Congestion Pricing

In this paper, Kiran Bhatt reviews the experience of roadway congestion pricing strategies around the world, focusing on the systems in London, Stockholm, Singapore, and selected U.S. cities. He argues that most of the reviewed projects have successfully influenced travel behavior and prevented congestion from occurring on priced lanes. Congestion pricing in Singapore, London, and Stockholm has resulted in a 10 to 30 percent reduction in traffic in the charging zone. Speeds also have increased by 10 to 30 percent within and beyond the zone. More important, up to 50 percent of the discouraged car trips have been replaced by public transportation or car pools. Bhatt asserts that these traffic impacts have been stable over thirty years in Singapore and five years in London.

Financially, congestion tolls in London, Singapore, and Stockholm have covered both the operating expenses and costs of improvements to bus and rail services. In Singapore, revenues generated from congestion charges are 2.5 times the sum of operating and capital costs. In London, they are two times the total operating expenses. There is no evidence that retail stores in the charging zones have been adversely affected by congestion pricing and that businesses have opposed the policy. The perception that congestion pricing is unfair to low-income drivers has not been supported in the selected cases.

Although studies on the environmental impacts of congestion pricing remain tentative, the approach seems to decrease emissions in priced zones because of traffic reduction. In London, levels of nitrogen oxide, CO2, and particulates fell by 13.4, 15, and 7 percent, respectively, between 2002 and 2003 within and beyond the charging zone.

Congestion pricing can influence land use by altering land values, rents, availability of labor, and business location. A 1996 study on this topic in London found that a £4 (more than US$6 based on the exchange rate in 2011) congestion toll would increase employment in central London by 1 percent, whereas inner and outer London employment would fall by 0.5 percent. The number of higher-income households in central London also would increase. These results imply shifts in residential and commercial activities and land use within London that were caused by the change in the relative price of commuting to the city center. In sum, as Bhatt argues, there is evidence to prove that congestion pricing can reduce congestion and automobile emissions and provide new sources of funding for transportation investment.

This paper was presented at the Lincoln Institute’s Land Policy Conference of 2010 and is Chapter 10 of the book Climate Change and Land Policies.