It Pays to Price Congestion

Urban congestion is an increasingly pressing problem for commuters in large metropolitan areas, particularly on highways in and around cities. By some estimates, gridlock costs the United States more than $100 billion annually. Many cities, plagued by congestion and eager for new revenue sources, are out to change this. Chicago Mayor Rahm Emanuel, for example, recently proposed adding a “congestion fee” on weekday city parking.  Other urban centers such as Minneapolis are using high-occupancy toll (HOT) lanes to manage congestion, while still others are using dynamic tolling and high-occupancy vehicle (HOV) lanes and incentivizing telecommuting.

In  “Reducing Urban Road Transportation Externalities: Road Pricing in Theory and in Practice,” Alex Anas and Robin Lindsey of NYU and the University of British Columbia, respectively, introduce the theory behind road pricing and explore some of the options for implementing congestion pricing in urban transportation systems. The article notes that while pricing schemes provide environmental benefits, the monetary value of drivers’ time saved is far greater.

Anas and Lindsey use several case studies to determine the effectiveness of pricing schemes in Singapore, Stockholm, London, and Milan. According to studies reviewed by the authors, benefits exceed the costs in each case. The cordon scheme in Singapore presents the most compelling reduction in congestion. Created in 1975, the policy presented drivers with a one-way fee to enter the central business district in the morning.  It resulted in a significant reduction of morning traffic flows due to rescheduled and rerouted trips.

The paper touches on the unintended consequences of road pricing in urban areas, identifying the winners and losers under such policies.  For example, low-income travelers may not benefit from tolls if public transportation in the affected area is an insufficient alternative.  Anas and Lindsey emphasize that a strong public transportation system complements road-pricing programs and may eliminate some of the distributional concerns that arise from congestion pricing policies.

This is no small matter: public acceptance, according to Anas and Lindsey, is “the most important barrier to road pricing schemes.” The authors point out that the timing of pricing proposals can impact their success. They also suggest that environmental benefits can be used to generate public support if and when policies produce these benefits.

The report’s framework for thinking about road pricing is a valuable addition to the current conversation regarding the potential benefits of congestion pricing. However, advice on how to successfully incorporate road pricing into more U.S. metros is still needed.