Congestion pricing

A proposal by former Mayor of London Ken Livingstone would have resulted in a new pricing structure based on potential CO₂ emission rates by October 2008.^[46] The goal was that vehicles with the very lowest CO₂ emission rates would be exempted, and those with higher emission rates would pay a new higher charge of £25, with the rest paying the same charge they pay today.^[47] However, Livingstone's successor as Mayor of London, Boris Johnson, announced at the beginning of his administration that he would reform the congestion charge.^[48]

In 2002 Edinburgh, United Kingdom, initiated an implementation process; a referendum was conducted in 2005,^[79] with a majority of 74.4% rejecting the proposal.^[80][81]

Councils from across the West Midlands in the United Kingdom, including Birmingham and Coventry, 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.^[82]

In 2007,

United States

In August 2007, the

San Francisco transport authorities began a feasibility study in 2006 to evaluate the introduction of congestion pricing.^[102][103] The charge would be combined with other traffic reduction implementations, allowing money to be raised for public transit improvements and bike and pedestrian enhancements.^[104] The initial pricing scenarios were presented in public meetings conducted in December 2008,^[105] 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.^{[106][107] [needs update]}

Governor Andrew Cuomo reintroduced a congestion pricing proposal for New York City in 2017 in response to the New York City Subway's state of emergency, a proposal that Mayor Bill de Blasio opposed. A commission to investigate the feasibility of congestion pricing, organized in late 2017, found that a congestion pricing scheme could benefit New York City.^{[108][109][110][111]} 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.^{[112][113][114]} The Federal Highway Administration gave its final approval on June 26, 2023, allowing the MTA to begin setting toll rates for the proposed congestion zone. The scheme is scheduled to begin in 2024.^[115][116]

China

In September 2011, local officials announced plans to introduce congestion pricing in Beijing. No details were provided regarding the magnitude of the congestion charges or the charge zone.^[118] The measure was initially proposed in 2010 and was recommended by the World Bank.^[119][120] A similar scheme was proposed for the city Guangzhou, Guangdong province, 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.^[120]

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-time

In January 2012, the federal government of Brazil enacted 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 as walking and cycling), and to finance public subsidies to transit fares. The law went into effect in April 2013.^{[125][126][127]}

In April 2012, one of the committees of the

The Norwegian electronic toll collection system is called AutoPASS and is part of the joint venture EasyGo.

Single facilities

Urban

In March 2001, the Port 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 an E-ZPass issued in New York State. These discount toll was implemented at several tunnels and bridges connecting New York City and New Jersey, including the George Washington Bridge, Lincoln Tunnel, and Holland Tunnel, and at some other bridges administered by PANYNJ.^[148][149] Since March 2008, qualified low-emission automobiles with a fuel economy of 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.^[150]

In January 2009, variable tolls were implemented at Sydney Harbour Bridge, two weeks after upgrading to 100% free-flow electronic 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 is Australia's first road congestion pricing scheme, and has had only a very minor effect on traffic levels, reducing them by 0.19%.^{[151][152][153][154]}

In July 2010 congestion tolls were implemented at the

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.[161]

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:^[162]

"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 Button^[163] and Small et al.,^[12] 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 rationing is 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.^[164]
• 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 a

Congestion pricing remains highly controversial with the public both before and after implementation. This has in part been resolved through referendums, such as after the seven-month trial period in Stockholm;^[168] 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.^[169][170]

Some concerns have also been expressed regarding the effects of cordon area congestion pricing on economic activity and land use,^[171] 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.^[72][172]

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 in London,^[173] while others show that businesses were then supporting the charge six months after implementation.^[174] Reports show business activity within the charge zone had been higher in both productivity and profitability and that the charge had a "broadly neutral impact" on the London wide economy,^[175] while others claim an average drop in business of 25% following the 2007 extension.^[176]

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,^[177] and the imposition of a regressive tax on some commuters.^[178][179] Stockholm's trial of congestion pricing, however, showed a reduction in traffic in areas outside the congestion zone.^[180] 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.^[181] The installation of cameras for tracking purposes may also raise civil liberties concerns.^[182][183]

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 five to 15 percent more polluted between 2006 and 2010", and that young children would have suffered substantially more asthma attacks.^[184][3] 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, reduce greenhouse gas emissions, reduce traffic accidents, and increase tax revenues.^[185] A 2020 study of London found that congestion pricing (introduced in 2003) led to reductions in pollution and reductions in driving, but it increased pollution ^[186]from diesel vehicles (which were exempt from the congestion pricing).^[187] A 2021 study found that congestion pricing reduced CO₂ emissions through downsizing commuting distances and housing sizes.^[2]

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.^[188][189]

A 2016 study found that more people used public transportation due to increases in congestion pricing in Singapore.^[190] 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.^[191]

Waterways

Panama Canal booking system and auction

Considering the high operational costs of the vessels (container ships have daily operational costs of approximately US$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 highest toll for high priority passage paid through the Transit Slot Auction was US$220,300 charged on a tanker in August 2006,^[196] 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 just US$13,430.^[197] The average regular toll is around US$54,000.

Airports

Many airports are facing extreme congestion, runway capacity 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.^{[198][199][200]} The first scheme was started in 1968 when higher landing fees for peak-hour use by aircraft with 25 seats or less at Newark, Kennedy, and LaGuardia airports in New York City. As a result of the higher charges, general aviation activity 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 at Boston's Logan Airport was adopted; with this measure much of the general aviation abandoned Logan for secondary airports.^[201] 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".^[202]

Congestion pricing has also been implemented for

• 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

References