Congestion

Pricing

A PRIMER

December 2006

FEDERAL HIGHWAY ADMINISTRATION

Office of Transportation Management, HOTM

400 Seventh St. SW, Room 3404

Washington, DC 20590

Publication Number: FHWA-HOP-07-074
Table of Contents

I. THE CONGESTION PROBLEM .....................................................................................................................1

Costs of Congestion........................................................................................................................................1

Alarming Trends...............................................................................................................................................1

Causes of Congestion .....................................................................................................................................1

II. WHAT IS CONGESTION PRICING? ..............................................................................................................1

Technology for Congestion Pricing .................................................................................................................2

Variably Priced Lanes ......................................................................................................................................2

Variable Tolls on Roadways .............................................................................................................................3

Cordon Pricing.................................................................................................................................................4

Area-wide Pricing ............................................................................................................................................4

Use of Revenues from Pricing .........................................................................................................................4

III. BENEFITS OF CONGESTION PRICING........................................................................................................5

Benefits to Transit Riders and Carpoolers ......................................................................................................5

Benefits to Drivers ...........................................................................................................................................5

Benefits to Businesses ...................................................................................................................................6

IV. EXAMPLES IN THE U.S .................................................................................................................................6

HOT Lanes on I-15 in San Diego, CA..............................................................................................................6

SR 91 Express Lanes in Orange County, CA...................................................................................................6

Bridge Pricing in Lee County, Florida ..............................................................................................................6

Oregon’s Mileage-Based Pricing Test .............................................................................................................6

V. EXAMPLES FROM ABROAD.........................................................................................................................7

Central London ................................................................................................................................................7

Singapore.........................................................................................................................................................7

Stockholm City Center ....................................................................................................................................7

Nationwide Truck Pricing in Germany .............................................................................................................8

VI. FEDERAL POLICY AND PROGRAMS ON PRICING ....................................................................................8

Federal Legislation...........................................................................................................................................8

U.S. DOT’s Congestion Relief Initiative ...........................................................................................................8

VII. FREQUENTLY ASKED QUESTIONS.............................................................................................................9

How does electronic tolling work? ..................................................................................................................9

How does dynamic pricing work? ...................................................................................................................9

How do out-of-town motorists who don’t have a transponder pay? ..............................................................9

Wouldn’t electronic tolling invade a motorist’s privacy? ................................................................................9

How much is the charge?................................................................................................................................9

Isn’t pricing inequitable towards low-income motorists?................................................................................9

Isn’t congestion pricing “double taxation”? ..................................................................................................10

Won’t adjacent free roads get more congested due to diverted traffic?.......................................................10

Do people have flexibility to change the time when they travel? ..................................................................10


I. THE CONGESTION PROBLEM

Costs of Traffic Congestion 

Growing congestion in the U.S. transportation network 

poses a substantial threat to the U.S. economy and to 

the quality of life of millions of Americans. According 

to the Texas Transportation Institute (TTI), in 2003, congestion in the top 85 U.S. urban areas caused 3.7 billion 

hours of travel delay and 2.3 billions gallons of wasted 

fuel, for a total cost of $63 billion. This figure would be 

substantially higher (perhaps almost triple) if it accounted for the significant cost of growing system unreliability 

and unpredictability to drivers and businesses, the environmental impacts of idle-related auto emissions, or 

higher gasoline prices. In the 10 most congested areas, 

each rush hour traveler “pays” an annual “congestion 

tax” of between $850 and $1,600 in lost time and fuel 

and spends the equivalent of almost 8 workdays each 

year stuck in traffic. 

Alarming Trends

Highway congestion has increased dramatically over the 

past two decades. Between 1982 and 2003, U.S. highway 

congestion has increased in extent, duration, and intensity. 

In 2003, in the largest U.S. cities, highway congestion:

•	 Impacted 67% of travel (up from 33% in 1982);

•	 Lasted 7 hours per day in duration (up from 4.5 hours in

1982); and

•	 Added an additional 37% to the length of the average rush

hour driver’s trip (up from 13% in 1982).

Congestion is also growing rapidly in small and mediumsized metropolitan areas. Based on current trends, a 

medium-sized city should expect its congestion in 10 years 

to be as bad, or worse than, that currently experienced 

by a large city. The rate of congestion growth has been 

greater in rural than in urban areas, portending increased 

congestion in communities of all sizes.

Causes Of Congestion

At its most fundamental level, highway congestion is 

caused by the lack of a mechanism to efficiently manage 

use of capacity. When searching for a solution to the congestion problem, most people immediately think of adding a new lane to an overburdened highway. Construction 

costs for adding lanes in urban areas average $10 million 

per lane mile. Generally, the funding for this construction 

comes from the tax that drivers pay when buying gas for 

their vehicles. Overall, funds generated from gas taxes on 

an added lane during rush hours amount to only $60,000 

a year. This amount is grossly insufficient to pay for the 

lane addition. The bargain price paid by motorists for use 

of expensive new capacity encourages more drivers to use 

the expanded highway. Introducing congestion pricing on 

highway facilities discourages overuse during rush hours 

by motivating people to travel by other modes such as carpools or transit, or by traveling at other times of the day. 

II. WHAT IS CONGESTION PRICING?

Congestion pricing – sometimes called value pricing – is 

a way of harnessing the power of the market to reduce the 

waste associated with traffic congestion. Congestion pricing works by shifting purely discretionary rush hour highway 

travel to other transportation modes or to off-peak periods, 

taking advantage of the fact that the majority of rush hour 

drivers on a typical urban highway are not commuters. By 

removing a fraction (even as small as 5%) of the vehicles 

from a congested roadway, pricing enables the system to 

flow much more efficiently, allowing more cars to move 

through the same physical space. Similar variable charges 

have been successfully utilized in other industries – for example, airline tickets, cell phone rates, and electricity rates. 

There is a consensus among economists that congestion 

pricing represents the single most viable and sustainable 

approach to reducing traffic congestion. 

Although drivers unfamiliar with the concept initially have 

questions and concerns, surveys show that drivers more 

experienced with congestion pricing support it because it 

offers them a reliable trip time, which is very valuable especially when they have to be somewhere on time. Transit 

and ridesharing advocates appreciate the ability of congestion pricing to generate both funding and incentives to 

make transit and ridesharing more attractive.

There are four main types of pricing strategies, each of 

which is discussed in more detail later in this section:

•	 Variably priced lanes, involving variable tolls on separated

lanes within a highway, such as Express Toll Lanes or HOT

Lanes, i.e. High Occupancy Toll lanes

• Variable tolls on entire roadways – both on toll roads and

bridges, as well as on existing toll-free facilities during

rush hours

• Cordon charges – either variable or fixed charges to drive

within or into a congested area within a city

• Area-wide charges – per-mile charges on all roads within

an area that may vary by level of congestion


Technology for Congestion Pricing

With congestion pricing, tolls typically vary by time of day 

and are collected at highway speeds using electronic toll 

collection technology. Traffic flows freely, and there are no 

toll booths. Vehicles are equipped with electronic devices 

called transponders or “tags”, which are read by overhead 

antennas. Toll rates for different time periods may be set 

in advance, or they may be set “dynamically” – hat is, they 

may be increased or decreased every few minutes to ensure that the lanes are fully utilized without a breakdown in 

traffic flow. 

Tags range from simple to highly sophisticated devices. 

Simple tags are “read-only,” meaning that they can provide 

an identification number to overhead readers using power 

from incoming radio frequency energy. More sophisticated tags are battery-powered, and have processing power 

and memory. Tags are now the normal way tolls are collected from regular users – 70 to 80 percent of tolls are now 

collected this way on most urban commuter toll roads in 

peak hours. Simple “sticker” tags may be obtained for less 

than $10. 

Global Positioning Systems (GPS) are used to collect truck 

tolls in Germany on the autobahns. In tests of such systems 

in the United States, an in-vehicle device records charges 

incurred based on its location as identified by the GPS 

unit in the vehicle. All location and payment information 

remains in the vehicle, and the vehicle owner periodically 

uploads the summary of charges to a processing center along with payments. The costs of such systems are 

currently high – as much as $500 per vehicle in Germany. 

Their high costs can be justified by additional services provided by the systems, such as in-vehicle navigation and 

commercial fleet management. Also, the need for roadside 

equipment for toll collection is reduced. 

Cameras are an essential complement to tags and GPS 

units to gain a record of the identity of vehicles that don’t 

have a working tag or GPS unit. Cameras can be used to 

deter toll violators. This is known as “video enforcement.” 

In cases where a tag is required for use of a facility, camera 

images allow a follow-up of violators and imposition of a 

penalty. 

Use of a toll facility may be permitted without a tag or 

GPS unit. In this case, a camera-based system is used to 

collect what is termed a video toll. This toll includes the 

additional costs for administration. Cameras are being improved steadily in their capabilities and some believe that 

very soon toll operators could rely entirely on video tolling. 

Variably Priced Lanes

Variably priced lanes include Express Toll lanes and HOT 

lanes. “HOT” is the acronym for “High Occupancy Toll.” 

On HOT lanes, low occupancy vehicles are charged 

a toll, while High Occupancy Vehicles (HOVs), public 

transit buses and emergency vehicles are allowed to 

use the lanes free of charge or at reduced rates. HOT 

lanes create an additional category of eligibility to use 

HOV lanes. People can meet the minimum vehicle passenger requirement – or they can choose to pay a toll to 

gain access to the HOV lane. 

With citizens growing more frustrated with under-used 

HOV lanes, HOT lanes are increasingly being viewed 

as a solution that can reduce public opposition to HOV 

lanes. Surveys show that low-income commuters express a high level of support for having a priced express lane option. This is valuable when they absolutely 

must get somewhere on time. In places like San Diego, 

support from low-income travelers is over 70 percent. 

Low-income commuters also benefit from toll-financed 

transit improvements.

Express Toll lanes are similar to HOT lanes. The difference is that all vehicles are required to pay a toll – 

HOVs do not get free service. This makes enforcement 

of toll-cheaters much easier. However, many travelers 

still have an incentive to carpool. By sharing the ride, 

each person in a two-person carpool pays only half the 

price, while each commuter in a four-person carpool 

only pays one-fourth.

Transponders are read by overhead antennas, allowing tolls to be paid

without stopping


Variable Tolls on Roadways

With this type of pricing, flat toll rates on existing toll 

roads are changed to a variable toll schedule so that 

the toll is higher during peak travel hours and lower during off-peak or shoulder hours. This encourages motorists to use the roadway during less congested periods, 

and allows traffic to flow more freely during peak times. 

Peak toll rates may be high enough to guarantee that 

traffic flow will not break down, thus offering motorists 

a reliable and congestion-free trip in exchange for the 

higher peak toll. 

Variable tolls can also be introduced on existing toll-free 

facilities to manage traffic flow. Again, tolls vary by time 

of day and are charged only on congested highway segments to manage traffic flow and recover the highway’s 

capacity to carry the number of vehicles it was designed 

for. The most efficient way to operate our freeways is 

to prevent congestion and keep traffic moving freely. 

When traffic flow collapses under congested conditions, capacity is lost (see box at right). By preventing 

congestion, pricing recovers this daily waste of public 

investment that occurs on congested highways.

Real life examples show the impacts of pricing. In Ft. 

Myers, Florida, a 50 percent discount on the toll was 

offered on the Midpoint and Cape Coral bridges for 

a short period of time before and after the rush hours. 

Survey data revealed that, among those eligible for the 

discount, there was an increase in traffic of as much as 

20 percent during the discount period before the morning rush hours, with corresponding drops in the rush 

hour itself.

Peak period vehicle throughput during the hour with heaviest

traffic, State Route 91 — priced vs. free lanes

Vehicles per 

lane per hour

1,600

1,200

800

400

0

Effects of Pricing on Vehicle Throughput

Vehicle “throughput” on a freeway is the number 

of vehicles that get through over a short period 

such as an hour. Once freeway traffic exceeds a 

certain threshold level, both vehicle speed and 

vehicle throughput drop precipitously. Data show 

that maximum vehicle throughput occurs at free 

flow speeds ranging from 45 mph to 65 mph. The 

number of vehicles that get through per hour can 

drop by as much as 50 percent when severe congestion sets in. At high traffic levels, the freeway 

is kept in this condition of “collapse” for several 

hours after the rush of commuters has stopped. 

This causes further unnecessary delay for off-peak 

motorists who arrive after rush hour. 

With peak-period highway pricing, a variable toll 

dissuades some motorists from entering freeways 

at those access points where traffic demand is 

high, and where such surges in demand may push 

the freeway over the critical threshold at which traffic flow collapses. Pricing prevents a breakdown 

of traffic flow in the first instance, and thus maintains a high level of vehicle throughput throughout 

the rush hours. As shown in the graph above, each 

variably priced lane in the median of State Route 

91 in Orange County, California, carries twice as 

many vehicles per lane as the free lanes during 

the hour with heaviest traffic. Pricing has allowed 

twice as many vehicles to be served per lane at 

three to four times the speed on the free lanes. 

Priced Free


Cordon Pricing

Cordon pricing involves charging a fee to enter or drive 

within a congested area, usually a city center. Singapore introduced the first such pricing scheme in 1975 

using low-tech daily charges. In 1998, the city shifted to 

a fully automated electronic charging system. In 2003, 

a cordon pricing scheme was introduced in central London. A similar scheme functioned in central Stockholm 

on a trial basis in 2006 from January through July.

Area-wide Pricing

The State of Oregon is currently testing a pricing 

scheme involving per-mile charges, which it will consider using as a replacement for fuel taxes in the future. 

A congestion pricing component is being tested, with 

higher charges during congested periods on high traffic road segments. The Puget Sound Regional Council 

has been testing the travel behavior impacts of a similar 

charging system in the Seattle metropolitan area during 

2005-2006. Charges are based on the type of facility 

being used and its level of congestion.

Use of Revenues from Pricing

Congestion pricing can generate substantial revenues 

from tolls. A portion of the revenues generated will be 

needed to operate the toll collection and traffic management systems. Net revenues after payment of operating costs can be used to pay for expansion of roadway 

facilities, to support alternatives to driving alone such 

as public transit, to address impacts on low-income 

individuals by providing toll discounts or credits, or to 

reduce other taxes that motorists pay for highways such 

as fuel taxes, vehicle registration fees or sales taxes.

Flat tolls, “stepped” variable tolls, and 

“dynamic” tolls

The first roads in the United States and in many 

other countries were toll roads. In these cases, toll 

rates were fixed at a flat rate, since their purpose 

was to raise revenue, not to manage demand. If 

tolls are to be used to manage demand, they must 

vary by the level of demand. They may be set in 

advance by time of day, based on traffic volumes 

observed – during the past week, month, or quarter. In each case, the toll schedule may appear as 

a “stepped” form, as shown below.

Tolls to manage demand may also be set “dynamically.” Under this approach, a maximum toll rate 

may be specified in advance for selected time 

periods (see schedule for I-15 HOT lanes shown 

below), but actual tolls typically vary below the 

maximum based on real-time traffic observed on 

the facility. While a driver knows the maximum 

rate that can be charged, actual rates (which are 

generally lower) are known to him or her only a few 

minutes in advance of approaching the priced facility. The driver can then choose to use the priced 

facility or continue to use toll-free facilities.

Fees for travel within Stockholm varied according to time of day, with

higher fees during rush hours (dollar rates converted from Swedish 

krona at current rates)

$1.38

$2.07

$2.76

$2.07

$1.38

$2.07

$2.76

$2.07

$1.38

6:30 – 6:59 a.m.

7:00 – 7:29 a.m. 

7:30 – 8:29 a.m.

8:30 – 8:59 a.m.

9:00 a.m. – 3:29 p.m.

3:30 – 3:59 p.m.

4:00 – 5:29 p.m.

5:30 – 5:59 p.m.

6:00 – 6:29 p.m.

6:30 p.m – 6:29 p.m. Free

Source: Stockholm Trial Expert Group

Maximum Toll Schedule for I-15 HOT Lanes, San Diego, California

Maximum 

Toll Evening Period (Northbound)

x x

x x x

x x

$4.00

$3.00

$2.50

$2.00

$1.50

$1.00

$0.75

$0.50

3:00 – 3:303:30 – 4:004:00 – 4:304:30 – 5:005:00 – 5:305:30 – 6:006:00 – 6:306:30 – 7:00


III. BENEFITS OF CONGESTION 

PRICING

Congestion pricing benefits drivers and businesses by 

reducing delays and stress, by increasing the predictability of trip times, and by allowing for more deliveries 

per hour. It benefits mass transit by improving transit 

speeds and the reliability of transit service, increasing 

transit ridership, and lowering costs for transit providers. It benefits State and local governments by improving the quality of transportation services without tax 

increases or large capital expenditures, by providing additional revenues for funding transportation, by retaining 

businesses and expanding the tax base, and by shortening incident response times for emergency personnel 

and thus saving lives. By preventing the loss of vehicle 

throughput that results from a breakdown of traffic flow, 

pricing maximizes return on the public’s investment in 

highway facilities. And it benefits society as a whole by 

reducing fuel consumption and vehicle emissions, by 

allowing more efficient land use decisions, by reducing 

housing market distortions, and by expanding opportunities for civic participation.

Benefits to Transit Riders and Carpoolers

Pricing in combination with transit services provides 

bus riders with travel time savings equivalent to those 

for drivers, and reduces waiting time for express bus 

riders due to more frequent service. Introduction of 

pricing in central London and Stockholm has resulted 

in significant shifts of commuters to transit, particularly 

buses. Bus delays in central London dropped by 50 

percent after the pricing scheme was introduced. There 

was a 7 percent increase in bus riders. In Stockholm, 

200 new buses were put into service in August 2005, 

several months in advance of the pricing trial, which 

began in January 2006. After the pricing scheme was 

implemented, daily public transportation use compared 

to the same month in 2005 was up by 40,000 riders 

daily. Ridership on inner-city bus routes rose 9 percent 

compared with a year earlier.

Within three months of the opening of the priced express lanes on California’s SR-91, a 40 percent jump 

occurred in the number of vehicles with more than three 

passengers. Ridership on buses and a nearby rail line 

have remained steady. On San Diego’s I-15 HOT lanes, 

revenues generated by toll-payers financed transit 

improvements that contributed to a 25 percent increase 

in bus ridership.

After the HOV lanes were converted into HOT lanes on 

I-15 in San Diego, carpooling increased significantly, 

even though there was no change in incentives to carpool – carpoolers continued to use the lanes free of 

charge, as they did before the lanes were converted. 

Similar effects were observed when the HOV lanes on 

I-25 in Denver were converted to HOT lanes in June 

2006. It’s not clear why carpooling increases – it could 

be a result of the extra publicity by the media.

Benefits to Drivers

On the State Route 91 priced lanes in Orange County, California, traffic during rush hours moves at over 

60 mph, while the traffic in adjacent lanes crawls at 

average speeds of 15 mph or less. Commuters on the 

priced express lanes thus save as much as half an hour 

each way on the 10-mile trip, or as much as an hour 

a day. 

If we could use pricing to restore free-flowing traffic 

conditions on other metropolitan freeways during rush 

hours, similar results could be achieved. An average 

commuter using a 5-mile freeway segment twice each 

day (i.e., once in each direction) would save about half 

an hour each day, or 120 hours annually – equal to three 

weeks of work or leisure time! 

The day-to-day variation in travel times is now understood as a separate component of the public’s and 

business sector’s frustration with congestion. An important benefit of pricing is that it guarantees toll-paying vehicles a reliable trip speed and travel time. 

Traffic speeds on SR 91 during rush hours

Speed (mph)

70

60

50

40

0

30

20

10

Priced Free


Benefits to Businesses

Growing congestion and unreliability threatens truck 

transportation productivity and ultimately the ability 

of sellers to deliver products to market. Additionally, 

when deliveries cannot be relied on to arrive on time, 

businesses must keep extra “buffer stock” inventory on 

hand. This can be expensive. Pricing of the nation’s 

major thoroughfares to guarantee free flow of traffic 

will ensure that reliability is restored to the transportation system, keeping business and transportation costs 

low. Lower costs will increase the competitiveness of 

U.S. businesses in international markets and boost the 

U.S. economy.

IV. EXAMPLES IN THE U.S.

HOT Lanes on I-15 in San Diego 

Since 1998, single-occupant vehicles pay a per-trip fee 

each time they use the I-15 HOT lanes. Tolls vary “dynamically” with the level of traffic demand on the lanes. 

Fees vary in 25-cent increments as often as every six 

minutes to help maintain free-flow traffic conditions 

on the HOV lanes. The project generates $2 million in 

revenue annually, about one-half of which is used to 

support transit service in the corridor. 

SR 91 Express Lanes in Orange County, 

California 

The four variably-priced express lanes in the median 

of the State Route 91 Freeway opened in December 

1995. The toll schedule is adjusted every three months 

based on traffic observed over the three-month period. 

Speeds are 60 to 65 mph on the express lanes while 

congestion on the free lanes has reduced average peak 

hour speeds to no more than 15 to 20 mph. During the 

peak hour, which occurs on Friday afternoon (5-6 pm) 

in the eastbound direction, the two “managed” express 

lanes each carry almost twice as many vehicles per lane 

than the free lanes, because of the effect of severe congestion on vehicle throughput in the free lanes. Toll revenues have been adequate to pay for construction and 

operating costs. In fact, in 2003 the private company 

that had the franchise to build and operate the facility 

sold the franchise to the Orange County Transportation 

Authority for a profit. 

Bridge Pricing in Lee County, Florida 

Variable pricing began August 3, 1998, on the Midpoint 

and Cape Coral toll bridges in Lee County, Florida. 

Bridge travelers were offered a 50 percent discount on 

their toll if they traveled during specific discount periods 

and paid 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. 

Oregon Mileage-Based Pricing Test 

The State of Oregon is studying an approach that would 

allow area-wide pricing with smaller expenditures 

on roadside infrastructure. The study is focusing on 

mileage-based fees and peak-period driving charges 

designed to reduce traffic during the most congested 

periods while at the same time raising revenue to replace existing fuel-based fees. GPS-based technology 

is being tested. 

Plastic pylons separate priced lanes from free lanes on State Route 91

The sign shows “shoulder” time periods when discount tolls are in effect on

two bridges in Ft. Myers


V. EXAMPLES FROM ABROAD

Central London

On February 17, 2003, London implemented an ambitious plan for using pricing to combat congestion in 

central London. The scheme involves a standard perday charge for vehicles traveling within a zone bounded 

by an inner ring road. The congestion charge, together 

with improvements in public transit financed with revenues from the charging system, led to a 15 percent 

reduction in traffic in central London, with no significant displacement to local roads outside the area. The 

majority of ex-car users have transferred to public transport. Travel delays have been reduced by 30 percent. 

Excess waiting time on buses has fallen by around 

one-third. 

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.

Singapore 

Traffic congestion was significantly reduced when peakperiod pricing was introduced in downtown Singapore 

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.

Stockholm City Center

Stockholm is the most recent large international city to 

deploy cordon pricing, in this case on a test basis from 

January 2006 to July 2006. The “trial” results were very 

favorable, with public acceptance climbing 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 will be reinstated in 2007.

Enforcement cameras in London are installed on existing utility poles


Nationwide Truck Pricing in 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 $0.31 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. 

VI. FEDERAL POLICY AND 

PROGRAMS ON PRICING

Federal Legislation

There are three programs or provisions within the 

Federal-aid Highway Program that support congestion 

pricing:

Value Pricing Pilot Program: This program, initially 

authorized in the Intermodal Surface Transportation 

Efficiency Act (ISTEA) in 1991 as the Congestion Pricing 

Pilot Program, encourages implementation and evaluation of projects encompassing a variety of strategies 

to manage congestion on highways, including both tolling of highway facilities and other pricing strategies not 

involving tolls. This is the only program that provides 

funding. 

High Occupancy Vehicle (HOV) Facilities: This 

program allows states to charge tolls to vehicles that 

do not meet the established occupancy requirements 

to use an HOV lane if the state establishes a program 

that addresses the selection of vehicles allowed in such 

lanes and procedures for enforcing the restrictions. 

Express Lanes Demonstration Program: This 

program permits tolling on up to 15 selected demonstration projects to manage congestion, reduce emissions in 

a non-attainment area, or finance new and existing Interstate lanes for the purposes of reducing congestion.

In addition, there are three programs or provisions within the Federal-aid Highway Program that support tolling 

for the purpose of highway financing:

Interstate System Construction Toll Pilot Program:

This program authorizes up to three facilities on the Interstate System to be tolled for the purpose of financing 

the construction of new Interstate highways.

Interstate System Reconstruction and Rehabilitation Pilot Program: This program allows up to three 

existing Interstate facilities (highway, bridge, or tunnel) 

to be tolled to fund needed reconstruction or rehabilitation on Interstate corridors that could not otherwise be 

adequately maintained or functionally improved without 

the collection of tolls.

Title 23 United States Code Section 129 Tolling 

Agreements: Section 129 allows tolling of non-Interstate highways as well as Interstate bridges and 

tunnels. There is no limit to the number of agreements 

that may be executed.

U.S. DOT’s Congestion Relief Initiative

The U.S. Department of Transportation’s Congestion 

Initiative further focuses the above tolling programs 

toward the overall goal of relieving congestion. The 

Department seeks to enter into Urban Partnership 

Agreements with selected cities, pursuant to which 

the cities and Department will commit to the following 

actions:

•	 Implementing a broad congestion pricing or variable toll

demonstration;

•	 Creating or expanding express bus services, which will

benefit from free flow traffic conditions;

•	 Securing agreements from major area employers to

establish or expand telecommuting and flex scheduling

programs;

•	 Encouraging and supporting use of technology to improve

the efficiency of operation of the highway system; and

•	 Expediting completion of the most significant highway

capacity projects currently underway that hold the greatest

potential for reducing congestion and bottlenecks.

To the maximum extent possible, the Department will 

commit discretionary resources and expertise to support the above actions, including potentially transit 

Small Starts funds, Intelligent Transportation System 

(ITS) funds, and Value Pricing Pilot Program funds. The 

Department will work to expedite completion of capacity projects through:

•	 Inclusion of such projects on the Executive Order on Environmental Stewardship and Transportation Infrastructure

Project Reviews; and

•	 Providing tolling flexibility, private activity bond borrowing

authority, and Transportation Infrastructure Finance and Innovation Act (TIFIA) program credit assistance, if necessary.


VII. FREQUENTLY ASKED QUESTIONS

How does electronic tolling work?

Typically, drivers simply put small electronic tags, called 

transponders, on the windshield inside their cars. In 

conjunction with using the transponder, they open an 

account with a toll operator. Tolls are then collected as 

the tag is read at normal highway speeds by electronic 

scanners suspended from gantries above the highway. 

Motorists ensure adequate funding is available in their 

accounts by linking their accounts to their credit card 

accounts or through a quick call, trip to a kiosk or office, 

or visit to a website. Tags may emit a signal warning 

consumers when their account is running low, or they 

are informed through messages beamed to them as 

they go by a toll collection point.

How does dynamic pricing work?

With dynamic pricing, tolls are continually adjusted according to traffic conditions to maintain a free-flowing 

level of traffic. Under this system, prices increase when 

the tolled lane(s) get relatively full and decrease when 

the tolled lane(s) get less full. The current price is displayed on electronic signs prior to the beginning of the 

tolled section. This system is more complex and less 

predictable than using a fixed-price table, but its flexibility helps to consistently maintain the optimal traffic 

flow. Motorists are usually guaranteed that they will not 

be charged more than a pre-set maximum price under 

any circumstances.

How do out-of-town motorists who don’t have 

a transponder pay?

This is handled in several ways. Of course, clear signage is used to show drivers which lane(s) or route to 

use to avoid the toll. This avoids most of these kinds of 

problems. Some systems also allow drivers to pay via 

credit card after-the-fact by calling a toll-free line. Some 

project sponsors simply let drivers use the tolled lane(s) 

at no charge the first few times. For instance, a letter 

may be sent to a non-paying driver identified based on 

matching of a photo of license plates with State vehicle 

registration databases. The letter would explain that if 

the driver wants to continue to use the facility, he or she 

should get a tag or risk a fine, but that initial usage is 

being allowed at no cost. The operator of an all-electronic toll facility in Toronto, Canada, simply bills such 

motorists for the cost of the toll plus a $1 administrative fee. Through these kinds of steps, the chances of 

tourists, occasional visitors, or inadvertent users being 

penalized are minimized.

Wouldn’t electronic tolling invade a motorist’s 

privacy?

All of the operating pricing projects in the United States 

and more than 250 other toll facilities across the country use electronic toll collection (ETC). Tolling agencies 

have devised a method to protect the public’s privacy 

by linking the transponder and the driver’s personal information with a generic, internal account number that 

does not reveal the driver’s identity and that is not disclosed to other organizations. Also, a motorist can open 

an anonymous account if he or she so chooses.

How much is the charge?

Prices will vary from project to project due to supply 

and demand, as well as other regional factors. If all 

lanes on an existing toll-free facility are priced, charges 

will be much lower, because there will be more “supply” 

of premium free-flowing traffic lanes, thus lowering the 

market-based price that must be charged to fully utilize 

the available capacity. Some projects do use a preset schedule of tolls. This has the advantage of being 

predictable and simple. With dynamic pricing, the toll 

fee is adjusted in real-time until optimal traffic flow is 

achieved. For example, the express lane fees for an 8-

mile section in San Diego typically range from $1 to $4.

Isn’t pricing inequitable towards low-income 

motorists?

Results from surveys conducted for projects in operation show that drivers of all income levels use priced 

express lanes. Although many low-income users don’t 

choose to use the tolled facility every day, they support 

having the option. For instance, a low-income parent 

racing to avoid the financial penalty associated with being late for pick-up at a day care facility, or for work, 

is often pleased to have the option of paying a fee to 

bypass gridlock in the regular lanes. In fact, a high level 

of support for San Diego’s HOT lanes comes from the 

lowest income users (70 percent support). Moreover, 

low-income bus riders may benefit significantly from 

toll-financed transit improvements. Finally, a well-designed value pricing plan can be less burdensome to 

low-income citizens than current systems that are based 

on regressive taxes, such as car registration fees, sales 

taxes and the gas tax. For example, a proposal for 

pricing the San Francisco-Oakland Bay Bridge included 

life-line discounts for low-income motorists. The Bridge 

also currently provides free service for carpool vehicles 

during rush hours.
10

Isn’t congestion pricing “double taxation”?

The prices road users currently face include only the 

value of their own travel time plus vehicle operating 

costs (including a small part that represents fuel taxes 

and occasional tolls). But the costs they impose during 

peak travel hours also include the value of the delays 

they impose on other users by slowing travel speeds. 

Speeds slow until the delays that vehicles impose on 

one another temporarily balance demand and supply, 

but only by deterring travelers (and shipments) whose 

time is most valuable, while wasting large amounts of 

others’ time. Besides wasting their own and others’ 

time, drivers sitting in congested traffic also impose pollution costs not covered by gas taxes.

Despite the magnitude of these costs imposed on others, rush hour vehicle users are currently not charged 

for these costs. Thus, separate congestion charges are 

appropriate. Gas taxes paid by a motorist amount to 

just two cents per mile driven. To avoid the claim of 

“double taxation,” gas taxes already paid can be tallied 

separately and reimbursed to the driver, as is already 

done for toll road users in a few States.

Won’t adjacent free roads get more congested 

due to diverted traffic?

It is true that when toll rates are raised on tollways, 

some drivers do divert to free alternatives. However, 

when pricing is introduced on previously congested 

highways, some traffic may actually be reduced on parallel arterials because certain travelers who were previously deterred by freeway congestion may shift back 

to the priced highways once congestion is eliminated 

and throughput has increased (as explained in an earlier 

section). Also, introduction of tolls during rush hour will 

be accompanied by expansion of transit capacity and 

continued availability of HOV options, so that some solo 

drivers will use transit or carpool rather than divert to 

free roadways. And, if rush hour toll revenues are used 

to pay for freeway widening, the expanded freeway 

will be able to carry even more traffic, and will further 

reduce traffic on parallel free arterials.

Do people have flexibility to change the time 

when they travel?

On average, over half of peak period drivers in metropolitan areas are not commuting. In other words, there 

is far more schedule flexibility than commonly understood. Moreover, the rise of the internet, pda’s and 

telecommuting are providing employees with unprecedented flexibility to work outside the four corners of 

their offices. Giving people the option and incentive 

to shift trip times even 30-45 minutes can significantly 

reduce congestion. It is expected that employers would 

also respond to congestion pricing by offering employees more work schedule options

For More Information Contact:

Patrick DeCorla-Souza, Program Manager

FEDERAL HIGHWAY ADMINISTRATION 

Office of Transportation Management, HOTM

400 Seventh St. SW, Room 3404

Washington, DC 20590

Tel: (202) 366-4076

e-mail: patrick.decorla-souza@dot.gov