Congestion Pricing for Stockholm

JERRY MECHLING OLE WETLESEN BORGE ARTYOM MATUSOV Congestion Pricing for Stockholm Congestion pricing⎯fees to discourage peak-use traffic that creates...
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JERRY MECHLING OLE WETLESEN BORGE ARTYOM MATUSOV

Congestion Pricing for Stockholm Congestion pricing⎯fees to discourage peak-use traffic that creates congestion and pollution—has long been favored by economists, but rarely implemented by politicians. However, on October 1, 2006, after four years of debate, a seven-month field trial, and split referendums (city residents in support and the surrounding county in opposition), a newly elected national government decided to permanently implement a congestion tax for Stockholm, Sweden. Was Stockholm an exception that proves the long-standing rule about the impossibility of congestion pricing? Or a harbinger of things to come in a world newly alert to climate change and environmental challenges? If Stockholm offered lessons, what were they? And if the Stockholm solution might work for other municipalities, what conditions and analysis might identify regions ripe for a similar approach? What should we do about congestion pricing—both in Stockholm and elsewhere?

Traffic and the "Dennis Settlement" Stockholm and its surrounding county holds about 1.95 million residents. The City of Stockholm houses some 60 percent of the area's jobs and a bit less than half the total population. Of the 227,000 people working in the inner city, 71 percent commute from outside. The city is divided by water in three out of four directions, forcing traffic to cross on a limited number of bridges. The area is heavily congested, even though 73 percent of commuters to the inner city use the well-developed public transportation system.

This case was prepared by Professor Jerry Mechling and case-writers Ole Wetlesen Borge and Artyom Matusov. HKS cases are developed solely as the basis for class discussion and are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2008, President and Fellows of Harvard College.

Congestion Pricing in Stockholm

In recent decades, congestion has led to a number of proposed transportation improvements. A broad agreement—the so-called “Dennis Settlement" 1 —was reached in 1992 between the Social Democrats and the Moderate party, the major Swedish political parties. This settlement proposed investments of about SEK 36 billion ($6.5 billion USD) over a 15 year period, distributed equally between roads, public transit, and environmental measures. The roads were to be financed by tolls, whereas public transit was to be funded in equal parts by the state and local government. The “Dennis Settlement” was heavily criticized. The main objection was a lack of environmental safeguards for the road projects. To stay in power, the Social Democrats, who headed the government from 1994 until 2006, needed support from parties opposed to the settlement. As a result, it was abandoned by the Government in 1997. By that time, however, a majority of the road and transit projects had been finished or at least approved. Contrary to the settlement, the state financed the majority of the new investments, partly due to a lack of enabling legislation for road tolls. Even with the new roads and public transit, traffic by 2005 had slowed down by 35 percent on the main road network. The biggest problem was the Inner City, where congestion interfered with deliveries and buses, and cars were responsible for one-third of total CO2 emissions. A variety of studies concluded that congestion could not be solved solely by new roads or public transit. 2

Stockholm calls for a congestion tax trial After abandoning the “Dennis Settlement,” the Social Democratic still wanted to assess regulating traffic through pricing. This led to an inquiry whose results, delivered in January, 1999, proposed legislation for "environmental steering" road charges with implementation at the local level. This was ultimately considered unconstitutional since counties and municipalities were entitled to tax their own inhabitants only, and an environmental steering charge would seem, in effect, to be a tax. In 2000 the government appointed the “Stockholm Committee”—consisting of politicians from local and central government, civil servants and infrastructure experts—with a mandate to propose transportation improvements within the County. In March 2002 the government gave the committee an additional mandate to assess how congestion taxes might be implemented. According to the mandate, the tax had to be part of a broader strategy to reduce congestion and improve the environment, and the Government would prepare specific legislation only if a county or region, based on a decision by an overwhelming majority, requested such action.

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Congestion Pricing in Stockholm In the lead-up to the 2002 elections, Annica Billström, the Social Democratic candidate for Mayor of Stockholm, promised to oppose any congestion tax. 3 This position was supported by sentiment within both the city and surrounding municipalities. However, upon election, Mayor Billström repositioned herself. After the elections, the Social Democrats in the national parliament once again formed a coalition with the Left and Green parties. The Green party insisted that the Social Democrats implement a trial congestion tax in Stockholm’s inner city area, provided there was local approval. 4 In compliance, two weeks after the national agreement, Mayor Billström got the City Council to agree to a trial. She then wrote a letter to the Minister of Communications requesting that the government fund the investments the trial necessitated. This request was granted (ultimately Stockholm received SEK 3.8 billion, or USD $500 million).

Organizing the trial In February 2003, the City Executive Board of Stockholm made directives for implementing the trial. The Executive Office was instructed to establish a Congestion Tax Secretariat and present an implementation plan within two months. The resulting plan recommended a single central zone with one major exemption⎯free passing through “Essingeleden” – a highway passing along the western part of the city center. The plan called for short range radio transmitters in every vehicle, with video taping of the license plates. The City Council adopted implementation principles in June 2003. Among them were: •

The goal should be to determine whether a congestion tax in combination with better public transit could produce reduced congestion, a better traffic system, and a better environment



The system should be time-differentiated with fees of $3 USD during peak hours and $1.50 USD during moderately busy hours



Exemptions should be made for emergency vehicles, alternatively fueled vehicles, etc.



The trial should have a set time period and Stockholm citizens should be able to vote on a permanent tax in a referendum held at the same time as the general election in fall 2006.

To implement the plan, the Congestion Tax Secretariat was established as a small project management office with three groups: 1. charging system technology 2. traffic planning and evaluation, and 3. information/communication.

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Congestion Pricing in Stockholm Each group had its leader and was overseen by a reference group consisting of managers from relevant authorities at the city, county and national level. At the national level, the Ministry of Finance proposed a congestion tax bill on April 28, 2004, transferring responsibility for procurement, technical solutions, and other implementation to the Swedish Road Administration. This bill was adopted by the parliament on June 16 (by a vote of 171 to 137). Central features were: •

The tax should be imposed on Swedish owned cars, with exemptions including cars running on alternative fuel (see Exhibit 1)



The tax should be measured and enforced via information technology: “The National Tax Board is the taxation authority. On behalf of this authority, the Swedish Road Administration shall, through automated processing based on information in the vehicle registry, decide the congestion tax, service charges and surcharges as well as carry out the collection of such tax and charges...”



The tax should be imposed when a car passes through a control point on working days between 6:30 AM and 5:29 PM, with the exemption of July. The tax should depend on anticipated congestion (see Exhibit 5)



The accumulated tax per 24 hour period should not exceed SEK 60 (approximately $10 USD). A tax bill for a car that has passed through a pay station should be made once per day



The cordon around the inner city was drawn up on a map (See Exhibit 2)



Vehicles by-passing Stockholm via the E4 highway “Essingeleden” would not be subject to the tax



Cars entering from the island Lidingö, which can only be accessed through the inner city, were exempted from the tax if they left the inner city within 30 minutes after entrance

For their part of the project, the Swedish Road Administration developed a relatively small project organization that reported directly to the Director-General. The project consisted of permanent employees as well as external consultants and worked through two different organizations, one handling technical issues and system operations, and the other handling communications. 5

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Congestion Pricing in Stockholm The implementation of the trial was then divided among several authorities at the national, county and city level. The City of Stockholm was responsible for general information, analysis of the test period, parking issues, and public transit. The County of Stockholm was coresponsible for the development of public transport through its subsidiary Stockholm Transport, while the Swedish Road Administration was responsible for developing the tax collection system and information about payment. (Exhibit 6 shows the major agencies involved.)

Developing the charging system The Executive Board decided to procure the charging equipment, systems, and operations in two stages: First through a general tender, and then an invitation to qualified suppliers based on a more detailed document. Stockholm sought a system to support a free flow of traffic and manage all payments and customer service, but did not specify how this was to be achieved. The first tender was advertised in July 2003. Six companies expressed interest and four were invited to submit full proposals. In May 2004 the procurement was transferred from the City of Stockholm to the Swedish Road Administration. The SRA awarded the contract to IBM Svenska AB (IBM’s Swedish subsidiary) on July 9, 2004. According to the contract, IBM was to build, run and coordinate the system through the trial period, for which it would be paid $300 million USD. 6 Two of the rejected bidders contested the award. The legal process went on until the Supreme Administrative Court upheld the award on March 30, 2005. The Government eventually started the test period on January 3, 2006 – 10 months after the final green light was given to IBM. At IBM the contract was handled by a project group headed by Ms. Lena Knutson. She recounts: “The business challenge was to design and build a turnkey solution for road charging including an end-to-end business and system solution within 11 months, and then to run an operation for 12 months in a cost efficient way. IBM had a contract with the Swedish Road Administration with total end-to-end responsibility for the operation. The project was around 4,000 people including all partners. Within IBM some 200 people participated in the Design and Build phase, with 75 in operations. The number of passages per day was 360,000, generating about 170,000 tax decisions every day. The solution included 7 major partnerships. These challenged our governance structure and multi-vendor core competencies within an extremely time-pressured project.” The system’s main components, all built on open standards, were: 1. Roadside equipment to collect commuter information from 18 control points around the inner city (see Exhibit 5). The equipment uses cameras and Optical Character Recognition (OCR) technology to recognize the license plate numbers. Vehicles with 5

Congestion Pricing in Stockholm automatic payment plans have transponders based on the Dedicated Short Range Communications (DSRC) protocol. A roadside Multi-Lane Controller (MLC) makes a data file with 1) at least two photographs, 2) the OCR interpreted registration number, 3) the transponder’s ID-number and 4) the time, date and place of passing. 2. A pre-processor that takes information from the control points and generates tax decisions. The license plate pictures are scanned one more time. If the pre-processor is not able to read the plates, the pictures are forwarded to operators for manual assessment. The pre-processor is updated on a daily basis with inputs from the Swedish Traffic Registry on tax-exempted vehicles and vehicle owners – i.e. the names of the persons liable for the tax. If a vehicle is to be taxed, the system calculates the tax for each passage and adds them together. The SEK 60 per day tax cap and the Lidingö exemption rule are then applied automatically. 3. A business process platform to book tax decisions and to handle payments, reminders and reports. 4. A web portal – with both a public and an intranet website for customer service and the National Tax Board. Vehicle owners can check here how much they are liable for. In addition, IBM established a call center where users could make inquiries, lodge complaints, or request a mailed invoice. The center initially held 500 customer service representatives, but was downsized after the trial to about 60. Some 96 percent of the plates are recognized by the software. When the number is unreadable, two operators assess the pictures independently. If they cannot agree, a third operator decides if the plate can be read. If not, the picture is deleted. The system has more than 40 interfaces with other IT systems. Among them are: •

The Swedish Traffic Registry. The pre-processor and business process platform are updated daily using data extracted from the Traffic Registry.



The National Tax Board. This office handles reviews and appeals, and also decides on exemptions, payment disputes, and refunds.



The National Enforcement Service. This unit handles unpaid taxes including services and surcharges for debt collection.



The Swedish Postal Service. This unit contracts for in-vehicle transmitters and manages the reminders and passage information.

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Congestion Pricing in Stockholm •

Pressbyrån kiosks and 7-Eleven convenience stores. These handle congestion taxes in person and via the Internet, receiving $1.50 USD for each processed order.



Bank and payment systems. The Swedish bank Nordea handles the congestion tax account for the government, and the Swedish Bank Giro Centre handles direct debit payments. Giro payments are processed via bank branches, Internet banks, and envelope services provided by banks.

The system has adjusted smoothly to evolving demands. Because the system is based on open standards, expansions can rather easily be integrated with other systems, an important part of the project. Knutsson indicated that, while incorporating all the requirements presented difficulties, the fact that the Swedish Road Administration oversaw the process and closely collaborated with IBM was a key factor for project success.

Tax Payments Most car owners paid their taxes by “autogiro,” where a transponder in the car detected passage and automatically debited the owner’s bank account. During the test period, transponders were sent free of charge to the 63% of owners who agreed to automatic payments. Another 24 percent paid at kiosks at Pressbyrån or 7-Eleven convenience stores. The final 13 percent paid by traditional bank payments. Tax payments were due within five days. To find the liability, the owner could inquire at a Pressbyrån or 7-Eleven kiosk or a web page established for this purpose. On the fifth day, the system mailed a request for payment plus a service fee. During the trial, 96 percent of the payments were on time. Knutsson noted that billing was particularly challenging because it was a constant timepressured exercise where commuters could not be charged more than SEK 60 per day (and Lidingö residents were exempted).

Privacy Protection A system with more than 40 interfaces with other systems raises obvious privacy issues. The Swedish Road Administration was responsible for protecting personal data in accordance with the law. To protect privacy, the cameras at control points did not take pictures of anything inside the vehicle, or even of the vehicle itself, and the license information caught by the camera was stored only until the tax was paid. The tax bill (registration number and amount) was a public document, but information about which control point(s) were passed and when was kept private. If users wished to access this information, they could go online to request that a paper copy be mailed to their home address. Although there were no privacy stipulations in the trial 7

Congestion Pricing in Stockholm tender, IBM worked closely with the Swedish Road Administration and other authorities to ensure that all legal requirements were met.

Impacts on public transport and commuter parking As part of the trial, the county-wide Stockholm Transport Authority predicted that about 12,000 people would switch to commute by public transit. To prepare for this, the Authority proposed 12 new direct bus lines, two new trunk lines, and an extension of existing trunk lines. These proposals were adopted at the national government’s expense. 7 Stockholm Parkering AB – a City-owned parking company – developed 10 new parking areas close to public transit. Stockholm Transport expanded 26 parking areas in cooperation with local municipalities. The total number of new parking spots was 3,600, all of which were offered free of charge during the trial.

Communication issues The communication goal for the tax trial was: Everyone who drives a Swedish registered vehicle in the Stockholm inner city after the turn of the year 2005/2006 shall know of the congestion tax and that it must be paid without having been prompted to do so. 8 Car owners thus needed to learn whether the tax applied to them and—if it did—how to pay. To get the word out, the project used newspaper announcements, roadside boards, banners and advertising on public transit, radio commercials, customer service centers and websites. The Road Administration also distributed a pamphlet by mail to all Swedish car owners. Swedish media showed great interest in the implementation and contributed to the distribution of knowledge. Information about the trial was meant to be neutral, and IBM was forbidden from promoting the congestion tax in any way. As the trial began, about 500 people worked in the customer service unit, handling about 10 000 inquiries per day. Call volume went rapidly down after the first few weeks, as did the customer service staff.

The impact on traveling patterns, congestion and the environment During the trial, the number of car trips to or from the Inner City went down 22 percent (16 percent down in the morning and a 24 percent down in the evening). Thus the 15 percent target reduction was easily achieved. The decrease was more or less the same in all directions except for Lidingö island, where car owners were exempted if passing through the inner city. The vehicle kilometers travelled in the inner city fell by approximately 14 percent. 9 The number of public transit journeys increased by 5 percent, or 30,000. 10 After the trial, the old travel 8

Congestion Pricing in Stockholm pattern quickly reemerged (see Exhibit 7). The tax was considered the main reason behind the transport shifts, but an increase in gas prices during the trial probably increased the effects. During the trial, the time required for journeys to or from the city center were reduced by about one third in the morning and one half in the evening. Within the inner city, travel times also decreased considerably. 11 According to City of Stockholm estimates, the emissions of particulates and nitrogen oxide from traffic fell by 8-12 percent in the inner city as a result of the congestion tax; for the whole city emissions were reduced by of 3-5 percent (see Exhibit 8). 12

A Quantification of the Tradeoffs The congestion tax shifted travel patterns away from peak road travel and created a new source of revenues that could be used in a variety of ways (new highways, public transit, and/or however the government decided). A key question for such a shift is whether, in the long term, the benefits are worth the costs. Answering this question requires some sort of monetization or other quanitification to aggregate and compare effects over time. Such a study was produced for the Stockholm trial (a summary of the results can be seen in Exhibit 9). 13 Among the most important conclusions, expressed as average annual impacts for the Stockholm region in millions of SEK per year: SEK/year in millions Description -175 Costs to road users (costs of the tax were greater than the value of the time saved) 211 Benefits from reduced gas emissions, better health, and road safety 729 Value of new government services including bus service expansion -341 Net cost of bus service expansions 424 Net benefits per year In general, road users lost but society gained. The above figures did not include the amortized costs of setting up the collection system, which were estimated at 76 million SEK/year, leaving a sizeable net benefit overall. Analysis by another firm used less optimistic estimates including a shorter period for amortizing the collection system; the conclusion in this case was that congestion was too low and collection costs too high to justify the tax. 14

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Congestion Pricing in Stockholm

Equity effects While car users as a group appear to lose through the tax, the impact on an individual car owner depends on the value of his or her time (time saved through less congestion is worth it for those with high enough incomes). As it turned out, about 20 percent of the car owners paid 75 percent of the congestion taxes collected. The tax itself negatively affected: • • • • •

the inner city and Lidingö more than other areas high-income individuals more than low-income individuals (because they more often used their cars to commute) employed people more than others households with two adults and children more than other households men more than women

Except for the inner city population, those who paid the most tax also gained the most via reduced congestion. Note that the overall equity of the tax—the tax plus related changes—is very dependent on the estimated value of how the revenues are spent.

The public response—from negative to barely positive Gallup polls prior to the trial showed that a majority were opposed to the tax. A poll in June 2005 had 71 percent in the county and 70 percent in the city against a tax. 15 When asked about a trial period, however, the numbers were a bit more positive, with 52 percent in the county and only 45 percent in the city opposed. The polls during and after the trial indicated yet more positive views. A Gallup poll in September 2006, just prior to the referendum, showed 56 percent "yes" in the city and 52 percent "yes" in the county. In the actual referenda, it was 51 percent "yes" in the City and only 40 percent "yes" in the surrounding county.

The ruling coalition decides Shortly after the parliamentary elections of 2006, the leaders of the parties in the ruling Alliance for Sweden coalition submitted a joint communiqué announcing support for a permanent congestion tax. The primary justification for reversing their pre-election opposition was that the Stockholm region direly needed new roads and highways for which there was otherwise no available funding. 16 The congestion charge was presented as a means to finance such projects. In particular, the Government abandoned the Citybana highway project, which all major parties in the parliament had previously supported, and which was to go from north to south traversing through central Stockholm, in favor of the Förbifart Stockholm highway bypass, which would also go from north to south while circumventing Stockholm to the west. The coalition mentioned that, pending an ongoing constitutional review to be completed by December 31, 2008, the county and municipal authorities might be able to administer the tax, or 10

Congestion Pricing in Stockholm the tax might be converted into a charge for this purpose. The Government further pledged to negotiate via a committee composed of government, county and municipal officials and to come up with a compromise that everybody could accept. Although the Alliance acknowledged that a majority had voted against the tax, they argued the electorate would now support it because revenues would go toward road projects. According to some insiders, however, the real reason behind the policy shift was a concession by the Moderate party to gain support on ministerial posts from the Center party (which is more sensitive to environmental issues). 17 Despite worries about how the tax turn-around would be received, public reaction was mild. Unlike 2002, when the Dennis Plan was scuttled, a majority in Stockholm City had supported the tax in a referendum and it was thus seen as more legitimate. As for the surrounding municipalities, these were more solidly conservative areas and less likely to abandon the conservative-based coalition. The congestion tax also aligned with Sweden’s strong sense of environmentalism. This made supporting the tax easier for the Moderates, as their platform needed strengthening in this area. 18

The congestion tax passes In the bill proposing the congestion tax, all operating income was to be set aside in a special fund to finance the Förbifart Stockholm. In addition, transportation projects needing speedier financing could borrow from the congestion tax fund and then repay out of their regular budgets. The Social Democrats—not part of the ruling coalition—voted against the bill. The Left and Green parties abstained because the fund would not be used for public transit. Some Social Democrats claimed that the Government had betrayed the electorate, since the 2006 referendum had asked if voters agreed that public transit and greater environmental safeguards should be funded by a congestion tax, and these were not part of the final bill. Despite opposition, the bill enabling a permanent congestion tax passed on June 20, 2007.

Financing transportation infrastructure with the congestion tax According to Staffan Ingvarsson, the Chief of Staff in the Stockholm Mayor’s Office: “The building of the Förbifart Stockholm has been a priority for the parties in the majority coalition in Stockholm for twenty years. In discussions between the government and local municipalities that took place last year, Förbifart Stockholm and the Citytunnel (Rail) were the top two priorities in the final paper.” 11

Congestion Pricing in Stockholm However, the ability of the congestion tax to finance the Förbifart is limited. Tax revenues for the first year are projected between SEK 700-750 million (USD $100-120 million), while operating costs will be around SEK 400 million (USD $65 million). It is estimated that the Förbifart Stockholm project will cost around SEK 25 billion, 19 with 2010 as the earliest date by which binding agreements are set to be signed. While using the congestion tax for transportation infrastructure has political appeal, especially since it is also a way for the Stockholm municipal and county governments to influence how the revenues are to be spent, the high price of Förbifart Stockholm will mean that not enough revenue will be accumulated by 2011 to fully finance the highway. The Government has suggested that additional Förbifart financing could come from public-private partnerships. This would likely require a toll road, however, risking a strong political backlash. Another option according to Ingvarsson is a: “…finance model where the congestion charge is one part, money from the local municipalities is one part and [national] government financing one part. It’s yet to be decided, but the latest large infrastructural projects in the Stockholm region have been approximately paid for by the city of Stockholm 25% and the government 75%.”

The congestion tax operations model The final model, initiated on August 1, 2007, has the same legal structure as the trial and uses more or less the same technical solutions. The percentage of plates read by the OCR scanners turned out to be so high that transponders were not necessary for car owners with “autogiro.” Transponders are now used only by car owners from the Lidingö, who are exempted from the tax on the condition that they leave the city centre within 30 minutes. The transponder ensures that this rule will apply to them. IBM is the operator of the tax under a contract renewable every year. IBM receives a base rate of SEK 116 million per year (USD 18 million). In addition, IBM is compensated based on the volume of traffic that goes through the system. After implementing the Stockholm system, IBM went on to win the contract to operate a similar London system after the current operator’s contract expires. In November, 2007 the Dagens Nyheter daily newspaper conducted a month-long phone survey in Stockholm County, reaching 552 residents, 32 percent of whom were car owners. 20 In the survey, respondents were told that research had found that the main reason for climate change is carbon emissions, much of which comes from cars. Within this framework, 32 percent of respondents said that a higher congestion tax was the best way to reduce traffic, while 29 percent favored higher fuel charges. In addition, respondents who did not own cars said that they 12

Congestion Pricing in Stockholm would be willing to see the congestion tax go up by an additional SEK 35 (USD $5.50) during peak hours, while car owners in the survey said they would be willing to see a SEK 26 (USD $4.00) increase. *** History has shown how hard it is to get new congestion taxes enacted. However, it may be equally hard or harder to repeal them once implemented: the taxes appear to work, and they will certainly work better as congestion and environmental problems increase and as the systems needed to measure and collect the taxes get more effective and less costly. For cities like Stockholm, and for companies like IBM, the future may call for continued analysis and innovation to demonstrate where the taxes meet a true need and—perhaps most important—to develop the political alliances needed to get the taxes and/or tax trials off the ground in the first place. Congestion pricing raises problems of economics and politics, and both seem to be getting easier to solve. As X said, looking back at the recent history: "Timing is critical in getting these systems in place, and— this time—the timing was right for Stockholm."

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Congestion Pricing in Stockholm Exhibit 1 21 Vehicles exempted from the congestion tax The congestion tax does not apply to: • • • • • • • • •



Emergency service vehicles* Buses with a total weight of 14 metric tones or more* Diplomatic cars * Taxis* Motorcycles* Vehicles registered abroad* Military vehicles* Transportation service vehicles with total weight less than 14 metric tonnes (owners must apply to the National Tax Board for approval) Vehicle used by a person with a disability parking permit (who had to apply to the National Tax Board him/herself). This exemption does not apply to commercial transport vehicles. Vehicle equipped with technology for running a) completely or partially on electricity or gas other than liquefied petroleum gas (LPG), or b) on a fuel blend consisting primarily of alcohol, and registered as such at the SRA*.

* Owners of these vehicles are not required to apply for an exemption from the congestion tax as the exemptions occur automatically through the information contained in the vehicle registry.

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Congestion Pricing in Stockholm

Exhibit 2 22 Map of Inner City Stockholm with 18 control points

The tax exempted ”Essingeleden” is the highway E4 crossing through the western part of the inner city.

15

Congestion Pricing in Stockholm Exhibit 3 23 Commuter parking

The 17 green parking areas existed prior to the trial period. The 8 blue areas were introduced as a part of the trial.

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Congestion Pricing in Stockholm Exhibit 4 24 How the control point works

The car passes by a laser detector (B) which trigger of the cameras (A) and (D). If the car has a transponder, it will communicate with the antenna (C). The front registration plate will be photographed by camera D, the rear plate by camera A.

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Congestion Pricing in Stockholm Exhibit 5 25 Tax structure Time interval 6:30-6:59 AM 7:00-7:29 AM 7:30-8:29 AM 8:30-8:59 PM 9:00 AM-3:29 PM 3:30-3:59 PM 4:00-5:29 PM 5:30-5:59 PM 6:00-6:29 PM

SEK 10 15 20 15 10 15 20 15 10

USD 26 1.56 2.34 3.12 2.34 1.56 2.34 3.12 2.34 1.56

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Congestion Pricing in Stockholm Exhibit 6 27 The Government Organization

Stockholm City

Congestion Charge Secretariat

Stockholm Stads Parkering AB (Parking)

Stockholm Office of Research and Statistics

Stockholm County

Stockholm Transport

Swedish Government

Swedish Road Administration

Project Administration Swedish Tax Agency Swedish Enforcement Agency

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Congestion Pricing in Stockholm Exhibit 7 28 Congestion effects in the trial period

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Congestion Pricing in Stockholm Exhibit 8 29 Estimated reductions in emissions from road traffic in Stockholm in 2006 with the Stockholm Trial Inner city: tons/year percent 45 -8.5% 670 -14% 21 -13%

City of Stockholm: Tons/year percent 47 -2.7% 710 -5.1% 23 -3.4%

Greater Stockholm*: tons/year percent 55 -1.3% 770 -2.9% 30 - 1.5%

“road wear particles” “exhaust particles” Volatile organic compounds, VOC benzene. C H

19 1.8 110

-13% -12% -14%

21 1.8 120

-3.3% -4.4% -5.2%

28 2.1 130

-1.5% -2.4% -2.9%

3.4

-14%

3.6

-5.3%

3.8

-3.0%

Carbon dioxide. CO

36,000

-13%

38,000

-5.4%

41,000

-2.7%

Nitrogen oxides. NOx Carbon monoxide. CO Particles. PM total 10

6

6

2

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Congestion Pricing in Stockholm Exhibit 9 30 Cost-benefit of a permanent Congestion Tax in million SEK per year (excluding investment costs) Congestion tax

Expansion of bus services

Total

Shorter travel times More predictable travel times

523 78

157 0

680 78

Change in mode of travel Congestion tax paid

-13 -763 -175

24 0 181

11 -763 6

64 22

0 0

64 22

125 211

0 0

125 211

Congestion tax revenues Public transport revenues Fuel tax revenues Wear and tear on infrastructure Maintaining public transport standards Total public sector income and expenses excl. operating and investment costs

763 184 -53 1 -64

0 0 0 0 0

763 184 -53 1 -64

831

0

831

Total surplus of benefits over costs excl. operating and investment costs

867

181

1,048

Operating costs Distortion and opportunity costs

-220 118

-341 -181

-561 -62

Net annual benefit for the Society of a permanent Congestion Tax excluding investment costs

765

-341

424

Total effect: road-users Reduced climate gas emissions Health and other environmental benefits Improved traffic safety Total effect: other factors

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Congestion Pricing in Stockholm

End Notes 1

Named after the former central bank president, Mr. Bengt Dennis, who headed the negotiations leading to the settlement.

2

Printout from Stockholm trials web site December 17, 2007. See the English version: http://www.stockholmsforsoket.se/templates/page.aspx?id=139

3

On Swedish Television’s debate program ABC, she said on August 20, 2002: ”My message to the voters in Stockholm is: there will be no charges in the next mandate period and that is an election promise from us.” http://sv.wikiquote.org/wiki/Annika_Billstr%C3%B6m

4

Trendsetter, a Civitas project: Background to the Stockholm Trial: http://www.curacaoproject.eu/documents/stockholm-trial.pdf. Print out December 17, 2007. Many of the facts on the trial period were gathered from this source.

5

Swedish Road Administration: Trial Implementation of a Congestion Tax in Stockholm 3 January – 31 July 2006 p. 10. Print out December 20, 2007 http://www.stockholmsforsoket.se/upload/Infomaterial%20VV/Booklet%20eng.pdf 6

Prud’homme, Rémy and Pierre Kopp. “The Stockholm Toll: An Economic Evaluation.” Second draft. SIKA Institute. September 7, 2006. www.sika-institute.se/Doclib/2006/pm_060907_prud.pdf Accessed January 14, 2008

7

Trendsetter, a Civitas project: Background to the Stockholm Trial p. 12: http://www.curacaoproject.eu/documents/stockholm-trial.pdf. Print out December 17, 2007

8

Swedish Road Administration: Trial Implementation of a Congestion Tax in Stockholm 3 January – 31 July 2006 p. 8. Print out December 20, 2007 p. 35 .http://www.stockholmsforsoket.se/upload/Infomaterial%20VV/Booklet%20eng.pdf Accessed January 2, 2008

9

City of Stockholm Traffic Office: Evaluation of the effects of the Stockholm Trial on Road Traffic. June 2006 p. 23 and 49 http://www.stockholmsforsoket.se/upload/Rapporter/Trafik/Under/Effects%20of%20the%20Stockholm%20Trial%2 0on%20road%20traffic.pdf Accessed January 2, 2008. 10

Trivector Traffic AB: Changes in travel habits in Stockholm County Effects of the Stockholm Trial August 2006 p.12 http://www.stockholmsforsoket.se/upload/Sammanfattningar/English/Changes%20in%20travel%20habits%20in%2 0Stockholm%20County.pdf Accessed January 2, 2008 11 City of Stockholm Traffic Office: Evaluation of the effects of the Stockholm Trial on Road Traffic. June 2006 p. 42-45 http://www.stockholmsforsoket.se/upload/Rapporter/Trafik/Under/Effects%20of%20the%20Stockholm%20Trial%2 0on%20road%20traffic.pdf Accessed January 2, 2008. 12

City of Stockholm – Environment and Health Administration: The Stockholm Trial: Effect on Air Quality and Health October 2006 p. 10 http://www.stockholmsforsoket.se/upload/Sammanfattningar/English/Effects%20on%20air%20quality%20and%20h ealth.pdf Accessed January 2, 2008

23

Congestion Pricing in Stockholm

13

Transek: Cost Benefit Analysis of the Stockholm Trial June 2006 p. 11 and 16 http://www.stockholmsforsoket.se/upload/Sammanfattningar/English/Costbenefit%20analysis%20of%20the%20Stockholm%20Trial%20v2.pdf Accessed January 2, 2008. The investment cost were “sunk” in Stockholm, and therefore not relevant in the analysis of a permanent tax. For other cities contemplating the introduction of a congestion tax these numbers are of interest: Depreciation (over 40 years) and opportunity cost of the investment were calculated to SEK 76 million/year. Even with this cost deducted, the tax generates a surplus of SEK 690 million per year. 14

Prud’homme, Rémy and Pierre Kopp. “The Stockholm Toll: An Economic Evaluation.” Second draft. SIKA Institute. September 7, 2006. www.sika-institute.se/Doclib/2006/pm_060907_prud.pdf Accessed January 14, 2008

15

Gallup on behalf of Stockholm Chamber of Commerce June 2005 (in Swedish) http://www.chamber.se/files/skop0507rapport.pdf 16

Reinfeldt, Fredrik; Maud Olofsson; Lars Leijonborg; and Göran Hägglund. "Vi säger ja till trängselskatten för att finansiera kringfartsleder." Dagens Nyheter. October 1, 2006. http://www.dn.se/DNet/jsp/polopoly.jsp?d=572&a=576709 Accessed January 14, 2008 17

Based on case-writer interviews with Moderate party members.

18

Ibid.

19

Swedish Road Administration Website: Förbifart Stockholm Q&A. http://www.vv.se/templates/page3____4292.aspx 20

"Höj trängselskatten för miljön." Dagens Nyheter. December 30, 2007. http://www.dn.se/DNet/jsp/polopoly.jsp?a=729034 Accessed January 14, 2008. 21

http://www.stockholmsforsoket.se/upload/Infomaterial%20VV/Booklet%20eng.pdf

22

http://www.vv.se/templates/page3wide____21329.aspx

23

The Stockholm trial home page December 17, 2007: http://www.stockholmsforsoket.se/templates/page.aspx?id=195 24

Swedish Road Administration homepage December 17, 2007: http://www.vv.se/templates/page3wide____21311.aspx 25

Congestion Tax Act 2004:609 Exhibit 1: http://www.riksdagen.se/webbnav/index.aspx?nid=3911&dok_id=SFS2004:629&rm=2004&bet=2004:629 26

USD = SEK 6.42 (December 5, 2007)

27

Printout December 17, 2007 of report from Trendsetter, a Civitas project: Background to the Stockholm Trial p. 20 http://www.curacaoproject.eu/documents/stockholm-trial.pdf. 28

From the Stockholm Trial Web page December 18, 2007: http://www.stockholmsforsoket.se/upload/Passager/daglig_pass.pdf

24

Congestion Pricing in Stockholm

29

City of Stockholm – Environment and Health Administration: The Stockholm Trial: Effect on Air Quality and Health October 2006 p. 10 http://www.stockholmsforsoket.se/upload/Sammanfattningar/English/Effects%20on%20air%20quality%20and%20h ealth.pdf Accessed January 2, 2008 30

Transek: Cost Benefit Analysis of the Stockholm Trial June 2006 p. 11 and 16 http://www.stockholmsforsoket.se/upload/Sammanfattningar/English/Costbenefit%20analysis%20of%20the%20Stockholm%20Trial%20v2.pdf Accessed January 2, 2008.

25

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