What Congestion Pricing Is, and Why You Should Care

Congestion pricing is a concept intended to reduce traffic in cities. Here's how it works and what it means for drivers.

Aidan Keefer | 

Nov 9, 2023 | 3 min read

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Congestion pricing is a series of charges applied to drivers in high-traffic areas with the intent of reducing waste and overcrowding on roadways. Unsurprisingly, the concept is generally focused on metropolitan centers, as recent years have seen worsening traffic in many cities in the United States. Looming return-to-work mandates threaten to aggravate the situation.

Higher costs for accessing city roadways would theoretically mean fewer drivers, thereby encouraging residents to walk, bike, or use public transit to get to their destination. For those who drive regularly, these changes could lead to increased commuting costs — through tolls, taxes, and additional fees — in the near future.

Congestion Pricing Is Not a New Concept

The concept of congestion pricing was first popularized by economist William Vickrey in 1952. In his initial proposal for New York City, Vickrey focused his attention on the metro rather than vehicles — fares for the public transportation system would increase during peak times and adjust based on the length of a rider's trip. This came at a time in the U.S. when vehicle ownership wasn't nearly as high as it is today.

Congestion pricing has since caught on internationally as a tax on drivers in major metropolitan areas, including Singapore, London, and Stockholm. In the U.S., the practice was first widely introduced in 2007 by the U.S. Department of Transportation via the Urban Partnerships Congestion Initiative. This short-term test project applied to major freeways in San Francisco, Seattle, Miami, Minneapolis, Chicago, and Los Angeles, and showed mixed signs of success as a traffic reducer and tax generator. Since then, it has become more seriously proposed as a full-time application.

How Congestion Pricing Is Calculated

As with other region-specific charges, the costs of congestion pricing for city drivers will likely vary. That said, local governments generally consider a few different ways to implement these fees. They include:

• Variably priced lanes — tolls on separated lanes within a highway can let drivers decide if they'd prefer to pay for the express lane instead of hitting traffic in high-occupancy lanes
• Variable tolls on entire roadways — fees could change during different times of the day on toll roads and bridges, as well as on existing toll-free roads during rush hours
• Cordon charges — variable or fixed fees to drive within a specific area that's predetermined as congested and cordoned off
• Area-wide charges — per-mile charges on roads within a designated zone, where fees adjust in real time based on current traffic conditions

Why Congestion Pricing Is Back in the News

New York City is close to implementing its own congestion prices as designated by the state government, which would aim to reduce traffic in the lower half of the Manhattan borough. The city would implement a combination of area-wide and variable toll fees to track and charge drivers in the city.

For drivers using Manhattan roadways, the costs of travel could range from $9 to $23, depending on varying factors. Within these rules, some exemptions are being considered:

• Local drivers with income under $60,000 per year
• Emergency vehicles
• Those who live in areas where they can't safely access downtown Manhattan via public transit

New York City's goal would be to reduce congestion, improve air quality, and bring in tax revenue that funnels back to public transit, like the MTA local subway system. Early projections are targeting as much as $1 billion in yearly revenue, indicating just how much congestion pricing could economically impact city drivers.

Aidan Keefer

Aidan Keefer is a writer and strategist focused on finance and insurance for the consumer and commercial markets, especially as those topics pertain to the automotive industry. Currently based in New York City, Aidan grew up in New Jersey — where he's navigated some of the most aggressive, unforgiving roads on the East Coast. Outside of writing about finance and insurance trends, Aidan can be found watching old movies or checking out the latest brewery opening.