Public transport relies on subsidies to operate in many cities and regions around the world. Subsidized public transport aims to ensure accessibility for all users and makes the mode more competitive, encouraging increased ridership and uptake over private vehicle use.
Importance of subsidies and incentives
Subsidies and incentives for public transportation have long been seen as an integral part of encouraging public transportation ridership. A recent study conducted in the United States found that metro areas that received more government subsidies per capita were more likely to run with more passengers on board, rather than running routes with just a few heavily subsidized riders per vehicle. This finding was important as it was an alternative to the widely held belief that subsidies only influenced ridership in very particular groups and led to inefficiencies in the system.
These findings are encouraging but public transport is operating within a paradox. While the COVID-19 pandemic and cost of living crisis have proven the importance of public transport as a key element of a holistic mobility system, its financing has been under considerable stress over the past decade due to budgetary constraints. Microincentives could offer an alternative to the traditional structure of large-scale government public transport subsidies, easing financial limitations while simultaneously encouraging modal shifts.
What are microincentives
A new study has been released by FACTUAL and supported by nine entities, including EIT Urban Mobility, CARNET, Karos Mobility, FAIRTIQ, Meep, Dott, Transport & Mobility Leuven, City of Tartu and Stad Hasselt. It proposes a change to the traditional public transport subsidy system, in favour of ‘a more flexible, dynamic, and targeted approach.’ The report, Microincentives for Sustainable Mobility in Europe dubs these tailored reward schemes, both financial and otherwise, ‘microincentives’ that have the ability to maximise the impact of subsidies to achieve the goals of city administrations and public transportation operators.
Microincentives can be deployed to promote public transport use depending on the needs and desires of its stakeholders. For example, the use of microincentives could promote increased public transport ridership at particular times, days, routes, or for specific user groups. These microincentives differ from traditional subsidies in two key ways:
- Microincentives are not purely financial but can offer alternative motivations beyond monetary subsidies.
- Microincentives are envisioned to be highly granular, allowing for near-individualised incentives, and can be adapted to users’ particular needs and desires.
The implementation of microincentives for modal shift
When it comes to increasing the share of public transport use over car ridership, the research presented by Factual shows mixed results and is largely dependent on local contexts and geographies.
The report’s stated preference study conducted in Berlin, Oslo, Leuven, Madrid and Barcelona found that car users are most sensitive to price as an incentive to shift from car trips to public transport. However, these results varied widely depending on the surveyed location. For example, in Barcelona, a 15% discount was enough incentive to encourage 20% of users to switch from cars to public transport, assuming the travel time was equivalent. In Lisbon, the share grew to 31%, showing that the efficacy of the incentive is affected by local perceptions. Additionally, in Oslo and Berlin, no discount was needed to encourage the modal shift, suggesting that the perception of public transport in these cities is more favourable as a baseline.
Additionally, the report shows that microincentives for public transport could be more effective when combined with disincentives for car use. For example, integrating low emission zones or increased parking fees in addition to incentives for public transport uptake can encourage drivers to switch to public transport use as it becomes a more attractive alternative.
The impact of flat incentives: free public transport
As geography and local perspectives matter when deploying microincentives for public transport uptake, it might then not be surprising that a ‘one size fits all’ approach like free public transport has been shown to display disappointing results.
According to a 2022 article examining Luxembourg’s implementation of fare-free public transport, two years after its introduction, there was little evidence indicating that car usage had reduced. In May 2022, congestion on Luxembourg’s roads was equivalent or higher than levels prior to the free public transport policy.
A policy brief entitled Full Free Fare Public Transport: Objectives and Alternatives, released by the International Association of Public Transport (UITP) explained that making public transport free did not necessarily encourage less car use, but actually incentivised those who might have otherwise walked, cycled or forgone the trip entirely. Therefore, though public transport ridership has been seen to increase when fare-free policies are introduced, it is due to simply more mobility; not less car usage.
While these incentives are largely introduced to encourage social equity and create greater opportunities for lower income populations’ mobility, UITP argues that social fares and more accessible networks could have greater impact than simply introducing flat incentives. And some experts believe that when fares are removed, it takes away the power of the user to demand better service. Constance Carr, an urban geographer at the University of Luxembourg explains, “Addressing the housing issue would be a greater social equity objective, if that is what the free public transit policy is actually trying to do.”
Funding subsidies with disincentives
Providing financial incentives to one group requires sourcing the necessary funds from elsewhere, inherently making subsidies and microsubsidies a political issue.
The push and pull that comes hand-in-hand with political financial decisions can be seen playing out in real-time right now in New York City. The Congestion Pricing Programme, a toll system proposed to reduce car and truck traffic on the city’s busiest streets, was expected to generate approximately $15 billion for much-needed capital improvements to the Metropolitan Transport Authority’s (MTA) public transportation network. However, at the last minute, Governor Kathy Hochul reversed her decision, halting the implementation of the programme. Popular opinion suggests that concerns about alienating vehicle users and manufacturers influenced this reversal, highlighting public transport’s vulnerability to political issues.
While one group may benefit from subsidies, another will (quite literally) pay the price for the incentives, in this case, public transport users and car users respectively. Similar subsidy initiatives have been successfully implemented worldwide, from London to Singapore, demonstrating that the trade-off can be less controversial in certain political contexts. However, the inherent nature of subsidies necessitates investment in one area and disinvestment in another. Obtaining multiple revenue sources outside of subsidies; such as full-fares sales and private sector investment, can help public transportation to become more resilient and less influenced by political factors.
Want to learn more?
Read Factual’s full report Microincentives for Sustainable Mobility in Europe
