ROAD PRICING AND PUBLIC TRANSPORT: LESSONS FROM LONDON

Road pricing can enhance public transportation by increasing its speed and service frequency. I examine these effects with a model of local bus service in London’s city center. The model focuses on four considerations: the cost savings to transit users and operators from reduced road congestion; the service improvements made feasible by increased ridership; the potential pass-through of operator cost savings as fare reductions; and the resulting multiplier effects on ridership and service offerings. I apply the model using data from the first few months of a February 2003 pricing program. Simulation results suggest significant effects even if pricing revenues had not been used to augment the transit budget as they were in London: a ridership increase of 11%, a service increase of 7% and user cost savings equivalent to 38% of the fare. Net benefits from these effects are equal to 39% of initial operator costs. These effects, but not the net benefits, are even larger in cities with more typical values for bus subsidies and initial modal share.