Urban Congestion Charging: Theory, Practice and Environmental Consequences

Abstract

The theory of road pricing developed for single links suggests time and location varying charges equal to the marginal congestion cost at the efficient level of traffic. The second-best network counterpart is derived, but would be infeasible to implement. Cordon tolls are feasible, and their optimal level computed for eight towns. A cost-benefit study showed that with a suitable choice of location, all schemes were socially profitable, though with wide variations across towns. The environmental benefits of cordon tolls are measured and shown to correlate with optimal congestion tolls, but to be modest in size and not to affect the optimal toll.

Keywords: Road Traffic Congestion, Road Pricing, Congestion Charging, Cordon Tolls, Environmental Taxes

JEL Classification: R41, R48, Q28, H23