Congestion pricing is the charging of a toll, or fee, for automobiles and other motor vehicles to enter or use specific roads or areas in order to reduce vehicle use and thereby reduce traffic congestion.
Reducing traffic congestion can not only increase the speed of travel but can also produce a variety of other benefits, particularly for the environment and public health. They include reducing air pollution, reducing traffic accidents, improving access for ambulances and other emergency vehicles, improving walkability, and encouraging the use of alternative transportation.
Congestion pricing has become increasingly economical to implement because of the dramatic reduction in cost and improvement in reliability of tolling hardware and software in recent years. It is usually the most successful when attractive alternative transportation options are available.
The tolls can be constant, can vary according to the time of day and the day of the week, or can change dynamically according to the current level of congestion. In addition to (1) recovering the costs of collecting of them, the funds obtained from tolling can be used (2) to reduce the rates of other forms of taxation, such as income taxes and sales taxes, (3) to offset the negative externalities of road transport and (4) for mitigating the negative effects of congestion pricing, such as by providing rebates for adversely affected small businesses and by improving alternative transportation.
Congestion pricing is being increasingly deployed in various urban areas because of both the growing awareness of its benefits and the declining cost of implementation. Among the oldest and best-known examples for city centers are Singapore and London.