Congestion Pricing: Paying to use the Road

Bente de Leeuw, Denissa Purba, Robert Zhang
University of Illinois at Urbana-Champaign

A lot of cities are currently implementing congestion pricing to ease traffic congestion or decrease pollution. In early 2019[1], New York declares that this city will join others to implement its first congestion pricing. But many are asking: what is congestion pricing, and why is it effective?

In implementing congestion pricing in the local traffic network, there are several methods to use. But before congestion pricing can be implemented, let us first determine a simple transportation network problem!

Imagine several alternative routes in a transportation network that we can choose to take us from point A to point B. There will be at least one route among those that is the fastest route. Obviously, we will choose that route. As we have many people, they will also choose this route from point A to point B. However, our road segment has its capacity! As most people will take the route, each road segment will become congested.

Due to this congestion, the initial fastest route would not the reliable one anymore. This would lead other people to take the other alternative route, which is quicker than being stuck in a rush. This mechanism of selecting routes within each user will keep iterated until all the routes are in “equilibrium” — there is no better route to go from point A to point B.

This condition is achieved by assuming that each driver tries to minimize their travel time. In its application, this type of travel behavior would result in non-optimum system performance. We will have some highly congested roads, while other roads are underused. One strategic policy in accommodating the system optimal is Congestion Pricing!

In Congestion Pricing policy, the government can change the equilibrium system and promote the system optimum by conditioning the driver to take the longer route through adding pricing schemes on a set of targeted alternative routes. Earlier, the travel time is be determined only by the performance of the road carrying numbers of vehicles. After introducing the pricing schemes, the travel time would also depend on the assigned toll.

Every driver that is using the roads needs to pay the toll to take the route. If we assign a higher toll on the fastest route, that makes the travel time less reliable than the other alternative routes, people will swift from the fastest road and take the other alternative route. This mechanism will reduce the congestion at the highly congested route by redistributing the flow into the other alternative roads. Thus, it gives the network a better performance.

Depending on the improvement that the government wants it can either charge people for driving into/through a specific zone, using a specific road or using the car at all.

Let’s see this interesting video!

Congestion Pricing Policy in London

London has implemented the congestion pricing system since 2003. Initially, London drivers are charged a fee of £5 (about US$6.50) when they travel to the city center on weekdays. The initial measures had a considerable impact in the first year; traffic congestion was reduced by 30%, bus speed increased by 6%, and exhaust emissions were reduced by 12%.

However, in recent years, the traffic congestion situation has sharply deteriorated due to the proliferation of app-based rental vehicles such as Uber, which were initially free of tolls[2]. Therefore, the London government will cancel this exemption on carpooling and initiate the congestion pricing starting April 8.

Congestion Pricing Policy in Stockholm

In Stockholm, the congestion charging system consists of a toll cordon around the city center to reduce traffic entering the city center through blocked arteries. Figure 1 shows the pricing policy area in the entire Stockholm city center[3]. 18 unmanned electronic control points have been set up at all entrances to the cordon, and taxes are levied on entry and exit to the area.

On working days, regardless of which direction you pass through the cordon, the cost is as follows: Peak hours (7:30–8:30 in the morning / 4–5:30 in the afternoon) 2 euros, 1.5 euro for 30 minutes before and after peak hours. From 6:30 in the morning to 6:30 in the afternoon, the remaining time is 1 euro. The total charge per day is capped at 6 Euros. There is no charge for evenings, weekends/holidays, and no charge for emergency vehicles, transit vehicles, and other government vehicles and vehicles with parking permits for the disabled.

During the congestion period, the toll cordon’s traffic volume was reduced by about 20%, which is equivalent to 100,000 passages passing through the toll cordon every day. This policy has also reduced the arteries’ congestion by about 30–50% and the emissions within the city by 10%-14%. The variability of travel time is also significantly reduced.

Figure 1 Stockholm Congestion Pricing Area


1 The Associated Press. (2019). “New York City drivers will soon have to pay for the privilege of sitting in traffic”. USA Today. Link:[Accessed on 5 December 2020}

2 Litman, T. (2005). London congestion pricing–implications for other cities. CESifo DICE Report, 3(3), 17–21.

3 Eliasson, J., Hultkrantz, L., Nerhagen, L., & Rosqvist, L. S. (2009). The Stockholm congestion–charging trial 2006: Overview of effects. Transportation Research Part A: Policy and Practice, 43(3), 240–250.

4 E. Kontou, “CEE 598 UTM Lecture Notes,” University of Illinois at Urbana-Champaign, 2020.