rather than imposing a charge to limit demand by testing willingness to pay.

The License Plate Lottery came into effect in 2011, when the Beijing government introduced a quota of 20,000 licenses each month, distributed through a lottery. Car buyers frequently exceed 1.5 million, which implies about 1 out of every 80 applicants actually wins a plate each month. Policies like these, though effective and followed by other metropolises like Shanghai and Guangzhou, are hardly enough to combat congestion, as simultaneously, urbanization policies attract more and more migrant workers to space-limited urban centers. But, according to the Beijing Transportation Research Center, the average weekday congestion time rose to 100 minutes for the first half of 2013, a 30-minute bump from the same period a year earlier. As a result, Beijing has already begun contemplating further reduction to the license plate quota next year.

Talk of a congestion charge will be politically charged in any city in the United States. Indeed, no American city has successfully implemented such a policy. However, a measure like the License Plate Lottery that limits people’s rights to owning a car would be completely unimaginable in the United States. How did the lottery policy get passed with considerable ease in China, and how are people much more willing to accept involuntary limitations than price-induced voluntary options? In a poll taken in Guangzhou, a city which is following the lead of Beijing in introducing involuntary measures, more than 80 percent of respondents opposed the notion of a congestion charge.

In order to even consider congestion pricing, there have to be other viable forms of transport that can adequately substitute for cars. Governments across China have been putting a large amount of resources into improving and increasing public transportation. However, public transportation is neither sexy nor efficient enough for the burgeoning middle class car owners to make the switch.

Some may argue road space rationing mechanisms such as those adopted by Beijing are more equitable than a more regressive congestion pricing scheme. In a rationing program, every car owner is restricted in the same way, whereas congestion fees may not matter much for rich people and government vehicles, but disproportionately affect the low to middle class. On the other hand, the Chinese public in general feels more comfortable with government policies that don’t lead to greater responsibility for government officials and agencies, which the public believes invites more corrupt practices that favor the rich and powerful — even at the expense of some of their “rights.”

The future of congestion pricing in China does not lie with a strong-willed government or politician. Rather, it lies in informing and educating the public, who are much more amenable than their American counterparts on such issues, illustrated by the acceptance of the License Plate Lottery and the End Number License Plate Policy. However, the objective merits of the policy, especially compared to the more stringent measures, have to be conveyed through non-official channels, preferably impartial commentators and intellectuals. Their presence in China is scarce, but their insight can provide much needed legitimacy. If more people and scholars are engaged in the policy discussion, and are willing to stand up against a sometimes ill-formed popular opinion, they can support policies that truly protect real public interests.

Guo Dong is a postdoctoral research scholar in the Earth Institute Research Program on Sustainability and Management. 


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