The right way to handle congestion

THE rise of ride-hailing firms like Uber and Lyft has been a boon for passengers. But it hasn’t been good for everyone. Licensed cabbies lament the extra competition. Drivers for the new services complain about inadequate benefits. The latest preoccupation is the impact of ride-hailing on congestion. Between 2013 and 2016, the number of such vehicles in London rose by 66%; rush-hour traffic in the city centre slowed by 20%. Manhattan has seen something similar.

Governments are right to worry about ride-hailing’s impact on traffic congestion. INRIX, a traffic-information firm, estimates that between fuel bills, time wasted sitting around in traffic and increased shipping costs, congestion cost New York City and London a combined $46bn last year. But the response of lawmakers is wrong-headed. On August 8th New York’s city council voted to place a one-year moratorium on issuing new licences for ride-hailing cars. Sadiq Khan, London’s mayor, now says he wants to do the same.

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A citywide cap on the number of ride-hailing vehicles will certainly have an impact. Because drivers for firms like Uber and Lyft have high attrition rates, a moratorium on new licences could lead to a sharp drop in the total number of such vehicles. But the effect will be to hurt people living in suburban areas, who have fewer transport options. Between 2014 and 2017, the combined number of taxi and ride-hailing trips rose by 350% in New York’s outer boroughs, but by only 25% in Manhattan, where it is much easier to find a cab.

A far better way for big cities to reduce traffic jams is to implement road pricing. When people drive their cars during peak hours, they create a cost for everyone else in the form of increased congestion. Making drivers pay money when roads are busy compensates the rest of society for the inconvenience, and discourages people from driving during rush hour.

London already has a congestion charge (New York does not). But its scheme, which was introduced in 2003, falls badly short in three ways. Most obviously, congestion charges need to vary by time of day. Currently, drivers have to pay a flat fee of only £11.50 ($14.75) to enter central London, which means they have little incentive to drive during off-peak hours. Singapore offers a better model. Cars there are fitted with electronic sensors; drivers are charged a fee every time they pass one of the city’s gantries. By studying traffic flows, officials can set appropriate congestion charges based on time and location.

Second, governments should charge ride-hailing vehicles more than private ones. Like cabs, they can more easily absorb fees as part of the cost of doing business. They flit in and out of city centres repeatedly in the course of a day. Fix NYC, a task force formed by New York’s state government, has proposed that taxis and ride-hailing cars pay a congestion surcharge for every trip into the city centre. London does the opposite: such vehicles are, bafflingly, exempt from congestion charges.

Third, cities should recognise that traffic and pollution are different problems. One reason why London’s congestion charge is losing its potency is because the city offers a number of exemptions for greener vehicles. Since both low-emission cars and gas-guzzlers contribute to traffic, both should pay congestion charges. Regulating to reduce emissions—or imposing a separate charge on high-emissions vehicles, as London plans to do next year—is the better way to tackle pollution.

Congestion imposes big economic costs. But the problem cities face is not simply a surplus of ride-hailing vehicles. They have too many cars, of all kinds, on the roads in rush hour. Smart tax policy, not a crude cap on licences, is the answer.