An Open Access Article

Type: Research Article
Volume: 2019
Keywords: Common Resources, Negative Externalities, Traffic Jam, Air Pollution, Vehicle Emissions, Public Transportation, Supply-side and Demand-side measures, Congestion Charges, Tolls, Transport Infrastructure, Greater Beirut Area, Space Economics, Economic and Environmental Implications, Regressiveness
Relevant IGOs: Intergovernmental Panel on Climate change (IPCC), World Bank (WB), World Health Organization (WHO), World Economic Forum (WEF)

Article History at IRPJ

Date Received: 2019-09-10
Date Revised:
Date Accepted: 2019-09-26
Date Published: Intergovernmental Panel on Climate change (IPCC), World Bank (WB), World Health Organization (WHO), World Economic Forum (WEF)
Assigned ID: 20191004

Can Congestion Charging be a Solution to Beirut’s Chronic Traffic Problem?

Harrouk TONY
Author affiliation(s): (1) School of Global Economics and Development, Pôle Universitaire Euclide (Euclid University); EUCLID Global Institute, Washington DC (United States)

Corresponding Author:

Pr Devender BHALL, HDR (Editor)


1. Introduction

“What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others.”[1] A saying by the ancient Greek philosopher Aristotle that dates a bit less than three millenniums. It describes the problem of common resources and their abuse. Nowadays, this problem persists even in more supine forms such as pollution and road congestion. The main purpose of this paper is to examine the application of the concept of “congestion charging” in Lebanon and more specifically in the overcrowded Greater Beirut Area (GBA). Pertinent background information is exposed, highlighting some relevant history and the current situation as well as the economic implications of traffic jams.  Thereafter, the theory of congestion charging is exposed with real world examples and results. The analytical part focuses on the various anticipated effects of the application of congestion charging schemes. It is worth indicating that our study is qualitative, not quantitative. In other words, the discussion concerned the direction of variation of the parameters in question rather than the amount of the variation.

One last note about GBA. There, space is scarce and expensive. Accordingly, significant expansions of the road network prove exorbitant in cost, not to mention other negative implications. In fact, “More roads simply encourage more people to use their cars, to live farther away from work, and thus use more road space.”[2] Consequently, it is mandatory for the government of Lebanon to look for solutions to the congestion problem that are beyond the conventional supply and demand-side measures.

2.     Background

The fifteen years war that erupted in 1975 brought serious damage to the transportation infrastructure of Lebanon, as well as degrading the public transport system. Several key infrastructure projects were implemented after the war aiming to upgrade this infrastructure and expand the network’s traffic capacity, namely at the main north, south, and east entrance corridors of the city. On the other hand, the concentration of activity around the capital is alarmingly on the rise. In excess of 40% of the nation’s total population currently lives in Beirut; a population that has grown substantially following the influx of Syrian refugees since 2011. This high concentration exacerbates the urban transportation challenges of the city, which rest on inappropriate infrastructure, gridlock traffic jam, high level air pollution, unregulated public transportation, and road mishaps. Consequently, the city’s urban development is gravely affected and traffic congestion is thought to be a main cause: “The congestion problem is increasing due to rapid motorization along with increased household income and growth of middle-income households. Almost half of the total vehicles in Lebanon circulate in the GBA and the traffic volume in the GBA reaches 7,000 vehicles per hour in the northern entrance of Beirut.”[3]

To address such traffic jam problems, it is common among most nations to adopt supply-side actions such as the enlargement of road webs and the upgrading of the public transportation system. In parallel, demand-side measures are recently gaining attention: “In addition to these supply-side responses, there is growing interest in using demand-side measures, particularly fiscal or pricing reforms to address the broader societal costs (or negative externalities) of transportation systems. A more novel approach is congestion tolls, which economists have long advocated as an effective way of allocating scarce roadway capacity to the highest valued users.”[4] It is important to note here that, to ensure optimal outcome in resolving congestion problems, the 2017 Policy Research Working Paper of the World Bank recommends the sufficient availability of supply-side measures to complement the demand-side instruments. Such an availability proves crucial to ensure the sufficient substitution of private cars with mass transportation so as to ease up traffic.  A notable characteristic of the GBA is the restricted number of alternatives to the use of privately owned vehicles. For instance:

Motorization has rapidly increased despite the fact that import duties on vehicles account for more than 50% of a vehicle’s total value, the gasoline tax is one of the highest in the region and parking space is severely limited. The situation is worsened by the high cost of housing which causes people to reside away from the city center whereas most jobs are concentrated there. The city also lacks a reliable public transportation system. The GBA’s transportation system is additionally strained due to the influx of Syrian refugees over the last few years. Affluent Syrian families, concentrated in the GBA, have brought their cars into Lebanon and intra-city trips in the GBA have significantly increased. It is estimated that the influx of Syrian refugees has resulted in sudden traffic increases in the GBA in the range of 15-25% (World Bank, 2015).[5]

A situation that affords a lot of improvement, in case suitable policies and measures were implemented. Worth mention that the initial 1995 Greater Beirut Transportation Plan (GBTP) stipulated the construction of two Metro Lines, one Regional Rail Service, 3 Bus Lines running on dedicated bus lanes, thirteen bus lines running in mixed traffic, and taxi-service. All of that should have been completed by 2015. Furthermore, the plan covered the pedestrian aspect in terms of sidewalks, and the bicycle alternative transport mode.[6] Regretfully, none of these plan measures were executed!

On the bright side, the immediate action plan has been implemented with regards to traffic management and network upgrades:

More than 210 intersections are now signalized, 40 CCTV cameras have been installed along 4 major corridors and have been connected to a state of the art traffic management center. A dozen grade separations have been constructed, and paid on-street parking has been introduced on many streets in Beirut and that has significantly increased parking turnover and pushed long-term parkers to parking lots. Although sidewalks have been rebuilt with bollards for preventing cars from mounting them in some streets and the city is much more pedestrian friendly than before, there is still a very large margin of improvement available. With that all said, public transport is still under provided.[7]

Hence, the successful implementation of the immediate action plan, though very modest compared to the original 1995 GBTP, lays the ground for more advanced future measures. In 2017, sensing the economic priority of such a project, the Government of Lebanon (GOL) came to a resolution to proceed with a complete public transport program for GBA comprising of a network of Bus and Bus Rapid Transit (BRT) solutions for the medium term, and extending the BRT lines to southern and eastern suburbs in the second and third phase: “This ambitious project will be the first mass-transit and regular transport system in Lebanon for over 50 years, in a complex political-economy context in the country and the sector (alignment, informal operators, behavioral change, institutional). It is a vital project in tackling traffic congestion, contributing to growth and connectivity between various Lebanese regions, and in providing affordable and reliable transport.”[8] No wonder Lebanon ranks 95th out of 140 nations in terms of infrastructure: 94th in Road connectivity index, and 127th in Quality of roads.[9] According to the World Bank’s “Roads and Employment Project” (2017), the total Lebanese road network constitutes of 21,705 km of roads.[10] According to the same report, and while there is no accurate survey of road conditions as the last survey was conducted back in 2000, the Ministry of Public Works and Transport estimates that only 15 percent of roads in the main network are in good condition, while 50 percent are in fair condition and the remaining 35 percent are in poor condition. In addition to the poor road network, the absence of a dependable public transportation system makes the situation even worse:

Inefficiency and lack of organization characterize the current system of public transport in Lebanon. This has led to the multiplication of shared taxis, known as “service cars,” and minivans. Besides the prolonged detours of “service cars” to pick up more passengers and the excessive speed and irresponsible behavior of minivans drivers, the fierce competition among drivers leads to a continuous and unpredictable stopping of vehicles which, in turn, causes additional traffic congestion and deterioration of road safety.[11]

A direct consequence of this chaotic public transport situation is the over-reliance of citizens on their private cars for commuting. Actually, 75% of the population do rely on their own cars while only 25% count on public transportation.[12]

Therefore, the heavy reliance on private cars seems to be the direct cause of traffic congestion:

Estimates reveal that there are around 1.75 million registered vehicles in Lebanon, of which 85 percent are cars. As a matter of fact, the total number of registered new cars has been increasing at an average yearly rate of 13 percent between 2007 and 2016. Besides the considerable number of cars in the capital, Beirut witnesses the entry and exit of almost 500,000-600,000 daily vehicles from its three main arteries (Tripoli road, Damascus road, and Saida – Tyre road). This also means that there is one car for almost every three individuals, which is a very high ratio when compared to different countries like Turkey and China, where the ratios stand at one vehicle for every seven persons and 12 persons, respectively… As a considerable number of Lebanese citizens commute to the capital on a daily basis, the Greater Beirut area witnesses a large congestion problem especially at its North, East and South entrances. These corridors experience average speeds as low as 10-30 km/h which in turn increases trip times by around 50-70 percent.[13]

Figure reference[14]

Consequently, the situation could easily be described as a crisis. A striking fact is that the occupancy rate per vehicle is a mere 1.2, which explains the elevated number of cars hitting the road.[15]

In response to this difficulty, the Lebanese have innovated several solutions which, though useful, remain limited in effect. Carpolo is an app that offers carpooling solutions. Loop is an electric scooter sharing service. YallaBus is a mobile application aiming to induce commuters to utilize the existing buses: “The Lebanese fleet of licensed commercial passenger transport vehicles consists of 39,000 vehicles. The majority are taxi-service automobiles and less than 20 percent is divided between vans and buses – which cater to less than 1.7 percent of the undertaken daily trips.”[16]  Lastly, Beirut’s Bikes 4 All is the first bike-sharing initiative in Lebanon.

3.     Economic Implications

It is estimated that Lebanese citizens lose 16% of their productive time commuting. This costs the Lebanese economy more than $2 Billion in losses on a yearly basis: 5 percent of the country’s GDP.[17] It is noteworthy indicating here that according to the World Bank (WB), and because of the lack of dependable and economical transport options, a notable 15% of households’ spending goes to transportation.[18] On the other hand, and according to the WB also, it is estimated that the influx of refugees has increased the rehabilitation and upgrade needs of the road network by about $50 million yearly.[19]

4.     A Possible Way Out

What could be done to alleviate this extremely supine externality? Besides the upgrade of the public transport system, fiscal policy instruments are commonly used to mitigate transport sector externalities. The findings of the WB in this regard establish that: “Congestion charges would reduce vehicle traffic by 9 to 12 percent and significantly improve environmental quality. The vehicle tax literature suggests that every 1 percent increase in vehicle taxes would reduce vehicle miles by 0.22 to 0.45 percent and CO2 emissions by 0.19 percent. The fuel tax is the most common fiscal policy instrument; however, its primary objective is to raise government revenues rather than to reduce emissions and traffic congestion.”[20] One instrument of growing interest is congestion charges:

Congestion charges internalize the additional travel cost imposed by motorists on fellow travelers by altering their travel behavior (Sikow-Magny, 2003). This charge also encourages people to travel during off-peak hours, through non-congested routes or through other modes of transportation. It is considered an effective policy instrument in controlling vehicular emissions because it helps to reduce the number and duration of trips, alter routes, and offers decreases in speed variation (Daniel and Bekka, 2000). However, the willingness of motorists to pay congestion charges depends upon their level of income and their availability of alternative means of transportation (Sharp, 1966). Congestion pricing is theoretically well-established and implemented in practice throughout many urban centers, particularly in developed countries.[21]

Hence, could this policy apply in the context of Lebanon?

5.     Congestion Charges, The Theory

“Smoking, driving, and mobile phones all cause what economists call “negative externalities.” That is, the costs of these activities to other people tend to exceed the costs to the individuals of their proclivities. The invisible hand of the market fumbles, leading resources astray. Thus, because a driver’s private motoring costs do not reflect the costs he imposes on others in the form of pollution and congestion, he uses the car more than is socially desirable.” [22]

To correct for such negative externalities, economics call for Pigovian taxes: “When externalities are present, society also cares about the well-being of the bystanders who are affected. Pigovian taxes correct incentives for the presence of externalities and thereby move the allocation of resources closer to the social optimum. Thus, while Pigovian taxes raise revenue for the government, they also enhance economic efficiency.”[23]

Congestion charges are one type of a Pigovian tax: “The theory of congestion pricing states that the charges imposed should equal the difference between the social marginal cost and the private cost for the flow, which will prevail only after imposing the charges. Congestion charges are meant to internalize their external costs.”[24]

The first prominent basic work to depict the dislocation of resources caused by the complimentary ingress to common roads was achieved by Pigou (1920) and Knight (1924). As shown in Figure 1 hereafter: “The average time taken for a motorist to travel a particular road segment increases with an increase in traffic flow. With the increased congestion, average speed decreases and average travel time increases for the driver. Thus, an increased travel time causes the average and the marginal travel costs to increase.”[25]

It is worth indication that: “Earlier studies (i.e., studies before nineties) focused mainly on reducing congestion, whereas recent studies equally address both congestion and environmental pollution. These address the need and the effectiveness of taxation in correcting the misallocation of public resources associated with free access to public roads.”[26]

6.     Congestion Charges In The Real World

Several countries around the world have applied congestion charging schemes in the aim of lessening the social and environmental costs of traffic jam. However, not all cases have had the same favorable outcome. Automobilists may be convinced to change their commuting behavior in response to congestion fees, though traffic deviation is to be expected. Singapore in 1975 is perhaps the first to apply congestion pricing with the objective of changing travel behavior:

In this system, only those cars with three or fewer people were charged. The charge ranged between $1.50 to $2.50 per day (Daniel and Bekka, 2000). In September 1998, after 23 years in operation, the ALS was replaced by an electronic version called the Electronic Road Pricing System (ERP), (Keong, 2002). In 2003, the city of London introduced a congestion charging scheme in which vehicles entering inside a 22-square km zone comprising core shopping, government, entertainment and business districts were required to pay a congestion charge of £5 between 7 AM and 18.30 PM on weekdays. The charge has been increased to £8 since July of 2005 (Schmöcker et. al., 2005).[27]

Four congestion pricing systems in different nations are illustrated in the following table. The purpose behind imposing the charge defines the method. In Singapore, the United States, and the United Kingdom, the main goal behind road pricing is congestion relief, whereas in Norway, at first, it was conceived to generate revenue (currently it is environmental quality and safety). Moreover: “In Singapore and the United Kingdom, motorists pay charges on a daily basis, unlike the United States and Norway where motorists pay a toll per passage. In Singapore, charges vary, depending on the peak and off-peak periods and are reviewed on quarterly basis.”[28]

In addition to aiding correct externalities from transportation, like air pollution and traffic jam, a congestion charge yields   important revenues. These could exceed the annual operating costs as is the case in Singapore and Norway (see Table 1).

With regards to GBA, a combination of area licensing and electronic road pricing seems to be appropriate.

7.     Effects of Congestion Charges

According to the WB study, several effects are to be expected such as a reduction in fuel consumption, air quality and social welfare improvement. [29] Hereafter, we shall briefly highlight the most relevant findings as they directly relate to our research. The interpolation on GBA case shall follow for each section:

7.1.  On Transportation Services

The results in this main arena are positive in that a significant reduction of traffic is observed:

The congestion tax system introduced in London for example, led to the reduction in city-center traffic by 12%; of which 50-60% shifted to public transport (Transport for London, 2004). Rich and Nielsen (2007) estimate that annual reductions in car mileage in Copenhagen would be 7%, 6.5% and 3%, respectively, if congestion charges are introduced based on km charging, cordon and large toll ring systems. The reduction in congestion time would be approximately 2-3 times as high as that of car mileage. It is estimated that daily inbound traffic would be reduced by 5% in New York if a toll or a variable charge (like MTA) is introduced on the East River Bridge (Zupan et al., 2003). A London-type congestion charge would reduce daily traffic volume in the city by 9%; if a full variable pricing is introduced the reduction could reach 13% (Zupan et al., 2003).[30]

For our case of GBA, a full variable pricing, not considering any other factor for now, should reasonably be able to generate 4-5% reduction in car mileage and 8-10% reduction in traffic. Congestion time is expected to be reduced by 8-15%. Apart from the considerable number of cars in the capital, the number of cars entering and exiting Beirut daily is expected to decrease by an estimated 10%, thus, 50,000-60,000 cars should be removed from the road on daily basis. This assumes the availability of a reliable and comprehensive public transportation system.

7.2.  On the Environmental Condition

The same WB study indicates in its quantitative impact evaluation that:

A congestion charge not only reduces congestion but also reduces carbon monoxide (CO) and volatile organic compound (VOC) emissions proportionately more than other types of emissions (Abbott et al., 1995; Acutt and Dodgson, 1997). Daniel and Bekka (1999) estimate the impacts of congestion pricing on emissions of CO, nitrogen oxide and hydrocarbons for an actual metropolitan highway network calibrating Delaware’s household travel demand, and highway traffic count data in EPA’s mobile 5a model. They find that vehicle emissions could be reduced as much as 10% in aggregate and 30% in highly congested areas through the use of a congestion charge.[31]

It is reasonable to expect the same environmental impact if a similar scheme is applied in GBA.

7.3.  On the Economy and the Well-Being

An abundance of analysis exists on the economic and well-being effects of congestion charging.[32] Many factors influence the outcome, the same definition of well-being is one of them:

Studies conducted as early as the 1960s have shown that congestion charges can increase welfare (see e.g., Walters, 1961; Weitzman, 1974). This is because a congestion charge ensures more efficient use of existing infrastructure while generating revenues, which then can be invested in the road and public transport system surplus (Eliasson and Mattson, 2006). However, the welfare of those who use the roads can decline if the revenue generated from such charges is not returned to them (Glazer and Niskanen, 2000). Parry (2002) finds that under ideal congestion pricing, a congestion tax imposed uniformly across freeway lanes can achieve more than 90% of the maximum efficiency gains.[33]

A side effect that existing studies caution from is regressiveness. Since people who better value their time are those of high income, they consider it worth it to pay a charge. However, it is not the case for groups of low income who shall be worse off due to the charge. Because the travel choice of reduced income families is extremely affected, they will mostly believe in the goodness of traffic charging schemes if revenues obtained thereof are redistributed:

Evans (1992) argues that low-income groups can benefit from congestion charges if the revenue generated is invested in public transportation. This is because low-income groups use public transportation more often than higher-income groups, and thus will profit more from the revenues generated through congestion charging. There are several proposals (Goodwin, 1989; Small, 1992; Verhoef et. al., 1997) put forward to enhance acceptability of congestion-pricing schemes. Small (1992) proposes reimbursing the travelers as a group to offset the regressive taxes and using revenue to fund new transportation services. Verhoef et al. (1997) suggest considering the motorists’ preference while recycling revenues generated through congestion charges to the economy (e.g., investment in new roads, reduction of fuel taxes). Different schemes for recycling congestion tax revenues obviously have different implications for different travelers. Eliasson and Mattson (2006), for example, show that women and low-income groups benefit the most when the revenue is used for improving public transport. The net benefit will be equal for men, and women on average, and benefit high-income groups if revenues are used for tax cuts. The distribution impacts of congestion pricing depends upon where different population groups live and work, their mode of transportation for commuting, and the ways in which revenues collected are allocated (Santos and Rojey, 2004). Parry and Bento (1999) show that the net effect of a revenue-neutral tax on congestion can stimulate labor force participation at the margin. De Borger and Mayeres, (2007) argue that the better welfare improvement is possible only when the government differentiates variable car taxes between periods to capture greater differences in congestion between peak and off-peak periods. De Palma et al. (2006) find that welfare gains tend to increase with an increase in proportion of a transport network that is priced. They argue that, in order to stop extensive traffic diversions in places where only a small fraction of transport network is tolled, charges need to be set at relatively low levels.[34]

Applying the above findings to our case of GBA; Lebanese economic welfare is expected to increase due to a congestion charging scheme because the efficiency of use of roads shall be improved. A key condition for a sustainable gain in welfare is the correct redistribution of revenues. Data on the wage distribution of employees indicate that: “Wages in Lebanon are highly skewed towards lower income brackets. The lowest two brackets, or earners of up to LL 15 million annually (~USD 10,000) account for 56.8 percent of all employees and 22.4 percent of total declared wages. At the other end of the range, the highest two brackets, account for 6.3 percent of employees and take in 31.7 percent of total declared wages.”[35]Another survey initiated by Konrad Adnauer Stiftung in partnership with Statistics Lebanon, conducted in December 2018, indicated that:  “While three-quarters of the respondents said they were employed, 36 percent earned less than $1,000 per month.”[36] It can be deduced that the proportion of low income Lebanese households is significant. Hence a proper application of a congestion pricing scheme in conjunction with a reliable public transportation and a proper redistribution of revenues shall have a favorable impact on welfare. Again the availability of reliable and affordable public transportation and alternatives to low occupancy private vehicles is crucial. If the WB project for BRT and public buses is implemented, then congestion pricing could be envisaged and should induce an appropriate change in behavior: “Because people make decisions by comparing costs and benefits, their behavior may change when the costs or benefits change. That is, people respond to incentives.”[37] Furthermore, in the market for vehicle travel, and in line with the law of demand, the demand for private car travel is expected to decrease with the increase in the associated cost/price of vehicle travel thanks to the extra congestion charge. [38]Substitution of private car travel mode towards public transportation is expected to rise significantly. Hence, keeping everything else constant, when reliable and affordable public transportation becomes available, and the charge is thereafter implemented, the demand for private car travel is expected to diminish and the demand curve should shift to the left. Conversely, the demand for public transportation is expected to rise, and its corresponding demand curve should shift to the right.

In the frame of “space economics” for transport studies, looking at the supply side, we can consider Qs as the quantity of vehicle space that can be accommodated/supplied by the existing road network in question. Qd is the quantity of vehicle space demanded by commuters. In the actual situation, where the negative externality of congestion exists, the social cost of car travel exceeds the private cost. Moreover, the optimum quantity of vehicle space is smaller than the equilibrium quantity. We have an excess demand (Qd > Qs), since the cost (price) of private car travel Pc (P current) is below the equilibrium cost Pe (Pc < Pe), Qs is less than Qd and a shortage of space is manifested in the form of congestion. If a sufficient charge (an increase in the cost (price) of car travel)   is applied to achieve equilibrium between supply and demand, the quantity demanded is expected to be reduced, thereby eliminating the shortage and easing congestion. How much is the value of such a charge is not in the scope of our study and requires further surveys, modeling, and evaluation. Moreover, adequately charging congestion shall bring the cost of travel closer to the actual social cost, and shall shift the supply curve to the left.[39] Consequently, the travel quantity demanded shall diminish to reach the social optimum that is less than the equilibrium quantity before applying the charge. Hence congestion is expected to ease, and the new market equilibrium will produce the socially optimal quantity of car travel demand. The congestion charge will give commuters an incentive to take into account the external effects of their actions. “This policy is based on one of the ten principles of economics: People respond to incentives.”[40]

On the other hand, if the revenues from congestion charging are partly invested in the expansion of the road network, that will cause an increase in supply, hence a shift in the supply curve to the right allowing the equilibrium cost (price) of travel, directly correlated with the congestion charge, to be reduced (thus a reduction of the charge is possible), since the demand curve is sloping downward; assuming everything else remains constant. Roads can be seen as a scarce resource, and: “In market economies, prices are the mechanism for rationing scarce resources.”[41]

With the presumed availability of substitutes, the demand for car travel is expected to be elastic. However, many economic, social and psychological factors are to be taken into account as well. Commuters’ preferences dictate whether private car travel or other modes of transportation shall be used. Traveling is a necessity for a substantial portion of the population which can drive the demand for private car travel to be inelastic if it were not for the existence of convenient substitutes. Other studies of elasticities indicate a value of elasticity, for example in the London case, of between -1.3 and -2.1: “These high elasticities in London are probably linked to the wide availability of public transport. In a region with poor public transport alternatives, we would expect to observe a lower elasticity of demand for travel by car.”[42]

In terms of equity, the congestion charge seems to abide by the “Benefit Principle” in that: “A person who gets great benefit from a public good should pay more for it than a person who gets little benefit.”[43] On the other hand, it is difficult to apply the “Ability-to-pay” principle, in its vertical and horizontal dimensions, to the congestion charge. The regressiveness issue has been discussed earlier in a different part.[44] Nevertheless, it would be less regressive if the charging system is designed such that high-income commuters, having more expensive/luxurious cars, pay a larger congestion charge.

7.4.  Consumer Choice

“People face tradeoffs… When a consumer buys more of one good, he can afford less of other goods… People consume less than they desire because their spending is constrained, or limited, by their income.”[45] Considering the budget constraint curve for the quantity of travel by private car (horizontal axis) versus the quantity of travel by public transportation that a typical consumer can afford (Vertical axis). When the congestion charge is applied, the relative price of private car travel compared to public transport choice shall increase. The slope of the budget constraint curve shall become steeper as the consumer is expected to change behavior and chose more of the public transport mode of travel and less of private car travel. Furthermore, the congestion charge shall constrain the consumer/commuter to choose his preference on a lower indifference curve, hence pushing his optimum choice point to a lower indifference curve as the budget constraint curve becomes steeper.[46]This is to conclude that the effect of the congestion charge on consumer optimum preference based on the theory of consumer choice is in-line with the intended objective of changing the travel mode towards substitution of private car travel with public transportation.

7.5.  Macroeconomic Effects

On another front, the income savings that the consumer shall achieve from substituting private car travel with the cheaper public transportation option and from the expected enhancement in productive time are expected to shift his budget constraint curve for other normal goods bundles outward.[47] Given the shift in the budget constraint and the consumer’s preferences as represented by his indifference curves, the consumer’s optimum moves from the point labeled initial optimum to the point labeled new optimum.”“[48] Accordingly, his purchasing power shall increase, and his consumption shall grow, which reflects positively on consumption being a major component of the aggregate demand and the overall economy. On another front, the substitution effect due to the increase in cost of private car travel is expected to escalate.

Another possible effect of the extra money being spared (out of the 15% household spending on transport indicated earlier) from shifting to less costly travel modes and from the expected improvement in productive time, could be an increase in private savings. More money can be placed in interest-bearing accounts which help cause interest rates to decrease, and subsequently spending on domestic investment to increase. This in turn lays the ground for more long-run economic growth and a reduction in unemployment.

Moreover, the decline in private car travel is expected to reduce fuel consumption and the associated fuel import bill. Furthermore, private car imports shall be reduced as the demand for alternative transport modes accentuates. Both effects of fuel and car import reductions will contribute in lowering the trade deficit and shall also reflect positively on the foreign currency reserves, hence improving macroeconomic stability. As the value of imports diminishes, the net exports increase. Hence economy’s GDP shall rise.[49] Conversely, unemployment rate shall decline.[50]

On the other hand, when revenues generated from congestion charging are reinvested in upgrading the road network and strengthening public transport services, more government funds shall be released hence helping to curb the existing enormous budget deficit (11% of GDP in 2018).[51] The borrowing needs of the government shrink, making way for more loanable funds to be freed for the private sector; reducing interest rates and mitigating the investment crowding out effect of the budget deficit.[52]

More importantly, the sizeable aggregate congestion externality is expected to be contained. 5% of GDP is the amount that this externality imposes on the economy. [53] It is said that: “The total monetary value of the congestion delays caused by all traffic in LBP per year per consumer in the model. In the base year, this amounts to 283,399 LBP per consumer per year (approximately 189 $ US). The aggregate amount is equivalent to 2.11% of the Beirut region’s gross product and 3.96% of the per consumer income.”[54]

Moreover, the reduction in private car travel is expected to reduce related air pollution, thus reducing pollution associated health hazards. This should logically constrict the associated healthcare bill, thus in turn helping to curb the budget deficit, hence enticing the corresponding positive effects mentioned earlier.

Another positive impact of congestion charging is expected in the area of road traffic accidents where more than one thousand person lose their lives every year, this not mentioning the other casualties which count in thousands.[55]

On the other hand, to capture the best-aforementioned welfare improvement, the GOL will have to apply a system of variable car taxes. Worth mention that a profound cost-benefit analysis will be mandatory to further evaluate such a venture prior to any implementation. Moreover, there exists plenty of technological choices that could be resorted to for proper implementation, this is in case enough political will exists.[56]

8.     Conclusion

As we can notice, the economic theory and some real-world cases point in the direction that considerable benefits are to be expected from applying congestion charging in Lebanon. Ultimately, the road pricing instrument is predicted to smooth out the current and future demand for the arisen demand of transport. Moreover, the excessive reliance on private car travel makes the country a fertile land for congestion charging, provided suitable affordable and reliable public transportation is availed, and a proper redistribution of generated revenues is warranted. The challenge is to gather a political will behind it, and to develop the proper set up for professional implementation. This being said, the road map towards execution requires a thorough cost-benefit evaluation based on which, congestion charging will need or not to be integrated in the overall transport plan of the country as early as possible. This is where the World Bank expertise, advice, and weight can play a constructive leading role. An expert review of the whole transportation plan for GBA in particular, and the whole country in general is needed so as to determine the optimal path to addressing this drastic condition.

Significant merits can ensue from the congestion charging scheme. The time element proves key for the major productivity gains. Positive impact is expected on the economy thanks to the reduced losses, both in opportunity and actual costs, due to traffic congestion. This substantial loss, estimated at around 5% of GDP, is expected to be significantly diminished.[57] Accordingly, as the economy grows, government revenues from taxes shall improve, thus mitigating the critical budget deficit. Yet, as the economy grows, employment receives a favorable boost.

The revenues could be diverted, among others, to improve the poor condition of the road network, implement the needed road expansion projects, support the public transportation, mitigate transport-related pollution, and lessen road accidents.

Moreover, lower fuel and car imports will help level the abnormally disproportionate balance of payment. On the other hand, economic welfare is expected to improve with a more efficient use of the existing infrastructure. Impact on the welfare of low and middle-income households is expected to be positive thanks to, among others, a change in travel behavior that will reduce transportation costs on households, and improve overall productivity resulting in more money available for more useful spending in other sectors of the economy.

Lastly, the concerned IGOs definitely do have a major say in the way matters are dealt with by the GOL. One supportive contribution for example by the WHO, besides among others, the significant annual counting and benchmarking of the number of fatalities and casualties from road accidents, could manifest itself in a more proactive function such as advising, directing and  persuading the GOL towards effectively planning and executing adequate remedy measures. The same policy could apply more or less to the WB, the IPCC and the WEF in their respective spheres of influence.

Conflict of Interest

The author declares no conflict of interest


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[2] Kelber, Rebecca. “Lebanese Think Country Going in Wrong Direction: Survey | News , Lebanon News | The Daily Star.” Accessed March 30, 2019.

[3] Mankiw, Gregory N. Principles of Economics. 3rd ed. South-Western College Pub, 2003.

[4] Miri, Lama. “A Traffic Crisis in Lebanon: Entrepreneurs Rise to the Challenge.” Impakter, November 28, 2017. Accessed March 11, 2019.

[5] Nakkash, Nabil. “Assessing the Failure of Beirut City in Implementing a Sustainable Transport System | LinkedIn.” Last modified December 14, 2016. Accessed March 13, 2019.

[6] Redd, Benjamin. “Lebanon Looks to Slash 2019 Budget | News , Lebanon News | The Daily Star.” Last modified March 18, 2019. Accessed April 9, 2019.

[7] Santos, Georgina, and Blake Shaffer. “(PDF) Preliminary Results of the London Congestion Charging Scheme.” Last modified October 2004. Accessed March 19, 2019.

[8] Sayegh, Walid. “Assessing Labor Income Inequality in Lebanon’s Private Sector.” UNDP Fiscal Policy Advisory and Reform Project at the Lebanese Ministry of Finance (February 2017): 22.

[9] Schwab, Klaus. “The Global Competitiveness Report 2018.” World Economic Forum. Last modified October 16, 2018. Accessed March 14, 2019.

[10] The Research Department of Blominvest Bank. “Road Traffic Needs Immediate Intervention | Business , Local | The Daily Star.” Accessed March 15, 2019.

[11] Timilsina, Govinda R., and Hari B. Dulal. Fiscal Policy Instruments For Reducing Congestion And Atmospheric Emissions In The Transport Sector: A Review. Policy Research Working Papers. The World Bank, 2008. Accessed March 12, 2019.

[12] United States Department of Transportation – Federal Highway Administration. “Technologies That Enable Congestion Pricing—A Primer – How Technology Complements Congestion Pricing – FHWA Operations.” Last modified April 16, 2019. Accessed March 12, 2019.

[13] World Health Organization 2017. “Road Traffic Accidents in Lebanon.” World Life Expectancy. Accessed April 8, 2019.

[14] “Project-Information-Document-Integrated-Safeguards-Data-Sheet-Greater-Beirut-Urban-Transport-Project-P160224-Sequence-No-00.Pdf,” n.d. Accessed March 13, 2019.

[1] Gregory N. Mankiw, Principles of Economics, 3rd ed. (South-Western College Pub, 2003), 232.

[2] Ibid.

[3] Alex Anas et al., Reducing Traffic Congestion in Beirut: An Empirical Analysis of Selected Policy Options, Policy Research Working Papers (The World Bank, 2017), 2, accessed March 13, 2019,

[4] Ibid.

[5] Ibid., 3.

[6] Nabil Nakkash, “Assessing the Failure of Beirut City in Implementing a Sustainable Transport System | LinkedIn,” last modified December 14, 2016, accessed March 13, 2019,

[7] Ibid.

[8] “Project-Information-Document-Integrated-Safeguards-Data-Sheet-Greater-Beirut-Urban-Transport-Project-P160224-Sequence-No-00.Pdf,” n.d., 3, accessed March 13, 2019,

[9] Klaus Schwab, “The Global Competitiveness Report 2018,” World Economic Forum, 345, last modified October 16, 2018, accessed March 14, 2019,

[10] The Research Department of Blominvest Bank, “Road Traffic Needs Immediate Intervention | Business , Local | The Daily Star,” accessed March 15, 2019,

[11] Ibid.

[12] Ibid.

[13] Ibid.

[14] Anas et al., Reducing Traffic Congestion in Beirut, 6.

[15] Lama Miri, “A Traffic Crisis in Lebanon: Entrepreneurs Rise to the Challenge,” Impakter, November 28, 2017, accessed March 11, 2019,

[16] Ibid.

[17] The Research Department of Blominvest Bank, “Road Traffic Needs Immediate Intervention | Business , Local | The Daily Star.”

[18] “Project-Information-Document-Integrated-Safeguards-Data-Sheet-Greater-Beirut-Urban-Transport-Project-P160224-Sequence-No-00.Pdf,” 3.

[19] The Research Department of Blominvest Bank, “Road Traffic Needs Immediate Intervention | Business , Local | The Daily Star.”

[20] Govinda R. Timilsina and Hari B. Dulal, Fiscal Policy Instruments For Reducing Congestion And Atmospheric Emissions In The Transport Sector: A Review, Policy Research Working Papers (The World Bank, 2008), i, accessed March 12, 2019,

[21] Ibid., 4.

[22] Mankiw, Principles of Economics, 218.

[23] Ibid., 214.

[24] Timilsina and Dulal, Fiscal Policy Instruments For Reducing Congestion And Atmospheric Emissions In The Transport Sector, 4.

[25] Timilsina and Dulal, 4.

[26] Ibid., 5.

[27] Ibid., 6.

[28] Ibid.

[29] Ibid., 8.

[30] Ibid.

[31] Ibid., 9.

[32] Ibid., 10.

[33] Ibid.

[34] Ibid., 10–11.

[35] Walid Sayegh, “Assessing Labor Income Inequality in Lebanon’s Private Sector,” UNDP Fiscal Policy Advisory and Reform Project at the Lebanese Ministry of Finance (February 2017): 5.

[36] Rebecca Kelber, “Lebanese Think Country Going in Wrong Direction: Survey | News , Lebanon News | The Daily Star,” accessed March 30, 2019,

[37] Mankiw, Principles of Economics, 7.

[38] Ibid., 66.

[39] Ibid., 206.

[40] Ibid., 207.

[41] Ibid., 84.

[42] Georgina Santos and Blake Shaffer, “(PDF) Preliminary Results of the London Congestion Charging Scheme,” 176, last modified October 2004, accessed March 19, 2019,

[43] Mankiw, Principles of Economics, 254.

[44] Ibid., 255.

[45] Mankiw, 453-54.

[46] Ibid., 461.

[47] Ibid., 463.

[48] Ibid.

[49] Ibid., 681.

[50] Ibid., 727.

[51] Benjamin Redd, “Lebanon Looks to Slash 2019 Budget | News , Lebanon News | The Daily Star,” last modified March 18, 2019, accessed April 9, 2019,

[52] Mankiw, Principles of Economics, 708.

[53] The Research Department of Blominvest Bank, “Road Traffic Needs Immediate Intervention | Business , Local | The Daily Star.”

[54] Anas et al., Reducing Traffic Congestion in Beirut, 44.

[55] World Health Organization 2017, “Road Traffic Accidents in Lebanon,” World Life Expectancy, accessed April 8, 2019,

[56] United States Department of Transportation – Federal Highway Administration, “Technologies That Enable Congestion Pricing—A Primer – How Technology Complements Congestion Pricing – FHWA Operations,” last modified April 16, 2019, accessed March 12, 2019,

[57] The Research Department of Blominvest Bank, “Road Traffic Needs Immediate Intervention | Business , Local | The Daily Star.”

Table of Contents


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