You Can Cut Travel and Grow the Economy. Here's How.
Key Takeaways
- Degrowthers and mainstream economists share the same flawed assumption: that all travel drives economic growth.
- Roughly half the true cost of driving is covered by taxpayers, not users.
- Heavy subsidies create large volumes of low-value, marginal trips.
- Removing these subsidies through road user charging and priced parking would eliminate most of this marginal travel.
- Because traffic congestion behaves non-linearly, even modest trip reductions can substantially improve traffic flow.
- Time and money freed up from cutting marginal travel would likely shift into more economically productive activities.
- Higher public transport ridership from mode shift can fund service improvements, creating a virtuous cycle instead of a doom loop.
- Low-income households stand to gain from better walking, cycling, and public transport options, though some could face higher costs and should have support through the welfare system.
- The result is a transport system that's more productive, less congested, with a lower environmental footprint, all while growing the economy.
- The biggest barrier is the politics: concentrated losers tend to be louder than the diffuse majority who benefit.
What Next?
Do you have plans for taking forward road user charging, even if only for electric vehicles?
Introduction
Should we be trying to reduce how much people travel?
It's a question that comes up regularly in transport research and commentary, and it tends to produce two camps that talk past each other. The degrowth movement argues we need to consciously shrink production and consumption, including travel, to protect the planet. Mainstream economists push back hard, pointing out that mobility and accessibility are closely tied to economic growth, and that reducing travel means reducing prosperity.
Both sides are arguing from the same starting assumption: that more travel means more economic activity, full stop. They just disagree on whether that's good or bad.
I think that assumption is wrong, and once you drop it, the debate looks different.
In this blog, I'm going to argue that we can reduce how much people travel, at least in urban areas, while also growing the economy. Not by choosing between the degrowther and the economist's position, but by rejecting the premise both of them share. Once you look closely at what's actually driving today's travel demand, and how much of it we're propping up artificially, a different, more productive path opens up.
The False Assumption
Strip away the disagreement, and mainstream economists and degrowthers are working from the same logic: more travel means more consumption, more economic activity, more growth. They only differ on whether that's something to celebrate or something to stop.
But is it actually true? Does all travel drive economic growth?
I don't think it does, and the reason comes down to one thing: subsidy.
We heavily subsidise the vast majority of travel. Most estimates of the true cost of driving find that taxpayers cover a significant share of it, with one recent Australian study putting the figure at around 50%. Studies from Europe and the US land in a similar range. And this isn't just a car problem. Public transport is subsidised too (if you want to argue with me about whether it should be, read my blog on that first).
Subsidies work the same way in transport as they do anywhere else: they push up consumption, and much of that extra consumption is economically inefficient. As Todd Litman from the Victoria Transport Policy Institute puts it in a recent report, travel demand has a long tail. Lower the price enough, whether in money, time, or discomfort, and people keep travelling well past the point where the trip is genuinely worth it to them or to the economy. If those extra trips carry real external costs, congestion, emissions, and so on, their net effect can turn negative.
That's the piece both sides miss. By subsidising travel so heavily, we're not just enabling valuable trips. We're manufacturing a large volume of marginal travel that barely benefits the people taking it, crowds out higher-value trips, worsens congestion, and adds unnecessary environmental harm.
So what happens if we strip that marginal travel away?
The environmental benefit here is obvious. But does it cost us economic growth? I don't think it does, for two reasons.
First, congestion drops sharply once marginal trips disappear. Traffic congestion behaves non-linearly, so even a modest reduction in trips can produce an outsized improvement in traffic flow. A more productive transport system is a direct economic return.
Second, the time and money people no longer spend on low-value travel doesn't just vanish. It gets redirected, and often toward activities that generate more economic value than the marginal trip did.
That redirected spending could, of course, carry its own environmental cost. That's a fair point, but it's outside the scope of a transport blog. What I'll say is this: if government policy steers that spending toward lower-impact goods and services, the net benefit should still hold.
Put it together, and from a transport perspective alone, we can land in a position with higher economic growth, a smaller environmental footprint, and lower public spending, freeing up money for whatever governments choose to prioritise next: tax cuts, welfare, defence, or elsewhere.
So the real question becomes practical: what policies actually get us there?
Fixing the System: What the Policy Actually Looks Like
Setting aside the politics for a moment (I'll get to that), what does a more productive, lower-footprint transport system actually require?
The starting point is simple: remove the hidden subsidies baked into how we travel today. In practice, that means road user charging and priced parking, so people pay something closer to the full cost of the trips they take.
Here's what that shift sets in motion:
With subsidies gone, the most marginal trips disappear first. Some of that travel doesn't happen at all; for example, some of it shifts to online meetings instead.
As driving gets more expensive, we'd expect a first-order shift toward public transport, walking, and cycling. More riders means more farebox revenue, which (as long as we avoid the trap of low or free fares) lets operators cut subsidies and reinvest in better services. Better services attract more riders. That's the second-order effect, and it's a self-reinforcing one.
Growing public transport use also chips away at the cultural stigma in low-mode-share places, where transit gets seen as a last resort for people who can't afford a car rather than a genuine option. As that perception shifts, patronage grows further. In short, public transport tips out of doom-loop territory and into a virtuous cycle.
Meanwhile, less congestion means less pressure to keep building and widening roads, freeing up funding for walking and cycling infrastructure, which stands to benefit from rising demand, especially for shorter trips and, increasingly with e-bikes, longer ones too.
But what about low-income households?
Removing blanket subsidies raises a fair concern here. There's good news and a real risk.
The good news: low-income households stand to gain in two concrete ways.
- Better walking and cycling infrastructure gives them cheap, practical options for local trips.
- Improved public transport gives many of them a genuinely usable alternative to owning a car, and the costs that come with it.
The risk: some people on low incomes who still need to drive could end up paying more through road user charges than they currently pay in fuel tax.
The right fix is the welfare system. Where that's not workable, a targeted mobility wallet can fill the gap. Given how much money this reform frees up from reduced subsidies overall, funding it shouldn't be the constraint, and equity should improve on net.
Add it all up, and the new system delivers:
- Less unproductive travel
- A more productive, less congested transport network
- A shift toward more sustainable modes, cutting the sector's environmental footprint
- Lower taxpayer spending on transport
Plus a set of knock-on benefits:
- Better health, from more active travel and less pollution
- Improved road safety, as car use falls
- Better equity outcomes overall, through the mechanisms above
This isn't the future degrowthers are picturing, since economic growth keeps rising. And it isn't what mainstream economists expect either, since travel demand falls. It is a different paradigm.
The New Transport Paradigm β The Politics
This all sounds great on paper. In practice, it's a major departure from how we do things today, and departures like this always create winners and losers.
Even when the overall gains are large and widely shared, the politics tend to break down around that asymmetry. The people who lose out are usually few in number, but they're often vocal, organised, and motivated. The people who benefit are often many, but the gains are diffuse and harder to rally around. That imbalance, not the merits of the policy, is usually what decides these fights.
There's also a habit problem. People don't like change, even when the new system serves them better. The evidence suggests that once the change is made, people rarely want to go back. But getting them through that initial resistance is a real political challenge, especially in today's polarised environment, where any change can quickly become a proxy war for something else entirely.
That said, the direction of travel is already underway. Over the next few years, a number of jurisdictions, including New Zealand, parts of Australia, and the UK, are expected to progress road user charging in some form.
If any of them can navigate the politics successfully, they'll have a genuine shot at delivering this new paradigm at scale. Iβll be watching closely to see what we can learn from their experience.
Conclusion
The debate between degrowthers and mainstream economists is a false choice: either we protect the planet by travelling less, or we protect the economy by travelling more. Both sides accept the same flawed premise that all travel is economically valuable, and argue from there.
Once you remove that premise, the picture changes. In an urban context, a chunk of the travel we generate today only exists because we subsidise it so heavily, and much of it delivers minimal benefit to the people making the trip, let alone to the wider economy. Strip out the subsidy, and that marginal travel disappears. What's left is a transport system that moves people more productively, with less congestion, lower public spending, and a smaller environmental footprint.
That's a genuinely better outcome than either the degrowth or the usual economist positions offer.
The politics of getting there won't be easy. Removing subsidies always creates visible losers even when the overall gains are larger and more widely shared, and that asymmetry is exactly what makes reform hard. But with road user charging now on the table in New Zealand, parts of Australia, and the UK, we're about to find out whether any jurisdiction can navigate that politics successfully. If one does, it could show the rest of us what the new paradigm actually looks like in practice, not just in theory.