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The pluses and minuses of Beijing’s distance-based transit fare policy

Beijing recently unveiled a new transit fare scheme, currently a flat-rate system fixed at 2 Yuan per trip, and will embrace a distance-based fare structure. The new policy will bring recognizable benefits from economic and urban planning perspectives, while concerns aroused on social equity and travel choice orientation also need to be further addressed in long-term integrated urban transport strategy.

 

Distance-based fare structure vs. flat-rate fare structure

First, although much emphasis is placed on fare rises, the real accomplishment the new fare policy makes is a sensible pricing structure that improves economic efficiency and potentially reins the city’s urban sprawl.

From the efficiency perspective, a flat pricing scheme exacerbates the widening gaps between transit costs and revenues, because longer trips inflict greater service requirements, but transit users pay a flat fare no matter how far they travel. For example, passengers travel from Tiananmen East to Tiananmen West pay 2 Yuan to travel 800 meters, while passengers travel from Tongzhou Beiyuan (通州北苑) to Tiananmen pay the same price, 2 Yuan, to go 21 kilometers. Therefore, distance-based fares allow transit riders to pay fares in proportion to the level of service they use, thereby promoting the transit system’s efficiency.

Furthermore, a low, flat-rate transit fare system is also likely to contribute to urban sprawl. Driven by high housing prices and monocentric urban layout, the city of Beijing has almost doubled the size in the past decade, making commuting unbearable. Despite planners want people live closer to where they work, but the flat fare system, to some extent, encourages transit users to live far away from their jobs, because long-distance bus riders do not have to pay the full costs of their transit rides.

 

Mitigate the potential adverse impacts of the new fare policy

Secondly, despite the benefits of distance-based transit fare system, it still casts doubt on how the city can use it to strike a balance between maintaining transit ridership and making the system financially viable.

As a result of the distance-based fare structure, two types of passengers might be persuaded away to take other competing modes. First, increasing subway fare policy would cause social equity concerns, because the low-income stratum would be often the very group of people who rely on transit more often. Second, a high subway fare might encourage excessive car usage, leading to congestion and air quality concerns.

The low-income: rights of taking transit must be uncompromised

An overall concern with distance-based pricing approaches is that it may discourage the low-income households who cannot afford to pay a premium fare from taking subways. These people might have to choose to use lower priced, slower, parallel services. To ensure their rights of taking transit is uncompromised, this requires the city’s transport authority to either allocate some the revenue collected from transit farebox to subsidize this group of people, or provide duplicative services to subway services to ensure alternative transit options.

The high-income: car-usage reduction needs multiple financial encouragements

In fact, subway fares might play a considerable role in people’s travel choices, but other factors also matter, including the quality of the services, fuel taxes, and parking costs. Beijing’s subway system proves that a low fare rate is not sufficient to attract passengers (especially the high-income); in fact, the share of trips made by automobile in the Beijing has risen from 25% to 33% since the beginning of Beijing’s subway boom. Finally, the success of any transit fare reform rests to a large extent on pricing improvement in other competing transport sectors. As long as road usage is underpriced or parking is subsidized by employers, the distance-based fare policy could prove counter-productive. Therefore, transit fare reform should be part of a larger effort to correct pricing distortions throughout the transport system.

Throughout the world, public transit system provides essential accessibility to the public. How a transit trip is priced is a concern to not only transit operators but also urban residents, reforming subway fare structure is only the first step toward a more integrated approach to improve the city’s transit service, enhance travel demand management (such as the deployment of low emission zone), and more importantly, the city’s transport development strategy.

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