Leveraging progressive fare discounts to incentivize highway traffic

Piracicaba-Panorama Highway

The Piracicaba-Panorama concession in São Paulo is one of the largest road concessions in Brazil, spanning a network of highways that covers 1,200km of distance
With the concession up for renewal in 2020 and potential concessionaires re- bidding for the project, the government sought to improve traffic flow and reduce traffic during peak hours

Commuters that used the highway regularly found the toll-fees costly, reducing the financial viability of the highway as they sought cheaper, alternative routes
The existing pricing regime of toll-fees was undifferentiated, charging similar prices to all users despite variations in their willingness to pay different fees

The highway operator adopted a progressive fare discount1 (frequent user discount model) for passenger and small cargo vehicles that use the network of highways frequently
Commuters who install electronic billing devices on their vehicles attain progressive fare discounts; over a 30-day period, discounts per trip can vary between 5%- 90% of the toll-fee with a maximum of 30 discountable trips per month

The new model captures local drivers less willing or able to pay full tolls while also ensuring that higher-volume commuters stay loyal to the roads
Users will have monthly savings that could reach 74% of the full rate
The new system will produce an average of 20% less revenue than the previous system; to offset the decline, the grantor allowed the concessionaire to collect additional ancillary revenues
Potential for negative environmental impact as more vehicles emit Carbon Dioxide that may affect the environment of surrounding areas of the highway

Governments can employ flexible tariff systems to optimize traffic flows by increasing traffic during off- peak hours and reducing traffic during peak periods
Governments and concessionaires can promote the financial benefits of modern electronic payment systems to "nudge" users of infrastructure to adopt them. This in turn can enable even more sophisticated payment schemes in the future
To counter any potential decrease in revenue caused by the progressive user discounts governments can include contract structures that unlock the use of ancillary revenue streams.