The effect of road pricing on traffic composition: Evidence from a natural experiment in Milan, Italy

This paper aims to estimate the effect of road pricing on the composition of traffic. By considering the case of Milan, where a charge to enter the city centre was introduced in 2008, and by relying on an unexpected and temporary suspension of the tax, we analyse the effect of the policy on flows of vehicles classified by type of engine. We have found that a road pricing scheme shifted users from Euro 0-3 vehicles (i.e., those vehicles particularly polluting according to the European Emission Standards classification and produced before 2000-2001) to liquefied petroleum gas, bi-fuel and hybrid vehicles. However, the environmental benefits of the policy were limited by a substantial increase in the usage of motorbikes. This evidence calls for a consideration of the behavioural reactions of road users when making ex ante evaluations of the social profitability of road pricing schemes.