Supply and Demand graph, illustrating one of
the most important economic principles
Road pricing (also road user charges) are direct charges levied for the use of roads, including road tolls, distance or time based fees, congestion charges and charges designed to discourage use of certain classes of vehicle, fuel sources or more polluting vehicles. These charges may be used primarily for revenue generation, usually for road infrastructure financing, or as a transportation demand management tool to reduce peak hour travel and the associated traffic congestion or other social and environmental negative externalities associated with road travel such as air pollution, greenhouse gas emissions, visual intrusion, noise and road accidents.
In most countries toll roads, toll bridges and toll tunnels are often used primarily for revenue generation to repay for long-term debt issued to finance the toll facility, or to finance capacity expansion, operations and maintenance of the facility itself, or simply as general tax funds. Road congestion pricing for entering an urban area, or pollution charges levied on vehicles with higher tailpipe emissions are typical schemes implemented to price externalities. The application of congestion charges is currently limited to a small number of cities and urban roads, and the notable schemes include the Electronic Road Pricing in Singapore, the London congestion charge, the Stockholm congestion tax, the Milan Area C, and High-occupancy toll lanes in the United States. Examples of pollution pricing schemes include the London low emission zone and the discontinued Ecopass in Milan. In some European countries there is a period-based charge for the use of motorways and expressways, based on a vignette or sticker attached to a vehicle, and in a few countries vignettes are required for the use of any road. Mileage based usage fees (MBUF) or distance based charging has been implemented for heavy vehicles based on truck weight and distance traveled in New Zealand (called RUC), Switzerland (LSVA), Germany (LKW-Maut), Austria (Go-Maut), Czech Republic, Slovakia, Poland, and in four US states: Oregon, New York, Kentucky and New Mexico.
Many recent road pricing schemes have proved controversial, with a number of high-profile schemes in the US and the UK being cancelled, delayed or scaled back in response to opposition and protest. 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 is just another tax. A 2006 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.
Road pricing is a general term that may be used for any system where the driver pays directly for use of a particular roadway or road network in a particular city, region or nation. Road pricing also includes congestion charging, which are charges levied on qualifying road users to reduce peak demand, and thereby reduce traffic congestion and also to place a charge on road users for other negative externalities, including traffic accidents, noise, air pollution, and greenhouse gas emissions.
The first published reference to 'road pricing' was possibly in 1949 when the RAND Corporation proposed "use of direct road pricing to make freight journeys more expensive on congested routes or to influence the time of day at which freight traffic operates". Nobel-laureate William Vickrey then built on the ideas of the economist Arthur Pigou, outlining a theoretical case for road pricing in a major work on the subject of 1955 proposing in 1959 that drivers should be charged by electronic means for use of busy urban roads. Arthur Pigou had previously developed the concept of economic externalities in a publication of 1920 in which he proposed that what is now referred to as a Pigouvian tax equal to the negative externality should be used to bring the outcome within a market economy back to economic efficiency.
In 1963 Vickery published a paper 'Pricing in urban and suburban transport’ in the American Economic Review and Gabriel Joseph Roth, John Michael Thomson of the Department of Applied Economics at the University of Cambridge published a short paper titled "Road pricing, a cure for congestion?" The Smeed Report, 'Road Pricing: The Economic and Technical Possibilities', which had been commissioned in 1962 by the United Kingdom Ministry of Transport, was published in 1964. Road pricing was then developed by Maurice Allais and Gabriel Roth in a paper titled "The Economics of Road User Charges" published by the World Bank in 1968.
The first successful implementation of a congestion charge was with the Singapore Area Licensing Scheme in 1976. The Electronic Road Pricing (Hong Kong) scheme operated as a trial between 1983 and 1985 but was not continued permanently due to public opposition. A number of road tolling schemes were then introduced in Norway between 1986 and 1991 in Bergen, Oslo, and the Trondheim Toll Scheme. It was noticed that the Oslo scheme had the unintended effect of reducing traffic by around 5%. The Singapore scheme was expanded in 1995 and converted to use a new electronic tolling system in 1998 and renamed Electronic Road Pricing. The first use of a road toll for access by low-occupancy vehicles to high-occupancy vehicle lane was introduced in the U.S. on California State Route 91 in 1995. Since 2000, other schemes have been introduced, although the New York congestion pricing proposal and a number of UK proposals were not progressed due to public opposition.
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%
Main roadways and highways in Shanghai are tolled, and an assessment was completed to evaluate implementation of congestion pricing for vehicles entering the central business district. The city also restrains car use, ownership and there are restrictions on getting a driver's license; since 1998, the number of new car registrations is limited to 50,000 vehicles a year and car registrations are sold by public auction, with prices reaching up to US$5,000 in 2006. Parking is also limited.
Congestion based pricing for Beijing was recommended by the World Bank in 2010 and local officials announced plans to introduce a scheme in September 2011 although no details about the cost or the charge zone have been provided. The city is dealt with traffic congestion and air pollution through a driving restriction scheme implemented since the 2008 Summer Olympics. As of June 2016, another 11 Chinese cities have similar restriction schemes in place.
In early 2010 the city Guangzhou, Guangdong province, 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. The city of Nanjing is also considering the implementation of congestion pricing.
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 variable pricing scheme based on actual traffic flows and emissions data, and allow the fee to be charged for different vehicles and varying by time of the day and for different districts. The Dongcheng and Xicheng are among the districts that are most likely to firstly implement congestion charge. Vehicle emissions account for 31% of the city's smog sources, according to Beijing Environmental Protection Bureau. The local government has implemented already several policies to address air quality and congestion, such as a driving restriction scheme based upon the last digits on their license plates. Also a vehicle quota system was introduced in 2011, awarding new car licenses through a lottery, with a ceiling of 6 million units set by the city authority for 2017. In May 2016, the Beijing city legislature announced it will consider to start levying traffic congestion charges by 2020 as part of a package of measures to reform the vehicle quota system. As of June 2016, the city's environmental and transport departments are working together on a congestion pricing proposal.
Hong Kong's Electronic Road Pricing system operated between 1983 and 1985 with positive results. Public opposition stalled its permanent implementation. Proposals were however raised again in 2012.
The world's first congestion pricing scheme was introduced in Singapore's core central business district in 1975 as the Singapore Area Licensing Scheme. It was extended in 1995 and converted to the 100% free-flowing Electronic Road Pricing (Singapore) in September 1998. Variable pricing based on congestion levels were introduced during 2007. It is one of a number of elements in their Transportation Demand Management, which also includes high annual road tax, custom duties and vehicle registration fees for new vehicles, a quota system for new vehicles and heavy investment in public transportation. Singapore has one of the highest per capita incomes in Asia, but fewer than 30% of Singaporean households own cars.
A distance based charging scheme called Go-Maut was implemented in Austria for all vehicles over 3.5 tonnes on motorways in 2004. In addition, all vehicles under 3.5 tonnes are required to buy a sticker or vignette to access the Austrian motorway network, which is owned and operated by a state owned company called ASFINAG. The vignette enables the vehicle to use almost the entire motorway network in Austria for a specific period of time, with the lower charge set at €8 for 10 days. However, for selected routes, such as long tunnels and expensive routes through the Alps, there is an additional toll charge.
The only Finnish town to suffer serious road congestion is Helsinki, which is built on a narrow peninsula. In the 1980s and 1990s the City Administration was already proposing tolls on vehicles entering the centre but these were successfully resisted by the Chamber of Commerce.
Road pricing was taken up in the central government programme in 2011, when the coalition members committed themselves to examining "the introduction of GPS-based road user charges". Transport minister Merja Kyllönen set up a working group to study "road user charging systems" in October 2012. The Ministry was committed to the architecture of the European Electronic Toll Service.
In March 2013 an independent Finnish policy institute recommended a market-based road pricing architecture for Europe. The roads needed for a journey could be pre-booked, the price of "slots" rising as the roads to be used approached capacity. The price would become payable at the scheduled time of departure unless the slot holder resold the slot before then. Casual motorists without bookings would be charged the current price. The paper proposed that Finland, having no serious road congestion to address, could serve as a testbed for road charging mechanisms.
The Transport Ministry’s working group reported in December 2013 that a tax proportional to road use would implement transport and environment policies better than current fixed taxes on motoring, although collection costs would be many times higher. The focus of transport policy should be on solving capacity problems by managing demand rather than by building new infrastructure. However, it argued that buses and lorries should be exempted from road use charges on the grounds that the rise in costs could not be offset by cutting other heavy vehicle road taxes, which were already close to the minimum set in the EU’s vignette directive. For private cars the report looked at the implications of fixed and regional kilometre charges but did not consider market or other methods for responding to varying local congestion. Before the adoption of any system, it proposed broad trials to establish the technical viability of taxing road use, its enforceability and the protection of privacy.
The LKW-MAUT distance based charging scheme large goods vehicles in Germany began operation on 1 January 2005 after a two-year delay with prices varying depending on emission levels and the number of axles. The scheme, which combining satellite technology with other technologies and is operated by Toll Collect, suffered delays before implementation.
Rome converted a residents' pass system for the core of the city to a road pricing system in 2001 and Genoa started a trial system in 2003.
The Milan "Ecopass" system began operation in early 2008 with an objective to reduce air pollution from vehicles. It was extended several times before being replaced by Area C, a conventional congestion pricing scheme covering the same geographic area in January 2012 as an 18-month pilot. Electric vehicles, public utilities' vehicles, police and emergency vehicles, buses and taxis are exempted from the charge. Hybrid electric and bi-fuel natural gas vehicles (CNG and LPG) will be exempted until 1 January 2013.
The scheme was made permanent in March 2013. All net earnings from Area C are invested to promote sustainable mobility and policies to reduce air pollution, including the redevelopment, protection and development of public transport, "soft mobility" (pedestrians, cycling, Zone 30), and systems to rationalize the distribution of goods.
The automated 'Controlled Vehicular Access' (CVA) system was launched in Malta's capital city of Valletta on 1 May 2007. The number of vehicles entering the city reduced from 10,000 to 7,900; there has also been a 60% drop in car stays by non-residents of more than eight hours with a marked increase of 34% in non-residential cars visiting the city for an hour or less.
Norway implemented electronic urban tolling on the main road corridors into Bergen (1986), Oslo (1990) and then the Trondheim Toll Scheme the following year. The Bergen scheme operated as a cordon on all entry points to the central area of the city. The Oslo scheme was initially created as a conventional road toll for revenue generation reasons, but had the unintended effect of reducing traffic by around 5%. Charges vary by time of the day. The legal basis for introducing congestion charging fee was approved by Parliament in 2001 In October 2011 the Norwegian government announced the introduction of rules allowing congestion charging in cities. The measure is intended to cut greenhouse gas and air pollutant emissions, and relief traffic congestion. As of November 2015, Norwegian authorities have implemented urban charging schemes that operates both on the motorways and for access into downtown areas in five additional cities or municipalities: Haugesund, Kristiansand, Namsos, Stavanger, and Tonsberg.
The Stockholm congestion tax covering Stockholm City Centre was trialed for seven-month trial during 2006 and has been operational on a permanent basis since 1 August 2007; all the entrances and exits of this area have unmanned control points operating with automatic number plate recognition and most vehicles pay a fixed fee during peak hours. A similar congestion tax was introduced in Gothenburg in 2013, the Gothenburg congestion tax. In opposite to Stockholm, this tax covers also usage of bypass road past the city. The congestion tax is called tax, not toll or fee, since a principle has been established that road tolls can only exist to pay for the construction of the specific tolled road, during a limited period. The congestion tax charges every road that crosses certain lines, regardless of its age. Three bridges in Sweden have road tolls (as of 2015).
The Smeed Report recommended the implementation of congestion charging in 1964 and road pricing for London was considered by the Greater London Council in 1973 but was not progressed. The Durham City congestion charge was introduced in 2002 and the London congestion charge in 2003. In June 2005, Transport Secretary Alistair Darling announced the a proposal for a national scheme in which every vehicle would be fitted with a satellite receiver that would calculate charges, with prices (including fuel duty) ranging from 2p per mile on uncongested roads to £1.34 on the most congested roads at peak times. The scheme was dropped after an online petition against proposals gained over 1.8 million signatures. A number of local schemes were then proposed and rejected during 2007-2008, including the Manchester congestion charge Planned emissions based charges in London cancelled following the 2008 Mayoral election. A 'Western Extension' was added to the London scheme in 2007 but then removed in January 2011. The London low emission zone was introduced in stages between 2008 and 2012 with an aim of reducing the pollution emissions of diesel-powered commercial vehicles in London. UK wide road pricing for large goods vehicles, which was first proposed in 2000 before being dropped and then revived in 2012.
Approved by Mayor Boris Johnson in April 2013, the Ultra Low Emission Discount (ULED) went into effect on 1 July 2013, substituting the Greener Vehicle Discount. The ULED introduced more stringent emission standards that limited the free access to the congestion charge zone to electric cars, some plug-in hybrids, and any car or van that emits 75g/km or less of CO2 and meets the Euro 5 emission standards for air quality. The measure was designed to curb the growing number of diesel vehicles on London's roads. The owners of vehicles registered for the Greener Vehicle Discount were granted a three-year sunset period before they have to pay the full congestion charge. The sunset period ended on 24 June 2016.
In March 2001, the Port Authority of New York and New Jersey implemented a discount during off-peak hours for those vehicles paying tolls for several tunnels and bridges connecting New York City and New Jersey using the electronic EZ Pass. Since March 2008, qualified low-emission automobiles could get a 50% discount during off-peak hours.
In April 2007 the New York City Mayor Michael Bloomberg proposed a contentious congestion charge on cars using most streets in the central business district (southern half of Manhattan) as part of the broader PlaNYC 2030. The plan received broad support from a coalition of civic, business, environmental, labor, community and public health organizations and the City Council voted for the measure but also received significant opposition. The New York Legislature declined to vote on it in April 2008 saying that "... the opposition was so overwhelming,... that he would not hold an open vote of the full Assembly,".
In 2006, San Francisco authorities began a feasibility study to evaluate congestion pricing in the city. The initial charging scenarios considered were presented in public meetings held in December 2008 and the final draft proposal were discussed by the San Francisco Board of Supervisors (SFBS) in December 2010, which recommended implementation of a six-month to one-year trial in 2015. Separately, in July 2010 congestion tolls were implemented at the San Francisco-Oakland Bay Bridge.
Other metropolitan areas
In August 2007, the United States Department of Transportation selected five metropolitan areas to initiate congestion pricing demonstration projects under the Urban Partnerships Congestion Initiative, for US$1 billion of federal funding. The five projects under this initiative are; Golden Gate Bridge in San Francisco, State Route 520 serving downtown Seattle and communities to its east, Interstate 95 between Miami and Ft. Lauderdale, Interstate 35W serving downtown Minneapolis, and a variable rate parking meter system in Chicago, which replaced New York City after it left the program in 2008.
High-occupancy toll (HOT) lanes
High-occupancy toll lanes are lanes where a variable fee based on demand is charged to non-exempt vehicles. Exempt vehicles include high-occupancy vehicles, transit vehicles and often also low-emission vehicles. Users not wanting to pay the fee have the option of using general purpose lanes. HOT lanes were first implemented on California's private toll 91 Express Lanes, in Orange County in 1995, followed in 1996 by Interstate 15 in San Diego.
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 for transit fares. The law went into effect in April 2013.
- São Paulo city
In April 2012, one of the committees of the São Paulo city council approved a bill to introduce a R$4 (~ US$2) per day congestion charge within the same area as the existing road space rationing (Portuguese: Rodízio veicular) by the last digit of the license plate, which has been in force since 1996. The bill still needs approval by two other committees before going for a final vote at the city council. Opinion surveys have shown that the initiative is highly impopular. A survey by Veja magazine found that 80% of drivers are against congestion pricing, and another survey by Exame magazine found that only 1% of São Paulo's residents support the initiative, while 30% find that extending the metro system is a better solution to reduce traffic congestion. São Paulo's strategic urban development plan "SP 2040", approved in November 2012, proposes the implementation of congestion pricing by 2025, when the density of metro and bus corridors is expected to reach 1.25 km/km2. The Plan also requires ample consultation and even a referendum before beginning implementation.
Congestion pricing has also been implemented in urban freeways. Between 2004 and 2005, Santiago de Chile implemented the first 100% non-stop urban toll for concessioned freeways passing through a downtown area, charging by the distance traveled. Congestion pricing is used since 2007 during rush hours in order to maintain reasonable speeds within the city's core with the aim of keeping a minimum level of service for their customers.
- GNSS road pricing
- List of toll bridges
- List of toll roads
- Road space rationing
- Sustainable transport
- Toll roads around the world
- Vehicle miles traveled tax
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- Marta Salomon, Iuri Dantas & Andréa Jubé Vianna (2012-01-09). "Lei federal autoriza criação de pedágio urbano por prefeituras" [Federal law authorizes the creation of congestion pricing by local governments]. O Estado de S. Paulo (in Portuguese). Retrieved 2013-06-26.
- Agência Estado (2012-01-04). "Dilma aprova lei que prevê pedágio urbano" [Dilma approves law that allows congestion pricing]. R7 Noticias (in Portuguese). Retrieved 2013-06-26.
- Presidência da República (2012-01-03). "Lei Nº 12.587, de 3 de Janeiro de 2012" [Law N. 12.587 of 3 January 2012] (in Portuguese). Presidência da República, Casa Civil. Retrieved 2013-06-26. See article 23.
- Roney Domingos (2012-04-25). "Projeto que cria pedágio urbano passa em comissão na Câmara de SP" [Bill to create congestion pricing passed in commission of the São Paulo city council]. O Globo (in Portuguese). Retrieved 2013-06-27.
- "Pedágio urbano de São Paulo pode custar até R$ 88 por mês" [São Paulo's congestion pricing could cost up to R$88 per month]. Terra (in Portuguese). 2012-04-26. Retrieved 2013-06-27.
- Claudia Jordão e Maria Paola de Salvo (2012-06-20). "Perdendo 30 bilhões de reais por ano por congestionamentos de trânsito, SP mira o exemplo do pedágio urbano de Londres" [Lossing 30 billion reais per year due to traffic congestion, São Paulo looks at the example of London congestion charges]. Veja São Paulo (in Portuguese). Retrieved 2013-06-27.
- Amanda Previdelli (2012-06-11). "Paulistano não quer pedágio urbano, segundo Datafolha" [São Paulo residents do not want congestion pricing according to Datafolha]. Exame (magazine) (in Portuguese). Retrieved 2013-06-27.
- "Pedágio urbano e incineração de lixo estão entre as propostas da SP 2040" [Congestion pricing and waste incineration are among the proposals of SP 2040]. Folha de S. Paulo (in Portuguese). 2012-11-13. Retrieved 2013-06-27.
- UK Commission on Integrated Transport. "Road Charging Scheme: South America – Chile, Santiago de Chile". Archived from the original on 21 April 2008. Retrieved 2008-07-04.
- Costanera Norte Freeway. "Costanera Norte Freeway" (in Spanish).
- "Costanera Norte Tarifas 2010" (PDF) (in Spanish). Sociedad Concesionaria Costanera Norte. Archived from the original (PDF) on 15 February 2010. Retrieved 2010-02-27. Three different tolls are charged based on pre-set average operating speeds: basic non-peak hour, basic rush hour, and fixed congestion toll.
- "Autopistas urbanas proponen subir tarifas y el MOP elabora plan para auditar alzas" (in Spanish). ODECU. 2009-07-15. Retrieved 2010-02-27.
- Button, Kenneth J. (2010). Transport Economics 3rd Edition. Edward Elgar Publishing, Cheltenham, UK. ISBN 978-1-84064-191-2. (See Chapter 9: Optimizing Traffic Congestion)
- Santos, Georgina (editor) (2004). Road Pricing, Volume 9: Theory and Evidence (Research in Transportation Economics). JAI Press. ISBN 978-0762309689.
- Schade, Jens; Schlag, Bernhard (editors) (2003). Acceptability of Transport Pricing Strategies. Emerald Group Publishing, Bingley, West Yorkshire. ISBN 978-0080441993.
- Small, Kenneth A. (2008). "Urban Transportation". In David R. Henderson (ed.). Concise Encyclopedia of Economics (2nd ed.). Indianapolis: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267.
- Small, Kenneth A.; Verhoef, Erik T. (2007). The Economics of Urban Transportation. Routledge, New York. ISBN 978-0-415-28515-5. (See Chapter 4: Pricing)
- Smeed, R.J. (1964). Road pricing: the economic and technical possibilities. HMSO.
- Tsekeris, Theodore; Voß, Stefan (2009). "Design and evaluation of road pricing: State-of-the-art and methodological advances". Netnomics. 10: 5–52. doi:10.1007/s11066-008-9024-z.
- Verhoef, Erik T.; Bliemer, Michiel; Steg, Linda; Van Wee, Bert (editors) (2008). Pricing in Road Transport: A Multi-Disciplinary Perspective. Edward Elgar Publishing, Cheltenham, UK. ISBN 978-1845428600.
- Walters, A. A. (1968). The Economics of Road User Charges. World Bank Staff Occasional Papers Number Five, Washington, D.C. ISBN 978-0-8018-0653-7.
- Combating Gridlock – Study of Deloitte Research on Congestion Charging
- Fuel for Thought – The what, why and how of motoring taxation Institute for Fiscal Studies (2012)
- National Alliance Against Tolls (Britain) Road pricing page
- Reducing Congestion and Funding Transportation Using Road Pricing in Europe and Singapore published by FHWA, AASHTO and the TRB
- Review of Road Pricing to Reduce Congestion, U.S. Government Accountability Office – 2012
- Road pricing case studies
- Transportation Research Board Committee on Road Pricing
- When the Road Price Is Right – Land Use, Tolls, and Congestion Pricing, Urban Land Institute, 2013, ISBN 978-0-87420-262-5
- TripSum @ Xeesa.com: Online Fuel/ ERP/ Taxi fare calculator to check and calculate Fuel cost, ERP(Toll pricing) and Taxi Fare needed for a motorist's driving or taxi trip in Singapore