Equity Impacts of the London Congestion Charging Scheme: An Empirical Evaluation Using Synthetic Control Methods

Abstract

Congestion pricing has been long-believed to effectively regulate traffic in urban city centers. Practical implementations of such policies have been hindered by concerns that they would disproportionately and adversely affect low-income groups. This paper analyzes the impacts of two price increases to the congestion charge on different income groups in Central London, making use of the synthetic control method to leverage empirical data from the UK National Travel Survey. We estimate that the highest income earners contributed to more of the revenue than the lowest income earners, making the scheme progressive in the scale of its equity impact. Although high-income travelers appeared to drop more charge-eligible trips as the price increased, their total trips to Central London did not decrease, suggesting that they were able to substitute with non-chargeable modes of travel. Low-income travelers saw large declines across both chargeable and non-chargeable modes, revealing a much lower rate of substitution. The low-income group responded more to the 2011 price increase than the 2014 one, demonstrating the diminishing ability of subsequent price increases to regulate demand.