Optimal pricing of car use in a small city: A case study of Uppsala

Abstract

Studies of cities that have successfully shifted demand from cars to more sustainable modes suggest that coordinated packages of mutually reinforcing policy instruments are needed. Congestion charges and parking fees can be important parts of such packages. This paper examines the introduction of welfare-optimal congestion charges and parking fees in a model calibrated to Uppsala, a small city in Sweden. These effects are modeled with a simple transport demand model for the welfare optimization of parking fees, congestion charges, and public transport provision. The results suggest that welfare-optimal congestion charges in Uppsala are as high as EUR 2.8 in peak hours and EUR 1.4 in off-peak hours. A rough cost–benefit analysis shows that the introduction of congestion charges in Uppsala is welfare improving if the operating costs of congestion charges are proportional to city population size. In the main scenarios, optimal congestion charges and parking fees reduce the number of car trips by 10% and 7%, respectively. The model can be used to assess when it is worthwhile to introduce congestion pricing.

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