Good day my good friend.
How are you today? I hope that you are well, and are beating the January blues that the persistent rain is trying to hammer into the UK at the moment. You know the weather is bad when the light in your office is on all day. That or the office just doesn’t get daylight.
Before we get into things, a couple of public service announcements. Firstly, next Friday I will be on a panel at the Transport Technology & AI Conference in Birmingham. I plan to say a few words about how the public sector needs to bite the bullet and find useful ways to use AI to make transport better, as the first movers will set the direction. Feel free to come and disagree with me, or agree with me if you prefer.
Secondly, the Transport Planning Society is looking for new Board members to take the society forward over the coming couple of years. I will be stepping down from my role on the Board, and I can recommend being on the Board to anyone. Especially if you care about the direction of the profession and want to do something practical about it. Or you really like paperwork. Its open to all members, and nominations are closing next Friday (30th January). If you want a chat about what it is like, feel free to drop me a message.
If you think the content of this newsletter is of interest to someone else, please forward it to them. Maybe more can then join our growing family of transport geeks!
🥱 Sometimes, boring is the way to go
Charging for road use seems to be having its time in the sun at the moment. Here in the UK, the Oxford Temporary Congestion Charge has come into effect, and the Government is committed to introducing road user charging for electric vehicles. Meanwhile, across the other side of the pond, New York’s Congestion Charge has been making headlines for its traffic reduction powers.
The financial management of urban road networks is undergoing a bit of a transformation. As cities grapple with the dual pressures of climate targets and crumbling infrastructure, the implementation of road user charging may, finally, have moved from a theoretical economic concept to a key weapon in the traffic-busting arsenal. However, as the data from the last two decades demonstrates, the success of these schemes is not merely measured by the reduction in vehicle kilometres, but by something more boring: are they successful financially?
One of the first things to understand about road user charging is that there is no single financial model. Instead, there is a patchwork of mechanisms that behave in radically different ways. On one hand, there is the traditional congestion charge, such as the one seen in London since 2003. This is essentially a daily entry fee, a blunt instrument designed to discourage any vehicle from entering a zone during peak hours. But the revenue model shows a surprising mix of income streams. While detailed data on revenue sources is no longer provided, in 2007/08, Penalty Charge Notices accounted for 27% of revenues.
The revenue here is a mix of the daily fees paid by compliant drivers and the much larger penalty charge notices (PCNs) issued to those who fail to pay. In the early years of the London scheme, it was actually the penalties that provided a surprising and significant chunk of the income, making up nearly 33 percent of the gross receipts at one point. This highlights a strange reality where the financial health of a scheme can sometimes depend on people getting the rules wrong.
Contrast this with the Nottingham Workplace Parking Levy (WPL). This is not a charge on the act of driving itself but rather a levy on the destination. It targets employers who provide more than ten parking spaces for their staff. From a financial perspective, this model is remarkably stable. Because the council is dealing with a fixed number of known businesses rather than thousands of transient motorists, compliance is nearly 100 percent. There are no cameras chasing individual cars and very few penalty notices. Instead, there is a predictable, annual stream of income. Between 2012 and 2022, Nottingham generated over £90 million in revenue, which allowed the city to leverage over £1 billion in external funding for its tram network and electric bus fleet. It is a slow and steady model that lacks the in-your-face style of paying a daily fee in London, but offers much greater long-term certainty for the Council.
In Milan, the transition from the Ecopass to Area C shows yet more variation in the charging models. The Ecopass, introduced in 2008, was a pollution-based charge that varied from €0 to €10 depending on the vehicle's engine. When the city shifted to the Area C flat-rate congestion charge in 2012, revenue increased from approximately €12 million to over €20 million in a single year. By 2018, annual income had risen to €33 million. Milan’s model is particularly transparent about its reinvestment: 62 percent of net earnings are dedicated to strengthening public transport, 22 percent to sustainable mobility projects, and only 16 percent to operating costs. This level of granular financial reporting is essential for maintaining the public trust necessary to sustain such a scheme.
When a local authority proposes a charging scheme, the financial forecasts are always scrutinised with intense suspicion. There is sometimes an assumption that councils are overestimating potential revenues to justify the political pain of the charge. However, the history of these schemes suggests that the opposite is true. The projects that succeed are those that embrace deeply conservative, almost pessimistic, revenue forecasting.
The London Congestion Charge provides a classic case study in this regard. Before the scheme launched, planners were cautious. They predicted a net annual revenue of somewhere between £130 million and £145 million. When the scheme actually went live, the traffic reduction was much greater than they had dared to hope. While this was a massive win for congestion, it meant that fewer people were paying the daily charge than anticipated. If the planners had been aggressive in their revenue targets, the scheme might have been viewed as a financial failure in its first year. Because they were prudent, they were able to beat the forecasts and invest more money in improving buses and cycling in the city.
We see a similar pattern in Stockholm. During the 2006 trial, the traffic reduction across the cordon was approximately 20 percent, which was at the high end of expectations. In terms of predictive accuracy, the Swedish models were remarkably precise for peak-time travel, where they predicted an 11 percent reduction and observed 12 percent. However, they significantly under-predicted the reduction in off-peak travel. Those who favour the conservative approach in forecasting tend to win out because they build in a buffer for the inevitable moment when the public finally decides to leave the car at home. It is far better to have a surplus that can be reinvested than a deficit that requires a taxpayer bailout of a controversial charging zone.
In Birmingham, the Clean Air Zone (CAZ) generated £25.6 million in net surplus in its first year, significantly outperforming initial cautious predictions. This variance was driven by a lower compliance rate than the 95 percent the council had modelled. When compliance is lower, penalty revenue surges, creating a temporary fiscal windfall. However, relying on non-compliance is a dangerous financial strategy for the long term. As drivers adapt and upgrade their vehicles, that revenue inevitably begins to erode, often at a rate of 10 to 15 percent per year. Plus, for a Clean Air Zone, the aim is partly to encourage drivers to drive compliant cars, which are assumed to be less polluting than those they scrapped.
This leads us to the fundamental paradox that sits at the heart of road user charging: the conflict between policy success and financial sustainability. In any other business, if what you do is so good that it changes the world, you expect to make more money. In road charging, if your policy is so good that it actually clears the roads, you go broke and can’t re-invest the money in sustainable transport. If the primary goal of a charge is to reduce congestion, then the ultimate sign of success is a city with empty streets. But empty streets do not pay for new buses, cycle tracks, and extended trams.
If the charge is too successful in changing behaviour, the revenue needed to fund the sustainable alternatives begins to evaporate. This leaves transport planners in a precarious position. If they set the charge too low, they fail to reduce traffic and the city remains choked. If they set it too high, they kill off the very revenue stream they need to pay for the buses that those former drivers are now supposed to be using.
London is currently navigating this with its recent announcement to increase the daily Congestion Charge from £15 to £18 from January 2026. This increase is specifically designed to combat the "revenue base erosion" caused by the rapid uptake of electric vehicles. The Cleaner Vehicle Discount, which previously exempted electric cars from the charge, is being phased out because TfL estimated that without this change, more than 2,000 additional vehicles would enter the zone daily by 2026. As we move towards a more electrified vehicle fleet, the traditional justification for charges on environmental grounds disappears, forcing a shift back toward congestion charges to partly keep the transport budget from going insolvent.
To understand why these schemes behave the way they do, we have to look at the nature of travel demand and the concept of price elasticity. In simple terms, price elasticity measures how much the demand for something drops when the price goes up. If the price of a luxury good doubles, you probably buy something else. That is high elasticity. But for many people, driving is not a luxury; it is a necessity.
Transport research in the United Kingdom has consistently shown that the price elasticity of demand for car travel is relatively low, especially in the short term. Most estimates suggest an elasticity coefficient of around -0.3. In English, if you increase the cost of driving by 10 percent, you generally see only a 3 percent drop in traffic. People are remarkably stubborn. They will grumble, they will cut back on other spending, and they will complain to the Council, but they will keep driving.
However, elasticity is not a fixed number. It varies based on the alternatives available. In Stockholm, where the public transport market share was already 77 percent before the charges were introduced, the elasticity was higher because people actually had a viable choice. In Milan, the introduction of Area C led to a 17 percent increase in underground usage and a 12 percent increase in surface public transport users. In a city with a patchy bus service, a road charge is less of an incentive to change behaviour and more of a simple tax on existing habits. This is why the investment in sustainable transport must often come before or alongside the charge. If you do not give people a way out, the charge remains an inelastic burden that raises money but does not actually fix the congestion.
As we look toward the next decade of transport planning, the financial model for road user charging is likely to change again. The rise of electric vehicles is already threatening the Treasury’s income from fuel duty, and local councils are watching their own charging revenues with a wary eye. Plus there is the ever-present issue of congestion posing significant economic externalities. In London, the 2024 congestion costs were estimated at £3.85 billion, or approximately £942 per driver, suggesting that despite the charges, the economic cost of gridlock remains higher than the cost of the fees themselves. Imagine what the cost would be without the charge.
The future likely lies in more sophisticated, distance-based charging that can be adjusted in real time based on congestion and air quality. But the lessons of the last twenty years remain. Success in this field requires a clear-headed understanding that a charge is a tool for change, not just a cash cow. It requires the humility to make boring, conservative forecasts that allow for the volatility of human behaviour. And above all, it requires an acknowledgement of the paradox at its core. If we truly want to create cities where people do not need to drive, we must be prepared for the day when the driving charges no longer pay the bills. The virtuous circle of the polluter paying for the bus is a brilliant way to start the engine of change, but eventually, we will need to find a more permanent way to keep the wheels of sustainable transport turning.
👩🎓Latest Research
The clever clogs at our universities, government departments, and other clever people have published the following excellent research. Where you are unable to access the research, email the author – they may give you a copy of the research paper for free.
TL:DR - This study uses high-resolution spatial data to reveal how shared micro-mobility can either bridge or widen the equity gap in Asian urban contexts.
TL:DR - This research article integrates mobile phone data with vehicle emission profiles to quantify how transport pollution disproportionately affects specific low-income groups.
TL:DR - This report details how Agentic AI is moving from pilot to production to autonomously manage traffic signal timing and predictive maintenance.
TL:DR - This technical briefing highlights the "leapfrogging" potential of solar-powered off-grid EV charging systems across 52 African nations.
TL:DR - This study investigates how limited vehicle access in rural communities within Vermont and California negatively impacts resident mobility and quality of life, while proposing strategies such as expanding on-demand transit and increasing affordable housing in town centers to mitigate these challenges.
😀Positive News
Here are some articles showing that, despite the state of the world, good stuff is still happening in sustainable transport. So get your fix of positivity here.
Salvador, Brazil, was officially celebrated this week for expanding its electric BRT system with a specific focus on gender-inclusive workforce training.
A landmark study published on 13 January 2026 by ETH Zurich and African partners shows that off-grid solar charging for e-bikes is now more cost-effective than fossil fuels in many African regions.
The Caledonian Sleeper has expanded its service to include Birmingham International, offering a sustainable overnight rail alternative for travelers moving between the Midlands and Northern Scotland.
Westmorland and Furness Council has approved £1.7 million in funding to maintain 25 existing bus routes and investigate the launch of seven new services to improve rural connectivity and access to essential services.
Watford Borough Council and Beryl have extended their bike-share partnership for another five years, adding 120 new e-bikes to the fleet to support a modernised, electric-focused network until 2031.
Plans have been unveiled for a major new bus depot in Ipswich that will maintain 150 zero-emission electric and hydrogen buses to transport thousands of workers, significantly reducing car journeys on rural roads.
💻 Hard Work
This week has been spending riding the rails for meetings in London, Cambridge, and Bradford. Lots of chats with people I cannot mention, but they know who they are. For each of you, i can assure you that the time we spent together was very much cherished.
In my project on School Crossing Patrollers, a deluge of FOI responses with location data of sites have come in this week. I currently have a backlog of 90 authorities to track progress against. The next stage will be reviewing the data and cleaning it. But that is for February.
I also had the great pleasure of dialling into the presentations given by this year’s brilliant Transport Planning Society Bursarians. After having to judge their work this year, I can safely say that there was not one poor report or presentation among the lot of them. I hope to share more news on them in the coming weeks, once me and the fellow judges have adjudged which one is the winner. That will be a very tricky task indeed.
🎶 Musical Finale
Most of you might know Where Is My Mind? by The Pixies from its use in the movie Fight Club. To be fair, the tune was perfect for that movie, in that it is about feeling lost inside your own head. Where everything is both calm and utterly barmy at the same time. Regardless, its a brilliant song.