Efficiency vs equity: Conflicting objectives of congestion charges

- We find a conflict between efficiency and equity in charging scheme design.
- The reason is that high-income groups live in areas with more workplaces.
- Leads to higher levels of congestion in relations where low-income groups travel.
- System designers have a major impact on equity by choosing charging locations.

This paper analyses the trade-off between equity and efficiency in the design of the Stockholm congestion charging systems. Comparing different designs for Stockholm, the paper shows that the most efficient system is the least equitable. Indeed, we show that moving towards a more efficient system design favours high-income-users most. The reason is the uneven distribution of workplaces and residential areas, combined with richer socio-economic groups living in areas with more workplaces. Hence, the conflict between efficiency and equity of this policy arises from the spatial mismatch of residential areas and locations of employment, and the spatial separation between low-income and high-income groups that characterise most cities. This paper shows that these spatial patterns have a large effect on the distribution effects of the congestion charges and that the system design can have a major impact on equity.