Targeting urban congestion: Equity and second-best issues

Distributional and second-best problems of implementing efficiency based demand management of road use in Australian cities are addressed. Both road use pricing and parking policies are considered. Failure to price roads and parking spots efficiently contributes to excessive travel and to excessive urban expansion. A key policy concern is to promote demand management acceptability by offering transportation alternatives and by making explicit the sources of efficiency gain from revenue neutral road charging policies with double-dividend advantages. Second-best policies of restricting land releases on city boundaries to encourage more compact city development may be inferior to policies of pricing major roads, cordon pricing and demand based parking policies.