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‘Smart Parking’: Dynamic Car Park Pricing to Improve Air Quality in Greater Manchester

By James Thompson, Strategist


In early February Mayor Andy Burnham expressed frustration at the sorry state of the Greater Manchester Clean Air Zone (CAZ). On the cusp of its implementation the CAZ has faced widespread criticism post-pandemic, with many arguing that supply chain issues, inflation and the rising cost of living will hinder any switch to cleaner vehicles. The critics hence consider the CAZ as a poorly designed harmful tax.


Whilst being sympathetic to these concerns, Burnham drew fresh attention to the role of the Conservative Westminster government. In his statement Burnham highlighted how the Central Government’s 2024 legal mandate for air compliance in Manchester pushed policy direction towards “a charging CAZ as the default option” . Since these discussions the Conservatives have altered the legal compliance date to 2026. However, this date is still ambitious, particularly in light of the Mayor conceding to residents' concerns over the CAZ charging categories and the size of the engine switching subsidy.


To my mind, Greater Manchester is in need of a less politically toxic air pollution policy. In this short article I will outline my proposal: ‘Smart Parking’ - a dynamic parking price strategy to address Greater Manchester’s air pollution problem. This policy could potentially serve as an easy and efficient fix for an increasingly convoluted issue.


The Problem


Within the Clean Air policy debate one clear statistic stands out. In 2017, “one in 23 deaths in Greater Manchester” were due to dangerous particulate matter in the air. These largely avoidable deaths arise because “chronic exposure” to gases such as ammonia and nitrogen oxides increases the “risk of developing cardiovascular and respiratory diseases, as well as of lung cancer” . Evidence also suggests that poor air quality causes “adverse reproductive outcomes” and stunts the development of a child’s brain.


In addition to impacting individuals' wellbeing directly, the air quality in Greater Manchester will incur an increasing economic cost. Air pollution in Greater Manchester will decrease labour productivity, constraining the regional economy, whilst also simultaneously increasing demands for healthcare and welfare expenditure. The financial position of the GMCA will consequently be worsened, serving as an opportunity cost for spending on other aims, such as the promised ‘Our People, Our Place’ levelling up priorities. This scenario is forecasted by the National Government, who estimate the cost of inaction for the whole of England as “£5.3 billion” by 2035, excluding social care costs. Therefore, the air quality problem should be viewed additionally by the GMCA as a long term economic concern, which could negatively impact the cash flow of the local government and adversely affect citizens' economic freedoms and quality of life.


The Policy


As correctly identified by the CAZ, the main culprit of air pollution in Greater Manchester is cars, with 12% of particulate matter and 34% of nitrogen oxides coming from car fumes and tyre wear. In 2019, on average 29,000 cars entered the city centre during the morning peak, emitting great amounts of harmful pollutants. The ‘Smart Parking’ policy I propose directly addresses this negative dynamic.


“Smart Parking’ advocates for the installation of parking sensors in City Centre car parks. The information collected by the sensors would allow the price of spaces to fluctuate according to demand. For example, if the sensors detected that few spaces were available in the car park the price would automatically adjust to recognise that. The driver seeking to park at a peak time, where already a considerable amount of pollutants have been emitted by previous drivers, would be charged a reflective higher price; this dynamic price would incorporate the social cost of driving, which would compensate the community for the air quality issue. The compensation for the negative externality of driving would arise from the reinvestment of parking revenues into other ‘green’ schemes, such as the subsidy associated in the CAZ. The extra funds which could be spent on CAZ subsidies, derived from ‘Smart Parking’, would be beneficial to improve the political palatability of the macro policy.


Most importantly, the fluctuating price would foster behavioural change towards other, less polluting, modes of transport. This policy would particularly target peak hours commuters, which would minimise the impact on off peak travellers who are often shoppers and spenders. The policy would require sensor technology to pick up determinate information and a customer facing app for drivers to pay the dynamic price. This policy is in the spirit of ‘Smart Cities’ which describe how technology can improve the efficiency and quality of urban services and networks for the “benefit of its inhabitants and local business”. ‘Smart Parking’ is completely within the Greater Manchester Authorities grasp because, following the formal end of lease contracts to NCP company, city centre car parks are now owned by Manchester City Council. The Council has the power to implement ‘Smart Parking’ and subtly, but significantly, contribute to tackling the air quality problem.


The Rationale


The current prices for car spaces within Manchester City Centre are lower than the socially optimum. This is considering the high volume of polluting car travel, with over half of Greater Manchester citizens feeling that cars take up too much of road space. The pricing of car parks does not reflect the great harm that air pollution is doing to the community. Therefore, by implementing dynamic pricing, the loss to society, incurred from driving’s negative externalities, can be captured. When lots of cars have driven into the city centre the price of car spaces will be proportionately high in order to address the social cost of the drivers emissions. When there are many spaces available the car park price will be lower so as to reflect the relative absence of pollution. The dynamic nature of the pricing means that drivers are hit with a higher price only when social cost has truly reached an undesirable level.

Graph: James Thompson


This function of the policy can be observed graphically, whereby a price increase during busy times (Pp to Ps) forces a reduction in the quantity of cars occupying the spaces (Qp to Qs). By consequence, the difference between the social cost of driving and its private cost is captured (as represented by the orange triangle). This deadweight social loss can be reinvested in policies which alleviate the air pollution problem.


The nature of dynamic ‘Smart’ pricing means the policy has a positive behavioural component. It logically follows that drivers faced with a higher parking price during peak times will look for alternative, cheaper forms of transport. Therefore the policy nudges commuters to use public transport, ride sharing, cycling or walking; all of which minimise pollutant emissions and promote positive lifestyle changes. The long term outcome of the ‘Smart Parking’ policy would hence capture the social cost of pollutants in addition to facilitating a positive behavioural shift away from harmful car travel.


It is worth recognising that any behavioural change comes with an implicit economic assumption, namely that drivers are price sensitive. If drivers price elasticity is inelastic the policy will not foster behavioural change, and will only serve to be an unavoidable, punitive tax. That is to say that if drivers are not responsive to price changes, and simply absorb higher parking prices, they will not be encouraged to change their transport and subsequent polluting habits.


However, there is evidence that parking price is correlated with car ownership, indicating that a similar relationship exists for car usage. In Amsterdam “a 10% increase in residential parking prices is associated with an 8% reduction in car ownership”: while in New York, parking space availability was a greater factor in car ownership and use than income. This evidence suggests that, should Manchester have similar alternatives to car travel, that a similar behavioural response rate will be observed.


An anticipated criticism of the ‘Smart Parking’ policy is that citizens who live further out from the city centre, with reduced public transport options, will have inelastic demand for car park spaces. Therefore, the incidence of taxation would fall on lesser connected individuals, often in poorer boroughs; this would make ‘Smart Parking’ a regressive policy. This would cast doubt on whether Manchester could boast similar price responsiveness as Amsterdam or New York. However, I would argue that public attitude, in addition to existing and planned infrastructure, demonstrates that this regressive concern is surmountable.


There is notable appetite for alternative modes of transport in Greater Manchester with “64% of respondents [in a recent survey] feeling that cyclists had too little space” . Furthermore, the Greater Manchester Authority are making positive moves to improve alternative transport infrastructure; this can be seen with the addition of the Bee Bike network, improvements to Tram lines, and the recent plans to bring buses back into public ownership. These steps will do much to connect individuals from other boroughs to the city centre, increasing their options to reasonably priced transport alternatives. These improvements, in addition to the nudge of the ‘Smart Parking’ policy, will change behavioural and minimise the impact of air pollution on our lives.


The evidence that elasticities exist between car usage and parking price, and the comprehensive portfolio of transport options on the horizon suggests that the ‘Smart Parking’ policy would likely achieve its behavioural change ambitions. This would allow air quality to be drastically improved and make the 2026 legal requirement imposed by the central government more achievable.


The Conclusion


In this article, I have outlined the ‘Smart Parking’ policy. I have discussed how sensors, which collect parking space information can be used to fluctuate space prices. This allows the social cost of car pollution to be absorbed within parking prices. The dynamic nature of the pricing strategy means that peak time drivers are targeted, whilst off-peak drivers (generally shoppers) will face reflective lower prices. The higher price of spaces for peak hour drivers will, over time, foster behavioural change away from pollutant cars in favour of public transport and other positive alternatives. This assumption has been supported by correlative evidence from comparable jurisdictions. This policy, working in tandem with a more politically feasible CAZ, could allow Greater Manchester to achieve its air quality targets. It is just the supplementary policy which Burnham needs right now.


To read the Policy Proposal in full please click here







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