Congestion pricing

Extracted Attributes

• Purpose

  To manage congestion without increasing supply, regulate demand, and make users pay for the negative externalities they create.

• Definition

  A system of surcharging users of public goods (like roads, public transport, airports) that are subject to congestion through excess demand.

• Key Benefits

  Reduced urban traffic congestion, reduced pollution, reduced asthma, increased home values, more efficient use of infrastructure.

• Key Criticisms

  Concerns regarding equity, economic burden on neighboring communities, negative impact on retail businesses and general economic activity, perceived as another tax levy.

• Economic Theory

  Uses the price mechanism to cover the social cost of activities creating negative externalities, encouraging demand redistribution in time or space for more efficient outcomes.

• Types of Systems

  Cordon area (around city center), area-wide, city center toll ring, corridor or single facility pricing.

• Alternative Names

  Congestion charges, Value pricing

• Economist Consensus

  Most economists agree that some form of road pricing to reduce congestion is economically viable and makes citizens better off when proceeds lower other taxes.

• Renewed Interest Cause

  Concerns about fossil fuel consumption and greenhouse gas emissions in the context of climate change.

• Economist Disagreements

  How to set tolls, how to cover common costs, what to do with excess revenues, whether and how to compensate 'losers' from tolling previously free roads, whether to privatize highways.

Timeline

• Singapore introduces urban road congestion pricing, pioneering the concept. (Source: Summary)

  1975-01-01

• Singapore refines its congestion pricing system, shifting to a fully automated electronic charging system. (Source: Summary)

  1998-01-01

• London implements congestion pricing in its central business district. (Source: Web Search Results)

  2003-02-17

• Stockholm's congestion pricing scheme is permanently reinstated after a referendum. (Source: Web Search Results)

  2007-08-01

• Renewed interest in congestion pricing emerges due to concerns about fossil fuel consumption and greenhouse gas emissions in the context of climate change. (Source: Summary)

  2020-01-01

Congestion pricing

Congestion pricing or congestion charges is a system of surcharging users of public goods that are subject to congestion through excess demand, such as through higher peak charges for use of bus services, electricity, metros, railways, telephones, and road pricing to reduce traffic congestion; airlines and shipping companies may be charged higher fees for slots at airports and through canals at busy times. This pricing strategy regulates demand, making it possible to manage congestion without increasing supply. According to the economic theory behind congestion pricing, the objective of this policy is to use the price mechanism to cover the social cost of an activity where users otherwise do not pay for the negative externalities they 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 more efficient outcomes. Singapore was the first country to introduce congestion pricing on its urban roads in 1975, and was refined in 1998. Since then, it has been implemented in cities including London, Stockholm, Milan, Gothenburg, and New York City. It was also considered in Washington, D.C. and San Francisco prior to the COVID-19 pandemic. Greater awareness of the harms of pollution and emissions of greenhouse gases in the context of climate change has recently created greater interest in congestion pricing. Implementation of congestion pricing has reduced traffic congestion in urban areas, reduced pollution, reduced asthma, and increased home values, but has also sparked criticism and political discontent. There is a consensus among economists that congestion pricing in crowded transportation networks, and subsequent use of the proceeds to lower other taxes, makes citizens on average 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.

Web Search Results

• Congestion pricing - Wikipedia

  Congestion pricing or congestion charges is a system of surcharging "Surcharge (payment systems)") users of public goods "Public good (economics)") that are subject to congestion through excess demand "Demand (economics)"), such as through higher peak charges for use of bus services, electricity, metros, railways, telephones, and road pricing to reduce traffic congestion; airlines and shipping companies may be charged higher fees for slots at airports and through canals at busy times. This [...] 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 a demand management strategy to relieve traffic congestion within that area. The economic rationale for this pricing scheme is based on the externalities or social costs of road transport, such as air pollution, noise, traffic accidents, environmental and urban deterioration, and the extra costs and delays imposed by traffic congestion upon other drivers when [...] Congestion pricing is a concept from market economics regarding the use of pricing mechanisms to charge the users of public goods "Public good (economics)") for the negative externalities generated by the peak demand in excess of available supply. Its economic rationale is that, at a price of zero, demand exceeds supply, causing a shortage, and that the shortage should be corrected by charging the equilibrium price rather than shifting it down by increasing the supply. Usually this means

• What is Congestion Pricing? - FHWA Office of Operations

  Congestion pricing - sometimes called value pricing - is a way of harnessing the power of the market to reduce the waste associated with traffic congestion. Congestion pricing works by shifting some rush hour highway travel to other transportation modes or to off-peak periods, taking advantage of the fact that the majority of rush hour drivers on a typical urban highway are not commuters. By removing a fraction (even as small as 5 percent) of the vehicles from a congested roadway, pricing [...] TRB Committees Contacts | | Home > About Congestion Pricing What is Congestion Pricing? Congestion pricing - sometimes called value pricing - is a way of harnessing the power of the market to reduce the waste associated with traffic congestion. Congestion pricing works by shifting some rush hour highway travel to other transportation modes or to off-peak periods, taking advantage of the fact that the majority of rush hour drivers on a typical urban highway are not commuters. By removing a [...] fraction (even as small as 5 percent) of the vehicles from a congested roadway, pricing enables the system to flow much more efficiently, allowing more cars to move through the same physical space. Similar variable charges have been successfully utilized in other industries - for example, airline tickets, cell phone rates, and electricity rates. There is a consensus among economists that congestion pricing represents the single most viable and sustainable approach to reducing traffic

• Frequently Asked Questions - Congestion Pricing

  # Frequently Asked Questions ## What is Congestion Pricing? What are pricing strategies? Increasingly, Americans recognize that gas taxes do not provide adequate funds for the large capital and maintenance needs of the highway network. Tolling refers to charging drivers a fee for use of a highway, and using those fees collected to build, maintain, and improve the highway. "Pricing" refers to varying toll levels by time of day or traffic volume in order to manage congestion. [...] (PPP)? + Does the state allow public-private partnerships (PPP)? --- What is Congestion Pricing? What are pricing strategies? Increasingly, Americans recognize that gas taxes do not provide adequate funds for the large capital and maintenance needs of the highway network. Tolling refers to charging drivers a fee for use of a highway, and using those fees collected to build, maintain, and improve the highway. "Pricing" refers to varying toll levels by time of day or traffic volume in order [...] Tolling and pricing are appropriate in states and local regions where funds available to support the construction of highway improvements are constrained and where congestion is impacting economic productivity and quality of life. They can be used on state, county or local highways as well as the Interstate Highway System. Pricing should be used to encourage the efficient and effective use of new and existing transportation infrastructure, with toll revenues providing a supplementary funding

• [PDF] Congestion Pricing: Examples Around the World

  Several cities in Europe have implemented congestion pricing in their central business districts to combat traffic congestion and air pollution, including London, Stockholm, Malta, Rome, and Milan. This brief highlights the London and Stockholm schemes, as well as a more comprehensive approach involving pricing of the expressway system and major arterials in Singapore. London On February 17, 2003, London implemented congestion pricing in central London. The scheme involves a standard per-day [...] charge for vehicles traveling within a zone bounded by an inner ring road. Motorists are currently charged £8 (US $16) a day to drive within the central city zone between 7 am and 6:30 pm on week-days. The congestion charge, together with improvements in public transit fi-nanced with revenues from the charging system, led to a 15 percent reduction in traffic in central London, and a 30 percent reduction in travel delays. There was no significant diversion of traffic to local roads outside the [...] ref-erendum and the scheme was permanently reinstated in August 2007. Singapore Traffic congestion was significantly reduced when peak-period pricing was intro-duced in downtown Singapore during the morning rush hours in 1975. In spring 1998, the city shifted to a fully automated electronic charging system. Variable electronic charges were also introduced on the expressway system, with charges set by time of day to ensure free flow of traffic. The system, the first of its kind in the world, has

• 5 Cities with Congestion Pricing - Smart Cities Dive

  Congestion pricing is gathering some inertia in cities worldwide for a few reasons; safety, money, and public desire are among the main ones. Unlike traditional mechanisms to deal with more cars such as, well, building new roads, congestion pricing has had a profound effect on the cities it has come to. Pricing schemes operate on the same general platform – charge a car if it passes into a certain zone of a city – but each country has generated an architecture that is influenced as much by

Congestion pricing or congestion charges is a system of surcharging users of public goods that are subject to congestion through excess demand, such as through higher peak charges for use of bus services, electricity, metros, railways, telephones, and road pricing to reduce traffic congestion; airlines and shipping companies may be charged higher fees for slots at airports and through canals at busy times. Advocates claim this pricing strategy regulates demand, making it possible to manage congestion without increasing supply. According to the economic theory behind congestion pricing, the objective of this policy is the use of the price mechanism to make users conscious 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, and forcing them to pay for the negative externalities they create, making users more aware of their impact on the environment. Singapore was the first country to introduce congestion pricing on its urban roads in 1975, and was refined in 1998. Since then, its application on other urban roads around the world is currently limited to a few cities, including London, Stockholm, Milan, and Gothenburg, Sweden, as well as a few smaller towns, such as Durham, England; Znojmo, Czech Republic; Riga (ended in 2008), Latvia; and Valletta, Malta. It has also been proposed in New York City and San Francisco. 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. Implementation of congestion pricing has reduced congestion in urban areas 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, has a negative effect on retail businesses and on economic activity in general, and represents another tax levy. A survey of economic literature on the subject, however, finds that most economists agree that some form of road pricing to reduce congestion is economically viable, although there is disagreement on what form road pricing should take. 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. Also, concerns regarding fossil fuel supply and urban transport high emissions of greenhouse gases in the context of climate change have renewed interest in congestion pricing, as it is considered one of the demand-side mechanisms that may reduce oil consumption.