Congestion pricing, the route taken by more and more cities

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Traffic is a headache, and not just for drivers. Blocked roads have become a growing economic, health and environmental threat to societies, contributing to millions of premature deaths each year and costing vast sums in lost productivity (about $87 billion in the United States alone). For policymakers, this has raised the appeal of an option that can not only unclog the streets and improve the air, but also fill government coffers. Could congestion pricing become the norm for cities?

1. What is congestion pricing?

Charging drivers to enter busy areas. It is already in use in Singapore, London, Milan and Stockholm. New York is the latest city to join the movement with plans to charge some motorists up to $23 to enter Manhattan’s central business district. Paying to get into city centers during rush hour, or in the case of London from 7 a.m. to 6 p.m., is a diversion for many commuters that pushes them to seek more sustainable alternatives such as public transport, the carpooling or cycling. London charges 15 pounds ($18) per day. Benefits for cities can include faster bus journeys, a friendlier environment for bikes and pedestrians, fewer road accidents and less pollution.

2. Does it solve traffic jams?

Congestion fell by 30% and pollution dropped by almost a quarter the year after London started charging to enter an 8 square mile (21 square kilometer) zone. The Stockholm system, launched four years after London’s in 2007, has reduced traffic to and from a 13 square mile area by 20% and reduced traffic delays by up to 50%. Congestion pricing appears to discourage some people from driving downtown, but has less of an effect on businesses that can pay the charge. Congestion in London has returned to preload levels, in part due to commercial vehicles filling online shopping orders and an increase in demand for ride-sharing services such as Uber Technologies Inc.

In London, clusters of cameras read the number plates of vehicles entering the charging zone and the system checks whether their owners have paid the charge. Drivers can automate payments, allowing the system to record the number of days they have driven in the zone and automatically debit their bank account. In Stockholm, drivers were given electronic tags to install in their cars, which triggered automatic payments when passing through city checkpoints. Some city authorities are finding ways to adjust prices based on levels of congestion or air pollution.

4. Where does the money go?

The revenue can be used to offset the projected loss of billions of dollars in fuel taxes as electric vehicles become more common. London’s congestion charge is expected to bring in £154m ($200m) in 2020, to be reinvested in the capital’s transport. Charges in Singapore and Stockholm have each brought in more than $100 million a year. New York’s Metropolitan Transportation Authority, a state agency that runs the city’s subways, buses and commuter trains, plans to upgrade public transportation infrastructure by issuing bonds against the new revenue stream.

Motoring lobbies such as the American Automobile Association and some commuters argue that middle-income people in outlying areas without access to public transportation are paying the brunt. Skeptics point out that London still has some of the worst traffic in the world and that location tracking exposes consumers to privacy and data risks. Critics also note that this is an inequitable solution, since the price is the same for everyone, regardless of means. Some motorists oppose congestion pricing or any road charges on the grounds that driving symbolizes personal freedom.

6. Is there another approach?

There is the Parisian model, where restrictions prevent the most polluting vehicles from entering, a bar that keeps rising. The French capital banned cars built to pre-1997 emissions standards in 2016, then three years later extended the ban to those built before 2006. Restrictions on cars built before 2009 came into force from 2021. The two models are not mutually exclusive (London has started banning heavy-duty polluting vehicles) but they reflect different political cultures, one more tolerant of state-imposed bans and the other more open to control through royalties.

7. Who benefits from congestion pricing?

People who live in cities are the ones who benefit the most. Pollution brings all kinds of costs and any policy that reduces it will bring economic benefits, from fewer sick days to better quality of life. Companies that provide congestion pricing technologies include Austrian Kapsch TrafficCom AG, Dutch company TomTom, German Siemens AG and Norwegian Q-Free ASA. The US government’s Global Positioning System and the European Union’s Galileo navigation project manage satellite positioning constellations. HERE Global BV, a mapping company whose owners include Audi, BMW AG and Daimler, expects congestion pricing to become the new normal.

8. What is the future of congestion pricing?

World Bank systems analysts have observed that humans since Neolithic times have tended to plan around an hour a day for travel. While technologies such as automobiles and airplanes have extended the speed and range of travel, people still like to limit their travels. This is essential for supporters of congestion pricing who want to make it part of so-called multimodal transport systems that mix rail, road and air into seamless networks. And with the US Census Bureau calculating that workers in the world’s largest economy are about to cross the one-hour threshold, demand for ways to ease traffic jams is unlikely to wane.

More stories like this are available at bloomberg.com

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