HomeLow carbon futureWhat can other places learn from London’s financial incentives for sustainable travel?

What can other places learn from London’s financial incentives for sustainable travel?

This post is by Millie Mitchell, senior researcher at the Centre for London.

Getting people out of their cars and onto more sustainable modes of transport is going to be essential to reduce air pollution in cities and cut climate impacts by the amount necessary. One lever policy makers can use is to change the cost of travel: making it more expensive to travel by car, or at least cheaper to travel by bike and public transport for instance. But this comes with high levels of political risk, especially in a cost of living crisis.

London is an outlier in the country, with many financial incentives in place for sustainable travel, but do they work? And what could other cities learn from what the capital has done?

Car ownership is very expensive but addictive
Driving is a sticky habit to break. This is in spite of the fact that, for many, owning and running a car is one of their biggest outgoings after housing. The many costs of driving, on top of the initial purchase, include MOTs, road tax, insurance, parking and fuel costs. As a result, many people don’t actually know how expensive their cars are, especially not on a per use basis. And, for those that do, high upfront costs are a sunk cost that can lead them to drive more frequently ‘to get their money’s worth’.

The most effective financial incentives to reduce driving are those applied on a per journey basis where the benefits of driving less often accumulate. London has two such charges: the congestion charge, introduced in 2003 by former Labour mayor Ken Livingstone, and the Ultra Low Emissions Zone (ULEZ), first introduced by Conservative mayor Boris Johnson in 2019. Both of them have been judged to be broadly effective at achieving their policy objectives. On implementation, the congestion charge slowed the growth in traffic in central London, and the ULEZ expansion from central to inner London boroughs has led to a 23 per cent reduction in nitric oxide and nitrogen dioxide levels since 2019.

That said, there is still room for improvement. These charges don’t address all the negative externalities of car use across the city and, whilst the ULEZ is successful at reducing the number of highly polluting cars on the road, it has had a less notable impact on getting people out of cars. One way to do this fairly would be to introduce a smart distance and emissions based road user charging system.

In London, after walking, cycling is often the cheapest way of getting around. However, if you’re not already a cyclist, the costs of owning a bike can be daunting. More than just the bike itself, many Londoners have to pay their local authorities for cycle storage which, for families, can quickly add up to more than the cost of a parking space.

The chance to test other methods can help people switch
Most people won’t get rid of their car in favour of a bike straight away. They will bear the financial costs of both unless they are convinced their car (or often their second car) isn’t necessary. Reducing the upfront costs of cycling could be a motivation for more people to give it a go.

Nationally, the ‘cycle to work’ scheme goes some way towards doing this, allowing employees at participating organisations to spread the cost of a new bike through salary sacrifice. But even this is a big commitment if you are low paid or not already in the habit of cycling. And not everyone is eligible: many small businesses aren’t signed up to it and it can’t be used to pay for children’s bikes.

One way local authorities in London are combatting this is by offering a trial bike scheme via organisations like Peddle My Wheels, where residents pay monthly for bikes before deciding to buy (payments made during the trial period are taken off the purchase cost).

Hire bikes and e-scooters go one step further. These options allow Londoners to give cycling a go, one journey at a time. Some operators, such as Lime, have partnered with Transport for London (TfL) and boroughs to introduce concessions and discounted zones for residents in areas of deprivation.

Cycling may not be for everyone, but public transport is a more sustainable travel option than driving. Whilst London’s public transport pricing is far from perfect, there are lessons that can be learnt from the incentives it’s using.

Incentives for young people builds habits for life
Children under five travel free on trains across the country, but TfL also offers free travel for older children, and buses are free for young people up to the age of 18. This has helped to instil the habit of travelling by public transport, and it can act as an incentive for parents not to drive.

TfL’s fare structure, with daily and weekly price caps, builds predictability into the cost of travelling across the city. And ‘Hopper’ fares on buses and trams allow travellers to tap in and out multiple times in an hour without paying several fares. Compared with the variable costs of driving, public transport has an appealing predictability, especially for those on low incomes.

The final lesson from London is that financial incentives have worked best in combination, as recent Centre for London research shows. A package of policies that pushes and pulls people onto sustainable transport increases public acceptability and is fairer too.

This approach isn’t limited to the cost of transport. When the congestion charge was first introduced, it was accompanied by the introduction of over 300 new bus routes serving central London.

Good communication of any policy is key to its uptake. The latest ULEZ expansion was accompanied by an unprecedented package of support for everyone living in London, such as free car club membership and discounted cargo bikes. Yet many people don’t know about these. By comparison, the recent announcement that the ULEZ scrappage scheme is extended to all Londoners has been front page news.

Other cities can do more to follow London’s lead. Policies tested in the capital have shown that financial incentives do work. With strong political will, and a thoughtful combination of carrots and sticks, cost can be a powerful tool for cities to use to encourage modal shift.

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Green Alliance is a charity and independent think tank focused on ambitious leadership and increased political support for environmental solutions in the UK. This blog provides space for commentary and analysis around environmental politics and policy issues as they affect the UK. The views of external contributors do not necessarily represent those of Green Alliance.