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Congestion Pricing, the Route More Cities Are Taking

Traffic is a headache, and not just for drivers. Jammed roads have become a growing economic, health and environmental menace to societies, contributing every year to millions of premature deaths and costing vast sums in lost productivity (an estimated $87 billion in the US alone). To policy makers, that’s raised the allure of an option that not only can de-clog the streets and improve the air but also fill government coffers. Might congestion pricing become the norm for cities? 

1. What is congestion pricing?

Charging drivers to enter busy areas. It’s already used in Singapore, London, Milan and Stockholm. New York is the latest city to join the movement with plans to charge some motorists as much as $23 to enter Manhattan’s central business district. Paying to drive into urban centers during rush hour, or in London’s case from 7 a.m. to 6 p.m., is a turnoff for many commuters that pushes them to seek more sustainable alternatives such as mass transit, car pooling or cycling. London charges 15 pounds ($18) a day. The upsides for cities can include quicker bus journeys, a friendlier environment for bicycles and pedestrians, fewer road accidents and less pollution. 

2. Does it tackle the jams?

Congestion fell 30% and pollution dropped by almost a quarter the year after London started charging to enter an area of 8 square miles (21 square kilometers). Stockholm’s system, launched four years after London’s in 2007, cut traffic to and from a 13-square-mile zone by 20% and reduced traffic delays by as much as 50%. Congestion pricing appears to discourage some individuals from driving downtown but has less effect on businesses that can afford the charges. Congestion in London has returned to pre-charge levels, partly a result of commercial vehicles fulfilling online shopping orders and a rise in demand for ride-hailing services such as Uber Technologies Inc. 

3. How does it work?

In London, clusters of cameras read the registration plates on vehicles entering the charging zone and the system checks if their owners have paid the charge. Drivers can automate payments, allowing the system to record the number of days they’ve travelled within the zone and automatically debit their bank account. In Stockholm, drivers were given electronic tags to be installed in their cars, which triggered automatic payments when they passed the city’s control points. Some urban authorities are finding ways to fine-tune prices based on levels of congestion or air pollution. 

4. Where does the money go?

The revenue can be used to offset the anticipated loss of billions of dollars in fuel taxes as electric vehicles become more commonplace. London’s congestion charge is forecast to raise 154 million pounds ($200 million) in 2020, to be reinvested in transport in the capital. The 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 rails, plans to upgrade public transportation infrastructure by issuing bonds against the new revenue stream. 

5. Who’s against it?

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

6. Is there another approach?

There’s the Paris model, whereby restrictions keep out the most polluting vehicles, a bar that’s steadily raised. The French capital banned cars built to pre-1997 emissions standards in 2016, then three years later extended the ban to those from before 2006. Restrictions on cars built before 2009 kicked in from 2021. The two models are not exclusive (London has started banning heavy polluting vehicles) but they reflect different political cultures, one more tolerant of state-enforced bans and the other more open to control via fees.

7. Who profits from congestion pricing?

People who live in cities stand to profit the most. Pollution incurs all sorts of costs and any policy that reduces it is going to provide some economic benefits, from reduced sick days to better quality of life. Companies that supply congestion pricing technologies include Austria’s Kapsch TrafficCom AG, Dutch company TomTom, Germany’s Siemens AG and Norway’s Q-Free ASA. The US government’s Global Positioning System and the European Union’s Galileo navigation project run satellite-positioning constellations. HERE Global BV, a mapping company whose owners include Audi, BMW AG and Daimler, expects congestion pricing could become the new normal. 

8. What’s the future of congestion pricing?

Systems analysts at the World Bank observed that humans have since Neolithic times tended to budget about 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 cap their commutes. That’s key for proponents of congestion pricing who want to make it a part of so-called multimodal transport systems that blend rail, road and air travel into seamless networks. And with the U.S. Census Bureau calculating that workers in the world’s biggest economy are close to breaking the one-hour threshold, the demand for ways to ease congestion is unlikely to abate. 

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