pricing system

Road pricing

Road pricing is an economic concept regarding the various direct charges applied for the use of roads. The road charges includes fuel taxes, licence fees, parking taxes, tolls, and congestion charges, including those which may vary by time of day, by the specific road, or by the specific vehicle type, being used. Road pricing has two distinct objectives: revenue generation, usually for road infrastructure financing, and congestion pricing for demand management purposes. Toll roads are the typical example of revenue generation. Charges for using high-occupancy toll lanes or urban tolls for entering a restricted area of a city are typical examples of using road pricing for congestion management purposes.

European application

Facing rising levels of traffic congestion, European governments are giving serious consideration to nationwide road pricing schemes. Some of these could exploit the new Galileo satellite positioning system, although it is possible to arrange road pricing using various different technologies. A satellite based system would entail vehicles containing a satellite tracking device which would determine which roads were being driven along, for how far and at what time of day. This information would then be sent to a central computer system, and the appropriate charges levied against the driver.


Schemes for charging trucks (lorries) in Germany by the company Toll Collect, and Austria are already underway. The German scheme went live on January 1, 2005, trucks pay between €0.09 and €0.14 per kilometer depending on their emission levels and number of axles. The expensive scheme, combining satellite technology with other technologies, suffered numerous delays before implementation, whilst a scheme using much simpler technology in Austria was up and running in 2004. In the UK, the Labour government announced in July 2005 that the proposed UK truck road user charging scheme would not go ahead.


There is a pollution charge in Milan, started on a trial basis on January 2, 2008. Called "Eco-pass", it gives exemption to Euro3 and Euro4 and hefty discounts to residents.


A fully automated system called a Controlled Vehicular Access (CVA) system has been launched in Malta's capital city of Valletta since May 1, 2007.When compared to other countries that make use of congestion charging models, the Maltese system makes use of a wider array of innovations including variable payments according to the duration of stay, flexible exemption rules, including exemptions for residents within the charging zone, and monthly or quarterly billing options for vehicle owners. Pre-payment facilities, including direct debit arrangements and purposely designed vouchers, are also available. The billing system was designed in Malta and has been described as a state of the art 'next generation congestion charge billing solution'. The Valletta Congestion Charge, which is also known as Valletta CVA, was recently nominated for the Best European Transport Strategy Award. Public voting is still underway.


One of the earliest schemes was introduced in Bergen in Norway in 1986. Only traffic entering the town is charged and only during weekdays from 6:00 a.m. through 10:00 p.m. Public service vehicles pay no charge.

Bergen has now a fully automated toll plaza system that is based on passing without stopping for all traffic. There are no coin slots or manual service. A similar system was introduced for the Oslo Toll Ring from February 2, 2008. To ensure interoperability of electronic fee collection in Norway a system called AutoPASS is used throughout the country for toll roads and congestion charging schemes etc. Most local drivers have purchased a tag which is automatically read on passing the detectors. , there will be six fully automated schemes in operation. For the others motorists without a tag pay a fee at a manual barrier.


Stockholm has a congestion pricing system, Stockholm congestion tax, in use on a permanent basis since August 1, 2007, after having had a seven month trial period from January 3 to July 31, 2006. The City Centre is within the congestion tax zone. All the entrances and exits of this area have unmanned control points operating with automatic number plate recognition. All vehicles entering or exiting the congestion tax affected area, with a few exceptions, have to pay 10–20 SEK (1.09–2.18 EUR, 1.49–2.98 USD) depending on the time of day between 06:30 and 18:29. The maximum tax amount per vehicle per day is 60 SEK (6.53 EUR, 8.94 USD). Payment is done by various means within 14 days after one has passed one of the control points, one cannot pay at the control points.

United Kingdom

UK governments have periodically considered the possibility of using road pricing since the early 1960s, when the Smeed Report considered how to implement congestion charging.

Durham became the first city in the UK to have a permanent congestion charge in 2002. London has had a congestion charge in the central area since 2003. The organisation responsible for the charge is Transport for London (TfL). The fee was introduced on February 17, 2003. Initially set at £5, then raised on July 4, 2005 to £8, the daily charge must be paid by the registered keeper of a vehicle that is on public roads in the congestion charge zone between 7 a.m. and 6 p.m. (previously 6:30 p.m.), Monday to Friday. Failure to pay the charge means a fine of at least £50. The charge area was extended into parts of West London on February 19, 2007. A scheme similar to the one in London is proposed in Manchester, covering a wider area but with a much smaller daily charging window covering the morning and evening rush hours. . A scheme for Cambridge is currently under consideration and the subject of heated public debate, with council surveys showing that a majority of Cambridge-area residents reject the scheme. A scheme for Edinburgh was rejected in a public referendum in February 2005. On 2008-03-05, councils from across the West Midlands, including those from Birmingham and Coventry, rejected the idea of imposing road pricing schemes on the area, this was despite promises from central government of transport project funding in exchange for the implementation of a road pricing pilot scheme. Similar schemes proposed for cities in the East Midlands have also been dropped. Extensive studies are being done on introducing a scheme for all UK vehicles, with an aim to implementation at the earliest around 2013. In October 2005 the UK government suggested they explore "piggy-backing" road pricing on private sector technologies, such as usage based insurance (also known as pay-as-you-drive, or PAYD). This method would avoid a large-scale public sector procurement exercise, but such products are unlikely to penetrate the mass market. If introduced, this scheme would likely see a charge being levied per kilometre depending on the time of day, the road being driven along, and perhaps the type of vehicle. For example, a large car driving along the western section of the M25 in rush hour would pay a high charge; a small car driving along a rural lane would pay a much lower charge. The very highest charges would be likely in the most congested urban areas. It is expected that rural motorists would benefit the most from such a scheme, perhaps by paying less through road pricing than they do at present through petrol and car taxes, whereas urban motorists would pay much more than they presently do. However, this is highly dependent on whether such a scheme would be designed to be either revenue neutral or congestion neutral. A revenue neutral scheme would replace (at least in part) petrol and vehicle taxes, and would be such that Treasury revenue under the new scheme would equal the revenue from current taxes. A congestion neutral scheme would be designed so that growth in congestion levels would stop as a result of the new charges; the latter scheme would require significantly higher (and increasingly higher) charges than the revenue neutral scheme and so would be unpopular with the UK's 30 million motorists. The carbon emission consequence of moving from fuel duty to a charge per mile has been raised as a concern by some environmentalists, as has any diversionary response from heavily trafficked (and hence more expensive) roads. The UK government announced funding for road pricing research in seven local areas in November 2005.

In June 2005, Transport Secretary Alistair Darling announced the current proposals to introduce road pricing. Every vehicle would be fitted with a satellite receiver to calculate charges, with prices (including fuel duty) ranging from 2p per mile on uncongested roads to £1.34 on the most congested roads at peak times.

A 2007 online petition against road pricing, started by Peter Roberts and hosted by the British government, attracted over 1.8 million signatures, equivalent to 6% of the entire driving population. Over 150,000 signatures were added during the last day before the petition closed on February 20, 2007. In reply, the prime minister e-mailed the petitioners outlining his rationale, denying that the proposals were to introduce a stealth tax or increase surveillance, and promising 'debate' before a decision was made as to whether to introduce a national scheme. Also, in a recent poll 74% of those questioned opposed road pricing.

In July 2008, Roberts started the Drivers' Alliance, a mass-membership organisation dedicated to researching the issues surrounding road pricing and campaigning against its introduction.


Singapore implemented the world's first congestion pricing scheme in 1975, through manual police control around the CBD of an urban area (see Area Licensing Scheme). In September 1998 the system was upgraded with ETC technology, 100% free-flow (see Electronic Road Pricing). The electronic toll collection scheme adopted was implemented by the Land Transport Authority (LTA), after careful planning and successfully stress-testing the system. The congestion charges were implemented as part of a comprehensive package of road pricing and harsh supply restraints, in recognition of the country's land constraints, need of economic competitiveness, and to avoid the traffic gridlock that chokes many cities in the world.

One key aspect of traffic management in Singapore is the restraint of vehicle ownership, either through the imposition of high ownership costs or restriction on the actual growth of the car population. These measures have included high annual road tax, custom duties and vehicle registration fees. Besides fiscal deterrents, supply of motor vehicles was regulated since 1990, when a Vehicle Quota System was introduced. Use-related charges, such as fuel taxes (50% of final sale price), congestion charges and high parking rates are utilized by public authorities to further constraint travel. In parallel to the whole spectrum of road pricing measures, the government has invested heavily in public transportation and implemented a park-and-ride scheme. In summary, Singapore's urban and transport strategy allowed the users to have pro-transit "carrots" matching auto-restraint "sticks", As a result, and despite having one of the highest per capita incomes in Asia, fewer than 30% of Singaporean households owns cars.

In an effort to improve the pricing mechanism and to introduce real-time variable pricing, Singapore’s LTA, together with IBM, ran a pilot from December 2006 to April 2007, with a traffic estimation and prediction tool, which uses historical traffic data and real-time feeds with flow conditions from several sources, in order to predict the levels of congestion up to an hour in advance. By accurate estimating prevailing and emerging traffic conditions, this technology is expected to allow variable pricing, together with improved overall traffic management, including the provision of information in advanced to alert drivers about conditions ahead, and the prices being charged at that moment. This new system integrates with the various LTA's traffic management existing systems, such as the Green Link Determining System, TrafficScan, Expressway Monitoring Advisory System, Junction Electronic Eyes, and the Electronic Road Pricing system. The pilot results were successful, showing overall prediction results above 85 percent of accuracy.

New York proposal

On April 22, 2007, New York City Mayor Michael Bloomberg, citing what he considered to be successes in London, Singapore and Stockholm, proposed a plan to charge $8 per day for cars to use the streets of the central business district (southern half of Manhattan) but not when using only the marginal highways, or nights or weekends. It would not involve satellite location, but drivers who wanted their tolls collected automatically could have a transponder like the E-ZPass already used to collect tolls on tunnels and bridges.

Immediately following the April 22 announcement, a coalition under the banner Campaign for New York's Future came out in support of the Mayor's sustainability proposal, PlaNYC 2030. Others opposed it, saying it would cause asthma or create "rat run" districts at the border.

On July 16, 2007, the New York Legislature shelved the proposal to bring congestion pricing to Manhattan. A week later they passed a law creating a 17-member New York City Traffic Congestion Mitigation Commission to study methods. The Commission's report was favorable and the City Council voted for the measure, but in April the New York Legislature declined to vote on it.


Opposition to road pricing, when coming from the broad political left is largely directed at perceptions of fairness. Charging for something that was once "free" may be seen as unfair. Road pricing has the possibility of being a regressive tax, in that a flat-rate tax falls more heavily on poor drivers than the rich (the fuel tax, while moderately regressive, gives much more incentive to poor drivers than rich drivers to drive more fuel-efficient cars, thereby somewhat negating its regressive aspect). A way for the government to deflect this criticism would be to use the toll revenue to reduce other, equally regressive taxes. New toll roads in a largely free system may be seen as punishing one area when the rest of the system enjoys toll-free motoring. Proponents of pricing would counter the fairness or equity argument by stating that pricing creates a choice, and choices are fair because people are not identical, sometimes people have high values of time (e.g., when they are late for an appointment), sometimes they have lower values of time (e.g., when they are enjoying the drive). The proponents would thus suggest that making all drivers pay the same tax to receive the same service isn't fair if people value the service differently. Another argument is that, while road pricing may be unfair to some road users, the alternative, i.e., congestion is unfair to all road users, since it wastes everyone's resources. The ultimate fairness of road pricing is only determined once the use of any net revenues is taken into account.

Conservative critics such as Steven Norris, on the other hand, say that "free" roads produce positive externalities that outweigh the opportunity cost of congestion, i.e., that road pricing reduces the overall number of journeys, thus harming business and economic growth. In particular, Steven Norris argues that the cost of the congestion charge disproportionately hits low-paid workers whose working hours start at night when public transport is not available and end when the congestion period is in force, indirectly hitting London's service economy.

Motoring interest groups see road pricing as an additional financial burden on already allegedly over-taxed car owners. Many are not opposed to road tolls as such, but wish to see them as a replacement for fuel tax rather than an additional charge.

Some groups of libertarian inclination, such as the Association of British Drivers, criticize road pricing on the basis of individual rights. They argue that freedom of movement is a fundamental right that should not be infringed through financial barriers, and sometimes compare the practice to highwaymen. Note that some libertarians in general, however, favour transfer of roads to private ownership, which is likely to result in tolls for individual roads, set on a profit-maximizing rather than an economic welfare-maximizing basis, which in many cases is likely to lead to a higher toll.

Others see proposed schemes such as PAYD (which is based upon a compulsory GPS tracking system) as an infringement on their rights to privacy, and fear that such a vast surveillance system may be abused. However, such systems need not necessarily invade the privacy of road users. For example, users of the Express Lanes on California State Route 91 were able to open an account with the California Private Transportation Company without revealing their real name. As long as the account was in credit, no information about the payer needed to enter the computer system. Fewer than five Californians sought to protect their privacy in this way.

The general public appears to have concerns about the proposed introduction of road pricing in the UK, with fears that the government could be using it to increase motoring taxes overall. In 2003, the Institute of Public Policy Research think-tank concluded that overall road pricing would have to raise more money than current taxes if it were to reduce congestion. Local authorities have been denied access to government transport funds for not including proposals for road pricing in their applications.

See also


Further reading

  • Smeed, R.J. (1964), "Road pricing: the economic and technical possibilities", HMSO.

External links

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