The days of free parking may be numbered. In a world where rapid urbanization and climate change are raising awareness of the high costs of traffic congestion, Citibank and IBM announced this week that they are joining forces to provide financing and technology for cities adopting smart parking technology.Smart parking technology allows city parking meters to adjust time of day parking rates to reflect the level of congestion being experienced in an urban area. The idea is that higher parking costs will both allow cities to take advantage of the real costs of high demand for parking while at the same time discouraging drivers to bring their cars to the city at peak congestion times. The hope is that smart parking technology will discourage drivers from circling endlessly in search of cheap parking, when spaces in commercial parking garages are available.  

The parking payment structure in most cities as it stands now incentivizes drivers to drive around in order to find a good parking spot. The effort can save drivers money, should they luckily get a cheap curbside spot Commercial garages typically charge 2-3 times more per hour than street parking. Average estimates from studies show that 30% of traffic in the central business districts of cities is caused by people looking for parking.  Studies show that congestion causes a huge waste of fuel and related carbon emissions.

The Citibank-IBM venture follows a Siemens announcement last week that it is providing advanced parking solutions to reduce congestion in major cities with Streetline, named one of Fast Company’s 10 Most Innovative Companies in Transportation in 2011.The importance of the technology was outlined in a recent New York Times front page article detailing how San Francisco is experimenting with these technologies to dynamically vary parking prices during the day, to reduce congestion and gasoline use.

Smart parking technology takes into account the fact that some congestion is caused by mispricing of valuable parking real estate. How many people opt to spend time circling around their destination looking for a spot on the street when there is a garage right nearby? In fact, people in major cities spend between 3.5 and 14 minutes looking for a space each time they park.

The level of vehicles miles traveled is a major variable in oil demand and transportation emissions. Studies of 15-block areas in New York and Los Angeles found that drivers circling for parking traveled about 366,000 and 950,000 excess miles, respectively.

Several municipal areas around the world have implemented a variety of strategies to reduce transportation demand and raise funds. Cities such as Miami and Pittsburgh have percentage taxes on parking, and per-space levies have had some success in Australia and Canada. Seattle, San Francisco, and Austin are focused on pricing of public parking. However, there is still a need for a more comprehensive model that clearly indicates the environmental impacts of policies and new technologies that can be applied to greater areas.

Figuring out how to deal with parking in the suburbs and small towns is more difficult because they are low density areas where businesses rarely charge explicitly for parking. One thing to consider is for a county or state government to place a tax on parking based on area. This would raise the cost of all parking and should reduce the amount of driving people do. It should also encourage people to plan ahead, park in more central locations, or combine errands, which we know there is potential for; according to Gallup, combining errands is a popular step to take when gas prices are high. In addition, changing parking prices to reflect market value should encourage people to use public transportation, walk or ride a bike for short trips.

Changing parking policy can have a significant impact on driving decisions. Looking to decrease transportation demand should include a discussion about how we value and pay for parking.

In life, as in Monopoly, it feels great to land on Free Parking. Yet to reduce congestion, oil use and CO2 emissions, parking needs an innovative Luxury Tax.   

This post was written by Kathleen Barker, an intern at the Baker Institute Energy Forum