Congestion Pricing

Congestion pricing is a market-based policy instrument that, at its most basic, requires road users to pay for using a stretch or road or for passing through a designated charging zone. Congestion pricing may also be referred to as road pricing or congestion charging. The terminology may differ according to the country using the term and may also be influenced by factors such as public acceptability and the aims of the pricing scheme in question.

There are a number of reasons why congestion pricing might be introduced: first, for environmental reasons—to reduce the emissions of greenhouse gases, or local air pollution; second, to ease the traffic flow, especially in cases where congestion is considered to be having an adverse effect on the local economy; third, to pay for improvements to the transport infrastructure; and fourth, to raise revenue for other purposes. Most commonly, congestion pricing is introduced for environmental or traffic flow reasons or a combination of the two. Where the aim of a pricing scheme is to reduce traffic levels, the charge is often higher than if it were simply aimed at raising revenue. This is to provide a disincentive to car users, working on an “unwillingness to pay” principle.

Traffic in central London, where congestion pricing has been in effect for a number of years, fell by 21 percent 2002–2006, and an estimated 70,000 fewer vehicles are on the streets each day

Source: iStockphoto

There are several high-profile examples of congestion pricing within cities, most notably Singapore, with the Electronic Road Pricing; Stockholm, with the Stockholm Congestion Tax; and London, with the Congestion Charge. There are a number of ways in which charges can be applied. In all three examples, road users pay as they enter the designated charging zone. In the cases of Singapore and Stockholm, a charge is made every time the road user crosses the zone boundary, whereas in the case of London, a flat daily rate is charged.