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 congestion.
Causes of Congestion
At its most fundamental level, highway congestion is caused by the lack of a mechanism to efficiently manage use of capacity. When searching for a solution to the congestion problem, most people immediately think of adding a new lane to an overburdened highway. Construction costs for adding lanes in urban areas average $10 million per lane mile. Generally, the funding for this construction comes from the tax that drivers pay when buying gas for their vehicles. Overall, funds generated from gas taxes on an added lane during rush hours amount to only $60,000 per year. This amount is grossly insufficient to pay for the lane addition. The bargain price paid by motorists for use of expensive new capacity encourages more drivers to use the expanded highway. Introducing congestion pricing on highway facilities discourages overuse during rush hours by motivating people to travel by other modes such as carpools or transit, or by traveling at other times of the day.
Although drivers unfamiliar with the concept initially have questions and concerns, surveys show that drivers more experienced with congestion pricing support it because it offers them a reliable trip time, which is very valuable especially when they need to be somewhere on time. Transit and ridesharing advocates appreciate the ability of congestion pricing to generate both funding and incentives to make transit and ridesharing more attractive.
Congestion Pricing Strategies
Congestion pricing projects can be grouped into two broad categories: (1) projects involving tolls; and (2) projects not involving tolls. Within these two categories are eight types of strategies, each of which is discussed in more detail in the Strategies section of this web site.
- Strategies Involving Tolls
- Strategies Not Involving Tolls
Effects of Pricing on Vehicle Throughput
Vehicle "throughput" on a freeway is the number of vehicles that get through over a short period, such as an hour. Once freeway traffic exceeds a certain threshold level, both vehicle speed and vehicle throughput drop precipitously. Data show that maximum vehicle throughput occurs at free flow speeds ranging from 45 mph to 65 mph. The number of vehicles that get through per hour can drop by as much as 50 percent when severe congestion sets in. At high traffic levels, the freeway is kept in this condition of "collapse" for several hours after the rush of commuters has stopped (See page 60 of the report Measures, Markers and Mileposts The Gray Notebook for the quarter ending September 30, 2006 (PDF, 5.55MB)). This causes further unnecessary delay for off-peak motorists who arrive after rush hour.
With peak-period highway pricing, a variable toll dissuades some motorists from entering freeways at those access points where traffic demand is high, and where such surges in demand may push the freeway over the critical threshold at which traffic flow collapses. Pricing prevents a breakdown of traffic flow in the first instance, and thus maintains a high level of vehicle throughput throughout the rush hours. Each variably priced lane in the median of State Route 91 in Orange County, California, carries twice as many vehicles per lane as the free lanes during the hour with heaviest traffic. Pricing has allowed twice as many vehicles to be served per lane at three to four times the speed on the free lanes.
Technology for Congestion Pricing
With congestion pricing, tolls typically vary by time of day and are collected at highway speeds using electronic toll collection technology. Traffic flows freely and there are no toll booths. Vehicles are equipped with electronic devices called transponders or "tags", which are read by overhead antennas. Toll rates for different time periods may be set in advance, or they may be set "dynamically" - that is, they may be increased or decreased every few minutes to ensure that the lanes are fully utilized without a breakdown in traffic flow.
Tags range from simple to highly sophisticated devices. Simple tags are "read-only," meaning that they can provide an identification number to overhead readers using power from incoming radio frequency energy. More sophisticated tags are battery-powered, and have processing power and memory. Tags are now the normal way tolls are collected from regular users - 70 to 80 percent of tolls are now collected this way on most urban commuter toll roads in peak hours. Simple "sticker" tags may be obtained for less than $10.
Global Positioning Systems (GPS) are used to collect truck tolls in Germany on the autobahns. In tests of such systems in the United States, an in-vehicle device records charges incurred based on its location as identified by the GPS unit in the vehicle. All location and payment information remains in the vehicle, and the vehicle owner periodically uploads the summary of charges to a processing center along with payments. The costs of such systems are currently high - as much as $500 per vehicle in Germany. Their high costs can be justified by additional services provided by the systems, such as in-vehicle navigation and commercial fleet management. Also, the need for roadside equipment for toll collection is reduced.
Cameras are an essential complement to tags and GPS units to gain a record of the identity of vehicles that don't have a working tag or GPS unit. Cameras can be used to deter toll violators. This is known as "video enforcement." In cases where a tag is required for use of a facility, camera images allow a follow-up of violators and imposition of a penalty.
Use of a toll facility may be permitted without a tag or GPS unit. In this case, a camera-based system is used to collect what is termed a video toll. This toll includes the additional costs for administration. Cameras are being improved steadily in their capabilities and some believe that very soon toll operators could rely entirely on video tolling.
Use of Revenues from Pricing
Congestion pricing can generate substantial revenues from tolls. A portion of the revenues generated will be needed to operate the toll collection and traffic management systems. Net revenues after payment of operating costs can be used to pay for expansion of roadway facilities, to support alternatives to driving alone such as public transit, to address impacts on low-income individuals by providing toll discounts or credits, or to reduce other taxes that motorists pay for highways such as fuel taxes, vehicle registration fees, or sales taxes.