Congestion pricing

This article is about traffic congestion pricing. For other types of congestion pricing, seeDynamic pricingandVariable pricing.For the broader concept of direct charges paid by road users, seeRoad pricing.

Congestion pricingorcongestion chargesis a system of surcharging users ofpublic goodsthat are subject to congestion through excessdemand,such as through higher peak charges for use ofbus services,electricity,metros,railways,telephones,androad pricingto reducetraffic congestion;airlinesandshippingcompanies may be charged higher fees for slots atairportsand throughcanalsat busy times. Advocates claim thispricingstrategy regulates demand, making it possible to manage congestion without increasingsupply.

Electronic Road Pricinggantry in Singapore, the first place in the world to implement an urban cordon area congestion pricing scheme

According to the economic theory behind congestion pricing, the objective of this policy is to use theprice mechanismto cover the social cost of an activity where users otherwise do not pay for thenegative externalitiesthey create (such as driving in a congested area during peak demand). By setting a price on an over-consumed product, congestion pricing encourages the redistribution of the demand in space or in time, leading to moreefficientoutcomes.

Singaporewas the first country to introduce congestion pricing on its urban roads in1975,and was refined in1998.Since then, it has been implemented in cities such asLondon,Stockholm,Milan,andGothenburg.It has also been proposed inSan Francisco,and was supposed to be implemented inNew York Cityin June 2024. Greater awareness of the harms of pollution and emissions ofgreenhouse gasesin the context ofclimate changehas recently created greater interest in congestion pricing.

Implementation of congestion pricing has reduced congestion in urban areas,reduced pollution,reduced asthma,and increased house values,but has also sparked criticism and public discontent. Critics maintain that congestion pricing is not equitable, places an economic burden on neighboring communities, and adversely affects retail businesses and general economic activity.

There is a consensus among economists that congestion pricing in crowded transportation networks, and subsequent use of the proceeds to lower other taxes, makes the average citizen better off.Economists disagree over how to set tolls, how to cover common costs, what to do with any excess revenues, whether and how "losers" from tolling previously free roads should be compensated, and whether to privatize highways.Four general types of systems are in use: a cordon area around a city center, with charges for passing the cordon line; area wide congestion pricing, which charges for being inside an area; a city center toll ring, with toll collection surrounding the city; and corridor or single facility congestion pricing, where access to a lane or a facility is priced.

Description

Congestion pricing is a concept frommarket economicsregarding the use ofpricingmechanisms to charge the users ofpublic goodsfor thenegative externalitiesgenerated by the peak demand in excess of available supply. Its economic rationale is that, at a price of zero, demand exceeds supply, causing ashortage,and that the shortage should be corrected by charging theequilibrium pricerather than shifting it down by increasing the supply. Usually this means increasingpricesduring certain periods of time or at the places where congestion occurs; or introducing a new usagetaxor charge when peak demand exceeds available supply in the case of a tax-funded public good provided free at the point of usage.

Economic rationale for moving from untolled equilibrium to congestion pricing equilibrium

According to the economic theory behind congestion pricing, the objective of this policy is the use of the price mechanism to make users more aware of the costs that they impose upon one another when consuming during the peak demand, and that they should pay for the additional congestion they create, thus encouraging the redistribution of the demand in space or in time,or shifting it to the consumption of asubstitute public good;for example, switching from private transport to public transport.

This pricing mechanism has been used in several public utilities and public services for setting higher prices during congested periods, as a means to better manage the demand for the service, and whether to avoid expensive new investments just to satisfy peak demand, or because it is not economically or financially feasible to provide additional capacity to the service. Congestion pricing has been widely used bytelephoneandelectric utilities,metros,railwaysandautobusservices,and has been proposed for charginginternet access.It also has been extensively studied and advocated by mainstream transport economists forports,waterways,airportsandroad pricing,though actual implementation is rather limited due to the controversial issues subject to debate regarding this policy, particularly for urban roads, such as undesirable distribution effects, the disposition of the revenues raised, and the social and political acceptability of the congestion charge.

An introductory flowchart describing congestion pricing

Congestion pricing is one of a number of alternativedemand side(as opposed tosupply side) strategies offered by economists to addresstraffic congestion.Congestion is considered a negativeexternalityby economists.An externality occurs when a transaction causes costs or benefits to a third party, often, although not necessarily, from the use of a public good: for example, if manufacturing or transportation cause air pollution imposing costs on others when making use of public air. Congestion pricing is anefficiency pricingstrategy that requires the users to pay more for that public good, thus increasing the welfare gain or net benefit for society.

Nobel-laureateWilliam Vickreyis considered by some to be the father of congestion pricing, as he first proposed adding a distance- or time-based fare system for theNew York City Subwayin 1952.In the road transportation arena these theories were extended byMaurice Allais,Gabriel Roth who was instrumental in the first designs and upon whoseWorld Bankrecommendation the first system was put in place in Singapore.Also, it was considered by theSmeed Report,published by the BritishMinistry of Transportin 1964,but its recommendations were rejected by successive British governments.

The transport economics rationale for implementing congestion pricing on roads, described as "one policy response to the problem of congestion", was summarized in testimony to theUnited States CongressJoint Economic Committee in 2003: "congestion is considered to arise from the mispricing of a good; namely, highway capacity at a specific place and time. The quantity supplied (measured in lane-miles) is less than the quantity demanded at what is essentially a price of zero. If a good or service is provided free of charge, people tend to demand more of it—and use it more wastefully—than they would if they had to pay a price that reflected its cost. Hence, congestion pricing is premised on a basic economic concept: charge a price in order to allocate a scarce resource to its most valuable use, as evidenced by users' willingness to pay for the resource".

Roads

For broader coverage of this topic, seeRoad pricing.

Practical implementations of road congestion pricing are found almost exclusively in urban areas, becausetraffic congestionis common in and around city centers. Congestion pricing can be fixed (the same at all times of day and days of the week), variable (set in advance to be higher at typically high-traffic times), or dynamic (varying according to actual conditions).

As congestion pricing has been increasing worldwide, the schemes implemented have been classified into four different types: cordon area around a city center; area wide congestion pricing; city center toll ring; and corridor or single facility congestion pricing.

Cordon area and area wide

See also:Electronic Road Pricing (Singapore),London congestion charge,Stockholm congestion tax,Ecopass,Milan Area C,andGothenburg congestion tax

At Old Street, street markings and a sign (inset) with the white-on-red C alert drivers to the congestion charge,London.

Cordon area congestion pricing is a fee or tax paid by users to enter a restricted area, usually within a city center, as part of ademand managementstrategy to relieve traffic congestion within that area.The economic rationale for this pricing scheme is based on theexternalitiesorsocial costsof road transport, such asair pollution,noise,traffic accidents,environmental and urban deterioration, and the extra costs and delays imposed bytraffic congestionupon other drivers when additional users enter a congested road.

Rome's Traffic Limited Zone (ZTL) entry control point with automatic surveillance

The first implementation of such a scheme wasSingapore Area Licensing Schemein 1975, together with a comprehensive package ofroad pricingmeasures, stringent car ownership rules and improvements in mass transit.Thanks to technological advances inelectronic toll collection,electronic detection, and video surveillance technology, collecting congestion fees has become easier.Singaporeupgraded its system in 1998,and similar pricing schemes were implemented inRomein 2001,Londonin 2003 with extensions in 2007;Stockholmin 2006, as a seven-month trial, and then on a permanent basis.In January 2008Milanbegan a one-year trial program calledEcopass,charging low emission standard vehicles and exempting cleaner andalternative fuel vehicles.The Ecopass program was extended until December 31, 2011,and on January 16, 2012, was replaced byArea C,a trial program that converted the scheme from a pollution-charge to a congestion charge.TheGothenburg congestion taxwas implemented in January 2013 and it was modeled after the Stockholm scheme.

Trängselskattautomatic control point atRopsten, Stockholm.The sign on the right informs the drivers about the different fees, which vary depending on the time of the day.

Singapore and Stockholm charge a congestion fee every time a user crosses the cordon area, while London charges a daily fee for any vehicle driving in a public road within the congestion charge zone, regardless of how many times the user crosses the cordon.Stockholm has put a cap on the maximum daily tax,while in Singapore the charge is based on a pay-as-you-use principle, and rates are set based on traffic conditions at the pricing points, and reviewed on a quarterly basis. Through this policy, theLand Transport Authority(LTA) reports that the electronic road pricing "has been effective in maintaining an optimal speed range of 45 to 65 km/h for expressways and 20 to 30 km/h for arterial roads".

Singapore

Main article:Electronic Road Pricing

Automatic tolling gantry of Singapore'sElectronic Road Pricingscheme

In an effort to improve the pricing mechanism, and, to introduce real-timevariable pricing, Singapore'sLTAtogether withIBM,ran a pilot from December 2006 to April 2007, with atraffic estimation and prediction tool(TrEPS), which uses historical traffic data and real-time feeds with flow conditions from several sources, in order to predict the levels of congestion up to an hour in advance. By accurately estimating prevailing and emerging traffic conditions, this technology is expected to allow variable pricing, together with improved overall traffic management, including the provision of information in advance to alert drivers about conditions ahead, and the prices being charged at that moment.

In 2010 the Land Transport Authority began exploring the potential ofGlobal Navigation Satellite Systemas a technological option for a second generation ERP. LTA objective is to evaluate if the latest technologies available in the market today are accurate and effective enough for use as a congestion charging tool, especially taking into consideration the dense urban environment in Singapore. Implementation of such system is not expected in the short term.

London

Main article:London congestion charge

A proposal by former Mayor of LondonKen Livingstonewould have resulted in a new pricing structure based on potential CO₂emission rates by October 2008.Livingstone's successor as Mayor of London,Boris Johnson,announced in July 2008 that the new CO₂charging structure will no longer be implemented.Johnson decided to remove the 2007 Western Extension from the congestion charging zone beginning on January 4, 2011, to increase the basic charge to£10,and also to introduce an automated payment system called Congestion Charging Auto Pay (CC Auto Pay), which will charge vehicles based on the number of charging days a vehicle travels within the charging zone each month, and the drivers of these vehicles will pay a reduced£9daily charge.In November 2012Transport for London(TfL) presented a proposal to abolish the Greener Vehicle Discount,and the Ultra Low Emission Discount (ULED) went into effect on 1 July 2013, limiting the free access to the congestion charge zone to selected vehicles.There has been criticism because during the first ten years since the scheme was implemented, gross revenue reached about £2.6 billion, but only £1.2 billion has been invested, meaning that 54% of gross revenues have been spent in operating the system and administrative expenses.

A new toxicity charge, known as T-charge was introduced from 23 October 2017. Older and more polluting cars and vans that do not meetEuro 4 standardswill have to pay an extra £10 charge within the Congestion Charge Zone (CCZ).On 8 April 2019, the T-charge was expanded into theUltra Low Emission Zone(ULEZ).

Entrance toMilan Area C

Milan

Main articles:EcopassandMilan Area C

The Ecopass pollution charge ended on December 31, 2011, and was replaced by theArea Cscheme, which went into effect on January 16, 2012, initially as an 18-month pilot program. The Area C scheme is a conventional congestion pricing scheme and is based on the same Ecopass geographic area. Vehicles entering the charging zone incur a charge of€5regardless of their pollution level. However, residents inside the area have 40 free entries per year and then a discounted charge of€2.Electric vehicles,public utility vehicles, police and emergency vehicles, buses and taxis are exempted from the charge.Hybrid electricandbi-fuelnatural gas vehicles(CNGandLPG) were exempted until January 1, 2013, Exemption has been postponed until December 31, 2016.

The scheme was made permanent in March 2013. All net earnings from Area C are invested to promotesustainable mobilityand policies to reduceair pollution,including the redevelopment, protection and development ofpublic transport,"soft mobility" (pedestrians,cycling,Zone 30) and systems to rationalize the distribution of goods.

Stockholm

Main article:Stockholm congestion tax

Automatic detection system atStockholm's first electronic gantry atLilla Essingen

On 1 January 2016, congestion taxes were increased in the inner-city parts ofStockholm,and also the congestion tax was introduced onEssingeledenmotorway.This was the first increase of the tax since it was introduced permanently in 2007.

The congestion tax is being introduced at the access and exit ramps of twointerchangeson Essingeleden in order to reduce traffic jams in peak periods, and with shorter traffic jams on Essingeleden, the surrounding roads are expected to have shorter tailbacks. The transport agencies involved expected to reduce traffic on Essingeleden by some 10% in peak hours.One week after the tax began to be charged, traffic on the motorway had decreased by 22% compared to a normal day in mid-December.

The tax increase was implemented not only to improve accessibility and the environment, but also to help develop the infrastructure. The additional funds will contribute to finance the extension of theStockholm metro.As the Stockholm congestion tax varies by time of the day, the highest increase took place at the two busiest rush hour periods, 7:30 to 8:29, and 16:00 to 17:29, from SEK 20 to SEK 30. The objective was to steer the traffic towards other times of the day and public transport, and in this way reduce congestion in the Inner City area. Also the maximum amount levied was raised to SEK 105 per day and vehicle.

Norway

See also:Toll roads in Norway

Several cities in Norway have tolled entrances to the more central urban areas, the first beingBergenin 1986. Starting with Trondheim in 2010, later in Kristiansand, Bergen and Oslo, time differing fees were introduced, so that rush hours (in Oslo 06.30 – 09.00 and 15.00 – 17.00) cost more. The price is (in 2020) typically NOK 28 (€2.37) per passage, but to enter Oslo to the inner city and leave means passing five stations which costs NOK 126 (€10,66).

Old town centres

See also:Durham City congestion charge

AroundEuropeseveral relatively small cities, such asDurham,England;Znojmo,Czech Republic;Riga,Latvia;andValletta,Malta,have implemented congestion pricing to reduce traffic crowding, parking problems and pollution, particularly during the peak tourism season.

Durhamintroduced charges in October 2002, reducing vehicle traffic by 85% after a year; prior to this 3,000 daily vehicles had shared the streets with 17,000 pedestrians.

Vallettahas reduced daily vehicles entering the city from 10,000 to 7,900; making 400 readily available parking places in the center. There has been a 60% drop in car stays by non-residents of more than eight hours, but there has been a marked increase of 34% in non-residential cars visiting the city for an hour or less.

Rejected proposals

See also:Congestion charging in Greater Manchester,Edinburgh congestion charge,Electronic Road Pricing (Hong Kong),andNew York congestion pricing

TheNew York City congestion pricingproposal was rejected by theNew York State Legislaturein 2008, but later approved in 2019.

A map ofGreater Manchesterhighlighting area of the rejected congestion charging scheme

Hong Kongconducted a pilot test on anelectronic congestion pricingsystem between 1983 and 1985 with positive results.However, public opposition against this policy stalled its permanent implementation.

In 2002Edinburgh,United Kingdom, initiated an implementation process; areferendumwas conducted in 2005,with a majority of 74.4% rejecting the proposal.

Councils from across theWest Midlandsin the United Kingdom, includingBirminghamandCoventry,rejected the idea of imposing congestion pricing schemes on the area in 2008, despite promises from central government of transport project funding in exchange for the implementation of a road pricing pilot scheme.

In 2007,New York Cityshelved a proposal for a three-year pilot program for implementation inManhattan,and a new proposition was denied in 2008,with potential federal grants ofUS$354 millionbeing reallocated to other American cities.

Greater Manchester,United Kingdom, was considering a scheme with two cordons, one covering the main urban core of theGreater Manchester Urban Areaand another covering theManchester city centre.The measure was supported by the government,but three local authorities rejected it (Bury,TraffordandStockport); the support of two-thirds of Manchester's 10 local councils was needed for it to be implemented.A comprehensive transport investment package for Manchester, which included the congestion pricing element, was released for further public consultation and was to be subject of a referendum in December 2008.On 12 December 2008 the scheme was overwhelmingly rejected by 10 out of 10 councils by a public referendum.

Current proposals

See also:San Francisco congestion pricingandCongestion pricing in New York City

Traffic enteringSan Franciscothrough theGolden Gate Bridge.

United States

In August 2007, theUnited States Department of Transportationselected five metropolitan areas to initiate congestion pricing demonstration projects under theUrban Partnerships Congestion Initiative,for US$1 billion of federal funding.The five projects under this initiative areGolden Gate BridgeinSan Francisco,State Route 520serving downtownSeattleand communities to its east,Interstate 95 betweenMiamiandFt. Lauderdale,Interstate 35W serving downtownMinneapolis,and a variable rate parking meter system inChicagoplusMetro ExpressLanesin Los Angeles County, which replaced New York City after it left the program in 2008.

San Franciscotransport authorities began a feasibility study in 2006 to evaluate the introduction of congestion pricing.The charge would be combined with other traffic reduction implementations, allowing money to be raised for public transit improvements and bike and pedestrian enhancements.The initial pricing scenarios were presented in public meetings conducted in December 2008,and the final study results were announced in November 2010, proposing modified alternatives based on the public's feedbacks, and the updated proposal calls for implementing a six-month to one-year trial in 2015.

GovernorAndrew Cuomoreintroduced acongestion pricing proposal for New York Cityin 2017 in response to theNew York City Subway'sstate of emergency,a proposal that MayorBill de Blasioopposed. A commission to investigate the feasibility of congestion pricing, organized in late 2017, found that a congestion pricing scheme could benefit New York City.Cuomo's congestion pricing plan was approved in March 2019, though congestion pricing in New York City would not go into effect until 2022 at the earliest. New York City's congestion pricing zone will be the first in North America.TheFederal Highway Administrationgave its final approval on June 26, 2023, allowing the MTA to begin setting toll rates for the proposed congestion zone. Implementation was scheduled for 30 June 2024,but in an announcement by Governor Kathy Hochul on 5 June 2024, the plan was indefinitely postponed.In November 2024, Hochul announced an intent for the toll to go forward with a planned implementation in January 2025, at a reduced rate.

China

Severe air pollution inBeijing.Motor vehicle emissions account for 31% of the city's smog sources.

In September 2011, local officials announced plans to introduce congestion pricing inBeijing.No details were provided regarding the magnitude of the congestion charges or the charge zone.The measure was initially proposed in 2010 and was recommended by theWorld Bank.A similar scheme was proposed for the cityGuangzhou,Guangdongprovince, in early 2010. The city opened a public discussion on whether to introduce congestion charges. An online survey conducted by two local news outlets found that 84.4% of respondents opposed the charges.

In December 2015, the Beijing Municipal Commission of Transport announced plans to introduce congestion charges in 2016. According to city's motor vehicle emission control plan 2013–2017, the congestion charge will be a real-timevariable pricingscheme based on actual traffic flows and emissions data, and allow the fee to be charged for different vehicles and varying by time of the day and for different districts. TheDongchengandXichengare among the districts that are most likely to firstly implement congestion charge. Vehicle emissions account for 31% of the city's smog sources, according to Beijing Environmental Protection Bureau. The local government has implemented already several policies to address air quality and congestion, such as adriving restrictionscheme based upon the last digits on their license plates.Also a vehicle quota system was introduced in 2011, awarding new car licenses through a lottery, with a ceiling of 6 million units set by the city authority for 2017.In May 2016, the Beijing city legislature announced it will consider to start levying traffic congestion charges by 2020 as part of a package of measures to reform the vehicle quota system.As of June 2016,the city's environmental and transport departments are working together on a congestion pricing proposal.

Brazil

Traffic congestion onMarginal Pinheiros,near downtownSão Paulo.According toTimemagazine, São Paulo has the world's worst traffic jams.Drivers are informed throughvariable message signsthe prevailingqueue length.

In January 2012, thefederal government of Brazilenacted the Urban Mobility Law that authorizes municipalities to implement congestion pricing to reduce traffic flows. The law also seeks to encourage the use of public transportation and reduce air pollution. According to the law, revenues from congestion charges should be destined exclusively to urban infrastructure for public transportation and non-motorized modes of locomotion (such aswalkingandcycling), and to finance public subsidies to transit fares. The law went into effect in April 2013.

In April 2012, one of the committees of theSão Paulocity councilapproved a bill to introduce congestion pricing within the same area as the existingroad space rationing(Portuguese:Rodízio veicular) by the last digit of the license plate, which has been in force 1996. The proposed charge is R$4 (~US$2) per day and it is expected to reduce traffic by 30% and raise about R$2.5 billion (~US$1.25billion) per year, most of which will be destined to the expansion of theSão Paulo Metrosystem and bus corridors. The bill still needs approval by two other committees before going for a final vote at the city council. Since 1995, 11 bills have been presented in the city council to introduce congestion pricing.Opinion surveys have shown that the initiative is highly umpopular. A survey byVejamagazine found that 80% of drivers are against congestion pricing, and another survey byExamemagazine found that only 1% of São Paulo's residents support the initiative, while 30% find that extending the metro system is a better solution to reduce traffic congestion.São Paulo's strategic urban development plan "SP 2040", approved in November 2012, proposes the implementation of congestion pricing by 2025, when the density of metro and bus corridors is expected to reach 1.25 km/km².The Plan also requires ample consultation and even areferendumbefore beginning implementation.

Thailand

Main article:Congestion pricing in Bangkok

In October 2024, Thailand'sMinistry of Transportannounced plans for a 40-50Bahtcongestion charge for motorists who enter streets in innerBangkok.The funds would be used to subsidize a 20 Baht fare for all railway lines inGreater Bangkok.The plans were supported byGovernor of BangkokChadchart Sittipunt,who advocated for an expansion of Bangkok's transit network, including electric train and bus service along with pedestrian infrastructure.

Urban corridors and toll rings

"Costanera Norte"Freeway, crossing downtown with 100% free flow,Santiago, Chile

Congestion pricing has also been implemented in urban freeways. Between 2004 and 2005,Santiago de Chileimplemented the first 100% non-stop urban toll for a freeway passing through a downtown area,charging by the distance traveled.Congestion pricing has been used since 2007 during rush hours in order to maintain reasonable speeds within the city core.

Norwaypioneered the implementation ofelectronic urban tollingin the main corridors of Norway's three major cities:Bergen(1986),Oslo(1990), andTrondheim(1991).In Bergen cars can only enter the central area using a toll road, so that the effect is similar to a congestion charge. Though initially intended only to raise revenues to finance road infrastructure, the urban toll ring at Oslo created an unintended congestion pricing effect, as traffic decreased by around 5%. TheTrondheim Toll Schemealso has congestion pricing effects, as charges vary by time of day. The Norwegian authorities pursued authorization to implement congestion charges in cities, and legislation was approved by Parliament in 2001.In October 2011 the Norwegian government announced the introduction of rules allowing congestion charging in cities. The measure is intended to cutgreenhouse gasand air pollutant emissions, and relief traffic congestion.As of November 2015,Norwegian authorities have implemented urban charging schemes that operates both on the motorways and for access into downtown areas in five additional cities or municipalities:Haugesund,Kristiansand,Namsos,Stavanger,andTønsberg.

The Norwegian electronic toll collection system is calledAutoPASSand is part of the joint ventureEasyGo.

Single facilities

Urban

FasTrakHOT lanesat91 Express Lanes,atOrange County, California

Congestion pricing has also been applied to specific roadways.The first of this kind of specific schemes allowed users of low or single-occupancy vehicles to use ahigh-occupancy vehicle lanes(HOV) if they pay a toll. This scheme is known ashigh-occupancy toll lanes (HOT) lanes,and it has been introduced mainly in the United States andCanada.The first practical implementations wasCalifornia's private toll91 Express Lanes,inOrange Countyin 1995, followed in 1996 byInterstate 15inSan Diego.There has been controversy over this concept, and HOT schemes have been called "Lexus"lanes, as critics see this new pricing scheme as a perk to the rich.According to theTexas A&M Transportation Institute,by 2012 there were in the United States 722 corridor-miles of HOV lanes, 294 corridor-miles of HOT/Express lanes and 163 corridor-miles of HOT/Express lanes under construction.

Congestion pricing in the form of variable tolls by time-of-the-day have also been implemented in bridges and tunnels providing access to thecentral business districtsof several major cities. In most cases there was a toll already in existence.Dynamic pricingis relatively rare compared tovariable pricing.One example of dynamic tolling is theCustis Memorial Parkwayin the Washington, D.C., metro area, where at times of severe congestion tolls can reach almostUS$50.However, on average, round trip prices are much lower: $11.88 (2019), $5.04 (2020), $4.75 (2021).

Variable tolls by time-of the-day were implemented on theSydney Harbour Bridgein January 2009.

In March 2001, thePort Authority of New York and New Jersey(PANYNJ) implemented a discount on regular toll fees during off-peak hours for those vehicles paying electronically with anE-ZPassissued in New York State. These discount toll was implemented at several tunnels and bridges connectingNew York CityandNew Jersey,including theGeorge Washington Bridge,Lincoln Tunnel,andHolland Tunnel,and at some other bridges administered by PANYNJ.Since March 2008, qualified low-emission automobiles with afuel economyof at least 45 miles per gallon are eligible to receive a Port Authority Green Pass, which allows for a 50% discount during off-peak hours as compared to the regular full toll.

In January 2009, variable tolls were implemented atSydney Harbour Bridge,two weeks after upgrading to 100% free-flowelectronic toll collection.The highest fees are charged during the morning and afternoon peak periods; a toll 25% lower applies for the shoulder periods; and a toll lower than the previously existing is charged at nights, weekends, and public holidays. This isAustralia's first road congestion pricing scheme, and has had only a very minor effect on traffic levels, reducing them by 0.19%.

In July 2010 congestion tolls were implemented at theSan Francisco–Oakland Bay Bridge.The Bay Bridge congestion pricing scheme charges aUS$6toll from 5 a.m. to 10 a.m. and 3 p.m. to 7 p.m., Monday through Friday. During weekends cars payUS$5.The toll remained at the previous toll ofUS$4at all other times on weekdays.According to theBay Area Toll Authorityfewer users are driving during the peak hours and more vehicles are crossing the Bay Bridge before and after the 5–10 a.m. period in which the congestion toll goes into effect. The agency also reported that commute delays in the first six months have dropped by an average of 15 percent compared with 2009. When the congestion tolls were proposed, the agency expected the scheme to produce a 20 to 30 percent drop in commute traffic.

Non-urban

Autoroute A1in NorthernFranceis one of the few cases of congestion pricing implemented outside of urban areas. This is an expressway connectingParistoLille,and since 1992 congestion prices have been applied during weekends with the objective of spreading demand on the trip back to Paris on Sunday afternoons and evenings.

Research

Measurement of effects

In a road network, congestion can be considered a specific measure of the time delay in a journey or time lost throughtraffic jams.Delays can be caused by some combination of traffic density, road capacity, and the delaying effects of other road users and traffic management schemes such as traffic lights, junctions, and street works. This can be measured as the extra journey time needed to traverse a congested route when compared to the same route with no such interference. However, this technical definition of congestion as a measurement of delay can get confused and used interchangeably with traffic density in the public mind.

To measure the true effects of any traffic management scheme it is normally necessary to establish a baseline, or "do nothing" case, which estimates the effects on the network without any changes other than normal trends and expected local changes. Notably this was not done for theLondon Congestion Charging Scheme,which has led to claims that it is not possible to determine the extent of the actual influence of the scheme.Regardless of the scheme's impact, in a retrospective analysisTransport for London(TfL) estimated there would have already been a significant reduction in traffic as a consequence of parking policies and increased congestion due to traffic management and other interventions that had the effect of reducing highway capacity. In 2006, the last year before the zone was expanded, TfL observed that traffic flows were lower than in any recent year, while network traffic speeds were also lower than in any recent year.

In 2013, ten years since its implementation, TfL reported that the congestion charging scheme resulted in a 10% reduction in traffic volumes from baseline conditions, and an overall reduction of 11% in vehicle kilometres in London between 2000 and 2012. Despite these gains, traffic speeds have also been getting progressively slower over the past decade, particularly in central London. TfL explains that the historic decline in traffic speeds is most likely due to interventions that have reduced the effective capacity of the road network in order to improve the urban environment, increase road safety and prioritise public transport, pedestrian and cycle traffic, as well as an increase in road works by utilities and general development activity since 2006. TfL concludes that while levels of congestion in central London are close to pre-charging levels, the effectiveness of the congestion charge in reducing traffic volumes means that conditions would be worse without the Congestion Charging scheme.

New York City Congestion Pricing Environmental Assessment Study

In May 2023, the Metropolitan Transportation Authority (MTA) finalized and published the Environmental Assessment (EA) of the congestion program which included a public comment period of 30 days, ending on June 12, 2023.The EA included a comprehensive regional study of 22 million people taking 28.8 million journeys per average weekday in a 28-county area covering New York, New Jersey and Connecticut.Under the regional study, the MTA along with other sponsoring organizations included data from local studies as well as county data and observed significant patterns if congestion pricing were implemented. By June 22, 2023, the Federal Highway Administration (FHWA) published its Finding of No Significant Impact (FONSI) decision of the project. Under the FONSI decision, the FHWA found that the EA addressed public input, considered the impacts, and appropriately mitigated adverse effects. In the EA, it showed potential improvements on regional air quality as some drivers will shift from vehicle transportation to transit within the New York Metropolitan region. The EA reports 7 “alternative” scenarios for the congestion pricing project with the outlier differences where congestion pricing is fully implemented (known as “Scenario A” ) and the scenario where no action is taken from the project. The result of congestion pricing (Scenario A) in relative to the “no action” alternative is a 7.1% to 9.2% reduction in daily vehicle miles traveled, a 15.4% to 19.9% reduction in the number of vehicles entering congestion zone, and would have an estimated $1.02 to $1.48 billion net revenue for the program. Nitrogen oxide emissions would have been estimated to drop by 9.54% within the zone and approximately 5.96% in New York County (Manhattan). Other pollutants such as carbon emissions would have been expected to drop by 11.48% as well as fine particulate matter (PM2.5 & PM10) by 11.37% and 12.16% respectively.

The study also projects an increase in air pollutants in neighboring areas outside of the congestion zone. In particular, Bergen County in New Jersey would have been estimated to observe a 0.63% increase in nitrogen oxide emissions if congestion tolls are placed. Residents of the Bronx would have seen a 0.09% increase in nitrogen oxide emissions. Other areas with similar increasing air pollutant projections include Richmond and Putnam counties. Furthermore, the EA also indicated a slight significance on the number of vehicles on some highways if congestion pricing were implemented but showed a lack of significance in vehicle miles traveled. The EA data for a 2045 projection projected a 10.4% reduction in crossings from Brooklyn to the congestion zone which includes the BQE (Brooklyn-Queens Expressway) and other connected entryways such as the Manhattan and Brooklyn Bridge. Under congestion pricing, there will be a 5.4% decrease in vehicles on FDR Drive. These reductions represent 16,000 to 42,000 fewer people accessing the congestion zone in a private automobile on an average weekday.

The EA reported a lack of significant change in congestion (in vehicle miles traveled). For instance, the highway, FDR Drive would have been projected to experience a 0.2% increase in vehicle miles traveled. Nonetheless, some officials remain optimistic, citing that congestion pricing would have reduced the amount of traffic especially in areas like the BQE by around 7-10%. The study also projects an increase in air pollutants in neighboring areas outside of the congestion zone. In particular, Bergen County in New Jersey would have been estimated to observe a 0.63% increase in nitrogen oxide emissions if congestion tolls are placed. Residents of the Bronx would have seen a 0.09% increase in nitrogen oxide emissions. Other areas with similar increasing air pollutant projections include Richmond and Putnam counties. Furthermore, the EA also indicated a slight significance on the number of vehicles on some highways if congestion pricing were implemented but showed a lack of significance in vehicle miles traveled. The EA data for a 2045 projection projected a 10.4% reduction in crossings from Brooklyn to the congestion zone which includes the BQE (Brooklyn-Queens Expressway) and other connected entryways such as the Manhattan and Brooklyn Bridge. Under congestion pricing, there will be a 5.4% decrease in vehicles on FDR Drive. These reductions represent 16,000 to 42,000 fewer people accessing the congestion zone in a private automobile on an average weekday. The EA reported a lack of significant change in congestion (in vehicle miles traveled). For instance, the highway, FDR Drive would have been projected to experience a 0.2% increase in vehicle miles traveled. Nonetheless, some officials remain optimistic, citing that congestion pricing would have reduced the amount of traffic especially in areas like the BQE by around 7-10%.

Academic debate and concerns

Even the transport economists who advocate congestion pricing have anticipated several practical limitations, concerns and controversial issues regarding the actual implementation of this policy. As summarized by Cervero:

True social-cost pricing of metropolitan travel has proven to be a theoretical ideal that so far has eluded real-world implementation. The primary obstacle is that except for professors of transportation economics and a cadre of vocal environmentalists, few people are in favor of considerably higher charges for peak-period travel. Middle-class motorists often complain they already pay too much in gasoline taxes and registration fees to drive their cars, and that to pay more during congested periods would add insult to injury. In the United States, few politicians are willing to champion the cause of congestion pricing for fear of reprisal from their constituents. Critics also argue that charging more to drive is elitist policy, pricing the poor off of roads so that the wealthy can move about unencumbered. It is for all these reasons that peak-period pricing remains a pipe dream in the minds of many.

Both Buttonand Small et al.,have identified the following issues:

• The real-world demand functions for urban road travel are more complex than the theoretical functions used in transport economics analysis. Congestion pricing was developed as a first-best solution, based on the assumption that the optimal price of road space equals the marginal cost price if all other goods in the economy are also marginal cost priced. In the real world this is not true, thus, actual implementation of congestion pricing is just a proxy or second-best solution. Based on the economic principles behind congestion pricing, the optimal congestion charge should make up for the difference between the average cost paid by the driver and the marginal cost imposed on other drivers (such as extra delay) and on society as a whole (such as air pollution). The practical challenge of setting optimal link-based tolls is daunting given that neither the demand functions nor the link-specific speed-flow curves can be known precisely. Therefore, transport economists recognize that in practice setting the right price for the congestion charge becomes a trial and error experience.
• Inequality issue: A main concern is the possibility of undesirable distribution repercussions because of the diversity of road users. The use of the tolled road depends on the user's level of income. Where some cannot afford to pay the congestion charge, then this policy is likely to privilege the middle-class and rich. The users who shift to some less-preferred alternative are also worse off. The less wealthy are the more likely to switch to public transit.Road space rationingis another strategy generally viewed as more equitable than congestion pricing. However, high-income users can always avoid the travel restrictions by owning a second car and users with relatively inelastic demand (such as a worker who needs to transport tools to a job site) are relatively more impacted.
• There are difficulties in deciding how to allocate the revenues raised. This is a controversial issue among scholars. The revenues can be used to improve public transport (as is the case in London), or to invest in new road infrastructure (as in Oslo). Some academics make the case that revenues should be disposed as a direct transfer payments to former road users. Congestion pricing is not intended to increase public revenues or to become just another tax, however this is precisely one of the main concerns of road users and taxpayers.

One alternative, aimed at avoiding inequality and revenue allocation issues, is to implement arationingof peak period travel through mobility rights or revenue-neutral credit-based congestion pricing.This system would be similar to the existingemissions tradingofcarbon credit.Metropolitan area or city residents, or the taxpayers, would be issued mobility rights or congestion credits, and would have the option of using these for themselves, or trading or selling them to anyone willing to continue traveling by automobile beyond their personal quota. This trading system would allow direct benefits to be accrued by those users shifting to public transportation or by those reducing their peak-hour travel rather than the government.

Public controversy

Experience from the few cities where congestion pricing has been implemented shows that social and political acceptability is key. Public discontent with congestion pricing, or rejection of congestion pricing proposals, is due mainly to the inequality issues, the economic burden on neighboring communities, the effect on retail businesses and the economic activity in general, and the fears that the revenues will become just another tax.

Congestion pricing remains highly controversial with the public both before and after implementation. This has in part been resolved throughreferendums,such as after the seven-month trial period inStockholm;however this creates a debate as to where the border line for the referendum should go, since it is often the people living outside the urban area who have to pay the tax, while the external benefit is granted to those who live within the area. In Stockholm there was a majority in the referendum within the city border (where the votes counted), but not outside.

Some concerns have also been expressed regarding the effects of cordon area congestion pricing on economic activity and land use,as the benefits are usually evaluated from the urban transportation perspective only. However, congestion pricing schemes have been used with the main objective of improving urban quality and to preserve historical heritage in the small cities.

The effects of a charge on business have been disputed; reports have shops and businesses being heavily impacted by the cost of the charge, both in terms of lost sales and increased delivery costs inLondon,while others show that businesses were then supporting the charge six months after implementation.Reports show business activity within the charge zone had been higher in bothproductivityandprofitabilityand that the charge had a "broadly neutral impact" on the London wide economy,while others claim an average drop in business of 25% following the 2007 extension.

Other criticism has been raised concerning the environmental effects on neighborhoods bordering the congestion zone, with critics claiming that congestion pricing would create "parking lots" and add more traffic and pollution to those neighborhoods,and the imposition of aregressive taxon some commuters.Stockholm's trial of congestion pricing, however, showed a reduction in traffic in areas outside the congestion zone.Other opponents argue that the pricing could become a tax on middle- and lower-class residents, since those citizens would be affected the most financially.The installation of cameras for tracking purposes may also raise civil liberties concerns.

Effects

A 2019 study of congestion pricing in Stockholm between 2006 and 2010 found that in the absence of congestion pricing that Stockholm's air would have been 5 to 15 percent more polluted between 2006 and 2010 ", and that young children would have suffered substantially more asthma attacks.A 2020 study that analyzed driving restrictions in Beijing estimated that the implementation of congestion pricing would reduce total traffic, increase traffic speed, reduce pollution, reducegreenhouse gas emissions,reduce traffic accidents, and increase tax revenues.A 2020 study of London found thatcongestion pricing(introduced in 2003) led to reductions in pollution and reductions in driving, but it increased pollutionfrom diesel vehicles (which were exempt from the congestion pricing).A 2021 study found that congestion pricing reduced CO₂emissions through downsizing commuting distances and housing sizes.

A 2013 study found that after congestion pricing was implemented in Seattle, drivers reported greater satisfaction with the routes covered by congestion pricing and reported lower stress.

A 2016 study found that more people used public transportation due to increases in congestion pricing in Singapore.A 2016 study found that real estate prices dropped by 19% within the cordoned-off areas of Singapore where congestion pricing was in place relative to the areas outside of the area.

Waterways

Panama Canal booking system and auction

Several dozen vessels queuing at thePacific Oceanwaiting to enter thePanama Canal

Vessels waiting at theGatun Laketo cross theGatun Locksto exit the canal at theAtlantic side

ThePanama Canalhad a limited capacity determined by operational times and cycles of the existinglocksand further constrained by the current trend towards larger (close toPanamax-sized) vessels transiting thecanalwhich take more transit time within the locks and navigational channels, and the need for permanent periodical maintenance works due to the aging canal, which forces periodical shutdowns of thiswaterway.On the other hand, demand has been growing due to the rapid growth ofinternational trade.Also, many users require a guarantee of certain level of service. Despite the gains which have been made in efficiency, thePanama Canal Authority(ACP) estimates that the canal will reach its maximum sustainable capacity between 2009 and 2012.The long-term solution for the congestion problems was theexpansion of the canalthrough a new third set of locks. Work started in 2007 and the expanded canal enter commercial operation in June 2016. The new locks allow transit of larger,Post-Panamaxships, which have a greater cargo capacity than the current locks are capable of handling.

Considering the high operational costs of the vessels (container shipshave daily operational costs of approximatelyUS$40,000), the long queues that occur during the high season (sometimes up to a week's delay), and the high value of some of the cargo transported through the canal, the ACP implemented a congestion pricing scheme to allow a better management of the scarce capacity available and to increase the level of service offered to the shipping companies. The scheme gave users two choices: (1) transit by order of arrival on a first-come first-served basis, as the canal historically has operated or (2) booked service for a fee—a congestion charge.

The booked service allowed two options of fees. The Transit Booking System, available online, allowing customers who do not want to wait in queue to pay an additional 15% over the regular tolls, guaranteeing a specific day for transit and crossing the canal in 18 hours or less. ACP sells 24 of these daily slots up to 365 days in advance. The second choice was high priority transit. Since 2006, ACP has available a 25th slot, sold through the Transit Slot Auction to the highest bidder.The main customers of the Transit Booking System arecruise ships,container ships,vehicle carriers,and non-containerized cargo vessels.

The highest toll for high priority passage paid through the Transit Slot Auction wasUS$220,300charged on atankerin August 2006,bypassing a 90-ship queue awaiting the end of maintenance works on the Gatun locks, thus avoiding a seven-day delay. The normal fee would have been justUS$13,430.The average regular toll is aroundUS$54,000.

Airports

New York'sJohn F. Kennedy International Airport,one of the world's busiest

Manyairportsare facing extreme congestion,runwaycapacity being the scarcest resource. Congestion pricing schemes have been proposed to mitigate this problem, including slot auctions, such as with the Panama Canal, but implementation has been piecemeal.The first scheme was started in 1968 when higher landing fees for peak-hour use by aircraft with 25 seats or less atNewark,Kennedy,andLaGuardiaairports in New York City. As a result of the higher charges,general aviationactivity during peak periods decreased by 30%. These fees were applied until deregulation of the industry, but higher fees for general aviation were kept to discourage this type of operations at New York's busiest airports. In 1988 a higher landing fee for smaller aircraft atBoston's Logan Airportwas adopted; with this measure much of the general aviation abandoned Logan for secondary airports.In both US cases the pricing scheme was challenged in court. In the case of Boston, the judge ruled in favor of general aviation users due to lack of alternative airports. In the case of New York, the judge dismissed the case because "the fee was a justified means of relieving congestion".

Congestion pricing has also been implemented forscheduled airline services.TheBritish Airports Authority(BAA) has been a pioneer in implementing congestion pricing for all types ofcommercial aviation.In 1972 implemented the first peak pricing policy, with surcharges varying depending on the season and time of the day, and by 1976 raised these peak charges.London-Heathrowhad seven pricing structures between 1976 and 1984. In this case it was the US carriers that went to international arbitration in 1988 and won their case.

In 1991, theAthens Airportcharged a 25% higher landing fee for those aircraft arriving between 11:00 and 17:00 during the high tourism season during summer.Hong Kongcharges an additional flat fee to the basic weight charge.In 1991–92 peak pricing at London's main airportsHeathrow,GatwickandStanstedwas implemented; airlines were charged different landing fees for peak and off-peak operations depending on the weight of aircraft.For example, in the case of aBoeing 757,the peak landing fee was about 2.5 times higher than the off-peak fee in all three airports. For aBoeing 747the differential was even higher, as the old 747 carries a higher noise charge.Though related to runway congestion, the main objective of these peak charges at the major British airports was to raise revenue for investment.

See also

• Automobile costs
• Braess's paradox
• Deadweight loss
• Downs–Thomson paradox
• Electricity pricing
• Low-emission zone
• Energy demand management(congestion pricing applied to electric utilities)
• GNSS road pricing
• Induced demand
• Jevons paradox
• Lewis–Mogridge position
• Pareto efficiency
• Road pricing
• Road space rationing
• Tax incidence
• Tragedy of the commons
• Transport economics
• Transportation demand management
• Variable pricing
• Vehicle miles traveled tax
• Water pricing

Bibliography

• Button, Kenneth J.(2010).Transport Economics 3rd Edition.Edward Elgar Publishing,Cheltenham, UK.ISBN978-1-84064-191-2.(See Chapter 9: Optimizing Traffic Congestion)
• Button, Kenneth J. (1993).Transport Economics 2nd Edition.Edward Elgar Publishing Ltd, Cheltenham, UK.ISBN978-1-85278-523-9.
• Cervero, Robert (1998).The Transit Metropolis: A Global Inquiry.Island Press,Washington, D.C.ISBN978-1-55963-591-2.(See Chapter 6: The Master-Planned Transit Metropolis: Singapore)
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• McDonald, J.F.; d'Ouville, Edmond L.; Nan Liu, Louie (1999).Economics of Urban Highway Congestion and Pricing (Transportation Research, Economics and Policy Volume 9).Springer, New York.ISBN978-0-7923-8631-5.
• International Transport Forum,Organisation for Economic Co-operation and Development(2010).ITF Round Tables Implementing Congestion Charges.OECD Publishing, Paris.ISBN978-92-821-0284-8.
• Kockelman, Kara M.; Kalmanje, Sukumar (2005). "Credit-Based Congestion Pricing: A Policy Proposal and the Public's Response".Transportation Research.39A(7–9): 671–690.doi:10.1016/j.tra.2005.02.014.
• Peterson, Sarah Jo; MacCleery, Rachel (2013).When the Road Price Is Right: Land Use, Tolls, and Congestion Pricing.Urban Land Institute.ISBN978-0-87420-262-5.
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• Santos, Georgina, ed. (2004).Road Pricing, Volume 9: Theory and Evidence (Research in Transportation Economics).JAI Press.ISBN978-0-7623-0968-9.
• Schade, Jens; Schlag, Bernhard (2003).Acceptability of Transport Pricing Strategies.Emerald Group Publishing,Bingley, West Yorkshire.ISBN978-0-08-044199-3.
• Small, Kenneth A.; Verhoef, Erik T. (2007).The Economics of Urban Transportation.Routledge,New York.ISBN978-0-415-28515-5.(See Chapter 4: Pricing and 4-3: Congestion Pricing in Practice)
• Smeed, R.J. (1964).Road pricing: the economic and technical possibilities.HMSO.
• Tsekeris, Theodore; Voß, Stefan (2009). "Design and evaluation of road pricing: State-of-the-art and methodological advances".Netnomics.10:5–52.doi:10.1007/s11066-008-9024-z.S2CID153724717.
• Verhoef, Erik T.; Bliemer, Michiel; Steg, Linda; Van Wee, Bert (2008).Pricing in Road Transport: A Multi-Disciplinary Perspective.Edward Elgar Publishing, Cheltenham, UK.ISBN978-1-84542-860-0.
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External links

• Transportation Economics/Pricingat Wikibooks