or congestion charges
is a system of surcharging users of public goods that are subject to congestion through excess demand
such as higher peak charges for use of bus services, electricity
, metros, railways, telephones, and road pricing to reduce traffic
congestion; airlines and shipping companies may be charged higher fees for slots at airports and through canals at busy times. This pricing strategy
regulates demand, making it possible to manage congestion without increasing supply. Market economics theory, which encompasses the congestion pricing concept, postulates that users will be forced to pay for the negative externalities they create, making them conscious of the costs they impose upon each other when consuming during the peak demand
, and more aware of their impact on the environment.
The application on urban roads is currently limited to a few cities, including London, Stockholm, Singapore, Milan, and Gothenburg, as well as a few smaller towns, such as Durham, England; Znojmo, Czech Republic; Riga (the scheme ended in 2008), Latvia; and Valletta, Malta. Four general types of systems are in use; a cordon area around a city center, with charges for passing the cordon line; area wide congestion pricing, which charges for being inside an area; a city center toll ring, with toll collection surrounding the city; and corridor or single facility
congestion pricing, where access to a lane or a facility is priced.
Implementation of congestion pricing has reduced congestion in urban areas, but has also sparked criticism and public discontent. 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 represents another tax levy
A 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. Also, concerns regarding fossil fuel
supply and urban transport high emissions of greenhouse gases in the context of climate
change have renewed interest in congestion pricing, as it is considered one of the demand-side mechanisms that may reduce oil consumption.