Research & Commentary: Congestion Traffic Pricing

Published August 6, 2012

According to a report by the Texas Transportation Institute, the cost of urban traffic congestion, converted to a dollar value, quintupled between 1982 and 2007. Although congestion costs have fallen recently due to the recession and decreased economic activity, the cost of urban congestion remains more than $100 billion a year. 

Cato Institute transportation policy expert Randal O’Toole has observed that the traditional use of gasoline taxes as a highway user fee to combat traffic congestion fails because the taxes motorists pay are not directly connected to the specific roads they use. Thus the taxes do not communicate to drivers about the actual cost of using different roads – a heavily congested highway versus an alternate route, for example. 

Congestion pricing addresses these problems by using market principles to address traffic congestion. Under congestion pricing, operators of a road charge a variable price based on congestion, allowing the operator to manage demand and limit congestion. 

The Federal Highway Administration cites four main types of pricing strategies: 

* variably priced lanes, involving variable tolls on separated lanes within a highway, such as express toll lanes or high occupancy toll lanes; 

* variable tolls on entire roadways – on toll roads and bridges as well as on existing toll-free facilities during rush hours; 

* cordon charges – variable or fixed charges for driving within or into a congested area within a city; and 

* area-wide charges – per-mile charges on all roads within an area that may vary by level of congestion. 

Baruch Feigenbaum, a transportation policy analyst at the Reason Foundation, notes congestion pricing is not a one-size-fits-all proposal: It can be adapted to different metro areas’ congestion problems. 

Critics of congestion pricing argue it disproportionately affects lower-income drivers and amounts to double taxation, since previous taxes paid for the construction of roads. 

However, Robert Poole, director of transportation policy at Reason Public Policy Institute, says research shows “social welfare would be maximized not with a single price for all freeway users but with several choices of price and service level for various categories of user,” which helps ensure that use of each road is priced according to its real value. 

The following articles examine congestion pricing and several proposals on how to implement a pricing system to alleviate traffic congestion.

Ten Principles of Privatization
Privatization means shifting some or all aspects of service delivery from government to private-sector providers. It is a strategy to lower the costs of government and achieve higher performance and better outcomes for tax dollars spent. If badly executed, privatization can fail like any other policy. Fortunately, we have the experiences of governments in the United States and around the world to learn from. These “10 Principles of Privatization” from The Heartland Institute and Reason Foundation capture the best practices that have emerged from those experiences. 

Congestion Pricing: A Primer
Traffic congestion costs the economy billions per year. This primer from the Federal Highway Administration examines traffic congestion, its causes, and the possible solution of congestion pricing. It discusses different congestion pricing programs, the benefits of these programs, and how they have worked both across the United States and internationally. 

Income-Based Equity Impacts of Congestion Pricing
The Federal Highway Administration examines the effect of congestion pricing on low-income groups, public opinion expressed by various income groups, and ways to mitigate equity impacts. 

Reducing Congestion and Funding Transportation Using Road Pricing in Europe and Singapore–using-road-pricing-in-europe-and-singapore?source=policybot
Congestion pricing has been limited in the United States because of political, institutional, and public acceptance concerns. The Federal Highway Administration, American Association of State Highway and Transportation Officials, and National Cooperative Highway Research Program sponsored a study of Europe and Singapore to identify ideas and models for integrating different road pricing approaches into U.S. practices. The team found countries with clearly defined and well-understood policy goals were able to achieve targeted outcomes most effectively. The team also learned a large-scale demonstration project is a good tool for building public acceptance of road pricing. 

Using Pricing to Reduce Traffic Congestion
Prepared at the request of the chairman of the House Committee on the Budget, this study from the Congressional Budget Office explains how congestion pricing works, reviews the best available evidence on projects that make use of such pricing in order to assess the benefits and challenges of the approach, and discusses federal policy options for encouraging congestion pricing. 

Gaining Public Support for Congestion Pricing on Highways
In this policy study from the Reason Foundation, Robert Poole examines the current proposals for congestion pricing, identifies flaws, and suggests an alternative program, a multi-pricing approach for freeways that overcomes many of the problems the current pricing systems face. 

Transportation Policymakers Need to Use Congestion Pricing More
Baruch Feigenbaum of the Reason Foundation argues that as fiscal austerity increases the importance of improving and maintaining infrastructure, congestion pricing may be one of the best tools for solving traffic congestion. 

Ending Congestion by Refinancing Highways
Randal O’Toole of the Cato Institute proposes an affordable vehicle-mile fee system that preserves traveler privacy, eliminates nearly all traffic congestion, adequately funds all federal, state, and local roads, and does so in a revenue-neutral manner after eliminating gas taxes and local road subsidies. 

A Video Explanation of Congestion Pricing
This video from Streetfilms explains the concept of congestion pricing and explains how it can benefit cities. The video, part of a series on mobility in cities, argues congestion pricing makes economic sense.  

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget and Tax News Web site at, The Heartland Institute’s Web site at, and PolicyBot, Heartland’s free online research database, at