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CONGESTION PRICING IN CITIES OF THE DEVELOPING WORLD: EXPLORING PROSPECTS IN MEXICO CITY by Anjali Mahendra Bachelor of Architecture School of Planning and Architecture, 2000 New Delhi, India Submitted to the Department of Urban Studies and Planning in partial fulfillment of the requirements for the degrees of Master in City Planning and Master of Science in Transportation at the MASSACHUSETTS INSTITUTE OF TECHNOLOGY September 2004 © 2004 Anjali Mahendra. All rights reserved. The author hereby grants MIT permission to reproduce and distribute publicly paper and electronic copies of this thesis in whole or in parts Signature of Author ______________________________________________________ Department of Urban Studies and Planning August 9, 2004 Certified by ___________________________________________________________________ Professor Ralph Gakenheimer Departments of Urban Studies and Planning and Civil and Environmental Engineering Thesis Supervisor Certified by ___________________________________________________________________ Professor Joseph M. Sussman Departments of Civil and Environmental Engineering and Engineering Systems Thesis Supervisor Accepted by ___________________________________________________________________ Professor Dennis Frenchman Chair, MCP Committee Department of Urban Studies and Planning Accepted by ___________________________________________________________________ Professor Nigel Wilson Chair, Master of Science in Transportation Committee Department of Civil and Environmental Engineering CONGESTION PRICING IN CITIES OF THE DEVELOPING WORLD: EXPLORING PROSPECTS IN MEXICO CITY by Anjali Mahendra Submitted to the Department of Urban Studies and Planning on August 9, 2004 in partial fulfillment of the requirements for the degrees of Master in City Planning and Master of Science in Transportation Abstract Car ownership in many large cities of the developing world is rapidly increasing with rising incomes, and is accompanied by traffic gridlock, travel delays, and deteriorating air quality. The policy of congestion pricing to manage growing travel demand has been implemented with varying degrees of success in some developed countries. This thesis explores the applicability of congestion pricing in the Mexico City Metropolitan Area (MCMA). Current transportation policies in the MCMA were studied, with an analysis of the factors causing increased demand for private transport. Of the many forms in which congestion pricing may be implemented, we focused on the possibility of a central city congestion zone similar to that recently implemented in the city of London, providing arguments for its viability, and preliminary analyses regarding potential impacts. We studied how household level car ownership had changed for different income groups in Mexico City between 1994 and 2000, in order to make empirical estimates of the distributional impacts that a congestion pricing scheme might have. Our results show that the location of low income car owning households far from the central areas, and their limited access to efficient public transport creates negative consequences for them. Yet, significant overall reductions in traffic and travel time savings are possible with a congestion charge. Lower income people can benefit if the revenues from congestion pricing are used to improve their accessibility to public transport. Congestion pricing is difficult to implement, especially given the decentralization and overlapping levels of political authority in the MCMA. As part of this research, we surveyed various Mexican government officials, academics, researchers, and practitioners interested in improving transportation and air quality in the region. The survey shows that there is hesitation in considering any such policy in the MCMA without prior improvements in public transport. In light of these findings, we have outlined the complicated issues surrounding implementation, with recommendations for a course of action given the current policy agenda. The findings presented in this thesis can be used by decision makers in Mexico City to design a set of policies for improving mobility, with a better understanding of the issues surrounding congestion pricing. Thesis Advisor: Ralph Gakenheimer Title: Professor of Urban Studies and Planning and CEE Thesis Advisor: Joseph M. Sussman Title: Professor of Engineering Systems and CEE Thesis Reader: Anna Hardman Title: Visiting Lecturer, MIT and Professor of Economics, Tufts University 2 Acknowledgements I am grateful to Professor Ralph Gakenheimer, my research advisor, for his guidance as this thesis evolved, and his encouragement at every step in my treatment of this controversial subject. I have learned a lot from him, and my work as a transportation planner will continue to draw from these lessons. I also thank Professor Joe Sussman, my advisor in the Center for Transportation and Logistics, for his invaluable advice and critiques on this work. They both helped sharpen my understanding of transportation issues in the Mexican context through their experience. Thanks also to Anna Hardman, who has been much more than an academic guide in my time at MIT, always willing to discuss my work and career goals. I am deeply indebted to these members of my thesis committee. In addition, I thank Fred Salvucci for his inspiration, and helpful insights on this topic. I sincerely thank Professor Mario Molina and Dr. Luisa Molina for their interest and support, without which this work would not have been possible. This research was completed as part of the Integrated Program on Urban, Regional and Global Air Pollution, and was supported by funding from the Mexican Metropolitan Environmental Commission (CAM) and the Mario Molina Center for Energy and the Environment. Many thanks to Alvaro for the numerous Spanish-English translations he did for me, for his company, and for our engaging discussions. I also specially thank Julia, for her time and patience in helping me analyze my data. I thank all my colleagues and friends on the Mexico City project - Samudra, Rebecca, Ali, Janine, Bernardo, Travis, and Cristian. It has been a great experience working with you. I am grateful to all the people I met while I was in Mexico City for their time, information and ideas, and have listed them in Appendix 4 of this thesis. I specially thank Rebecca Dodder and Sergio Sanchez, for being wonderful hosts. At MIT, I appreciate the contribution of all my teachers, friends, and classmates, for making the last three years an enriching experience. Most of all, thank you Bala, for being patient with my numerous questions, and for always being there. Finally, I dedicate this work to my family, with love and gratitude. 3 Table of Contents ABSTRACT……………………………………………………………………2 ACKNOWLEDGEMENTS………………………………………………….……3 TABLE OF CONTENTS………………………………………………….……...4 LIST OF FIGURES……………………………………………………………...6 LIST OF TABLES………………………………………………………………8 CHAPTER 1. INTRODUCTION................................................................................. 8 1.1. CONTEXT .................................................................................................................. 8 1.2. MOTIVATION........................................................................................................... 10 1.3. ASSUMPTIONS AND HYPOTHESIS............................................................................. 13 1.4. THESIS OBJECTIVES ................................................................................................ 15 1.5. RESEARCH QUESTIONS ........................................................................................... 15 1.6. CONTRIBUTION TO EXISTING LITERATURE ............................................................. 16 CHAPTER 2. BACKGROUND INFORMATION ON MEXICO CITY............... 18 2.1. POPULATION GROWTH TREND ................................................................................ 19 2.2. URBAN STRUCTURE AND EXPANSION ..................................................................... 21 2.3. ECONOMIC CHARACTERISTICS AND INCOME DISTRIBUTION ................................... 22 2.4. TRANSPORTATION INFRASTRUCTURE AND TRAVEL DEMAND IN THE MCMA ........ 25 2.5. TRANSPORT EMISSIONS IN MEXICO CITY................................................................ 28 2.6. INSTITUTIONAL STRUCTURE ................................................................................... 30 2.7. CURRENT PROJECTS AND POLICIES ON THE URBAN TRANSPORT AGENDA.............. 30 2.7.1. Public transport ........................................................................................ 31 2.7.2. Private transport....................................................................................... 34 CHAPTER 3. CONGESTION PRICING – ECONOMIC, POLITICAL, AND EQUITY ISSUES ............................................................................... 39 3.1. GROWING MOTORIZATION IN THE DEVELOPING WORLD ........................................ 39 3.2. CONGESTION PRICING: ECONOMIC ARGUMENTS .................................................... 40 3.3. POLITICS ASSOCIATED WITH CONGESTION PRICING................................................ 43 3.4. DIFFERENT METHODS OF PRICING CONGESTION..................................................... 48 3.5. BRIEF OVERVIEW OF CONGESTION PRICING SCHEMES AROUND THE WORLD ........ 51 3.5.1. London Congestion Charging Scheme...................................................... 51 3.5.2. The Area Licensing Scheme and Electronic Road Pricing in Singapore . 52 3.5.3.

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