Road Pricing

Road pricing (also road user charges) are direct charges levied for the use of roads, including road tolls, distance or time based fees, congestion charges and charges designed to discourage use of certain classes of vehicle, fuel sources or more polluting vehicles. These charges may be used primarily for revenue generation, usually for road infrastructure financing, or as a transportation demand management tool to reduce peak hour travel and the associated traffic congestion or other social and environmental negative externalities associated with road travel such as air pollution, greenhouse gas emissions, visual intrusion, noise and road accidents.

In most countries toll roads, toll bridges and toll tunnels are often used primarily for revenue generation to repay for long-term debt issued to finance the toll facility, or to finance capacity expansion, operations and maintenance of the facility itself, or simply as general tax funds. Road congestion pricing for entering an urban area, or pollution charges levied vehicles with higher tailpipe emissions are typical schemes implemented to price externalities. The application of congestion charges is currently limited to a small number of cities and urban roads, and the notable schemes include the Electronic Road Pricing in Singapore, the London congestion charge, the Stockholm congestion tax, the Milan Area C, and high-occupancy toll lanes in the United States. Examples of pollution pricing schemes include the London low emission zone and the discontinued Ecopass in Milan. Mileage based usage fees (MBUF) or distance based charging has been implemented for heavy vehicles based on truck weight and distance traveled in New Zealand (called RUC), Switzerland (LSVA), Germany (LKW-Maut), Austria (Go-Maut), Czech Republic, Slovakia, Poland, and in four U.S. states: Oregon, New York, Kentucky and New Mexico.

Many recent road pricing schemes have proved controversial with a number of high profile schemes in the U.S. and the UK being cancelled, delayed or scaled back in response to opposition and protest. Critics maintain that congestion pricing is not equitable, places an economic burden on neighboring communities, has a negative effect on retail businesses and on economic activity in general, and is just another tax. A 2006 survey of economic literature on the subject, however, finds that most economists agree that some form of road pricing to reduce congestion is economically viable, although there is disagreement on what form road pricing should take. Economists disagree over how to set tolls, how to cover common costs, what to do with any excess revenues, whether and how “losers” from tolling previously free roads should be compensated, and whether to privatize highways.