Electronic road pricing schemes in selected places

• Many busy cities around the world have been facing serious traffic congestion problems, especially during rush hours in their core districts. Hong Kong is no exception. Recently, it has come up with a preliminary plan to introduce an electronic road pricing ("ERP") scheme in Central, restarting a project first proposed in the early 1980s and subsequently shelved due to political and privacy reasons. Meanwhile, a number of overseas places such as Singapore and Milan^{1Other European cities such as Stockholm and London also introduced their respective ERP schemes in the 2000s. Stockholm has adopted a cordon-based ERP scheme and has made reference to Singapore's scheme in devising its charging mechanism. London has adopted an area-based ERP scheme that is similar to that of Milan. Comparing across the three European cities, Milan has achieved a higher level of traffic reduction in the charging area after launching the ERP scheme.} have implemented their respective ERP schemes to address traffic congestion in their city centres. Singapore in 1998 launched the world's first ERP scheme, which has evolved over the years into a flexible policy tool for controlling traffic flow in its city centre and other urban areas. Milan introduced its ERP scheme in 2012 to meet the dual goals of controlling traffic congestion and air pollution in its city centre.
• The ERP scheme, alongside other complementary transport measures launched, has helped Singapore and Milan successfully ease traffic congestion in the specified charging areas. This issue of Essentials first highlights the proposed ERP scheme in Hong Kong and its latest development. This is followed by a discussion of the experience of Singapore and Milan in implementing their respective ERP schemes, to which Hong Kong might make reference when going ahead with the city's own proposed scheme.

• Traffic congestion has been a long-standing issue in Hong Kong amidst continuous growth in the number of licensed vehicles, which increased by 30% from 630 281 in 2011 to 817 874 in 2021.^{2Figures are as of December of the respective years. See Transport Department (2022).} This translated into an increase in the number of licensed vehicles per kilometre of road from 302 to 373 over the same period. Traffic congestion has been particularly serious in the Central Core District^{3The Central Core District is bound by Garden Road/Murray Road to the east, Hollywood Road/Lower Albert Road in the south, Rumsey Street in the west and the shoreline in the north.} where there is heavy traffic volume but limited room for road expansion.^{4Apart from rising traffic volume, congestion in the Central Core District is aggravated by prolonged stay of "chauffeur-driven vehicles" and illegal parking and loading/unloading activities.} According to the latest statistics available, the annual average daily traffic entering and leaving the Central Core District reached 503 400 vehicles in 2017, up from 463 300 in 2003.^{5See Transport Department (2019a, 2019b).} During noon peak hours, the car travelling speed on some roads within the Central Core District, such as some sections of Queen's Road Central, could fall to such low as less than 10 kilometres per hour.
• The Government has explored the feasibility of launching an ERP scheme to tackle the traffic congestion problem in urban areas since the 1980s. Three separate studies on whether ERP should be introduced in Hong Kong were conducted in 1983, 1997 and 2006 respectively.^{6The first study was conducted between 1983 and 1985, the second between 1997 and 2001, and the third between 2006 and 2009.} However, ERP was not taken forward then due to factors such as changes in economic situation at the time of the studies, privacy concerns and the lack of community consensus.^{7See Transport and Housing Bureau and Transport Department (2015).} In 2015, the Government rekindled discussion on ERP with the launch of a three-month public engagement exercise to solicit the public views on the proposal of introducing an ERP pilot scheme in the Central Core District.^{8The launch of the public engagement exercise served as a follow-up to the recommendations of the Transport Advisory Committee ("TAC"), which accepted the invitation of the Government in March 2014 to conduct a study on road traffic congestion in Hong Kong. TAC submitted a study report nine months later and recommended a total of 12 short to long-term measures to tackle road traffic congestion. One proposed measure is to start early planning for an ERP pilot scheme to promote efficient use of limited road space. See Transport Advisory Committee (2014).} Stakeholders were divided on the issue with some supporting the scheme and some others expressing strong reservations about it.^{9In 2017, the Government published the public engagement report for an ERP pilot scheme in which some people had expressed concerns over the scheme. These included adding fare burden on public transport passengers, giving priority to the rich in using the roads in the Central Core District, and affecting commercial activities and residents living in the charging area. There were also some others who had doubted the effectiveness of an ERP scheme in alleviating traffic congestion relative to other measures such as strengthening enforcement actions in the Central Core District. Besides, some were concerned about how the revenue generated from the pilot scheme would be used. See Transport and Housing Bureau and Transport Department (2017).}
• In 2019, the Government put forward a preliminary plan to introduce an ERP Pilot Scheme in the Central Core District^{10The Central Core District is considered as a suitable location for implementing an ERP pilot scheme in view of its importance as CBD in the territory and the severity of its road traffic congestion. In addition, it is served by excellent and high-capacity public transport services with an extensive coverage to various districts in the territory, allowing users of private cars and taxis to use different alternative public transport modes to access to this area. Furthermore, the Central-Wan Chai Bypass provides a free-of-charge alternative route to road users whose origins and destinations are not in the Central Core District to bypass the charging area.} as one of the Smart Mobility initiatives which promote the application of innovation and technology to build an intelligent traffic management system.^{11Smart Mobility is one of the six key areas of development under the Smart City Blueprint for building Hong Kong into a smart city. The overarching goals of the Smart Mobility initiatives are to ensure that the transport system is safe, informative, environmentally friendly, efficient and accessible.} According to the preliminary plan, the ERP Pilot Scheme will mainly cover congested roads in the Central Core District (the designated area) (see Figure 1) to minimize the impact on the residence nearby and commercial activities conducted within the area. The target of introducing the ERP Pilot Scheme is to reduce traffic volume in the Central Core District by 10% to 15%.^{12According to the Government, the ERP Pilot Scheme does not aim to increase government revenue. As such, it will consider providing additional recurrent resources broadly equivalent to the net revenue to be generated from the Pilot Scheme for implementing measures to improve public transport services and encourage wider usage.}
  Figure 1 – Proposed designated area covered under the ERP Pilot Scheme

  

  Source: Transport Department (2019a).
• The preliminary features of the proposed ERP Pilot Scheme include the following:
  • (a)
    technology – using the Radio Frequency Identification ("RFID") technology and supplementing it with the Automatic Number Plate Recognition ("ANPR") technology for identifying vehicles entering the designated area;
  • (b)
    charging mechanism – adopting a "cordon-based" charging per pass mechanism which charges a vehicle each time when the vehicle passes through a charging point during the charging period, and imposing variable charges at variable periods.^{13The cordon-based charging mechanism allows the charging level to vary based on time, location and travel direction in order to cater for different levels of congestion.} The charging points are located along the boundary (the "cordon") of the designated area. Vehicles are required to pre-install an "in-vehicle unit" for charging purpose; and
  • (c)
    charging level – the charging level and exemption arrangement^{14In the preliminary plan, vehicles such as mass carriers, emergency and security vehicles and vehicles with disabled person's parking permit may be exempted from paying the charge.} will be determined according to the carrying capacity and economic contribution of various types of vehicles.
• In addition to introducing the ERP Pilot Scheme, the Government has considered implementing a host of complementary measures to alleviate traffic congestion in the Central Core District. These measures include (a) offering the "park and walk" option to motorists travelling to Central by providing additional public parking spaces under the development projects undertaken around the periphery of the designated area and improving pedestrian access; (b) using video analytic technology in combating traffic offences that cause traffic obstruction such as illegal loading and unloading activities in "no-stopping" zones; and (c) further improving the public transport network to attract more commuters to opt for public transport in lieu of private cars for access to Central.

• In 2020, the Transport Department ("TD") established an international expert panel to offer advice on the implementation of the ERP Pilot Scheme.^{15The international expert panel comprises members from Hong Kong, the United Kingdom, the United States, Singapore and Sweden.} In addition, site trials of the detection system were completed in August 2021, the results of which indicated that the detection system concerned could operate in the narrow hilly roads in Central. TD will determine how the ERP Pilot Scheme should be taken forward, taking into consideration the traffic conditions of the tolled tunnels and their adjoining roads upon implementation of the Free-Flow Tolling System ("FFTS")^{16FFTS, another Smart Mobility initiative, adopts the RFID and ANPR technologies which are same as those proposed for the ERP Pilot Scheme. Implemented by phases from end-2022, FFTS enables motorists to pay tolls of the government tolled tunnels and Tsing Sha Control Area remotely using toll tags which are self-adhesive RFID stickers adhered to the vehicles for detection by boothless tolling facilities.} and the proposed Congestion Charging scheme for managing traffic of the three road harbour crossings^{17TD has planned to introduce a Congestion Charging scheme for the three road harbour crossings, i.e. the Western Harbour Crossing ("WHC"), Cross-Harbour Tunnel and Eastern Harbour Crossing, upon takeover of WHC when the build-operate-transfer franchise expires in August 2023. Under the scheme, which will operate on the infrastructure built for FFTS, different tolls will be charged at different time periods with due regard to the extent of congestion in order to suppress and divert excessive traffic during peak periods.} on top of Hong Kong's latest social and economic circumstances.

• Singapore is the world's pioneer in adopting road pricing as a policy tool for congestion management in its central business district ("CBD") with the launch of the Area Licensing Scheme ("ALS") in 1975. ALS was a manually enforced area-based charging scheme requiring motorists to purchase and display a special licence for entering a restricted zone during specified charging periods.^{18Under ALS, the costs of the special licence varied by the types of vehicles entering the charging area and had been adjusted over the years in response to the traffic flow situation. The initial charge of the licence for private vehicles was S$3 (HK$6) per day and S$60 (HK$125) per month. Certain vehicles such as buses, police and military vehicles and cars carrying at least four passengers were exempted from purchasing the licence for entering the charging area.} Though ALS had brought noticeable impact on reducing traffic entering CBD,^{19At the initial stage of implementation, ALS brought a 44% drop in traffic entering the charging area. The percentage drop in traffic flow still maintained at about 31% by 1988 despite increase in number of vehicles by 77% over the period. See Chin (2005).} the scheme was subject to limitations including inefficiency of operation and enforcement, inflexibility to adjust the charging periods and charges according to the traffic flow conditions, and the need to deal with multiple entries throughout the day.^{20One of the main limitations of ALS was its multiple-entry feature. Once an ALS licence had been purchased, the motorist could enter the restricted zone many times during the day. Thus, motorists paid only a one-time congestion charge for multiple entries into the restricted zone instead of paying every time they entered the area and contributed to congestion.} In 1998, the Land Transport Authority ("LTA"), Singapore's transport authority, replaced ALS with the world's first ERP scheme with a view to overcoming the limitations of ALS.

• LTA adopted the Dedicated Short-range Radio Communication ("DSRC") technology^{21DSRC is a wireless communication technology that enables secure and direct communication between vehicles and the surrounding infrastructure without involving any cellular infrastructure.} for its ERP scheme, facilitating charging per pass of the ERP gantry installed in the charging areas during the operating periods (i.e. 07:00 to 20:00 on Mondays to Saturdays).^{22There is no ERP charge on Sundays, public holidays and after 13:00 on the eve of certain public holidays.} Vehicles are required to install an in-vehicle unit with a stored-value smart card inserted in it for payment of the ERP charges when passing through each of the ERP gantries.^{23When a vehicle passes through an ERP gantry, the in-vehicle unit will be detected and the appropriate ERP charge will be deducted from the smart card. Alternatively, motorists can arrange to bill their ERP charges to their credit or debit cards by registering with the designated service providers.} In case an ERP transaction cannot be made due to reasons such as insufficient cash balance in the smart card or no in-vehicle unit installed, the enforcement cameras in the gantry will take a picture of the rear licence plate of the vehicle concerned and penalties will be imposed.^{24In case of insufficient cash balance in the smart card, the motorist concerned has to pay an administration charge of S$10 (HK$57) together with the outstanding ERP charges. For a vehicle passing an ERP gantry without an in-vehicle unit, the motorist concerned is required to pay a penalty of S$70 (HK$397) for each operating ERP gantry he/she drove through.}
• The ERP scheme is a cordon-based and point-based pricing scheme, with ERP gantries located within cordoned areas and at specific points along expressways and arterial roads. To cope with the changing traffic conditions in Singapore over the past two decades or so, LTA has gradually expanded the charging areas from an initial coverage of the CBD area and a few expressways involving 33 ERP gantries to the current coverage of the CBD area, the Orchard shopping district, major expressways and arterial roads involving 93 ERP gantries.
• Singapore's ERP scheme is also characterized by the following features that have contributed to the effective control of traffic flow in the charging areas/points:
  • (a)
    setting a highly flexible charging structure to respond to changing traffic conditions over the day at different locations – the current ERP variable rates range from S$0.25 (HK$1) to S$8 (HK$45) depending on the types of vehicles, location of the ERP gantry and time of passing the ERP gantry. The ERP rates are generally set in half-hour periods and the rates may change every half hour during peak hours to help spread traffic flow over a longer period;
  • (b)
    imposing equitable charges based on the road space that a particular type of vehicle takes up - while passenger cars, taxis and light goods vehicles are charged the regular ERP rates, heavy goods vehicles and small buses, and very heavy goods vehicles and big buses are charged 1.5 times and 2.0 times of the regular rates respectively. On the other hand, motorcycles are charged 0.5 times of the regular rates. No exemption of payment is offered except for emergency vehicles; and
  • (c)
    reviewing and adjusting the ERP rates regularly – the ERP rates are reviewed every quarter and usually adjusted during the June and December long school holidays based on the traffic conditions at the time with a view to keeping traffic flow at the optimal speed range of 20-30 kilometres per hour on arterial roads and 45-65 kilometres per hour on expressways.^{25For example, if the average speed in a specific ERP area is higher than the optimal speed, the ERP rates for that area will be lowered. In case the average speed is lower than the optimal speed, the ERP rates will be increased., 26Due to the outbreak of the Coronavirus Disease 2019 pandemic, Singapore has conducted more frequent reviews of the ERP rates since early 2020. Furthermore, as a result of the drop in traffic in the charging areas after the launch of the "circuit breaker" (a partial lockdown) between 7 April and 1 June 2020 amid the pandemic, the Singaporean government suspended ERP charging at all gantries between 6 April and 26 July 2020. Upon review of the latest traffic conditions, ERP charging has only been resumed for selected expressways since 27 July 2020.}

• LTA has introduced the ERP scheme as one of the major policy tools to manage road usage demand, complementing it with other key strategies to further ease traffic congestion and promote transportation efficiency. These strategies include (a) building a comprehensive road network and maximizing its capacity; and (b) developing a quality and efficient public transport system to alleviate the reliance on private vehicles.^{27In order to promote acceptance of the ERP scheme, LTA provided the in-vehicle units free of charge at the time of launching the scheme.} They are of particular importance to the operation of the ERP scheme, as they ensure alternative routes or transport modes are available for motorists who intend to bypass the charging areas/points and save on ERP charges.

• According to LTA, the ERP scheme has helped reduce traffic volume into Singapore's CBD by about 10% to 15% in the first two years of launch. Extension of the scheme to manage evening peak hour congestion for home-bound trips on the major expressways in 2005 brought about 20% to 30% reduction of the traffic flows in the first few months of launch.^{28See Chin (2005) and Land Transport Authority (2010).} Financially, the ERP scheme generated about S$150 million (HK$857 million) per year in the early 2010s.^{29In Singapore, ERP has always been positioned as a traffic management tool and was not implemented to increase government revenue. Indeed, with the ERP system replacing ALS, the revenue collected was less than that previously collected from ALS. See Theseira (2021).}
• Over the years, the ERP scheme has induced motorists to change their travelling patterns such as reducing number of trips to CBD, changing to unpriced or lower-priced alternative routes and taking public transport modes, thereby leading to reduction in traffic volume and improvement in travelling speed in the charging areas. Reflecting this, during the 14-year period between 1998 and 2012, the traffic volume to the CBD area has only increased marginally by 0.8% per year on average compared to the 3% annual growth in vehicle population.^{30See Energy Foundation (2014).}

• In 2016, LTA committed S$556 million (HK$3.1 billion) to upgrading the DSRC technology-based ERP scheme into one based on the Global Navigation Satellite System ("GNSS"). The satellite-based GNSS scheme, to be rolled out in 2023, enables LTA to flexibly expand the scheme coverage without the need for new gantries which are costly to build and maintain, and consider more equitable charging mechanism such as distance-based road pricing. The existing in-vehicle unit will be replaced by a new onboard unit with a big screen that can display value-added information for motorists such as maps, real-time traffic information and advance alerts on charging locations.

• Milan has adopted an area-based ERP scheme, the Area C scheme, in 2012 with a view to easing the persistent traffic congestion issue as well as reducing transport-related air pollution in the city centre. The Area C scheme replaced its predecessor Ecopass scheme introduced in 2008 for disincentivizing polluting vehicles from entering the city centre by imposing an entry charge relating to the pollution class of the vehicles.^{31Under the Ecopass scheme, vehicles of specified pollution class entering the charging area between 07:30 and 19:30 on Mondays to Fridays had to pay a pollution charge ranging from €2 (HK$23) for newer and lower polluting gasoline-powered vehicles to €10 (HK$115) for older and heavy diesel-powered vehicles. Hybrid, electric and alternative fuel vehicles are free to enter.} The Ecopass scheme had been effective in bringing down the emission of main pollutants by 15% to 45%. While the scheme also brought a drop in traffic flow in the charging area in the initial year of launch, the reduction was not sustainable as many motorists had replaced their polluting vehicles with environmentally friendly vehicles, leading to exemption from paying the entry charge.^{32The percentage decline in traffic flow in the city centre moderated somewhat from 21% in the initial year of launch to 11% in 2011. See Agenzia Mobilita Ambiente Territorio (2017) and Croci and Douvan (2016).} The Area C scheme was subsequently launched to address the limitations of the Ecopass scheme in controlling traffic congestion in the city centre.

• The Area C scheme covers Milan's city center, i.e. Area C,^{33The charging area is about 8.2 square kilometres, covering about 4.5% of the area of the Municipality of Milan.} which is accessible through 43 entrance points monitored by a system of cameras for enforcement purposes using the ANPR technology. The number plates detected by the cameras will be matched with the relevant databases to determine the appropriate charges to be imposed and any overdue charges involved. The operating hours of the Area C scheme are from Mondays to Fridays (excluding public holidays) between 07:30 and 19:30. Payment can be made by buying tickets at designated outlets or online on the day of access or by 24:00 the next day, or through direct debit arrangements.
• The Area C scheme features the following charging and operation arrangements for meeting the dual goals of controlling traffic flow and transport-related air pollution:
  • (a)
    charging mechanism – a daily flat rate of €5 (HK$42) is imposed on private and commercial vehicles for unlimited entry into the charging area.^{34A deferred payment of €15 (HK$125) is imposed on motorists who do not make payment on the day of access or by 24:00 the next day.} However, rental vehicles with more than nine seats are charged at higher rates ranging from €40 (HK$332) to €100 (HK$830) depending on the length of the vehicle in question;^{35School buses are charged at lower rates ranging from €15 (HK$125) to €40 (HK$332).}
  • (b)
    concessionary rates – resident vehicles and service vehicles for companies located in Area C are charged at a concessionary rate of €2 (HK$17) and €3 (HK$25) respectively after registration;
  • (c)
    exemption arrangement – apart from vehicles owned by public bodies and emergency vehicles, public transport, motorcycles and environmentally friendly vehicles such as electric vehicles and hybrid vehicles are exempted from the charges; and
  • (d)
    prohibiting certain types of vehicles from entering Area C – vehicles exceeding 7.5 metres, except those granted with exemption, and high-polluting vehicles are prohibited from entering Area C during the operating hours of the scheme.

• The Area C scheme has gained wide public acceptance as the local government has committed to reinvesting the revenue generated from the scheme in projects aiming at enhancing sustainability of the transportation system and improving alternative transport modes for travelling to the city centre. For example, since 2012, the revenue collected from the scheme has been reinvested in improving the frequency of public transport services, and implementing the city's bicycle sharing scheme and other transport-related infrastructure projects.

• The Area C scheme has brought visible impact on reducing traffic flow in the city centre of Milan. In 2012, the average number of access to Area C per day stood at 90 800, down by 31% from 132 000 in 2011. Up till 2018, the annual percentage reduction in traffic flow compared with the level in 2011 maintained at around 29% to 38%.^{36See Municipality of Milan (2022).} The reduction was attributable to, among other things, changes in motorists' travelling patterns such as avoiding passing through Area C when travelling to other destinations or taking up public transport instead of driving. The scheme has also been effective in driving down road traffic emissions and improving road side air quality, reducing total PM10 emission by 18% year-on-year in 2012. Besides, the scheme generated about €20 million (HK$172 million) to €30 million (HK$258 million) per year between 2012 and 2016, which had been reinvested in transport-related projects.^{37See Agenzia Mobilita Ambiente Territorio (2017).}

• Hong Kong has planned to introduce a cordon-based ERP scheme with a variable charging per pass mechanism in the Central Core District. The details of operation and charging arrangements have yet to be released by the Government. Singapore and Milan have tailored the features and operation arrangements of their respective ERP schemes to meet traffic control and other related objectives, and both have succeeded in controlling/reducing traffic flow in the designated charging areas. Over the past two decades or so, the ERP scheme in Singapore has evolved into a dynamic and flexible scheme with the government regularly adjusting its coverage and charging levels in response to the changing traffic conditions. Milan's Area C scheme has remained virtually unchanged in terms of its coverage and charging mechanism since its inception in 2012. Yet, in order to meet its dual goals of traffic and air pollution control, the design of the Area C scheme has initially built in differential charging levels, exemption for cleaner fuel and emergency vehicles, and prohibition arrangements to prevent large and/or high-polluting vehicles from entering the charging area during the operating hours of the scheme.
• In order to solicit public acceptance, both Singapore and Milan have set clear and transparent objectives for their respective ERP schemes, and introduce complementary measures to provide alternative transport modes for reaching the charging area and routes for motorists intending to bypass the charging area and avoid the ERP charges. Milan has also committed to reinvesting the revenue generated from the ERP scheme in transport-related projects, as well as providing concessionary rates to residents and companies locating in the charging area to relieve their burden.