Clear, accessible definitions for common urban planning terms.

What Is Congestion Pricing?

3 minute read

Congestion pricing raises the cost of driving on certain roadways at certain times, reducing traffic,encouraging alternate transportation modes, and generating revenue from the use of infrastructure.

Northern California Toll Lane

Sundry Photography / Shutterstock

Viewed by some as one of the most effective ways to reduce traffic congestion, congestion pricing uses market forces to discourage driving at peak hours by charging a fee for driving on certain lanes or roadways. According to the Federal Highway Administration, a reduction in traffic volume of as little as 5% can have a significant impact on traffic flow, improving vehicle throughput and speed.

Congestion pricing is designed to make alternate forms of transportation, such as public transit and ridesharing, more attractive. Congestion pricing can take several forms: The most common are variably priced lanes, such as carpool lanes, High Occupancy Toll (HOT) lanes, express lanes, and variable tolls placed on entire roadways or bridges during rush hours. Toll amounts frequently vary based on demand, with higher tolls charged at busier times. On San Diego's Interstate 15 HOT lanes, pricing fluctuates between 50 cents and $8.

Like other toll road systems, some congestion pricing programs use electronic toll collection technology to monitor vehicles and assess fees. HOT lanes let High Occupancy Vehicles (usually private vehicles carrying more than one person, buses, and other transit vehicles) travel in the lanes for free, while non-HOVs must pay a toll. This type of scheme encourages carpooling and transit use and helps reduce congestion on non-HOT lanes. Similarly, express lanes require all vehicles using them to pay a toll, making enforcement easier on local agencies. 

Another form of congestion pricing used in major cities including London, Stockholm, and Singapore is cordon pricing, which imposes a toll on all private vehicles entering designated areas of the city in an effort to reduce the number of cars driving into busy central business districts, where public transit should be more available. Singapore first introduced its policy in 1975, using a simple system of window stickers to charge drivers entering the central city at busy hours of the day. London, which implemented a cordon pricing scheme in 2003, saw congestion drop by 30% in the year after starting the program. However, congestion in that city has slowly returned to pre-cordon pricing levels as demand increases for delivery and rideshare services, signaling a need for further adjustments.

Some critics argue that fixed congestion pricing is regressive,harming low-income residents who often live far from their jobs in transit-poor peripheral areas and rely on automobiles to access jobs and other essential services. Yet research shows this isn't always the case: in New York City, a study found that just 4 percent of commuters from the city's outer boroughs drove to work, and of those, none were low-income. Supporters claim that the revenue raised by congestion pricing funds public transit upgrades and other infrastructure improvements that benefit everyone. 

Charging roadway users generates revenue that supplements road maintenance, toll operating costs, public transit improvements, and other transportation infrastructure. HOT lanes have also been shown to reduce air pollution and improve local air quality by facilitating a smoother flow of traffic. In one example, Seattle saw a 16 percent increase in transit ridership in the year after implementing HOT lanes. Revenue from congestion tolls can also offset the loss of fuel tax revenue precipitated by increased use of electric cars and more efficient vehicles. 

In the United States, proponents of congestion pricing have struggled to get such programs off the ground. As of this writing, New York City is poised to launch a congestion pricing program in Manhattan that would generate as much as $1.1 billion for the city's transit services. Los Angeles, Chicago, and Washington, D.C. have also taken steps toward similar programs. While HOV lanes operate in 20 states, HOT lane projects are operational in just eight of them.