The root causes of traffic congestion have long been understood, and there is now broad consensus that congestion generally reflects a fundamental imbalance of supply and demand. For example, during the rush hours in many major metropolitan areas the supply of roadway capacity is insufficient to meet the demand for those facilities. Economists have long understood that such an imbalance stems from inefficient pricing, where the true costs of usage are not reflected in prices paid by the users. For example, travelers are not generally charged for the impact their trip will have on others using the same facility (e.g., increased levels of congestion) or on other members of society (e.g., increased air pollution).
With congestion pricing, tolls typically vary by time of day (demand) and are collected at highway speeds using electronic toll collection technology. Traffic flows freely, and there are no toll booths. Vehicles are equipped with electronic devices called transponders or "tags", which are read by overhead antennas. Toll rates for different time periods may be set in advance, or they may be set "dynamically" - that is, they may be increased or decreased every few minutes to ensure that the lanes are fully utilized without a breakdown in traffic flow.
With user charges assessed at the point of use, greater efficiency results through improved response to market forces. As with market pricing in other sectors of the economy (such as cell phone use), road pricing helps allocate limited supply - in this case that of available road space. The price provides drivers with incentives to shift some of their trips to off-peak times, less-congested routes, or alternative modes. Some lower-value trips will be combined with other trips or will be eliminated.
There are four main types of pricing strategies: Variably priced lanes, including variable tolls on separated lanes within a highway, such as Express Toll Lanes or HOT lanes; variable tolls on entire roadways; cordon charges that are either variable or fixed charges imposed on drivers while traveling within or into a designated city area; and per-mile charges on all roads within an area (area-wide charges) that may vary by level of congestion.
Although drivers unfamiliar with the concept initially have questions and concerns, surveys show that as drivers become more experienced with congestion pricing they come to support it because it offers them a reliable trip time, which can be very valuable when it is critical that they be somewhere on time. Transit and ridesharing advocates appreciate the ability of congestion pricing to generate both funding and incentives to make transit and ridesharing more attractive.
Congestion pricing is also an effective way to fairly allocate the costs associated with operating, maintaining, and expanding the transportation system to meet growing travel demand. And, it provides important market signals to better identify where to make new investment in transportation. Finally, it holds the potential to help with transportation funding shortfalls by generating additional revenue.