I don't buy your refutation of the congestion argument. The capacity of a road-pricing based incentive system to be aligned with transport policy objectives is far and away greater than that offered by fuel duty and vehicle taxation. You can eliminate at a stroke many of the limitations of the current system -- for example, off the top of my head...

* Fuel duty is invariant with respect to local public transport infrastructure.

* Fuel duty offers no ability (at least not in a robust way) to make special allowances for rural areas and villages -- for example, with road pricing you could offset the cost of the extra congestion caused by a discount for rural roads against the benefits of making rural and village communities more viable in the long term.

* Road pricing allows faster routes (and possibly even lanes) to be available by paying a premium; this allows businesses in particular a greater degree of control over transport times and costs by making them more predictable, which would positively impact on the economy (and not insubstantially, either).

* Road pricing could also be used to fund construction of new roads where sufficient demand is present, offering a fairer basis for charging the costs -- those who get the benefit pay.

With regard to congestion, there's no guarantee that the extra cost in fuel of idling (which is unlikely to be that large) remotely in proportion to the optimal incentive for that road. Also, the costs associated with idling tend to be invisible (or at least seriously obscure) to the driver; itemised bills are rather more obvious, and therefore more likely to have an effect on behaviour. The London congestion charge has actually been rather successful.

With regard to costs, the devices would be fitted by manufacturers to new cars. Transitional arrangements for old cars could be used to allow a suitable period of time for the majority of vehicles to have the devices installed already before cars were required to have them installed. Transitional arrangements could be offered under a different pricing scheme to avoid penalising those with new cars, or a less robust system of discounts could be offered to those with the devices fitted to ensure neutrality (or more likely an incentive for early adopters). This would be more susceptible to fraud, granted, but it could be made sufficiently robust, and sufficiently disincentivised through fines and other legal measures that the level of fraud is acceptable within the time period of the transition. The fact that so many devices need to be fitted means there are cost savings associated with mass production. As a proportion of the cost of a car, the devices will be relatively cheap. Britain is by no means the only country looking at road pricing, and the technology R&D is being led by the private sector on its own, so it's not a pure government IT project.

On government IT projects, London congestion charging was pretty successful -- and bear in mind that government IT debacles are the only sort you're likely to hear about with any frequency; businesses don't like to make too much of a noise about their cock-ups, for obvious reasons; peoples' impressions therefore tend to be based on biased data here. I'm not claiming that government and the private sector are equally good at handling large scale IT projects, just that there are grounds for being wary of the perception that the public sector is particularly bad at it. However, it should be acknowledged that the technical issues are huge, particularly when it comes to preventing fraud; however, I do not believe they are in any way insurmountable.

Privacy... there could well be technological ways around the need for storing or making available personal data from the system (clever cryptographic protocols, etc), but whatever system is instituted would be unlikely to use such methods, and there would be large technical issues; that's an argument that stands. Although, it's worth observing that biometric ID cards could form a part of the system, and would solve several tricky technical issues.
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