Congestion pricing

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. Singapore was the first country to introduce congestion pricing on its urban roads in 1975, and was refined in 1998. Since then, its application on other urban roads around the world is currently limited to a few cities, including London, Stockholm, Milan, and Gothenburg, Sweden, as well as a few smaller towns, such as Durham, England; Znojmo, Czech Republic; Riga (ended in 2008), Latvia; and Valletta, Malta. It has also been proposed in New York City and San Francisco. 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. Implementation of congestion pricing has reduced congestion in urban areas and increased house values, but has also sparked criticism and public discontent.