Congestion pricing

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Typical traffic congestion in an urban freeway. Shown here I-80 Eastshore Freeway, Berkeley, San Francisco Bay Area, California.

London Heathrow Airport, one of the world's most congested airports.

Congestion pricing (also known as Congestion charges) is a concept from market economy regarding the use of pricing mechanisms to charge the users of public goods for the negative externalities generated by the peak demand in excess of available supply. Its economic rationale is that, at a price of zero, demand exceeds supply, causing a shortage, and that the shortage should be corrected by charging the equilibrium price rather than shifing it down by increasing the supply. Usually this means increasing prices during certain periods of time or at the places where congestion occurs; or introducing a new usage tax or charge when peak demand exceeds available supply in the case of a tax-funded public good provided free at the point of usage.

According to the economic theory behind congestion pricing, the objective of this policy is the use of the price mechanism to make users more aware 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,^[1][2] or shifting it to the consumption of a substitute public good; for example, switching from private transport to public transport. This pricing mechanism has been used in several public utilities and public services for pricing higher fees during congested periods, as a means to better manage the demand for the service, and whether to avoid expensive new investments just to satisfy peak demand, or because is not economically or financially feasible to provide additional capacity to the service. Congestion pricing has been widely used by telephone and electric utilities, metros, railways and autobus services,^[3] and has been proposed for charging internet access.^[4] It also has been extensively studied and advocated by mainstream transport economists for ports, waterways, airports and road pricing, though actual implementation is rather limited due to the controversial issues subject to debate regarding this policy, particularly for urban roads, such as undesirable distribution effects, the disposition of the revenues raised, and the social and political acceptability of the congestion charge.^[5][6]

[edit] Description

Congestion pricing is one of a number of alternative demand side (as opposed to supply side) strategies offered by economists to address traffic congestion.^[7] Congestion is considered a negative externality by economists.^[8] An externality occurs when a transaction causes costs or benefits to third party, often, although not necessarily, from the use of a public good. For example, manufacturing or transportation cause air pollution imposing costs on others when making use of public air. Congestion pricing is an efficiency pricing strategy that requires the users to pay more for that public good, thus increasing the welfare gain or net benefit for society.^[9][10]

William Vickrey, winner of the 1996 Nobel Prize for his work on "moral hazard", is considered one of the fathers of congestion pricing, as he first proposed it for the New York City subway system in 1952.^[11] In the road transportation arena these theories were extended by Maurice Allais, a fellow Nobel prize winner "for his pioneering contributions to the theory of markets and efficient utilization of resources", Gabriel Roth who was instrumental in the first designs and upon whose World Bank recommendation ^[12] the first system was put in place in Singapore, and Reuben Smeed, the deputy director of the Transport and Road Research Laboratory whose ideas presented in his report to the British government^[13] were rejected by successive governments since the 1960s.^[14]

The transport economics rationale for implementing congestion pricing on roads, described as "one policy response to the problem of congestion", was summarized in a testimony to the U.S. Congress Joint Economic Committee in 2003: "congestion is considered to arise from the mispricing of a good; namely, highway capacity at a specific place and time. The quantity supplied (measured in lane-miles) is less than the quantity demanded at what is essentially a price of zero. If a good or service is provided free of charge, people tend to demand more of it - and use it more wastefully - than they would if they had to pay a price that reflected its cost. Hence, congestion pricing is premised on a basic economic concept: charge a price in order to allocate a scarce resource to its most valuable use, as evidenced by users' willingness to pay for the resource".^[15]

[edit] Congestion pricing in urban roads

For the broader concept on roads charges see road pricing.

Practical implementation of road congestion charges is found almost exclusively in urban areas, because traffic congestion is common in and around city centers. Autoroute A1 in Northern France is one of the few cases of congestion pricing implemented outside of urban areas. This is a expressway connecting Paris to Lille, and since 1992 congestion prices are applied during weekends with the objective of spreading demand on the trip back to Paris on Sunday afternoons and evenings.^[16] As congestion pricing has been increasing worldwide, the schemes implemented have been classified in four different types: cordon area around a city center; area wide congestion pricing; city center toll ring; and corridor or single facility congestion pricing.^[17]

Electronic Road Pricing Gantry at North Bridge Road, Singapore

At Old Street, street markings and a sign (inset) with the white-on-red C alert drivers to the congestion charge, London.

The control point at Liljeholmen, Stockholm.

[edit] Cordon area and area wide congestion pricing

Cordon area congestion pricing is a fee or tax paid by users to enter a restricted area, usually within a city center, as part of a demand management strategy to relieve traffic congestion within that area.^[18] The economic rationale for this pricing scheme is based on the externalities or social costs of road transport, such as air pollution, noise, traffic accidents, environmental and urban deterioration, and the extra costs and delays imposed by traffic congestion upon other drivers when additional users enter a congested road.^[19]

The first implementation of such a scheme was Singapore's Area Licensing Scheme in 1975, together with a comprehensive package of road pricing measures, stringent car ownership rules and improvements in mass transit.^[20][21] Thanks to technological advances in electronic toll collection, electronic detection, and video surveillance technology, charging congestion prices is now easier than in the past. Singapore upgraded its system in 1998^[22] (see Singapore's Electronic Road Pricing), and similar pricing schemes were implemented in Rome in 2001, as an upgrade to the manual zone control system implemented in 1998;^[23][24] London in 2003 and extended in 2007 (see London congestion charge); Stockholm in 2006, as seven month trial, and then on a permanent basis since August 2007^[25] (see Stockholm congestion tax); and since January 2008, Milan introduced a congestion pricing scheme as a one-year trial, called "Ecopass", and exempts low-polluting cars (Euro IV).^[26] On the first day of the scheme, traffic was estimated to be 40 percent lower than normal.^[27][28][29]

Although there has not yet been a comprehensive study, initial reports from the cities that have implemented congestion pricing schemes show traffic volume reductions from 10% to 30%,^[30] as well as reduced air pollution.^[31] Also, all cities report public controversy before and after implementation, making political feasibility a critical issue (see the city specific articles).

Singapore and Stockholm charge the congestion fee every time a user crosses the cordon area, while London charges a daily fee for any vehicle driving in a public road within the congestion charge zone, regardless of how many times the user crosses the cordon.^[32] Stockholm has put a cap on the maximum daily tax,^[33] while in Singapore the charge is based on a pay-as-you-use principle, and rates are set based on traffic conditions at the pricing points, and reviewed on a quarterly basis. Through this policy, the Land Transport Authority (LTA) reports that the ERP "has been effective in maintaining an optimal speed range of 45 to 65 km/h for expressways and 20 to 30 km/h for arterial roads".^[34]

[edit] Recent developments

In an effort to improve the pricing mechanism, and, to introduce real-time variable pricing, ^[35] Singapore’s LTA together with IBM, ran a pilot from December 2006 to April 2007, with a traffic estimation and prediction tool (TrEPS), 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.^[36][37]

On February 12, 2008, Transport for London (TfL) announced that on October 2008 the London congestion charge will have a new pricing structure based on potential CO₂ emission rates.^[38][39] While vehicles with the very lowest CO₂ emission rates will be exempted, those with higher rates will pay the new higher charge of GBP£25, with the rest paying the £8 that they pay today.^[40] However, the newly elected Mayor of London Boris Johnson announced that he will reform the congestion charge, particularly the plan to introduce the higher charge for the higher CO₂ emission rate vehicles, by October 2008; also he wants to re-examine and run a new consultation about the 2007 western expansion of the congestion charge zone; and he wants to facilitate the payment of the charge by allowing it on a monthly basis.^[41][42]

[edit] "Old Town" centers

Around Europe several small cities, such as Durham,^[43] England; Znojmo,^[44] Czech Republic; Riga,^[45][46] capital of Latvia; and Valletta,^[47][48] capital of Malta, have implemented congestion pricing to reduce traffic crowding and parking problems, particularly during the peak tourism season, in an effort to preserve their historical buildings and sites, several of which are World Heritage Sites, and to improve the quality of the urban environment and to reduce pollution in the Old Town areas.

Znojmo's Gothic Church of St. Nicholas is one of the most recognizable landmarks of this medieval town.

• Durham was the first congestion charge scheme introduced in the UK, in October 2002.^[49] The toll was located in the only public access road leading to the World Heritage Site of Durham Cathedral and Durham Castle. Prior to the introduction of the congestion charge around 3000 vehicles used the road on a daily basis, shared with up to 17,000 pedestrians a day.^[49] A year later, figures showed vehicle activity using the road fell by 85%.^[49] (see Durham City congestion charge)

• Znojmo town center has many architecture styles and well preserved historical buildings, including town walls and towers, which became the natural boundary to restrict car access. In order to charge the congestion fee, two toll machines were installed close to the original towers. After implementation, traffic volume entering the center was reduced by more than two thirds, and instead, many visitors now park outside the restricted area and go on foot.^[44]

• The City of Valletta is listed by UNESCO as a World Heritage Site. After implementation of the Controlled Vehicular Access an average of 7,900 of cars were entering the city every weekday in contrast to the 10,000 cars entering previously, and 400 parking spaces in the city are now available at any time of day. Also, it was reported a 60% drop in car stays by non-residents of more than eight hours, but there has been an marked increase of 34% in non-residential cars visiting the city for an hour or less.^[48][50]

[edit] Rejected proposals

• Hong Kong conducted a pilot test on an electronic congestion pricing system between 1983 to 1985 with positive results.^[51] However, public opposition against this policy stalled its permanent implementation.

• In 2002 Edinburgh, Scotland's capital, initiated the process to implement a congestion pricing scheme known as the Edinburgh congestion charge. A referendum was organised and conducted in 2005 by the City of Edinburgh Council.^[52] On February 22, 2005 the result was announced, with a majority of 74.4% rejecting the proposal.^[53][54] (see Edinburgh congestion charge)

• On March 05, 2008, councils from across the West Midlands in England, including those from the major cities of Birmingham and Coventry, rejected the idea of imposing congestion 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.^[55]

• The New York congestion pricing scheme was being considered by New York City as a three-year pilot program for implementation in Manhattan,^[56][57][58] but on July 2007, the New York State Senate shelved the proposal^[59] and created the New York City Traffic Congestion Mitigation Commission to study other options for reducing traffic. On January 31, 2008, this commission approved a plan for congestion pricing, with some changes from Mayor Bloomberg's original proposal, such as reducing the congestion zone, no charges for vehicles which stay within the zone, and a discount for low-emission trucks.^[60][61][62] The proposal was approved by the New York City Council on March 31, 2008 by a vote of 30 to 20^[63] but needed to be approved by the State legislature. The deadline to approve the plan by the State Assembly was April 7, 2008, for the city to be eligible to receive a US$ 354 million federal grant for congestion relief and mass transit improvements.^[64][65] On April 7, 2008, after a closed-door meeting, the State Assembly decided not to vote on the proposal, "...the opposition was so overwhelming,...that he would not hold an open vote of the full Assembly", Sheldon Silver, the Assembly Speaker said.^[66] Afterwards, the USDOT announced that they will now seek to allocate those funds to another proposals in other cities. Chances for the bill to return any time soon to the State Assembly are considered dim.^[67]

[edit] Current proposals

A map of Greater Manchester highlighting the two cordons in red. The M60 Manchester orbital motorway is proposed as the "greater" cordon, whilst Manchester City Centre will have an additional "inner" cordon.

• The Manchester congestion charge was proposed in 2007 as a congestion pricing scheme for the Greater Manchester county.^[68][69] The proposal considers two cordons, one covering the main urban core of the Greater Manchester Urban Area and another covering the Manchester City Centre.^[70] As of January 2008 seven of the local authorities in Greater Manchester support the scheme and three have rejected it. A two-thirds majority is required for the measure to pass.^[71] Wigan Metropolitan Borough Council are now planning to hold on a vote on continuing their support for the plans.^[71] (see Manchester congestion charge)

• San Francisco began studies in 2006 regarding the feasibility of applying congestion pricing to solve the city’s traffic congestion problem.^[72] In August, 2007, San Francisco was included in a federal program, together with New York City and Washington, D.C., to receive a federal grant in the amount of US$ 158,7 million with a deadline set on March, 31, 2008. San Francisco plans to combine congestion pricing with other improvements as means of reducing traffic congestion and raising money for transit.^[73] In addition to study congestion pricing on Dole Drive, a major approach to the Golden Gate Bridge, San Francisco transportation officials are considering a toll for entering downtown.^[74] On March, 2008, the Golden Gate Bridge District approved a resolution to implement congestion pricing at the Golden Gate Bridge, charging higher tolls during peak hours, but rising and falling depending on traffic levels. This decision allowed the Bay Area to meet the federal requirement to receive the USDOT Urban Partneship grant. The details of the congestion pricing scheme will be defined before a public hearing scheduled for June, 2008. The congestion toll must be in place by September 2009.^[75][76]

• Between 2007 and 2008, the U.S. Department of Transportion selected seven metropolitan areas for USD1 billion of federal funding of congestion pricing demonstration projects. These include the Golden Gate Bridge in San Francisco, Interstates 10 and 210 in the Los Angeles region, State Road 520 serving downtown Seattle and communities to its east, Interstate 95 between Miami and Ft. Lauderdale, Interstate 35 West serving downtown Minneapolis, and on- and off-street parking in Chicago. The projects are scheduled to be implemented through 2011.^{[citation needed]}

[edit] Congestion pricing in urban corridors and toll rings

"Costanera Norte" Freeway, crossing downtown with 100% free flow, Santiago, Chile

Congestion pricing has also been implemented in urban freeways. Between 2004 and 2005, Santiago de Chile implemented the first 100% non-stop urban toll for concessioned freeways^[77] passing through a downtown area, charging by the distance traveled (Autopista Central and Autopista Costanera Norte).^[78] Congestion pricing is now used during rush hours in order to maintain reasonable speeds within the city's core, thus keeping a minimum level of service for their customers.

Norway pioneered with implementation of electronic urban tolling in the main corridors of Norway's three major cities: Bergen (1986), Oslo (1990), and Trondheim (1991).^[79] Though initially intended only to raised revenues to finance road infrastructure, the urban toll ring at Oslo created an unintended congestion pricing effect, as traffic decreased around 5%. Also the Trondheim Toll Scheme has congestion pricing effects, as charges vary by time of the day. Norwegian authorities have been considering the use of congestion charges, as the legal basis were approved by Parliament in 2001^[80] As of February 2008 the regulations on Road Pricing have however not come into force.

[edit] Congestion pricing in single facilities

Further information: List of HOT lanes in the United States

Other recent application of congestion pricing policies in the urban transportation context is to adopt an innovative tolling for a particular limited purpose.^[81] The first of this kind of specific schemes was allowing users of low or single-occupancy vehicles to use a High-Occupancy Vehicle lanes (HOV) if they pay a toll. This scheme is known as High-occupancy toll (HOT) lanes, and it has been introduced mainly in the United States and Canada. The first practical implementations was California's private toll 91 Express Lanes, at Orange County, in 1995 (SOV toll, HOV3+ discount/free off-peak), followed in 1996 by California's Interstate 15, in San Diego (SOV toll, HOV2+ free). There has been controversy over this concept, and HOT schemes have been called "Lexus" lanes, as critics see this new pricing scheme as a perk to the rich.^[82][83][84]

[edit] Concerns and criticisms

Both in the academic literature and in practice, the implementation of congestion pricing for urban road travel has raised several concerns, and has been subject of debate and controversy.

[edit] Academic debate and concerns

Even the transport economists who advocate congestion pricing have anticipated several practical limitations, concerns and controversial issues regarding the actual implementation of this policy. As summarized by Cervero:^[85] "True social-cost pricing of metropolitan travel has proven to be a theoretical ideal that so far has eluded real-world implementation. The primary obstacle is that except for professors of transportation economics and a cadre of vocal environmentalists, few people are in favor of considerably higher charges for peak-period travel. Middle-class motorists often complain they already pay too much in gasoline taxes and registration fees to drive their cars, and that to pay more during congested periods would add insult to injury. In the United States, few politicians are willing to champion the cause of congestion pricing in fear of reprisal from their constituents... Critics also argue that charging more to drive is elitist policy, pricing the poor off of roads so that the wealthy can moveabout unencumbered. It is for all these reasons that peak-periord pricing remains a pipe dream in the minds of many."

Both Button ^[86] and Small et. al ^[87], have identified the following issues:

• The real-world demand functions for urban road travel are more complex than the theoretical functions used in transport economics analysis. Congestion pricing was developed as a first-best solution, based on the assumption that the optimal price equals marginal cost pricing of road space if all other goods in the economy are also marginal cost priced. In the real-world this is not truth, thus, actual implementation of congestion pricing is just a proxy of a second-best solution. Based on the economic principles behind congestion pricing, the optimal congestion charge should make up for the difference between the average cost and the marginal cost, the practical challenge of setting optimal link-based tolls is daunting given that neither the demand functions nor the link-specific speed-flow curves can be known precisely.Therefore, transport economist recognized that in practice setting the right price for the congestion charge becomes a trial and error experience.
• Inequality issue: A main concern is the possibility of undesirable distribution repercussions because of the heterogeneity of users. The use of the tolled road depends on the user's level of income, some cannot afford to pay the congestion charge, then this policy is likely to privilege the middle-class and rich. The users who shift to some less-preferred alternative are also worst off. The less wealthy are the more likely to switch to public transit. Road space rationing, is another strategy generally viewed as more equitable than congestion pricing. However, high-income users can always avoid the travel restrictions by owning a second car^[88] and users with relatively inelastic demand (such as a worker who needs to transport tools to a job site) are relatively more impacted.
• There are difficulties in deciding how to allocate the revenues raised. This is a controversial issue among scholars. The revenues can be used to improved public transport (like London), or to invest in new road infrastructure (like Oslo), or as some academics defend, they should be disposed as a direct transfer payments to former road users. This policy is not intended just to increased public revenues or to become in another tax, but this is precisely one of the main concerns of the taxpayers.

A more acceptable alternative, proposed by transport economists^[89] to avoid inequality and revenue allocation issues, is to implement a rationing of peak period travel but through mobility rights or revenue-neutral credit-based congestion pricing. This system will be similar to the existing emissions trading of carbon credits, proposed by the Kyoto Protocol to curb greenhouse emissions. Metropolitan area or city residents, or the taxpayers, will have the option to use the local government-issued mobility rights or congestion credits for themselves, or to trade or sell them to anyone willing to continue traveling by automobile beyond the personal quota. This trading system will allow direct benefits to be accrued by those users shifting to public transportation or by those reducing their peak-hour travel rather than the government.^[90][91]

[edit] Public controversy

The experience with the few cases of congestion pricing implemented in cordon area shows that a key aspect is the social and political acceptability. The public discontent or even rejection of this policy is due mainly to the inequality issues, the economic burden on neighboring communities, the effect on retail businesses and the economic activity in general, and the fears of the revenues to become just another tax.

The Stockholm congestion tax before its inception was a highly debated proposition, especially in the peripheral parts of Stockholm county, where residents who lived outside of the control points but worked in the city center argued that they should also have a say in whether the proposition was to be accepted. A seven month trial period was held between January 3, 2006 and July 31, 2006,^[92] and after that, local consultative referendums were held in Stockholm Municipality and several other municipalities in Stockholm County on September 17, 2006, regarding whether to permanently implement the congestion tax. However, it was only the referendum in Stockholm Municipality that the ruling government at that time would use as a basis for the decision. The referendum results in Stockholm were a 53% majority supporting permanent implementation. In the surrounding municipalities, especially those which are part of the Stockholm urban area, the referendum resulted in a majority of the citizens against the tax, with results for the YES proposition between 29.6% to 45.9%.^[93][94]

Some concerns have also been expressed regarding the effects of cordon area congestion pricing on economic activity and land use,^[95] as the benefits are usually evaluated from the urban transportation perspective only. However, congestion pricing schemes have been used with the main objective of improving urban quality and to preserve historical heritage in the small cities of Valletta, Malta^[96] and Znojmo, Czech Republic.^[97] The implementation of the London congestion charge was also controversial. Reports have shops and businesses being heavily impacted by the cost of the charge, both in terms of lost sales and increased delivery costs as recognised by the London Chamber of Commerce.^[98] However an independent report six months after the charge was implemented suggested that businesses were then supporting the charge. London major commissioned the study which reported that 49% of businesses felt the scheme was working and only 16% that it was failing.^[99] The Fourth Annual Review by TfL in 2004 indicated that business activity within the charge zone had been higher in both productivity and profitability and that the charge had a "broadly neutral impact" on the London wide economy.^[100]In May 2007, a survey of 150 local businesses stated they had seen an average drop in business of 25% following the 2007 extension of the charge area, which was disputed by Transport for London (TfL) which stated that there had been "no overall effect" on business and that it had outperformed the rest of the UK in the central zone during 2006.^[101]

The New York congestion pricing proposal also brought controversy, among politicians and interest groups on both sides of the debate. New York State Assembly opposing members expressed skepticism about the plan, raising several questions about its viability, its environmental effects on neighborhoods bordering the congestion zone, the lack of state control in Mayor Bloomberg's proposal, and the imposition of a regressive tax on some commuters.^[102][103] Since motorists will want to avoid the congestion pricing zone, opponents claim they will choose to park in neighborhoods just outside the pricing zone. This, in turn, would allegedly create "parking lots" and add more traffic and pollution to those neighborhoods.^[104] The installation of cameras for tracking purposes may also raise civil liberties concerns.^[105][106] Other opponents argue that the pricing could become a tax on middle- and lower-class residents, since those citizens would be affected the most financially.^[107] Other advocate groups proposed alternate approaches, non-intrusive, low-cost (almost no cost) traffic mitigation measures as an alternative to the city's congestion pricing scheme that would also qualify for the federal grant.^[108][109] In response to many of these issues, Bloomberg argued that a significant percentage of commuters will switch to public transportation, and most likely for all of their commute; thus cars would be taken off the road outside the Central Business District as well as within it. The New York proposal became stalled in April, 2008.^[110]

[edit] Congestion pricing in waterways

[edit] Panama Canal Transit Booking System and Transit Slot Auction

The Panama Canal has a limited capacity determined by operational times and cycles of the existing locks (with Pedro Miguel locks as the main bottleneck); the current trend towards larger (close to Panamax-sized) vessels transiting the canal, thus taking more transit time within the locks and navigational channels; and the need for permanent periodical maintenance works due to the aging canal, which forces periodical shutdowns of this waterway. On the other hand, demand is growing due to globalization and the rapid growth of international trade. Also many users require a guarantee of certain level of service. Despite the gains which have been made in efficiency, the Panama Canal Authority (ACP) estimates that the canal will reach its maximum sustainable capacity between 2009 and 2012.^[111] The long-term solution for the congestion problems is the expansion of the canal through a third set of locks. Works started on 2007 and are planned to finish by 2014, on the centenary of the opening of the canal. The third set of locks will also allow for transit of larger Post-Panamax ships, with a higher cargo capacity.

A Panamax ship in transit through the Miraflores locks, Panama Canal

Considering the high operational costs of the vessels (containerships have daily operational costs of approximately US$40,000), the long queues that occur during the high season (sometimes up to a seven-day delay), and the high value of the some of the cargo (motor vehicles and containers with electronics) transported through the canal, the ACP implemented a congestion pricing scheme to allow a better management of the scarce capacity available and to increase the level of service offered to the shipping companies. The scheme gives users two choices: (1) transit by order of arrival on a first-come first-served bases (known as FIFO in queuing theory), as the canal historically has operated; or (2) booked service for a fee, i.e., the congestion charge.

The booked service allows two options of fees. The Transit Booking System, available online, allowing customers who do not want to wait in queue, to pay an additional 15% over the regular tolls, and thus, guaranteeing a specific day for transit and crossing the canal in 18 hours or less. ACP sells 24 of these daily slots up to 365 days in advance. The second choice is high priority transit. Since April 1, 2006, ACP has available a 25th slot, sold through the Transit Slot Auction to the highest bidder.^[112] The main customers of the Transit Booking System are cruise ships, containerships, vehicle carriers, and non-containerized cargo vessels.^[113]

The highest toll for high priority passage paid through the Transit Slot Auction was US$220,300, charged on August 24, 2006 by the Panamax tanker Erikoussa,^[114] bypassing a 90-ship queue awaiting for the end of maintenance works on the Gatun locks, thus avoiding a 7-day delay. The normal fee would have been just US$13,430.^[115] The average regular toll is around US$54,000.

[edit] Airport congestion pricing

Many airports around the world are facing extreme congestion, runway capacity being the scarcest resource. Congestion pricing schemes have been proposed by economists to mitigate this problem, including slot auctions, such as the Panama Canal did, but implementation has been piecemeal.^{[116][117][118]} The Port Authority of New York and New Jersey implemented the world's first runway congestion pricing scheme in 1968, charging higher landing fees for peak-hour use by aircraft with 25 seats or less at Newark, Kennedy, and LaGuardia airports. As a result of the higher charges, general aviation activity during peak periods decreased by 30 percent. These fees were applied until deregulation of the industry, but higher fees for general aviation were kept to discourage this type of operations at New York busiest airports. In 1988 the Massachusetts Port Authority adopted a higher landing fee for smaller aircraft at Boston’s Logan Airport as part of the Program for Airfield Capacity Efficiency (PACE). As a result, much of the general aviation abandoned Logan for secondary airports.^[119] In both US cases the pricing scheme was challenged in court. In the case of Boston, the judge rule in favor of general aviation users due to lack of alternative airports. In the case of New York, the judge dismissed the case because "the fee was a justified means of relieving congestion".^[120]

Queueing in the runway at London Heathrow Airport, ranked as the world's third busiest

Congestion pricing has also been implemented for scheduled airline services. The British Airports Authority (BAA) has been a pioneer in implementing congestion pricing for all types of commercial aviation. In 1972 implemented the first peak pricing policy, with surcharges varying depending on the season and time of the day, and by 1976 raised these peak charges. Heathrow had seven pricing structures between 1976 and 1984. In this case it was the US carriers that went to international arbitration in 1988 and won their case.^[121]

In 1991, the Athens Airport charged a 25% higher landing fee for those aircraft arriving between 11:00 and 17:00 during the summer (high tourism season). Hong Kong charges an additional flat fee to the basic weight charge.^[122] Between April 1991 and March 1992, British Airports Authority again implemented peak pricing at London's main airports: Heathrow, Gatwick and Stansted. Airlines were charged different landing fees for peak and off-peak operations depending on the weight of aircraft.^[123] For example, in the case of a Boeing 757, the peak landing fee was about 2.5 times higher than the off-peak fee in all three airports. For a Boeing 747 the differential was even higher, as the old 747 carries a higher noise charge.^[124] Though related to runway congestion, the main objective of these peak charges at the major UK airports was to raise revenue for investment.

[edit] See also

• Commons dilemma
• Energy demand management (Congestion pricing applied to electric utilities)
• Externalities
• Pareto efficiency
• Pigovian tax
• Road pricing
• Road space rationing
• Smeed Report
• Tragedy of the Commons
• Transport economics
• Variable pricing
• Welfare economics

[edit] References

[edit] External links

• Alternative approaches to congestion pricing. Website of the Keep NYC Congestion Tax Free
• Congestion Pricing: A Primer. FHWA. December 2006
• Congestion Pricing: A smart solution for reducing traffic in urban centers and busy corridors. Website of the Environmental Defense Fund
• Congestion Pricing - Paying Your Way in Communication Networks
• Congestion Reduction Demonstration - USDOT
• Electronic Tolling/Congestion Pricing - USDOT
• Policy Corner - USDOT
• Online TDM Encyclopedia: Road Pricing - Congestion Pricing, Value Pricing, Toll Roads and HOT Lanes. Victoria Transport Policy Institute
• Online TDM Encyclopedia: Vehicle Restrictions - Limiting Automobile Travel At Certain Times and Places Alternatives to congestion pricing
• Road User Charging Schemes Worldwide. U.K. Commision for Integrated Transport
• Transportation Research Board Committee on Congestion Pricing. National Academies of Sciences, Transportation Research Board. Current
• Urban Partnerships - USDOT.*

[edit] Bibliography

• Small, Kenneth A.; Verhoef, Erik T. (2007), The Economics of Urban Transportation, Routledge, New York, ISBN 978-0-415-28515-5 
• Button, Kenneth J. (1993), Transport Economics 2nd Edition, Edward Elgar Publishing Ltd, London, ISBN 978-1852785239 
• Cervero, Robert (1998), The Transit Metropolis, Island Press, Washington, D.C. Chapter 6, ISBN 1-55963-591-6 
• Doganis, R. (1992), The Airport Business, Routledge, London, ISBN 978-0415081177 
• McDonald, J.F.; d'Ouville, Edmond L.; and Louie Nan Liu (1999), Economics of Urban Highway Congestion and Pricing (Transportation Research, Economics and Policy Volume 9), Springer, New York, ISBN 978-0792386315 
• Walters, A. A. (1968), The Economics of Road User Charges, World Bank Staff Occasional Papers Number Five, Washington, D.C., ISBN 978-0801806537 
• Smeed, R.J. (1964), Road pricing: the economic and technical possibilities, HMSO