Transport Economics Report: Fuel Tax, ERP, and Light Rail Analysis

This report delves into transport economics, examining fuel tax, electronic road pricing (ERP), and light rail transit as strategies to mitigate road congestion. The report begins by defining fuel tax and ERP, detailing their functions and advantages, such as revenue generation for transportation projects and congestion reduction. It highlights the shift towards ERP due to its cost-effectiveness and efficiency compared to traditional fuel tax collection. The report then explores light rail transit as another solution, discussing its potential to reduce traffic, pollution, and promote community well-being. It acknowledges the challenges, such as increased vehicle registration in areas with light rail. The analysis further includes the impact of ERP on car-pooling and traffic patterns. Finally, the report references relevant studies to support its claims, providing a comprehensive overview of transport economics and potential solutions to urban traffic problems.

Running head: TRANSPORT ECONOMICS
Transport Economics
Name of the Student
Name of the University
Author note

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Table of Contents
Task 3.........................................................................................................................................2
Task 4.........................................................................................................................................2
Reference List............................................................................................................................4

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Task 3
An excise tax imposed on the fuel sale is called fuel tax. It is also known as gas tax,
petrol tax, fuel duty and gasoline tax. The tax is imposed on the fuel used for transportation in
most of the countries. The revenue generated from fuel tax is dedicated to spending related to
transportation projects.
To manage traffic using road pricing an electronic toll collection scheme is adopted, is
known as electronic road pricing (ERP). It is a form of congestion pricing, used to minimize
the road congestion (Grant-Muller and Xu 2014). Toll tax played a major role in the
transportation system of the country as the revenue generated from it used in various purpose
for maintaining highway system. The maintenance and development of many major highways
largely depended on toll tax.
In early days, the collection of fuel tax was much easier, less time consuming and less
expensive than the collection of ERP. The expense of ERP collection have reduced
significantly in the era of technological advancement. Therefore, the use of ERP over fuel tax
is suggested as it is more cost effective, easy and less time consuming.
To maintain US highway system, the country mainly depends on fuel taxes at the state
and federal levels in early 1990. The use of fuel tax was not in sync with inflation rate,
sluggish economy and fuel price increase decreased the growth rate of traffic (Spears,
Boarnet and Houton 2017). Further, Corporate Average Fuel Economy (CAFE) and hybrid
vehicles standards have also undermined the revenue by manufacturing more fuel efficient
cars.
Task 4
Other than fuel tax and electronic road pricing, to mitigate the effects of road
congestion on transport system light rail network is suggested. The light rail transit have the

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potential of reducing traffic congestion and pollution. Many countries such as USA adopted
the light rail transit as solution for traffic congestion (Litman 2017). Some other benefits of
this system are community well-being, reduction of air pollution and economic development.
The use of light rail transit will alleviate use of personal vehicle and less number of
automobile drivers on the road, thus minimize road congestion, reduces time of commute,
and increase the rate of highway safety. However, the congestion rose since the adoption of
light rail increased the number of registered vehicles in those places (Seo, Golub and Kuby
2014). The use of light rail is more viable in the lower income and densely populated places
than the urban areas.
The application of ERP increased the use of car-pooling, thus rush in peak traffic
hours eroded gradually and the rush in off peak hours rose, resulting in more effective use of
road space. The increasing traffic volumes does not effects average road speeds for major
roads and expressways. Disadvantage of ERP, it lead to congestion in smaller roads as the
traffic is moving from that road. The cost drivers increased significantly.
The implementation of fuel tax controls the pollution by reducing use of personal
vehicle, as the fuel tax increased the expense of the consumer. Imposition of tax increases
consumer expense, even switching to electric car is also difficult as it is quite pricey.

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Reference List
Grant-Muller, S. and Xu, M., 2014. The role of tradable credit schemes in road traffic
congestion management. Transport Reviews, 34(2), pp.128-149.
Litman, T., 2017. Socially optimal transport prices and markets. Victoria Transport Policy
Institute.
Seo, K., Golub, A. and Kuby, M., 2014. Combined impacts of highways and light rail transit
on residential property values: a spatial hedonic price model for Phoenix, Arizona. Journal of
Transport Geography, 41, pp.53-62.
Spears, S., Boarnet, M.G. and Houston, D., 2017. Driving reduction after the introduction of
light rail transit: Evidence from an experimental-control group evaluation of the Los Angeles
Expo Line. Urban Studies, 54(12), pp.2780-2799.