Congestion Pricing — A Primer: Overview

Benefits of Congestion Pricing

Congestion pricing benefits drivers and businesses by reducing delays and stress, by increasing the predictability of trip times, and by allowing for more deliveries per hour for businesses. It benefits mass transit by improving transit speeds and the reliability of transit service, increasing transit ridership, and lowering costs for transit providers. It benefits State and local governments by improving the quality of transportation services without tax increases or large capital expenditures, by providing additional revenues for funding transportation, by retaining businesses and expanding the tax base, and by shortening incident response times for emergency personnel, thus saving lives. By preventing the loss of vehicle throughput that results from a breakdown of traffic flow, pricing maximizes return on the public's investment in highway facilities. It benefits society as a whole by reducing fuel consumption and vehicle emissions, by fostering more efficient land-use decisions, by reducing housing market distortions, and by expanding opportunities for civic participation.

Variable tolls create incentives for more efficient use of existing capacity, and they also provide improved indicators of the potential need for future capacity expansion. When high toll rates are needed to balance demand with supply of road space, this is a signal that additional transportation capacity may be needed. At the same time, the higher tolls generate revenues that can be used to pay for capacity expansion to further enhance urban mobility.

People have varying needs for mobility from day to day. For example, one day they may be in a hurry to get to an appointment and thus be willing to pay more to get there on time. With our current fuel tax-based system to pay for roads, commuters cannot pay for better mobility, even if they want to. Everyone is forced to be stuck in the same traffic jam. That said, with electricity, which is also essential for life today, people pay for what they use in a direct fashion. Revenues generated ensure that power systems are designed to meet demand, and people are able to use as much as they need, when they need it, and are not forced to cope with inadequate heating or cooling in their homes. Pricing of highways will likewise generate sufficient revenue to design and run our road system efficiently and not force people to suffer inadequate mobility. With priced highways, those who are willing to pay more for better mobility will have the option to do so.

Benefits to Transit Riders and Carpoolers

Pricing, in combination with transit services, provides bus riders with travel-time savings equivalent to those for drivers and reduces waiting time for express bus riders due to more frequent service. Introduction of pricing in central London and Stockholm has resulted in significant shifts of commuters to transit, particularly buses. Bus delays in central London dropped by 50 percent after the pricing scheme was introduced. There was a 7 percent increase in bus riders. In Stockholm, 200 new buses were put into service in August 2005, several months in advance of the pricing trial, which began in January 2006. After the pricing scheme was implemented, daily public transportation use, compared with the same month in 2005, was up by 40,000 riders daily. Ridership on inner-city bus routes rose 9 percent compared with a year earlier. (See section on Examples From Abroad).

Within 3 months of the opening of the priced express lanes on California's SR-91, a 40 percent jump occurred in the number of vehicles with three or more passengers. Ridership on buses and a nearby rail line have remained steady. On San Diego's I-15 HOT lanes, revenues generated by toll payers financed transit improvements that contributed to a 25-percent increase in bus ridership. (See section on Examples in the United States).

After the HOV lanes were converted into HOT lanes on I-15 in San Diego, carpooling increased significantly, even though there was no change in incentives to carpool—carpoolers continued to use the lanes free of charge, as they did before the lanes were converted. Similar effects were observed when the HOV lanes on I-25 in Denver were converted to HOT lanes in June 2006. It's not clear why carpooling increases—it could be a result of the extra publicity by the media.

Benefits to Drivers

Graph showing the difference in the speeds traveled by cars in “priced” lanes vs. cars in free lanes.

Traffic speeds on SR 91 during rush hours.

On the State-Route-91–priced lanes in Orange County, California, traffic during rush hours moves at over 60 mph, whereas the traffic in adjacent lanes crawls at average speeds of 15 mph or less. Commuters on the priced express lanes thus save as much as half an hour each way on the 10-mile trip, or as much as an hour a day.

If we could use pricing to restore free-flowing traffic conditions on other metropolitan freeways during rush hours, similar results could be achieved. An average commuter using a 5-mile freeway segment twice each day (i.e., once in each direction) would save about half an hour each day, or 120 hours annually—equal to 3 weeks of work or leisure time!

The day-to-day variation in travel times is now understood as a separate component of the public's and business sector's frustration with congestion. An important benefit of pricing is that it guarantees toll-paying vehicles a reliable trip speed and travel time.

Benefits to Businesses

Growing congestion and unreliability threatens truck transportation productivity and ultimately the ability of sellers to deliver products to market. In addition, when deliveries cannot be relied on to arrive on time, businesses must keep extra "buffer stock" inventory on hand. This can be expensive. Pricing of the nation's major thoroughfares to guarantee free flow of traffic will ensure that reliability is restored to the transportation system, keeping business and transportation costs low. Lower costs will increase the competitiveness of U.S. businesses in international markets and boost the U.S. economy.

Evidence From Recent Research on Freeway Delay

When traffic flow collapses under high-traffic densities, highway capacity is lost. If only a fraction of vehicles are removed from a congested highway at critical times during the rush hours, traffic would flow much more efficiently throughout the peak period, allowing about 10 percent more cars to move through the same physical space than would be possible under congested flow. By preventing congestion from taking hold, pricing recovers the daily waste of time that occurs on congested highways when traffic flow breaks down.

Data show that maximum vehicle throughput occurs at speeds of about 45–55 mph.¹ When severe congestion sets in, the number of vehicles that get through a bottleneck location per hour may drop by as much as 10 percent. Traffic flow is kept in this condition of "collapse" with lower throughput and speeds for several hours after the rush of commuters has stopped. This causes further delay for motorists who arrive later in the day when demand might have easily been accommodated by available capacity, had traffic flow not broken down earlier.

With congestion pricing of highways, a variable toll dissuades some motorists from using limited access highways (generally freeways) at critical locations such as bottlenecks where traffic demand exceeds capacity in the peak hours. It prevents surges in demand that may push highway traffic volume over the threshold at which traffic flow collapses. Pricing prevents a breakdown of traffic flow in the first instance, maintaining a high level of vehicle speed and throughput throughout the rush hours. Collapse of traffic flow from overcrowding is avoided. Not only are more motorists able to get through bottlenecks during each hour, but also they get through faster.

1. Chen, C., & Varaiya, P. (2002, Spring). The freeway–congestion paradox. Access, (No. 20), 40–41.

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