Congestion charges are looming for Irish motorists. Here’s how they work elsewhere

The Government is to examine a raft of new measures to try to encourage people to leave their cars at home – of which new charges for cars entering congested urban centres would form a central part. A memo on the subject has been drawn up by Transport Minister, Eamon Ryan; it had been due to be considered at Tuesday’s Cabinet meeting, but was delayed, we are told, to give other Ministers more time to study it. In other words, a row is on the way, as Ministers try to agree a way forward in the months ahead. But how would new congestion charges and other measures aimed to get motorists out of their cars work?

1. Charging for congestion

Car congestion charges have two main policy goals: first, creating more room on the roads and reducing the significant costs of congestion and second, cutting harmful emissions. The charge also raises cash, but we will come back to that later.

Congestion charges were originally conceived as a way to reduce the traffic on clogged-up urban roads. The economic theory here is that motorists factor in costs they pay themselves – for fuel, for example, or maintaining their car – but they pay no attention to the wider costs to society of congested roads. (Economists call this a negative externality – typical when people use free public resources such as roads.) Congestion charges are designed to charge motorists for this wider societal impact – and thus try to get them to change their behaviour and drive less. The costs of operation of such systems are high – typically 15 to 30 per cent of the gross revenue raised, according to an OECD analysis. But the economic and social costs of congestion are very significant.

The practice has reached sophisticated levels in some places, particularly Singapore, where prices to motorists vary based on time and location and are adjusted regularly to try to maintain certain traffic speed levels, as part of a wider traffic management policy driven by advanced technology and in car control units. Using this, the authorities aim to adjust prices to ensure certain traffic speeds in city centre areas. Economists often favour such sophisticated approaches, as they allow more precise targeting, but winning political acceptance can be challenging.

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In most countries, the approach is less sophisticated, for example in London where motorists pay a £15 (€16.86) a day to enter the central city zone between 7am and 6pm, Monday to Friday, and 12 noon to 6pm at weekends or on bank holidays. This is policed by fixed road cameras which cross check number plates against those who paid the charge and issue penalty notices. The charge covers all trips within the cordon for a day – in other cities, for example Stockholm and Gothenburg, there are charges which apply every time a car enters the central zone, varying by time of day, though typically with a daily cap. Milan has a fixed €5 charge for most of the working week in its central area, managed by gantries and number recognition technology.

In London, the charge must be paid within three days – though most people sign up for automatic online payment. In Stockholm, the motorists gets a monthly bill – again many opt for automatic payment – with write-offs available against tax bills. Residents within central zones and emergency workers typically get discounts – in London. residents get a 90 per cent reduction. The London scheme currently involves a 100 per cent discount for electric vehicles, but this is due to end in December 2025.

2. Do these charges work?

The evidence suggests that they do. While it is always hard to estimate what would have happened in the absence of a charge, motor vehicle trips are often estimated to fall by 15 to 20 per cent, with significant reductions in pollution also recorded. Experience varies hugely, however. For example, in the earlier years of the charge, pollution from petrol cars fell in London, but damaging NO2 emissions increased as people used more diesel-powered buses and black taxis.

The suggestion in an initial analysis by the National Transport Authority (NTA) is that the proposed congestion charge could be €10 in Irish cities – though what might emerge after political consideration, and when, is unclear. The Commission on Taxation recommended that such charges be introduced soon, followed in time by more advanced charging systems based on factors such as distance driven, time of day and location – which would require significant technological development and consideration of issues such as GDPR rules. Another possible approach, which Transport Infrastructure Ireland has been asked to examine, is multi-point tolling on major roads, meaning motorists would face higher charges the further they travelled.

3. What other charges could be levied?

The NTA analysis also proposes that there could be a fourfold increase in parking charges. The economic basis for this – as well as discouraging car trips – is to free up more road space for walkers and cyclists. Economic theory has even proposed the examination of so-called curb charges, for pulling in.

In the Republic, the Commission on Taxation recommends a car-parking duty in addition to the current charging regime and for employees to face costs if they use parking provided by their employer. How exactly this would work is not spelled out.

International experience also suggests another option, specifically aimed at discouraging the most polluting cars. In London, a Ultra-Low Emissions Zone (ULEZ) was introduced in 2017, This involves an additional charge of £12.50 a day for driving in the central zone for older more polluting cars, generally those bought before 2007. This is paid in addition to the congestion charge. (Technically it applies to cars not meeting Euro 4 standards for petrol cars and Euro 6 for diesel – generally cars more than 16 years old.) This has led to a big fall in more polluting vehicles and improvements in air quality. The area covered by the ULEZ will expand this summer. London also operates a separate scheme involving higher charges on more polluting goods vehicles.

A number of other UK towns and cities have also introduced charges on more polluting cars. For example, Birmingham charges more polluting cars – using the same definition as the London ULEZ – £8 for entering its central city area. Initial results show a fall in traffic of older cars subject to the charge and a 13 per cent fall in NO2 emissions. Bristol has a £9 charge on more polluting cars since November 2022. In Brussels, the most polluting vehicles are banned from the central area.

The emergence of these clean air and low emission zones is an example of how technology can allow policy to move on from basic per day or entry point charges to meet other goals. This is likely to become part of the Irish debate as well. Milan, one of the early adopters of a charge for entering its central area by car, is now examining London-style restrictions on more polluting traffic.

4. Getting support for the policy

International experience shows the challenge in getting acceptance for congestion charges, with attempts to introduce such levies failing in many cases, despite the demonstrable advantages. The Commission on Taxation points out that even if all vehicles were electric, there would be a case for charges to reduce road congestion, which has been shown to impose heavy costs in terms of delays which affect people’s quality of life, particularly regular commuters. Political battles have been fought over charges in many cases, not least in London and in some cases, such as Milan and Stockholm, they were legitimised by public votes. In Ireland, the lack of powerful local governments to argue for such strategies may be a factor – in London, Ken Livingstone as mayor played a vital role.

The availability of public transport as an alternative is also a vital issue, as highlighted in the Irish case by the Tax Commission and referred to by Eamon Ryan. A report by EY for the NTA found that it was not the price of public transport which was vital in terms of people deciding to move from cars, but the availability. This points to the importance of improving bus services in particular in the short term – rail lines are important too, but take longer. A key political decision will be balancing the timing of congestion charging versus the delivery of public transport improvements.

5. The wider context for motorists

Motorists are going to be faced with a range of new taxes and charges in the years ahead. As the car fleet goes electric, the exchequer will lose up to €5 billion annually in cash from collapsing excise and VAT revenue on fuel and lower motor tax and VRT based on the current emissions-based charging. The Commission on Taxation recommended that motor tax and VRT be charged on another basis in the future to maintain revenue because raising cash for maintaining roads will still be important. Congestion charges would also raise revenue – and there will have be thought on where this is deployed – though their primary goal is to change behaviour. Taxes may need to be raised in other areas too to make up for lower motor taxation.

For motorists, congestion charging may only be the start of it.