Road Pricing in Theory and Practice: A Canadian Perspective

Abstract:     
Like other developed countries, Canada experienced massive increases in road transportation since the end of the Second World War. At first, Canadian governments attempted to match the growing demand for road transportation by improving the quality and capacity of roads and highways - significantly increasing the extent of paved roadways and introducing a national highway system supported by federal shared-cost funding. Since the 1970s, however, Canadian governments have been less willing to invest in roads and highways, as growing environmental concerns lessened public enthusiasm for automobiles and urban expressways in particular. At the same time, government support for public transit decreased, resulting in recurring fare increases and reduced ridership per capita. As a result, road congestion has increased significantly in Canada, particularly in the largest urban areas, the Greater Golden Horseshoe area surrounding Toronto, and along the Trans-Canada highway from Quebec City to Windsor, Ontario. In order to finance improvements to road and transit infrastructure and address the growing problem of road congestion in Canada, the federal government has promised to share a portion of the federal gas tax with municipalities, and provincial governments have established urban transportation authorities, increased funding for public transit, and plan to introduce high occupancy vehicle (HOV) lanes as an incentive for people to carpool. Notably absent from these measures, however, are any concrete proposals to introduce more explicit road prices in the form of tolls and congestion-related charges. This paper hopes to contribute to Canadian public policy by making a case for increased reliance on explicit charges for the use of Canada's roads and highways. Part II considers road pricing in theory, considering the main arguments for and against road user charges as well as their optimal design. Part III reviews international experience with road pricing in order to derive lessons for the Canadian context. Part IV offers tentative conclusions.

Working Paper Series