Congestion pricing
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Congestion pricing or congestion charges is a system of surcharging users of public goods that are subject to congestion through excess demand, such as through higher peak charges for use of bus services, electricity, metros, railways, telephones, and road pricing to reduce traffic congestion; airlines and shipping companies may be charged higher fees for slots at airports and through canals at busy times. Advocates claim this pricing strategy regulates demand, making it possible to manage congestion without increasing supply.
According to the economic theory behind congestion pricing, the objective of this policy is the use of the price mechanism to make users conscious of the costs that they impose upon one another when consuming during the peak demand, and that they should pay for the additional congestion they create, thus encouraging the redistribution of the demand in space or in time, and forcing them to pay for the negative externalities they create, making users more aware of their impact on the environment.
The application on urban roads is currently limited to a few cities, including London, Stockholm, Singapore, Milan, and Gothenburg, as well as a few smaller towns, such as Durham, England; Znojmo, Czech Republic; Riga (ended in 2008), Latvia; and Valletta, Malta. Four general types of systems are in use: a cordon area around a city center, with charges for passing the cordon line; area wide congestion pricing, which charges for being inside an area; a city center toll ring, with toll collection surrounding the city; and corridor or single facility congestion pricing, where access to a lane or a facility is priced.
Template:Economics sidebar Implementation of congestion pricing has reduced congestion in urban areas, but has also sparked criticism and public discontent. Critics maintain that congestion pricing is not equitable, places an economic burden on neighboring communities, has a negative effect on retail businesses and on economic activity in general, and represents another tax levy.
A survey of economic literature on the subject, however, finds that most economists agree that some form of road pricing to reduce congestion is economically viable, although there is disagreement on what form road pricing should take. Economists disagree over how to set tolls, how to cover common costs, what to do with any excess revenues, whether and how "losers" from tolling previously free roads should be compensated, and whether to privatize highways.
See also
- Automobile costs
- Energy demand management (congestion pricing applied to electric utilities)
- GNSS road pricing
- Pareto efficiency
- Road pricing
- Road space rationing
- Tragedy of the commons
- Transport economics
- Transportation demand management
