10.4 Congestion pricing and road user charging
9 min read•august 21, 2024
and are innovative strategies to manage traffic flow and fund transportation infrastructure. By charging drivers for road use during peak times, these systems aim to reduce congestion, improve travel times, and generate revenue for improvements.
These approaches leverage advanced technologies like and satellite-based tracking. As cities grapple with increasing traffic, congestion pricing offers a market-based solution to optimize road network efficiency and encourage sustainable transportation choices.
Congestion pricing overview
- Congestion pricing is an economic approach to managing traffic congestion by charging road users a fee or toll to discourage driving during peak periods
- Aims to reduce congestion, improve travel times, and generate revenue for transportation improvements
- Congestion pricing is a key tool in the Intelligent Transportation Systems (ITS) toolbox for optimizing road network performance and efficiency
Economic rationale for pricing
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- Congestion occurs when traffic demand exceeds road capacity, leading to delays and inefficiencies
- Traditional approach of building more roads is costly and often induces more traffic demand (latent demand)
- Pricing incentivizes drivers to consider the marginal social cost of their trips, including the congestion externality imposed on other road users
- By charging a price that reflects the true cost of driving during congested periods, the market can reach a more efficient equilibrium
Objectives of congestion pricing
- Reduce traffic congestion and improve travel times for all road users
- Encourage mode shift to public transit, carpooling, or off-peak travel
- Generate revenue for transportation improvements and maintenance
- Improve air quality and reduce greenhouse gas emissions by reducing vehicle miles traveled (VMT)
- Increase economic productivity by reducing time lost in traffic
Types of congestion pricing schemes
- : charges a fee to enter a designated congested area (e.g., city center)
- : charges a fee for driving within a designated zone
- : charges a fee for using a specific congested highway or road segment
- : adjusts the fee based on time of day, traffic conditions, or vehicle occupancy (e.g., )
- Distance-based pricing: charges based on the number of miles driven within a congested area
Road user charging systems
- Road user charging systems are the technological infrastructure that enables the implementation and enforcement of congestion pricing schemes
- These systems typically involve vehicle detection, identification, and payment processing components
- Advances in ITS have enabled more sophisticated and efficient road user charging systems
Electronic toll collection technology
- Electronic toll collection (ETC) systems automatically identify vehicles and charge tolls without requiring vehicles to stop at toll booths
- Common ETC technologies include:
- Dedicated Short-Range Communications (DSRC) transponders (e.g., E-ZPass)
- (ANPR) cameras
- Global Navigation Satellite System (GNSS) tracking
- ETC improves traffic flow, reduces congestion at toll plazas, and lowers operating costs compared to manual toll collection
Satellite-based charging systems
- Satellite-based charging systems use GNSS technology (e.g., GPS) to track vehicle movements and charge fees based on distance traveled, location, or time of day
- Advantages include flexible pricing based on real-time conditions, coverage of entire road networks, and interoperability across jurisdictions
- Examples include Germany's truck tolling system and Oregon's OReGO voluntary road usage charge program
Vehicle-miles-traveled (VMT) fees
- VMT fees charge drivers based on the number of miles driven, regardless of the specific roads used
- Seen as a potential long-term replacement for fuel taxes, which are declining due to improved fuel efficiency and electric vehicle adoption
- Can be implemented using odometer readings, in-vehicle devices, or GNSS tracking
- Pilot programs have been conducted in several U.S. states (e.g., California, Minnesota) to test technical feasibility and public acceptance
Congestion pricing implementation
- Implementing congestion pricing involves technical, political, and public outreach challenges
- Key considerations include the design of the pricing scheme, the selection of charging technology, and the use of revenue generated
Cordon pricing vs area pricing
- Cordon pricing charges a fee to enter a designated congested area, typically a city center or central business district
- Examples include Singapore's ERP, London's Congestion Charge, and Stockholm's congestion tax
- Relatively simple to implement and enforce using gantries or cameras at entry points
- Area pricing charges a fee for driving within a designated zone, regardless of the number of crossings
- Provides more comprehensive coverage of a congested area
- May require more extensive vehicle tracking infrastructure
Variable pricing strategies
- Variable pricing adjusts the congestion fee based on factors such as time of day, traffic conditions, or vehicle occupancy
- Time-of-day pricing sets higher fees during peak periods to encourage off-peak travel
- Examples include Singapore's ERP, which has higher rates during morning and evening rush hours
- adjusts fees in real-time based on current traffic conditions
- Requires advanced traffic monitoring and communication systems
- Examples include San Diego's I-15 Express Lanes and Minneapolis' I-394 MnPASS lanes
- High Occupancy Toll (HOT) lanes allow solo drivers to pay a fee to use carpool lanes, with the price varying based on demand
- Encourages carpooling while providing a congestion-free alternative for solo drivers willing to pay
- Examples include SR-91 Express Lanes in Orange County, California and I-95 Express Lanes in Miami, Florida
Public acceptance challenges
- Congestion pricing often faces public resistance due to concerns about fairness, privacy, and the perception of a new tax
- Effective public outreach and communication strategies are crucial for building support
- Emphasize benefits such as reduced congestion, improved travel times, and increased funding for transportation improvements
- Provide clear information about how the system works and how revenue will be used
- Incremental implementation and pilot programs can help demonstrate benefits and build familiarity
- Offering discounts or exemptions for low-income drivers or residents of the priced area can help address
Equity considerations
- Congestion pricing can have disproportionate impacts on low-income drivers who may have less flexibility in their travel choices
- Mitigation strategies include:
- Investing revenue in improved public transit services to provide alternatives to driving
- Offering discounts or exemptions for low-income drivers
- Providing rebates or tax credits to offset the cost of the congestion fee
- Carefully designing the pricing scheme and exemptions can help ensure that the benefits and costs are distributed fairly
Impacts of congestion pricing
- Congestion pricing has been shown to have significant impacts on traffic congestion, mode choice, and revenue generation
- Evaluating the impacts of congestion pricing is important for assessing its effectiveness and making adjustments as needed
Traffic flow improvements
- Congestion pricing can significantly reduce traffic congestion and improve travel times
- London's Congestion Charge reduced traffic volumes by 18% and congestion by 30% in the charging zone
- Stockholm's congestion tax reduced traffic crossing the cordon by 20% and increased average speeds by 30-50%
- Reduced congestion also leads to more reliable and predictable travel times
- Improved traffic flow can also reduce vehicle emissions and fuel consumption
Mode shift to public transit
- Congestion pricing can encourage drivers to switch to public transit, reducing the number of vehicles on the road
- London's Congestion Charge led to a 38% increase in bus passengers entering the charging zone
- Stockholm's congestion tax led to a 4-5% increase in public transit ridership
- Revenue from congestion pricing can be invested in improving public transit services, further encouraging mode shift
Revenue generation for transportation
- Congestion pricing can generate significant revenue for transportation improvements and maintenance
- London's Congestion Charge generates around £230 million per year, with net revenue invested in public transit, walking, and cycling improvements
- Stockholm's congestion tax generates around €100 million per year, with revenue used for road and public transit investments
- Revenue can also be used to offset other transportation taxes or fees, such as fuel taxes or vehicle registration fees
Economic effects on businesses
- Congestion pricing can have both positive and negative effects on businesses in the priced area
- Reduced congestion can improve the reliability of deliveries and employee commutes, increasing productivity
- Improved access by public transit can increase the customer base for businesses
- Some businesses may experience reduced customer visits or sales, particularly those dependent on drive-by traffic
- Careful design of the pricing scheme and use of revenue can help mitigate negative impacts on businesses
Case studies of successful implementations
- Several cities around the world have successfully implemented congestion pricing schemes, providing valuable lessons for other cities considering similar programs
Singapore's Electronic Road Pricing (ERP)
- World's first comprehensive electronic congestion pricing system, implemented in 1998
- Replaced earlier manual Area Licensing Scheme (ALS) implemented in 1975
- Charges vary by location, time of day, and vehicle type, with higher fees during peak periods
- Has significantly reduced traffic congestion and increased average vehicle speeds
- Revenue used to fund transportation improvements and offset vehicle taxes
London's Congestion Charge
- Implemented in 2003, charges a daily flat fee (currently £15) for driving in central London on weekdays
- Enforced using Automatic Number Plate Recognition (ANPR) cameras at entry points
- Has reduced traffic volumes by 18%, congestion by 30%, and emissions by 12% in the charging zone
- Revenue invested in public transit, walking, and cycling improvements
Stockholm's congestion tax
- Implemented in 2007 after a successful trial period in 2006
- Charges a variable fee (up to 35 SEK) for entering or exiting the city center on weekdays, with higher fees during peak periods
- Has reduced traffic crossing the cordon by 20% and increased public transit ridership by 4-5%
- Revenue used for road and public transit investments, including a new bypass road
High Occupancy Toll (HOT) lanes
- HOT lanes are a type of managed lane that allow solo drivers to pay a fee to use carpool lanes, with the price varying based on demand
- Examples in the U.S. include:
- SR-91 Express Lanes in Orange County, California (opened 1995)
- I-15 Express Lanes in San Diego, California (opened 1996)
- I-394 MnPASS lanes in Minneapolis, Minnesota (opened 2005)
- I-95 Express Lanes in Miami, Florida (opened 2008)
- HOT lanes have been shown to improve traffic flow, reduce congestion, and generate revenue for transportation improvements
- Dynamic pricing ensures that the lanes remain congestion-free even during peak periods
Future trends in road pricing
- As ITS technologies continue to advance, road pricing systems are evolving to become more sophisticated, dynamic, and interoperable
Integration with intelligent transportation systems
- Congestion pricing can be integrated with other ITS applications, such as:
- Advanced Traffic Management Systems (ATMS) for real-time traffic monitoring and dynamic pricing
- Advanced Traveler Information Systems (ATIS) for providing drivers with real-time pricing and travel time information
- Connected Vehicle (CV) technology for more accurate and efficient vehicle tracking and pricing
- Integration with ITS can enable more effective and responsive congestion management strategies
Dynamic pricing based on real-time conditions
- Advances in traffic monitoring and data analytics are enabling more dynamic and responsive pricing strategies
- Prices can be adjusted in real-time based on factors such as traffic volume, speed, and density
- Dynamic pricing can help optimize road network performance and ensure that congestion fees reflect actual conditions
- Examples include San Diego's I-15 Express Lanes and Minneapolis' I-394 MnPASS lanes
Interoperability across jurisdictions
- Interoperability allows drivers to use a single payment method or account across multiple tolling systems or jurisdictions
- Enables seamless travel across regional or national road networks
- Requires standardization of technologies, data formats, and payment systems
- Examples of interoperable systems include:
- E-ZPass in the northeastern U.S. (used by 17 states)
- European Electronic Toll Service (EETS) framework for interoperability across EU member states
Transition to mileage-based user fees
- Many experts see a long-term transition from fuel taxes to mileage-based user fees (MBUF) or road usage charges (RUC)
- MBUF can provide a more stable and equitable revenue source as fuel efficiency improves and electric vehicle adoption increases
- Can be implemented using GPS tracking, in-vehicle devices, or odometer readings
- Pilot programs have been conducted in several U.S. states (e.g., Oregon, California, Washington) and European countries (e.g., Netherlands, Belgium)
- Congestion pricing could be integrated with MBUF by charging higher rates for driving in congested areas or times
- Transition to MBUF will require addressing privacy concerns, ensuring equity, and building public acceptance
Key Terms to Review (28)
Area pricing: Area pricing refers to a system of charging fees for vehicle access to specific urban areas, particularly during peak congestion times. This approach aims to reduce traffic congestion by incentivizing drivers to alter their travel behavior, such as shifting their travel times or using alternative routes. By implementing area pricing, cities can manage demand for road space more effectively and encourage the use of public transportation or other sustainable modes of transport.
Automatic Number Plate Recognition: Automatic Number Plate Recognition (ANPR) is a technology that uses optical character recognition to read vehicle registration plates automatically. This system captures images of license plates, processes the information, and converts it into text for various applications, including traffic monitoring and law enforcement. ANPR plays a crucial role in congestion pricing and road user charging by facilitating efficient toll collection and traffic management.
Congestion charge zone: A congestion charge zone is a designated area in a city where drivers must pay a fee to enter or drive within it, primarily to reduce traffic congestion and promote the use of public transportation. This approach encourages more efficient use of road space and aims to minimize environmental impacts by discouraging excessive vehicle use in crowded urban areas.
Congestion Pricing: Congestion pricing is a transportation management strategy that charges drivers a fee to use specific roadways during peak traffic times to reduce congestion and encourage more efficient use of the transportation system. By making drivers pay for using crowded roads, it aims to shift travel behavior, improve traffic flow, and promote alternative modes of transportation. This pricing model can be applied in various settings, including urban centers and busy highways, playing a crucial role in overall transportation planning and demand management.
Cordon pricing: Cordon pricing is a form of congestion pricing that involves charging drivers a fee to enter or travel within a designated area, known as a cordon. This approach aims to reduce traffic congestion in urban centers by discouraging unnecessary trips and promoting the use of alternative transportation modes. Cordon pricing is typically applied during peak hours and is designed to generate revenue while also encouraging more efficient use of road space.
Corridor pricing: Corridor pricing refers to a specific type of congestion pricing strategy that applies fees to road users traveling within designated corridors, typically aimed at reducing traffic congestion during peak travel times. This method incentivizes drivers to alter their travel behavior, such as choosing different routes or times, thus helping to manage roadway demand and improve overall traffic flow. By targeting specific areas where congestion is most problematic, corridor pricing enhances the efficiency of the transportation network and promotes the use of alternative modes of transport.
Distance-based charges: Distance-based charges are fees that drivers pay based on the distance they travel on roadways, designed to encourage efficient use of transportation infrastructure. These charges can be implemented as a way to alleviate congestion by making users more aware of their travel impacts and costs, potentially leading to reduced vehicle miles traveled. By linking the cost directly to usage, distance-based charges aim to promote more sustainable transportation choices and better road management.
Dynamic pricing: Dynamic pricing is a strategy where prices are adjusted in real-time based on current market demands, customer behavior, and other external factors. This approach allows businesses to maximize revenue and efficiency by charging different prices to different customers or at different times, based on various conditions. It is widely used across various sectors, including transportation, where it adapts to traffic patterns, availability of services, and user demand.
Elasticity of Demand: Elasticity of demand measures how sensitive the quantity demanded of a good or service is to changes in price or other factors. When discussing congestion pricing and road user charging, elasticity is essential as it helps to understand how changes in tolls or fees can impact drivers' behavior and overall traffic patterns. This concept allows for better planning and implementation of pricing strategies aimed at reducing congestion.
Electronic Toll Collection: Electronic toll collection (ETC) is a system that allows vehicles to pay tolls automatically without stopping at a toll booth, using technologies such as transponders or license plate recognition. This system enhances traffic flow by reducing congestion at toll plazas and contributes to improved environmental conditions by decreasing vehicle emissions associated with idling. The adoption of ETC systems plays a significant role in modernizing transportation infrastructure and supports strategies aimed at managing traffic demand and reducing congestion on roadways.
Emission reduction: Emission reduction refers to the strategies and technologies aimed at decreasing the quantity of pollutants released into the atmosphere from various sources, particularly in the transportation sector. This is crucial for mitigating climate change, improving air quality, and promoting sustainable development. Effective emission reduction strategies not only involve cleaner fuels and vehicles but also incorporate intelligent systems that optimize traffic flow and minimize congestion.
Equity concerns: Equity concerns refer to the considerations of fairness and justice in the distribution of resources, opportunities, and impacts among different groups within society. These concerns are especially relevant in the context of transportation systems, where policies like congestion pricing and road user charging can disproportionately affect low-income individuals or marginalized communities who may rely on personal vehicles for their daily commutes.
Externalities: Externalities are costs or benefits that affect third parties who did not choose to incur those costs or benefits. They are crucial in understanding how certain actions, especially in transportation, impact society beyond the individuals directly involved. Externalities can lead to market failures, which often necessitate interventions such as pricing strategies or regulations to align individual incentives with societal welfare.
Flat-rate charging: Flat-rate charging is a pricing mechanism where users pay a fixed fee for access to a service or infrastructure, regardless of the level of usage. This approach simplifies the pricing structure but may not reflect the actual costs associated with congestion or road use, thus influencing travel behavior and traffic patterns.
Global navigation satellite system tracking: Global navigation satellite system tracking refers to the use of satellites to determine the precise location of a device or vehicle on Earth. This technology plays a crucial role in various applications, including navigation, timing, and positioning, allowing for real-time tracking of vehicles. It is essential in implementing strategies like congestion pricing and road user charging by providing accurate data on vehicle movements and locations.
High Occupancy Toll Lanes: High occupancy toll lanes (HOT lanes) are specialized road lanes that allow vehicles with multiple occupants to travel for free or at a reduced rate, while single-occupancy vehicles can use the same lanes by paying a toll. This system aims to reduce traffic congestion by encouraging carpooling and optimizing the use of available roadway space. HOT lanes often utilize dynamic pricing, where toll rates fluctuate based on real-time traffic conditions to manage demand and maintain a steady flow of traffic.
London Congestion Charge: The London Congestion Charge is a fee imposed on vehicles operating within designated areas of central London during peak hours to reduce traffic congestion and encourage the use of public transport. This initiative aims to improve air quality, enhance mobility, and generate revenue for public transport projects. The charge is part of a broader strategy of congestion pricing and road user charging that cities around the world are adopting to manage urban traffic effectively.
Road User Charging: Road user charging refers to a system where drivers are required to pay a fee for using specific roads, typically implemented to manage congestion and fund transportation infrastructure. This method aims to reduce traffic volumes, encourage alternative travel modes, and generate revenue for road maintenance and development. By linking the cost of road usage directly to the demand for space on those roads, road user charging can help promote more efficient transportation networks.
Singapore ERP: The Singapore Electronic Road Pricing (ERP) system is a dynamic congestion pricing mechanism designed to manage traffic congestion in the city-state of Singapore. By charging motorists based on real-time traffic conditions and vehicle movements, the ERP aims to reduce peak-hour congestion, promote public transport usage, and optimize road space. This system is integral to Singapore's broader strategy of sustainable urban mobility and efficient road use.
Smart traffic signals: Smart traffic signals are advanced traffic control systems that use technology to optimize the flow of vehicles and pedestrians at intersections. By leveraging real-time data and communication technologies, these signals can adjust their timing and operation based on current traffic conditions, enhancing safety and efficiency for all road users.
Sustainability benefits: Sustainability benefits refer to the positive impacts on the environment, economy, and society that arise from adopting practices that promote sustainable development. These benefits often include reduced greenhouse gas emissions, improved air quality, and enhanced social equity, which contribute to a healthier planet and improved quality of life for all. In the context of efficient transportation systems, sustainability benefits are closely linked to congestion pricing and road user charging mechanisms, which incentivize reduced vehicle use and support investments in greener alternatives.
Tolling Authority: A tolling authority is an organization or government entity responsible for the collection and management of tolls on certain roads, bridges, or tunnels. These authorities play a critical role in funding transportation infrastructure and managing traffic demand through strategies like congestion pricing and road user charging, which aim to reduce congestion by encouraging off-peak travel and more efficient road usage.
Traffic diversion: Traffic diversion refers to the process of redirecting vehicles away from congested or restricted roadways to alternative routes. This strategy aims to alleviate congestion, enhance roadway safety, and improve overall traffic flow, especially during incidents, construction, or events that hinder normal traffic patterns. By influencing driver behavior through various methods, traffic diversion can be effectively linked to congestion pricing and road user charging, which are designed to manage demand on specific roads and incentivize the use of less congested routes.
Transportation Agencies: Transportation agencies are government or quasi-government organizations responsible for the planning, implementation, and management of transportation systems and services within a specific jurisdiction. These agencies play a crucial role in facilitating efficient transportation networks by developing policies, allocating funding, and ensuring safety across various modes of transportation, including roadways, transit systems, and air travel. Their efforts often involve collaboration with other stakeholders to address issues like congestion, sustainability, and urban mobility.
Urban Planners: Urban planners are professionals who develop land use plans and programs that help create communities, accommodate population growth, and revitalize physical facilities. They consider various factors such as zoning laws, transportation systems, public spaces, and environmental sustainability to design urban areas that are functional and appealing for residents and businesses.
Value Pricing: Value pricing is a pricing strategy that sets prices primarily based on the perceived or estimated value of a product or service to the customer, rather than solely on cost. This approach aims to align the price with the benefits provided, which can lead to increased demand and customer satisfaction as users feel they are receiving good value for their money.
Variable pricing: Variable pricing is a strategy used to adjust the cost of goods or services based on specific factors such as demand, time, and congestion levels. This approach is particularly relevant in transportation, where prices can fluctuate to manage traffic flow and reduce congestion during peak times, encouraging users to modify their travel behavior.
Vehicle-miles-traveled fees: Vehicle-miles-traveled (VMT) fees are charges imposed on drivers based on the number of miles they drive, designed to generate revenue for transportation infrastructure and promote more efficient road use. These fees can help reduce congestion by encouraging drivers to consider the costs associated with their travel decisions. By linking fees directly to usage, VMT fees aim to address issues like road maintenance funding and environmental impacts, making them a key component of modern road user charging systems.