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Road Pricing Defined

Road Pricing as a Demand Management Tool

In addition to serving as a revenue source for transportation, road pricing in the form of congestion pricing can act as a tool for demand management. The variability of pricing depending on traffic conditions and policies capitalizes on market forces to manage the utility of finite roadway capacity.

Some facilities may experience sufficient demand to act as a source of revenue generation beyond pricing's ability to manage demand, however many facilities do not generate excess revenue beyond that to cover operations and debt service payments, if applicable. In fact, the funding of these facilities often involves revenue sources or financing beyond that which can be achieved through tolls alone.

There are four congestion pricing approaches that involve the collection of tolls:

  1. Priced Managed Lanes - "Partial facility" pricing involving one or more lanes on a roadway facility

    Rather than pricing the capacity of an entire facility, individual lanes (often one or two in both directions) can may be priced and operate parallel to the free general purpose lanes. Priced managed lanes offer a new and reliable travel alternative in congested roadway corridors for transit riders, HOV motorists and paying non-HOV drivers.

    There are two operating forms of priced managed lanes:
    • High-occupancy toll (HOT) lanes use price, occupancy and access restrictions to manage the number of vehicles traveling on them, thereby maintaining free-flow traffic conditions, even during peak travel periods. Typically, qualifying HOVs may use these limited-access highway lanes for free or at a reduced cost. Motorists in vehicles that do not meet passenger occupancy requirements may choose between the general-purpose lanes or paying for premium conditions in the HOT lanes.

      HOT lanes use electronic toll collection and traffic information systems that make it possible to provide variable, real-time toll pricing for non-HOV vehicles. Motorists receive information on price levels and travel conditions via variable message signs, providing potential users with information they need to decide whether or not to use the HOT lanes or the general-purpose lanes.
    • Express Toll Lanes (ETLs) are dedicated managed lanes within highway rights-of-way that motorists may use by paying a variably priced toll. They are also typically located next to the median to encourage travel for longer distance trips. Unlike HOT lanes, ETLs charge all vehicles - including HOVs - for passage. In some cases they may also offer discounted passage for HOVs, but ETLs do not incentivize ride sharing to the extent that HOT lanes do. Enforcement is much simpler and less costly than HOT lanes because there is no need to enforce vehicle occupancy. ETL concepts are also attractive to transportation agencies that want to use toll revenues to cover the cost of new construction and operation.

      Operating Examples

      As shown below, as of October 2013, there are 20 priced managed lane facilities operating across the country and an additional 22 are under construction. Several others are in different stages of planning, with many nearing construction. These new projects offer great diversity in their design and involve the conversion or extension of existing HOV facilities to priced operation, as well as investments in mega-projects with multiple lanes and points of access and egress. In addition, a number of metropolitan regions are moving forward with plans to develop networks of managed lanes that provide improved access and new travel options.

      See the FHWA Guide for Priced Managed Lane Development for detailed information on these innovative projects.

      Priced Managed Lanes Operating or in Construction

      February 2017
      Priced Managed Lanes Operating or in Construction, June 2015

      Download full sized version of map (pdf)
  1. Priced Highways - "Full facility" pricing of all lanes on a roadway facility
    These facilities charge tolls that vary by time of day or congestion level such that peak period travel is more expensive than off-peak travel, encouraging some trips to move to off-peak periods or other travel modes, such as transit. In this manner, the duration of peak-period congestion is reduced or eliminated, increasing the reliability of a user's trip and allowing for more efficient use of system capacity from a time-of-day and physical (lane-mile) standpoint. Variable toll rates can be fixed on a particular schedule or vary dynamically based on real time traffic conditions. Electronic toll collection is critical to these systems' efficient operation.

    Operating Example

    Variable Pricing on Existing Toll Facilities - Bridges in Lee County, Florida: Variable pricing began August 3, 1998, on the Midpoint and Cape Coral toll bridges in Lee County, Florida. Bridge travelers are offered a 50 percent discount on their toll if they travel during specific discount periods and pay their toll electronically. The discount periods are 6:30 to 7 am, 9 to 11 am, 2 to 4 pm, and 6:30 to 7 pm. This toll structure was developed to encourage drivers to shift from peak periods to off-peak/discount periods.

  2. Priced Zones - Area or cordon pricing

    Priced zones minimize congested conditions in dense urban environments (generally city centers and the corridors providing access to them) by charging vehicles for travel during peak periods, either as they pass a set boundary (cordon) or travel within a specified zone (area). A wide range of charging options exist for these facilities, including varying charges by time-of-day, by vehicle type, and by entry point. Charges can also be levied once (per 24-hour period) or each time the cordon is passed or the zone is entered. To date, such facilities are only in operation internationally.

    Operating Examples

    Cordon pricing - Stockholm Congestion Tax (Trängselskatt): Stockholm is the most recent, large international city to deploy cordon pricing. It was first introduced on a test basis from January 2006 to July 2006. The "trial" results were favorable, with public acceptance increasing throughout the trial, from under 30 percent approval before the trial to over 55 percent towards the end. There was an immediate 22 percent drop in vehicle trips, a decrease in travel times, and a large shift to public transit - ridership on inner-city bus routes rose 9 percent. Buses, taxis and distribution vehicles reported reductions in travel times. Traffic accidents involving injuries fell by 5 to 10 percent. Exhaust emissions decreased by 14 percent in the inner-city and 2 to 3 percent in Stockholm County. Residents of the City of Stockholm voted for continuation of the system in a referendum on September 17, 2006. It was reinstated on a permanent basis in August 2007. Follow the link to a cost-benefit analysis of the program.

    Area pricing - Central London Congestion Charging: On February 17, 2003, London implemented a plan for using pricing to combat congestion in central London. The scheme involves a standard per-day charge for vehicles traveling within a zone bounded by an inner ring road. The majority of the revenues from the charge are expended on transit improvements and services. Motorists are currently charged £8 a day to drive within the central city zone between 7 am and 6:30 pm on Monday through Friday. Drivers using a vehicle in the central zone pay the charge either in advance or on the day of travel. Drivers are able to pay on a daily, weekly, monthly, or annual basis by telephone, regular mail, Internet, or at retail outlets. The registration numbers of their vehicles are entered into a database. A network of fixed and mobile cameras observes the license plates of vehicles entering or moving within the central zone. There are no tollbooths, gantries or barriers. Drivers do not have to stop. Their license plate numbers are matched against vehicle registration numbers of those who have paid the charge. A number of exemptions from the charging plan are allowed, including a 90 percent discount for residents. Additional information is provided in the annual report for the program.

  3. Priced Road Networks - "Network" pricing of some or all lanes of a roadway network in an area or region

    Operating Examples

    Urban Expressway System Pricing-Singapore Electronic Road Pricing: Singapore introduced peak-period pricing during the morning rush hours in 1975. In spring 1998, the city shifted to a fully automated electronic charging system, with in-vehicle electronic devices allowing payment by smart card, and enforcement using cameras and license plate reading equipment. Variable electronic charges were also introduced on the expressway system, with charges set by time of day to ensure free flow of traffic. The system, the first of its kind in the world, has reduced traffic by 13 percent and increased vehicle speed by 22 percent. The system generates about US$70 million in revenue annually. Operating costs amount to about 7% of annual revenue. It should be noted that in addition to its priced roadway network, Singapore also levies an area pricing fee for vehicles entering the central business district during weekdays. Follow this link for further information.

    Nationwide Expressway System Pricing - Heavy Goods Vehicle Tolling (Germany): In January 2005, Germany implemented a new system to toll trucks on the autobahns. An average user charge of Euro 0.15 per kilometer (about $0.38 per mile) replaced the previous fees for time-based permits called "Euro Vignette." All trucks with a permissible gross weight of 12 or more tons are charged electronically using Global Positioning Systems (GPS). The tolls are based on distance traveled, number of axles, and the vehicle's emissions class. Net toll revenues go toward funding for transportation infrastructure. Further information is available in a publication issued by University of Minnesota Hubert Humphrey Institute for Public Affairs.

Further information on road pricing as a management tool is also available on FHWA's Electronic Tolling / Congestion Pricing webpage.

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