New York joins the small club of Congestion Charging cities: what have we learnt so far?

IN A LONG-AWAITED step for North America, New York City (NYC) began operating a system of congestion charging on 5 January 2025. This applies to Manhattan south of 60th Street, an area of 8.7 square miles – very similar to London’s congestion charging zone. Drivers in passenger vehicles and motorcycles are charged the toll once per day upon entering the Congestion Relief Zone. Drivers in trucks or buses (other than commuter buses) are charged for every entry into the Zone. The daytime toll for passenger and small commercial vehicles is US$9, and up to $22 for trucks and buses. Taxis are charged $0.75per trip. Enforcement is by means of infra-red cameras reading licence plates, with penalties imposed by the Metropolitan Transportation Authority. The stated objectives are to reduce traffic and travel times, lead to safer streets and cleaner air, and raise revenue for improvements to the subway system.

This may all be rather familiar to TAPAS readers as an echo of what happened in London over twenty years ago now. And the outcomes appear rather similar too.

Traffic data from the first week of operations of the NYC scheme showed a 7.5% reduction compared with the same period in the previous year, with reduction in journey times into the Zone of around 40% (ref 1). Analysis by vehicle type indicates the main impact to be on private vehicles, reduced to 34% of traffic from 40% previously, while yellow taxis were up at 23%, compared to 16% before. However, detailed traffic monitoring shows that impacts vary considerably according to location (ref 2).

Toll revenue is projected to be about UD$500m a year, although the funds available for investment would be less, after operating costs of around 25% of revenue are taken into account.

NYC has become the fourth major metropolis to adopt congestion charging, after London, Stockholm and Singapore. However, the future of congestion charging in NYC is in doubt since the Trump administration plans to reverse a federal approval granted last year, setting up a legal showdown over the tolling initiative.

I recently had a number of enquiries from US media about congestion charging in London, likely prompted by a 2018 published paper of mine comparing the three prior cities (ref 3). These are the main points.

London

Congestion charging was implemented in a zone in Central London in February 2003. The initial charge of £5 per day was raised to £8 in 2005, to £10 in 2011, to £11.50 in 2014, and in 2020 to the current charge of £15 per day for driving a vehicle within the designated zone between 07.00 and 18.00, Monday to Friday, and 12.00 to 18.00 Saturday and Sunday. A range of discounts and exemptions are available for certain groups and in respect of certain vehicles, including exemptions for taxis, private hire vehicles and low carbon emission vehicles, and a 90 per cent discount for residents of the charging zone. The charging scheme is operated by Transport for London (TfL) the public body responsible for public transport and major roads. Six detailed annual reports were published up to 2008 (ref 4), after which reporting was included in TfL’s main annual report series ‘Travel in London’.

The final annual report directly focused on London’s congestion charging provides a perspective on five years’ experience of operations in the central zone. The initial introduction of charges in 2003 led to a reduction of car traffic entering and leaving the zone of 33 per cent almost overnight, following which entering/leaving traffic of all kinds has remained at broadly stable levels. For the totality of four-wheeled vehicles, including cars, vans, lorries, buses and taxis, the initial reduction was 18 per cent, followed by relative stability. The increase in the charge in 2005 had virtually no further impact on traffic levels, which suggests that those car users more sensitive to price had largely been deterred by the initial £5 charge, and that the remaining car users are less sensitive to additional charges. Such relative price inelasticity may be due to factors such as the congestion charge being a relatively smaller proportion of the overall running costs of more expensive cars, or to the charge being treated as a business expense.

TfL estimates congestion by reference to the ‘excess travel rate’ – minutes per kilometre (the inverse of speed), comparing travel rates in the early hours of the morning with those during charging hours. Immediately prior to the introduction of charging, the mean excess travel rate was 2.3 min/km. With charging in place there was an initial 30 per cent reduction to 1.6 min/km. However, this parameter steadily increased in subsequent years, returning to 2.3 min/km by 2007, despite the increase in charge in 2005.

So, although introduction of congestion charging led to a significant and sustained reduction in traffic entering the zone, the initial impact on congestion proved short-lived. TfL accepts that congestion within the zone has returned to its previous level, despite there continuing to be less traffic – indeed, traffic in central London has been on a downward trend since the introduction of congestion charging (ref 5). Continued congestion is attributed to providing more road space for walking and cycling, and improvements to public transport, urban realm and road safety; other factors cited include reduction in effective capacity of the road network due to street works and major building works; and changed timings of traffic signals for reasons of traffic management and pedestrian safety.

London’s congestion charging scheme has been successful in many respects: implementation was the result of skilful political leadership; there is good public acceptability, with no pressure to withdraw or reduce the charge, although a Western extension to the charging zone, introduced by mayor Ken Livingstone was withdrawn by his successor, Boris Johnson, as a political decision. The technology, which uses number plate recognition cameras to enforce compliance, has proved reliable. Moreover, there is a useful net financial surplus to support public transport provision, worth £170m in 2023/04.

However, the main purpose of the London congestion charging zone was avowedly to reduce congestion and journey times, and in this respect it has not succeeded. What was observed was an immediate reduction in time delays after introduction of the charge, followed by a rebound over time to previous congestion levels. Analysis by tomtom, a provider of digital navigation services, found that London traffic was the slowest moving in Europe in 2024 (ref 6).

Stockholm

Congestion charges were introduced in Stockholm in 2006 as a seven month trial, followed by a referendum where a majority voted in favour of retaining the charges, which led to the permanent reintroduction of congestion charges in 2007. The charging system consists of a cordon around the inner city, with a time differentiated toll being charged in each direction – of 35 SEK (about £3) at peak times. Vehicles passing the control points are identified through automatic number plate recognition. Traffic across the cordon was reduced by around 20 per cent following introduction of the charge, a reduction that has remained stable over time.

Stockholm’s charging system consists of a cordon around the inner city, with a time differentiated toll being charged in each direction – of 35 SEK (about £3) at peak times.

Significant reductions in congestion were observed, comparing a period before introduction of the charge with the period immediately after, the magnitude depending on the class of road and the time of day and of year. However, there appear to have been no measurements of congestion beyond the short-term impact, so it is not possible to assess whether congestion reduction has been permanent, or whether temporary, as in London.

As for London, the Stockholm charging scheme reflects effective political leadership; the technology based on number plate recognition has worked well; and useful revenues have been generated. The successful employment of a trial period of operation provides a good example of how to gain public support for a controversial intervention. But the impact on traffic congestion in the medium term is unproven.

Singapore

Singapore introduced a congestion charge based on a paper licence in 1975, which was replaced in 1998 with Electronic Road Pricing (ERP), utilising a payment card inserted into an on-board unit that interacts with an exterior system of radio beacons mounted on gantries, payment being monitored by means of number-plate recognition cameras. The scheme covers a central restricted zone plus lower charges on four further zones. The aim is for vehicles to travel at a consistent speed in the restricted zone – between 20 and 30 km/h on urban roads and between 45 and 65 km/h on expressways. Accordingly, charges are assessed quarterly by measuring average speeds: if speeds fall below a threshold, charges are increased to reduce the volume of traffic, whereas if speeds are above the threshold, charges are reduced. Charges also vary by vehicle class, time of day and location. Traffic levels are quite sensitive to prices even though the charges are relatively low. Traffic volumes in the central business district were reduced by about 10–15 per cent following the introduction of ERP.

The Singapore ERP scheme covers a central restricted zone plus lower charges on four further zones. There are plans to replace it with a system based on Global Navigation Satellite Systems (GNSS) technology more responsive to managing traffic conditions, and offering the option of charging by distance travelled.

Importantly, Singapore is a city-state without a rural hinterland. Accordingly, private car ownership has long been limited through a licence bidding system aimed at restraining growth of the car stock to match planned increase in available road space. Vehicles are consequently expensive to acquire: a Certificate of Entitlement to own a car for 10 years may cost around S$100,000 (about £60,000), and car ownership is only about 100 cars per 1000 population, compared for instance to 450 cars per 1000 for the UK population. Revenues from licences are far greater than from congestion charges, so the latter are no of policy concern.

In effect, road user charging in Singapore comprises two elements: a high fixed charge for access to the network; and a low variable charge reflecting the use made as a function of congestion. The revenues from licence auctions help fund a comprehensive public transport system.

The current Singapore ERP system is reaching the end of its operational life. The transport authority plans to replace it with the new ERP 2.0 system based on Global Navigation Satellite Systems (GNSS) technology. This system is more responsive to managing road traffic conditions, offering the option of charging by distance travelled. It should be less costly to build and maintain, and better able to collect aggregated traffic data, to improve traffic management and transport planning.

Learning lessons

Now let’s look at what’s been learnt in this small corner of transport policy – and any clear deductions can be made about the outcomes, and their wider implications for charging and managing traffic.

In the case of London congestion charging, reductions in road capacity have been invoked to explain the failure to reduce congestion beyond the short run, as noted above. However, I suggest there is a more general explanation. Congestion arises in densely populated urban areas with high levels of car ownership, particularly at times of maximum demand when people travel to and from work. There are therefore many more trips by car that could be made but are not (suppressed trips) - due to anticipated time delays arising from congestion and individuals’ assessment of the relative performance of alternatives: public transport, cycling or walking, or choosing a different time or destination, or not making the trip at all. An important determinant of such choices is the time available to the individual for travel, which, for settled human populations, is found to be about an hour a day on average. This reflects a balance between the many activities that have to be fitted into the 24-hour day, and the need to venture beyond the home to engage with people and places important for economic wellbeing and quality of life.

The prospect of experiencing congestion delays exceeding the individual’s travel time availability is a deterrent to car use. Accordingly, congestion is generally self-limiting – as traffic increases, delays increase, and the incentive to make other choices increases for those who are flexible. Gridlock is generally avoided, aided by urban traffic management systems that micro-manage traffic flows.

For the same reason, road traffic congestion is difficult to mitigate, as road users anticipate expected traffic conditions. The introduction of congestion charging in London and Stockholm reduced traffic as those road users who were cost-sensitive vacated the charging zone. However, the resulting reduction in congestion lead, as might be expected, to a rebound, as those who were more time-sensitive but less cost-sensitive would make more and/or longer trips, until congestion reverted to its previous level. I anticipate that a similar rebound will be seen in NYC over time (if the scheme is not withdrawn). So, the effect of congestion charging at the charge levels that apply in these three cities is to redistribute road space from the those less able or willing to pay to those more willing or able to do so, rather than to reduce congestion.

Transport is generally a relatively equitable domain, compared with other areas of life. Paying more to travel by rail or air generally achieves more comfort but not higher speeds. On roads subject to traffic congestion and legal speed limits, a driver of a top of the range car has limited advantage in journey times compared with a one at the wheel of a basic family hatchback (the main exception being in countries where an interurban toll road offers an alternative to an historic toll-free route). So, the introduction of urban congestion charging could be seen as retrograde as regards equity. On the other hand, if the net revenues from the charging scheme are devoted to improving the public transport system, particularly rail-based in all its forms, those drivers priced off the road network may have an attractive alternative, and existing public transport- dependent travellers get a better system.

The case of Singapore, in contrast, illustrates the possibility that sufficiently high charges for car ownership could substantially reduce traffic and permit the resulting congestion to be effectively mitigated with modest charges to reduce delays to acceptable levels. But such an approach seems politically unachievable in high-income economies with typical levels of car ownership.

Future of road user charging

London congestion charging has been in place for more that twenty years. Arguably, as in Singapore, it is time to refresh the technology, given the general pace of digital advance. At the same time, the deployment of electric vehicles (EVs) is leading to a decline in proceeds from road fuel duty, which currently raises about £25 billion a year in the UK, a significant source of government revenue. For the time being, the lower running costs of EVs helps offset the higher capital costs to car owners, compared with internal combustion engine vehicles. But over time the purchase costs of EVs are expected to reduce, reflecting advances in battery technology and competition between manufacturers. So the question will soon need to be asked about users of EVs contributing adequately to the costs of the road network, and more generally to help fund other demands on public expenditure.

New options for more sophisticated methods of charging, identifying vehicle locations and time spent in tolled areas are now emerging, with the potential to be used to upgrade existing systems or new ones

One approach would be to build on the success of London congestion charging by creating a new payment mechanism via a smartphone app. A smartphone knows where it located, in time and space, so knows whether it is a charging zone at a time when charges are levied. A smartphone also has built in a payment mechanism. What would need to be added is a link to the vehicle, since it is this that is subject to the charge, not the phone, but this is feasible. Payment via a smartphone would allow new options for charging, including duration and location in the zone, and level of congestion. Capping the total daily charge via the app at the standard charge for payment of the daily fixed charge online should make the smartphone option acceptable, even attractive, to users.

A congestion charging mechanism of this kind could be extended to use by other cities wishing to manage traffic and raise funds to improve public transport. It could also be the basis for a national charging scheme for EVs, and possibly for all vehicles, at the right time.

In summary, congestion charges at the levels likely to be publicly acceptable are useful for raising revenue to improve the transport system and for wider public purposes, but cannot be relied on to achieve a useful reduction in road traffic congestion.

The long-standing belief of transport economists that road user charging is both a logical and desirable means to manage demand for road capacity has proved to be ineffectual in practical application, at least thus far, with Singapore as a single exception. In part this may be because cordon pricing unrelated to the level of congestion is a blunt tool, and not what the economic theory requires; and also because the charges levied are too low to have useful impact on congestion.

Moreover, economists generally focus on gains in efficiency and neglect losses of equity, though it is the latter, seen as reduction of ‘fairness’, that can motivate opposition to any new charging scheme. Yet, as we have seen in London, Stockholm and Singapore, and now New York City, firm political leadership is able to implement congestion charging, in the expectation that public acquiescence will follow, particularly if improvements to public transport are an evident benefit.

References and Links

1. https://www.mta.info/press-release/mta-releases-preliminary-traffic-and-transit-data-first-work-week-under-congestion

2. https://www.congestion-pricing-tracker.com
   

3. https://www.researchgate.net/publication/325800802_Tackling_Urban_Traffic_Congestion_the_experience_of_London_Stockholm_and_Singapore
   

4. https://tfl.gov.uk/corporate/publications-and-reports/congestion-charge
   

5. https://content.tfl.gov.uk/travel-in-london-2024-annual-overview-acc.pdf
   

6. https://www.tomtom.com/traffic-index/