Can Congestion Pricing Raise Awareness and Save the World?

congestion pricing
•••   PhotoAlto/Frederic Cirou, Getty Images

Congestion pricing is a trending yet often controversial approach for dealing with traffic gridlock. It is being explored by some cities as a means to reduce traffic congestion. Simply put, congestion pricing models charge transportation users more during peak hours. The idea behind this model is that increased financial pain would influence people to switch to public transit, or for those with less urgent need to travel during rush hour to change the timing of their trip to a quieter part of the day.

Congestion pricing approaches have been established in some major cities as well as smaller ones, although efforts to establish such policies have failed in others, such as recently in New York City. Concerns about the capacity of public transit to absorb the diverted commuters, public equity, and simply the fear of change can stand in the way of a successful congestion pricing program.

What is congestion pricing?

Congestion pricing, also referred to as congestion charges or value pricing, is a public policy approach designed to reduce pressure on transportation services by applying higher prices or surcharges during peak hours. In economic theory, congestion pricing is considered to be a demand side approach, in that it is designed to reduce the demand for transportation services during peak hours, and redistribute it to other times. A supply side approach, by comparison, would be to increase capacity, through a project to add extra lanes to a bridge or a highway, for example.

Unfortunately, such improvements often only result in temporary relief, stimulating the building of new housing projects that are attractive because of improved transportation infrastructure, yet which eventually lead to more congestion.

Another economic consideration is the cost that users of transportation impose on others during rush hour.

The decision of someone to travel during peak hours results in delays for other commuters, as well as increased costs for the delivery of goods, and other inefficiencies. Such costs, when they are not paid for by the person who imposes them, are referred to as negative externalities. Congestion pricing is a means of raising awareness concerning the costs inflicted on others associated with choosing to drive during peak times.

Why is congestion pricing a good idea?

Congestion pricing offers some important benefits to lawmakers and the users of transportation services alike. These include:

  • It helps postpone the need for new capital projects such as bridges and highways, allowing for the better utilization of existing infrastructure.

  • It can generate revenue that can be used to improve public transportation or other projects to improve services.

  • It lightens peak traffic, reducing delays and driver stress, without the need for tax increases. According to the U.S. Department of Transportation, even a 5 percent reduction in vehicles can allow for much more efficient traffic flow.

  • It may lead to an increase in public transit usage, providing greater utilization of the public transport system––if the necessary capacity exists.

  • It allows for more efficient response times for emergency personnel.

  • It allows for the greater efficiency of commercial traffic.

  • It aids society overall by reducing fuel consumption and vehicle emissions.

  • It helps prevent housing market distortions resulting from undercharged commuting costs. People will be more motivated to live in the city versus the suburbs

Different Approaches to Congestion Pricing

There are four different approaches to establishing congestion pricing in order to reduce demand. These include:

  • Variably priced lanes, including tolls on special lanes.  

  • Variable tolls on entire roadways, including bridges and highways, to be charged during peak hours.

  • Cordon charges, including either variable or fixed tolls for driving within or into a congested area within a city.

  • Area-wide charges, including per-mile charges for travel in a congested area of a city.

    Which Cities Use Congestion Pricing?

    The congestion pricing approach is used in London, Stockholm, Singapore, Milan and Gothenburg, as well as smaller centers such as Durham, England, Znojmo, Czech Republic, and Valletta, Malta. London began its congestion pricing scheme in 2003. It currently charges £11.50 for each day, for each non-exempt vehicle that travels within the cordoned zone. It limits free access to all-electric cars and low emission vehicles that meet Euro 5 standards for air quality.

    In the U.S., lane pricing has proven successful for State Route 91 in Orange County, California. The toll lane carries twice as many vehicles per lane as the free lanes during peak traffic. According to DOT, “pricing has allowed twice as many vehicles to be served per lane at three to four times the speed on the free lanes.”

    Barriers to change

    Congestion pricing typically is met with resistance from the public. For example, it will cost people more to travel during peak hours, and may force them out of their comfort zone to use public transit. If public transit is not in a position to provide extra ridership, this limitation is an additional barrier to the implementation of a congestion scheme.

    One way to reduce apprehension is through the use of a trial period. Stockholm held a seven-month trial, during which toll revenues were invested into improved transit. While pre-trial support was as low as 36 percent, the referendum was subsequently approved by a 53 percent vote.

    As Sharon Shewmake, an associate professor of economics and faculty member of the Institute for Energy Studies at Western Washington University, noted in The Seattle Times:

    Twelve years later, congestion pricing has become an accepted part of life in Stockholm. Traffic has decreased by more than 20 percent, air quality has improved, and greater numbers of residents use well-funded public transit subsidized by those who still drive through central Stockholm. The charge was so popular in Stockholm that nearby Gothenburg emulated Stockholm’s model despite being a smaller, less-congested city.

    Congestion pricing can definitely help raise awareness, and based on the cities which have implemented it, the results have been successful. Watch for congestion pricing to become an increasingly popular intervention for easing urban gridlock.