Evaluating Pricing Strategies

Factors To Consider When Evaluating TDM Strategies That Change Transportation Prices


TDM Encyclopedia

Victoria Transport Policy Institute


Updated 29 May 2015

TDM strategies that involve price changes, including road pricing, parking pricing, distance-based fees, fuel tax increases and commuter financial benefits. This chapter discusses various factors to consider when evaluating these strategies to insure that they achieve intended objectives. These include the method used to collect charges, their scope and scale, how well they reflect market principles, the quality of transportation alternatives and how revenues are used.




Efficient pricing is an important Market Principle. Prices provide market signals that can result in more efficient resource use. Efficient prices indicate the full costs of providing a good and the value the consumers place on using it. Prices that are either too high or too low reduce market productivity, equity and overall consumer benefits. Inefficient pricing contributes to many current transportation problems.


Pricing increases economic efficiency. For example, when travel demand exceeds a roadway’s capacity, efficient pricing can limit traffic to optimal volumes, which avoids congestion, and allows higher value trips priority over lower value trips, for example, allowing higher occupant vehicles to outbid lower-occupant vehicles, and vehicles with valuable loads and urgent deadlines to outbid vehicles with more time flexibility (this type of efficiency gain is recognized by economists but often overlooked in conventional engineering analysis, which measures efficiency terms of traffic flow and operating costs). Similarly, efficient emission pricing can encourage people who drive high annual miles or live in polluted areas to use cleaner (less polluting) vehicles, and those who have high polluting vehicles (such as older cars) to reduce their mileage.


Efficient pricing helps determine which combination of goods and services offer consumers the greatest benefits. For example, it would be inefficient for a consumer to take a trip that they value at $2.00 if it Costs $5.00 to provide (including vehicle, roadway, parking, crash risk and environmental damage costs). Such trips make society worse off overall. Similarly, it would be inefficient if many consumers would willingly pay the extra cost of a transportation facility or service improvement, but they are not provided due to market barriers or regulatory restrictions. This represents a lost opportunity for additional consumer benefits.


Motorists are accustomed to “free” roads and parking, and so tend to oppose pricing. But these facilities are never really free. Consumers pay through additional taxes, increased rents and mortgages, as employment compensation, and higher prices for consumer goods. The choice is really between paying directly or indirectly. Although paying indirectly is often more convenient, it violates a basic market principle, that prices should reflect resource costs. Paying directly lets individual consumers make trade-offs between Costs and Benefits. For example, paid parking lets motorists choose between a more convenient but higher priced parking spot, a less convenient but cheaper parking, or changing modes to save on parking costs altogether. Paying directly rather than indirectly gives consumers a new opportunity to save money by reducing their use of costly parking facilities. Currently in North America, road user fees only cover about half of roadway expenditures (Henchman 2013), and less on congested urban corridors where roadway construction costs are particularly high, causing motorists driving on less costly roadways to cross-subsidize users of those facilities. Road pricing insures that users of a road bear its costs.


Unpriced roads and parking are so well established that many consumers consider them a right, and will object to tolls and fees. But motorists’ right to free roads and parking conflicts with consumers’ right to avoid paying for goods they do not need or want. Even people who normally own and drive an automobile may sometimes prefer to use an alternative mode or parking location if they can save on road or parking costs – an option that is only possible if they pay directly or have a Cash Out option, which allows consumers to choose an alternative subsidy if they use an alternative mode.


Opponents sometimes argue that road pricing results in unfair double taxation: tolls in addition to fuel taxes (e.g., Citizens Against Tolls). However, the costs (congestion impacts on other road users, creating a need for increased road capacity) imposed per vehicle-mile tend to be significantly higher than average under urban-peak conditions. For example, urban-peak congestion costs each vehicle imposes on other road users are estimated to range from 15¢  to 50¢ per vehicle-mile, and adding urban highway capacity typically costs 25¢ to 75¢ per additional peak-period vehicle-mile (Transportation Costs). Cost recovery fees are therefore far greater than the 3¢ per mile average fuel tax paid by motorist. Without road pricing, urban-peak travel tends to underpay its true cost, resulting in economically excessive demand. Congestion pricing (tolls that vary by time and location) test motorists’ willingness to pay for the additional capacity they demand: if tolls can fund roadway capacity expansion it can be considered economically efficient, but if tolls reduce peak-period demand, highway widening would not be cost effective.


Pricing opponents also argue that driving is a necessity, so it is unfair to make it unaffordable to lower-income people. But the Equity impacts of pricing depend on several factors, including the portion of vehicle trips that are truly essential, the quality of travel options available, and how revenues are used. Although some vehicle trips provide Basic Mobility, such as emergency travel and commuting to school and work, many vehicle trips are discretionary (that is, they one of several possible options available to consumers), either because the trip itself is of low value or because it could shift to another time, mode, route or destination with minimal extra effort. Giving motorists more incentive to change these trips increases overall economic efficiency, improving mobility for those high-value trips (such as emergency response, commuting and freight deliveries), reducing infrastructure costs, and addressing other problems such as accident risk and pollution emissions. By using pricing revenues to improve travel options, such as investing in Public Transit, Ridesharing and Nonmotorized Travel improvements, the incremental costs to travelers of shifting mode can be reduced or eliminated, making most people better off overall as a result.


Many TDM strategies involve price changes, as listed in Table 1. These pricing strategies can provide many specific transportation benefits, including reduced traffic congestion, road and parking facility cost savings, reduced crashes, increased travel options, consumer savings, environmental protection and more efficient land use, depending on the type of pricing and other factors.


Table 1            TDM Pricing Strategies

Increased Prices

Reduced Prices

Road Pricing

Distance-Based Fees

Increased Fuel Taxes

Parking Pricing

Comprehensive Market Reforms

Smart Growth Policy Reforms (some)

Reduced Transit Fares

Commuter Financial Benefits

Pay-As-You-Drive Insurance

Smart Growth Policy Reforms (some)



Pricing strategies may be implemented to help achieve various goals and objectives, as described below.


·         Demand management. This means that pricing is specifically intended to cause a particular change in travel activity, such as a reduction urban-peak vehicle trips, or a reduction in mileage by higher-polluting modes.


·         Efficient land use. Pricing strategies can support strategic land use objectives, such as encouraging infill development and more Accessible land use patterns (Land Use Evaluation). Some pricing strategies are specifically intended to affect land use (Smart Growth Policy Reforms).


·         Internalizing external costs. This includes charging users directly for facility costs, congestion, crash risk and pollution emissions (Transportation Costs).


·         Revenue generation. This means funding transportation facilities and services directly through user charges, or applying general taxes to transportation activities. This is sometimes associated with privatization of facilities such as highways.


·         Fair competition among transport modes. This involves using pricing to correct existing market distortions and favor a particular mode. It can involve setting prices based on the relative costs of different modes, and using revenue raised by one mode to cross-subsidize other modes as a Least-Cost strategy to reduce traffic congestion, or for Equity sake. 



These objectives often overlap. For example, internalization of external costs is often a way to achieve demand management objectives, and revenue generation from one mode may be used to cross-subsidize another mode. Pricing programs are often intended to help achieve a variety of objectives. For example, if tolls are used to fund roads, their rates can time-variable in order to also help manage demand. The table below compares demand management and revenue generation objectives for transportation pricing strategies.


Table 2            Comparing Road Pricing

Demand Management

Revenue Generation

Reduces vehicle traffic.

Is a TDM strategy.

Revenue not dedicated to roadway projects.

Requires variable rates (higher during congested periods).

Travel shifts to other modes and times considered desirable.

Generates funds.

Rates set to maximize revenues.

Is a capacity expansion strategy.

Revenue often dedicated to roadway projects.

Shifts to other routes and modes not desired.



Although pricing reforms tend to be quite effective at changing travel behavior, they face barriers and constraints. They require decision makers to overcome resistance, change existing planning and funding practices, and address Social Equity concerns (Baker, et al, 2008). Pricing reforms are best implemented as part of a comprehensive package of TDM strategies, including improved Travel Options (such as improved Walkability and Transit), plus Information and Marketing to inform users about price changes and alternative modes.



Principles of Efficient Pricing

Market Principles generally support TDM pricing strategies. Vehicle use imposes costs associated with roads and parking, crash risk, and environmental impacts (Transportation Costs). Since consumers as a group ultimately bear these costs, the question is not whether or not roads and parking should be free, it is whether consumers should bear these costs directly or indirectly.


Costs and Prices

Cost refers to resources used to produce a good or service, which may include money, time, materials, land or even risk and discomfort. Costs and benefits have a mirror-image relationship: cost can be defined in terms of reductions in potential benefits, while benefits can be defined as a reduction in costs. Costs can be categorized in several ways:

·         Some costs are fixed (not related to consumption, such as vehicle registration fees and residential parking), while others are variable (directly increases with consumption, such as fuel and road tolls).

·         Some costs are internal (borne directly by the user of a good, such as transit fares and vehicle operating costs), while others are external (borne by others, or by users indirectly and not related to their consumption, such as pollution emissions and general taxes used to fund transportation services).

·         Some costs are market (commonly traded with money in a competitive market, such as vehicles and fuel), while others are nonmarket (not commonly traded in a market, such as crash risk and air quality).


Price refers to perceived, internal, variable costs, that is, the direct, incremental costs that individual consumers trade off in exchange for using a good or service. The price of travel includes the fare, vehicle expenses, travel time, risk and discomfort an individual bears, but not external costs they impose on others (such as congestion delay, crash risk or pollution costs borne by others), or costs a consumer bears indirectly, such as general taxes used to fund roadways that an individual pays regardless of their travel habits.



Efficient pricing requires that prices reflect marginal (incremental) costs. Exactly what constitutes marginal cost can vary depending on perspective. In the very short term, many costs are fixed. For example, roads and parking facilities can be considered sunk costs, if their construction costs are already paid, and if not used by motorists they would simply sit empty. However, the land used for roads and parking facilities generally have an opportunity cost, that is, they could be sold and used for other purposes. There is some debate concerning whether transportation should be charge cost-recovery prices, that is, with prices set to provide enough recovery to fund the entire operation (Litman 2003; Kageson 2003). Although cost recovery may not be required for direct economic efficiency, it is justified for the sake of economic neutrality (Market Principles), since prices for most other products reflect it. For example, even a farmer who owns their land (rather than rents) will generally price their product to recover operating costs and profits equivalent to rent. Failing to charge cost recovery underprices transportation relative to other consumer goods, which represents a market distortion. Of course, there may be other reasons to underprice and subsidize a particular form of transportation (for example, on equity grounds, or as a way to help stimulate development in a particular area), but it is not justified as a general strategy.


Many Costs imposed by motor vehicle use are either external (not borne directly by users) or internal-fixed (borne directly by users, but not affected by how much a vehicle use used). As a result, motor vehicle use is significantly underpriced. Current vehicle pricing could be made significantly more efficient and fair (Comprehensive Market Reforms).


Paying costs directly (what economists call “internalizing costs”) is generally most fair and efficient (Reitveld 2003). It means that consumers “get what they pay for and pay for what they get.” It allows individual consumers to make their own decisions and trade offs between different goods and services. As described by Adam Smith, one of the founders of economic theory,


“When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll in proportion to their weight or their tonnage, they pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them. It seems scarce possible to invent a more equitable way of maintaining such works. This tax or toll too, though it is advanced by the carrier, is finally paid by the consumer, to whom it must always be charged in the price of the goods. As the expense of carriage, however, is very much reduced by means of such public works, the goods, notwithstanding the toll come cheaper to the consumer than the; could otherwise have done; their price not being so much raised by the toll as it is lowered by the cheapness of the carriage. The person who finally pays this tax, therefore, gains by the application more than he loses by the payment of it. His payment is exactly in proportion to his gain. It is in reality no more than a part of that gain which he is obliged to give up in order to get the rest. It seems impossible to imagine a more equitable method of raising a tax.” (Smith 1776, chapter 5)



Is Driving Insensitive to Price?

Critics sometimes argue that driving is insensitive to price, pointing to a news article showing that a recent jump in fuel prices had little effect on automobile use, or data showing vehicle ownership to be relatively high even among lower-income households and in countries with high vehicle ownership taxes. “Motorists love their cars too much, they won’t give them up,” critics argue.


Such claims are partly true and largely false.


As it is usually measured, automobile use is inelastic, meaning that a percentage price increase causes a proportionally smaller reduction in vehicle mileage. For example, a 10% fuel price increase only reduces automobile use by about 1% in the short run and 3% over the medium run. Even a 50% fuel price increase, which seems huge to consumers, will generally only reduce vehicle mileage by about 5% in the short run, a change too small for most people to notice.


However, if a fuel price increase is sustained for several months, the mileage reduction will probably triple to about 15%, as consumers take higher fuel prices into account in decisions such as where to live, work and holiday.


Fuel prices are a poor indicator of the elasticity of driving, because over the long term consumers will purchase more fuel-efficient vehicles, so their annual fuel costs remain constant. Over the last few decades the real (inflation adjusted) price of vehicle fuel has declined significantly, and vehicle-operating efficiency has increased. For example, the $0.35 paid for a gallon of gasoline in 1955 dollars is worth $2.35 in current dollars, and an average car of that time could only drive 12 miles on a gallon. Real fuel costs are now a third lower, and an average car is nearly twice as efficient. Not surprisingly, consumers have responded to these trends by purchasing larger and more power vehicles, and driving more miles per year. Had fuel prices increased with inflation, fewer SUVs would be sold and motorists would drive fewer annual miles.


Critics also point out that people who live in countries with high fuel taxes continue to drive. However, residents of such countries drive more efficient vehicles and fewer annual miles. For example, Fuel Taxes are about 8 times higher in the U.K. than in the U.S., resulting in fuel prices that are about three times higher. As a result, U.K. vehicles are about twice as fuel efficient, on average, so per-mile fuel costs are only about 1.5 times higher, and automobiles are driven about 20% less per year, so annual fuel costs are only 1.25 higher than in the U.S. Since per capita vehicle ownership is lower, average per capita fuel expenditures are similar in both countries. Similar patterns can be found when comparing other countries with different fuel prices. This indicates that automobile use is sensitive to price.


The relatively low elasticity of driving with respect to fuel prices hides a much higher overall elasticity of driving. Fuel is only about a quarter of the total Vehicle Costs. A –0.3 elasticity of vehicle travel with respect to fuel price indicates that the overall price elasticity of driving is about –1.2, making driving an elastic good with respect to total vehicle costs. Pricing Reforms, Distance-Based Fees, Parking Pricing, Road Pricing and Carsharing are ways to charge motorists directly for a greater share of their total vehicle costs. 


The price sensitivity of driving is more evident with respect to parking fees and tolls. A modest Parking Fee or Road Toll can have a major effect on travel demand. Some of this reflects changes in destination and route, but it also includes changes in mode and travel distance (Pratt 1999). When per-mile or per-trip costs increase, motorists tend to drive less and rely more on other modes (NCHRP 2006; Prozzi, et al. 2009).


It is not the goal of most transportation demand management programs to take cars away from people – rather, it is to moderate their use and encourage the use of alternatives when appropriate. Pricing reforms can be an effective way to help achieve this objective. Although individual price changes have modest and gradual impacts, generally only affecting a small percentage of total travel, they can make a significant contribution if implemented as part of a comprehensive TDM program.



Mental accounting refers to analysis of how consumers think about pricing, taking into account factors such as price structures, initial conditions, customer attitudes and Marketing activities. In one example, Greenberg (2006) examines how mental accounting can be applied to optimize Pay-As-You-Drive Vehicle Pricing to achieve transport planning objectives.



Efficient Pricing

"The mode of taxation is, in fact, quite as important as the amount. As a small burden badly placed may distress a horse that could carry with ease a much larger one properly adjusted, so a people may be impoverished and their power of producing wealth destroyed by taxation, which, if levied in another way, could be borne with ease." Henry George


As discussed above, prices are efficient to the degree that they accurately reflect the costs imposed by a particular consumption activity. For this analysis it is useful to make a distinction between road user charges, which means that special fees paid by road users as a group, and road use charges, which implies that user fees reflect the road use costs imposed by a user. For example, a fixed registration vehicle fee is a road user charge, because the cost is paid by road users, but it is not a road use charge, because it does not accurately reflect the specific costs imposed by using a particular road, which varies depending on various factors. Road tolls and mileage-based fees can be considered road use charges, since they are directly related to how much a particular vehicle uses a roadway. A fuel tax is a road use charge, but less accurate than a toll, as discussed below.


Table 3 ranks common vehicle charging options in terms of how well they represent the costs imposed by a particular vehicle trip. Fees based on when and where driving occurs are best, particularly to represent parking, congestion, crash risk and pollution costs. This is now technically feasible using new Pricing Methods such as in-vehicle computerized meters or vehicle tracking systems that determine when and where driving occurs (CFIT, 2002).


Table 3            How Well Different Fees Represent Marginal Vehicle Costs


General Category




Time- and location-specific road and parking pricing

Variable road pricing, location-specific parking management, location-specific emission charges.


Second Best



Weight-distance charges, mileage-based vehicle insurance, prorated MVET, mileage based emission charges.


Third Best


Fuel charges

Increase fuel tax, apply general sales tax to fuel, pay-at-the-pump insurance, carbon tax, increase Hazardous Sub. Tax.


Fixed vehicle charges

Current MVET, vehicle purchase and ownership fees.



External costs

(not charged to motorists)

General taxes paying for roads and traffic services, parking subsidies, uncompensated external costs.

This table compares how different types of pricing reflect vehicle costs.



A fixed mileage-based charge that reflects vehicle weight, risk factors and emission rates ranks second. By prorating existing vehicle registration fees, distance-based fees can reflect both vehicle value and vehicle use, resulting in charges that are more progressive with respect to income, since higher income people tend to own more valuable vehicles and drive more per year. Fuel taxes rank third. It is more marginal than an external or fixed fee, but is not optimal since it does not reflect many of the factors that affect vehicle costs, such as vehicle type, driver, and travel conditions.


Fixed vehicle charges such as insurance and registration fees internalize costs to vehicle owners as a group, but once they are paid they have no effect on vehicle use. This is economically inefficient and results in cross-subsidies between those who drive less than average, and therefore impose relatively low costs, and those in the group who drive more than average and impose higher costs. External costs, such as roads funded by general taxes, unpriced parking, and uncompensated accident and environmental impacts are least effective at reflecting costs.


Table 4 shows which prices could be applied to various vehicle costs.


Table 4            Pricing of Various Costs







Road Tolls (fixed rates)






Congestion Pricing (variable rates)






Parking Pricing






Distance-Based Fees






Fuel Taxes






Pay-As-You-Drive Insurance






Different costs imposed by vehicles require different types of pricing. This table illustrates what type of pricing is appropriate for internalizing different costs.



Tradeoffs are often needed between price structure simplicity and complexity. Simpler structures are cheaper to administrate and collect, and easier for consumers to understand and accept. Research and experience indicate that consumers prefer simpler price structures but will accept and respond to more complex structures if they are clear and logical (Bonsall, et al. 2007).



Scale and Scope

Pricing can be implemented and evaluated at various geographic scales:

·         Point: Pricing a particular point in the road network, such as a bridge or a tunnel.

·         Facility: Pricing a roadway section.

·         Corridor: Pricing all roadways in a corridor.

·         Cordon: Pricing all roadways in an area, such as a central business district.

·         Regional: Pricing roadways at regional centers or throughout a region.



Table 5 illustrates the geographic scale of impacts from various pricing strategies. Congestion impacts tend to be evaluated on particular facilities and corridors, while crash and pollution reductions occur throughout a region and so require larger scale impacts.


Table 5            Geographic Scale of Pricing Strategies Impacts







Road Tolls (fixed rates)






Congestion Pricing (variable rates)






HOT Lanes






Cordon Fees






Distance-Based Fees






Pay-As-You-Drive Insurance






Parking Pricing






Parking Cash Out






Fuel Taxes








Scope refers to the range of objectives or impacts considered in analysis. Pricing evaluation can be affected by the scale and scope of analysis. For example, if an analysis only considers impacts on a particular facility or area, spillover impacts on other roads, and other indirect impacts may be overlooked (Comprehensive Planning).



Base Case

Price evaluation should be based on incremental (also called the marginal) costs and benefits. This requires defining the Base Case, meaning what would happen without the price change (Evaluating TDM). The evaluation of pricing strategies can be significantly affected by what is assumed to be the base case. For example, the evaluation of an HOT lane depend significantly on whether the alternative is:

·         Less road capacity (no additional lane).

·         An unpriced, general use lane.

·         Additional HOV capacity.

·         A transit project.



Travel Impacts

Prices can have significant impacts on travel behavior (Spears, Boarnet and Handy 2010; Zhang and Lu 2013). The Elasticities chapter describes methods to quantify and predict these impacts. Different types of pricing will cause different types of travel changes, which provide different types of benefits and costs to society (Evaluation). For example:


·         Road Pricing may shift traffic problems to unpriced roads or different destinations.


·         Time-variable congestion pricing (i.e., higher rates during peak periods) can cause vehicle trips to shift from peak to off-peak periods.


·         Distance-based fees tend to reduce total vehicle trips and trip distances, providing reductions in most external costs.


·         If travel alternatives are good, pricing is more likely to cause mode shifts.


·         If pricing is used to fund roadway capacity expansion that would otherwise not occur, it may increase total vehicle travel (Rebound Effect).



Efficient Road and Parking pricing both support and are supported by Smart Growth policies. Guo, et al. (2011) found that households in denser, mixed use, dense, transit-accessible neighborhoods reduced their peak-hour and overall travel significantly more than comparable households in automobile dependent suburbs, and that congestion pricing increase the value of more accessible and multi-modal locations.


The travel impacts of pricing depend on many factors, including the quality of alternatives (competing routes, destinations and modes), and the price structure used. If the price of an HOT lane is too low, it will experience congestion, reducing the performance for both single-occupant vehicle users and HOV users.




More efficient pricing can provide various benefits described below.


Congestion Reductions

Efficient road and parking pricing tends to be among the most efficient ways to reduce Traffic Congestion.


Road and Parking Facility Cost Savings

By reducing traffic congestion and total vehicle travel, efficient pricing reduces the need to expand roads and parking facilities. This can translate into savings to governments, businesses and households.


Accident Reductions

Efficient road and parking pricing can provide significant safety benefits (Litman 2011). Crash reductions vary depending on the type of price change, the portion of vehicle travel affected, and the quality of transport options available. If implemented to the degree justified on economic efficiency grounds (for example, cost recovery road and parking pricing), these reforms are predicted to reduce traffic casualties by 40-60%.

Energy Conservation and Emission Reductions

Efficient pricing tends to reduce transportation fuel consumption and emissions. Various studies indicate that the long-run elasticity of fuel consumption with respect to price is typically -0.3 to -0.7 (many estimates are lower because they reflect short-term impacts), which means that a 10% price increase reduces fuel consumption by 3% to 7%.


Improved Public Fitness and Health

By encouraging walking, cycling and public transit, efficient pricing tends to increase public fitness and health.


Improved Mobility for Non-Drivers

By increasing demand for alternative modes, efficient pricing can help improve alternatives, including walking and cycling conditions, and public transit services.


Pricing reforms are often evaluated based on a single benefit, such as road pricing for congestion reductions, parking pricing to reduce parking facility costs, or fuel pricing to reduce fuel consumption and pollution emissions. However, most pricing reforms can provide a variety of benefits, all of which should be considered in economic analysis.



Land Use Impacts

Pricing can have a variety of land use impacts (Deakin, in TRB, 1994). To the degree that it increases transportation costs to high-density areas, such as major commercial centers, it may encourage urban sprawl, but if congestion pricing improves access to such centers (by reducing congestion and funding transit improvement), it may encourage clustering. Since these factors tend to offset each other, actual impacts will tend depend on specific conditions. Levine and Garb (2002) argue that congestion pricing can either increase or reduce overall land use Accessibility, depending on how it is implemented. In this way, pricing can have significant long-term impacts on transportation patterns.



Public Acceptability and Impacts

Consumers generally oppose new or increased prices, which can be a major barrier to the implementation of pricing reforms. Several recent studies have examined citizen attitudes toward transportation pricing options, particularly Road Pricing (Marginal Cost Pricing Integrated Conceptual and Applied Model Analysis, www.mcicam.net). This research suggests that several strategies can be used to increase public acceptance of pricing strategies (Link and Polak, 2003; Ungemah and Collier, 2007; King, Manville and Shoup, 2007; Walker 2011; Leiserowit et al. 2011):

·         Pricing must be presented as a practical way to solve transportation problems such as congestion, pollution and traffic risk.

·         Pricing strategies must be perceived as an effective solution.

·         Revenues should be hypothecated (dedicated to transportation improvements) and transportation alternative must be provided.

·         Pricing must be perceived as fair.

·         Citizens must feel involved in developing pricing strategies.

·         Benefits be concentrated so beneficiaries have reason to advocate for implementation.



Recent experience indicates that, although there is often popular resistance and skepticism about new road pricing projects, opposition tends to decline once projects are in place and people become familiar with them (Litman 2003).


Pricing strategies tend to increase the range of available options to some motorists, although they can reduce affordability or convenience to others. For example, on unpriced roads, travelers have no alternative to being delayed by congestion, but HOT Lanes allow travelers to choose between driving in congestion, avoiding congestion by ridesharing or using transit, or avoiding congestion by paying a toll. This lets individual consumers choose the option that best meets their needs for a particular trip.


Pricing may be considered to reduce transportation options for low-income travelers who cannot afford an additional vehicle fee, but the vast majority of motorists either have travel alternatives (changes in travel timing, destination or mode), or can afford to pay an additional fee, at least sometimes. For example, a $2 per trip road toll paid 200 times per year may seem like a major additional cost to motorists accustomed to free roads, but it represents less than a 10% increase in total average vehicle costs. Few low-income motorists drive frequently drive alone on major congested highways or to commercial centers that are candidates for major parking price increases.


Consumers generally consider any increase in their prices to be harmful, although consumers can actually benefit overall by paying directly rather than indirectly for roads, parking and other costs. Direct pricing can give consumers a new opportunity save money. When roads and parking are unpriced, consumers bear the costs regardless of how much they drive. Even if roads are funded through fuel taxes, motorists who primarily drive under lower-cost conditions (e.g., during off-peak periods that do not contribute to the need to expand roadway capacity) tend to overpay their costs and cross-subsidize other motorists who drive under urban-peak conditions. Because costs are borne indirectly, motorists do not receive the full saving that result when they drive less. For example, motorists can reduce costs (traffic congestion, road and parking facility costs, crash risk, and pollution) by reducing their mileage. With current pricing, these savings are dispersed throughout society, benefiting other motorists. Only if motorists pay directly for roads, parking, crash risk and pollution will they perceive a direct financial savings when they reduce their mileage.


Similarly, if parking is supplied free with an apartment or condominium, the cost is unavoidable. An alternative would be to charge a lower rent for the apartment, and a separate rent for each parking space. This lets residents save by reducing the number of vehicles they own. Fuel price increases are often described as harmful to consumers and the economy, but consumers and the economy can benefit overall from tax shifting that uses revenues from increased fuel taxes to reduce other, more economically burdensome taxes on income and investment (Comprehensive Market Reforms).


If a consumer looks backward they may say, “I’ve already paid for roads and parking through taxes or rents. I want free roads and parking to get my money’s worth.” However, if a consumer looks forward, they may say, “I don’t want to pay for parking unless I use it. I want paid parking.”


Pricing tests users’ demand for facilities and services. For example, increasing highway capacity often costs 10-50¢ per additional peak-period vehicle mile (Transportation Costs). Unless enough peak-period users are willing to pay tolls of that magnitude, the project is not really a cost effective investment. Before adding capacity along a corridor, a transportation agency can toll the existing roadway, which will tend to reduce congestion. Only if the roadway is still congested when the toll is high enough to recover costs of additional capacity (say, 35¢ per vehicle-mile, or $3.50 for a 10-mile trip) would capacity expansion be considered cost effective.


Few urban highways have sufficient traffic demand to justify major capacity expansion. Muller (2001) found that of 16 recent U.S. toll road projects, demand and revenues on new toll road was significantly lower than expected, with actual revenues averaging only 50-60% of what was forecasted. Toll road authorities tend to overestimate traffic volume growth and underestimate the price elasticity of vehicle travel. Based on an extensive literature review, Williams-Derry (2011) concludes that toll roads usually generate less revenue than forecasted because motorists are more price sensitive than most models assume. Official forecasts frequently overestimate actual traffic and revenue from tolled roads, particularly where drivers have un-tolled alternatives.



Consumer Surplus Analysis

Direct pricing impacts can be evaluated based on consumer surplus analysis, which is a method of measuring the value consumers place on the goods and services they use. The basic technique is to add the incremental cost to consumers who don’t change their travel, to half the change in price times the number of trips that increase or decrease, known as the rule of half, which represents the midpoint between the old price and the new price, as described below.


For example, if a $1 per trip highway toll increase causes annual vehicle trips to decline from 3 million to 2 million, the reduction in consumer surplus is $2,500,000 ($1 x 2 million for existing trips, plus $1 x 1 million x 0.5 for vehicle trips foregone). Similarly, if a 50¢ per trip transit fare reduction results in an increase from 10 million to 12 million annual transit trips, this can be considered to provide $6 million in consumer surplus benefits (50¢ x 10 million for existing trips, plus 50¢ x 2,000,000 x 0.5 for added trips).


Many transportation models do not use consumer surplus analysis. They measure vehicle travel, assuming that any increase in travel time represents a cost to consumers, and any reduction in travel time represents a benefit. They ignore the possibility that travelers may sometimes prefer slower modes (transit, ridesharing, cycling and walking). Current evaluation practices favor transportation improvements that increase vehicle mobility, and undervalues TDM strategies that encourage more efficient travel patterns, improve transportation options or result in more Accessible land use patterns (Comprehensive Transportation Planning). Hensher and Goodwin (2004) identify various ways that current methods for evaluating travel time values tend to exaggerate motorists willingness to pay congestion tolls.


The Traffic Choices Study, a Puget Sound (Seattle, Washington area) congestion pricing pilot project, observed the driving patterns of 275 volunteer households with GPS-equipped vehicles before and after hypothetical tolls were charged for driving on major arterials and highways (PSRC 2008). The results indicate that financial incentives can cause motorists to make significant changes in travel activity (how, when and where they drive). The study found that commuters responsiveness to congestion tolls is significantly affected by the quality transit services available: the elasticity of Home-to-Work vehicle trips was approximately -0.04 (a 10% price increase causes a 0.4% reduction in commute trips), but increased to -0.16 (a 10% price increase causes a 1.6% reduction in commute trips) for workers with the 10% best transit service. This indicates that high quality public transit service significantly reduces the price (road toll or parking fee) required to achieve a given reduction in traffic congestion, a reflection of the smaller incremental cost to travelers (i.e., less loss of consumer surplus) when they shift from driving to high quality public transit.


Explanation of the “Rule of Half”

Economic theory suggests that when consumers change their travel in response to a financial incentive, the net consumer surplus is half of their price change (called the rule of half). This takes into account total changes in financial costs, travel time, convenience and mobility as they are perceived by consumers.


Let’s say that the price of driving (that is, the perceived variable costs, or vehicle operating costs) increased by 10¢ per mile, either because of an additional fee (e.g., paid parking) or a financial reward, and as a result you reduced your annual vehicle use by 1,000 miles. You would not give up highly valuable vehicle travel, but there are probably some vehicle-miles that you would reduce, either by shifting to other modes, choosing closer destinations, or because the trip itself does not seem particularly important.


These vehicle-miles foregone have an incremental value to you, the consumer, between 0¢ and 10¢.  If you consider the additional mile worth less than 0¢ (i.e., it has no value), you would not have taken it in the first place. If it is worth between 1-9¢ per mile, a 10¢ per mile incentive will convince you to give it up – you’d rather have the money. If the additional mile is worth more than 10¢ per mile, a 10¢ per mile incentive is inadequate to convenience you to give it up – you’ll keep driving. Of the 1,000 miles foregone, we can assume that the average net benefit to consumers (called the consumer surplus) is the mid-point of this range, that is, 5¢ per vehicle mile. Thus, we can calculate that miles foregone by a 10¢ per mile financial incentive have an average consumer surplus value of 5¢. A $100 increase in vehicle operating costs that reduces automobile travel by 1,000 miles imposes a net cost to consumers of $50, while a $100 financial reward that convinces motorists to drive 1,000 miles less provides a net benefit to consumers of $50.


Some people complicate this analysis by trying to track changes in consumer travel time, convenience and vehicle operating costs, but that is unnecessary information. All we need to know to determine net consumer benefits and costs is the perceived change in price, either positive or negative, and the resulting change in consumption. All of the complex trade-offs that consumers make between money, time, convenience and the value off mobility are incorporated.



Equity Impacts

Pricing can have a variety of Equity (also called distributional) impacts. A number of studies have examined the equity impacts of pricing (Fridstrøm 2000; Kalinowska and Steininger 2009; Larsen, et al. 2012; Litman 1996; McMullen, et al 2008; Parry 2008; RAND 2009; Rajé 2003; Santos and Rojey 2003; Vickrey 1992). In fact, most transport pricing studies and project give considerable attention to equity issues. Pricing strategies often succeed or fail based on how equity impacts are perceived by stakeholders, and how well equity concerns are addressed in the planning process.


Horizontal Equity

Horizontal equity (or fairness) refers to whether people are treated equally. It assumes that policies should apply equally to everybody, without favoring one individual or group over others. It implies that consumers should bear the costs they impose (“get what you pay for and pay for what you get”), unless a subsidy is specifically justified.


Pricing that more accurately reflects costs tends to increase horizontal equity. For example, direct road and parking pricing is generally fairer than paying indirectly, because the people who use a facility bear its costs. Even if costs are borne by motorists as a group through fuel taxes or insurance fees, more accurate pricing reduces cross-subsidies between different types of motorists.


Road pricing and highway privatization are often criticized on the grounds that they represent the transfer of public resources to benefit one group of citizens at others expense. Congestion pricing benefits higher income motorists who have a high ability to pay, and it can increase congestion delays to other road users. For example, pricing on a particular highway or lane can cause spillover traffic onto other, unpriced roads or lanes (Levinson, 2002; Safirova, Gillingham and Houde, 2007). From this perspective, road pricing can be considered comparable to public financial support for an exclusive club that is only affordable to wealthy residents. Roadway privatization allows private companies to reap profits. Although privatization advocates argue that such projects are privately funded and therefore no different than other commercial investments, in practice such projects often include various public subsidies, such as use of public rights-of-way without full rent or tax payment.


These inequities can be offset if some of the benefits of road pricing and privatization are distributed to lower-income motorists and non-drivers. For example, all households can be given a certain number of free peak-period trips or vehicle-miles on priced roads each year, as a way to provide Basic Access (an occasional urgent trip during peak periods), and to represent the public investment in such facilities. To the degree that public resources are invested in priced roads and that privatized roadways do not pay full rent or taxes on their rights-of-way or other investments, horizontal equity justifies that road pricing revenue should be used in ways that benefit lower-income people and non-drivers, such as reductions in general taxes, rebates to all households or public transit investments (Litman, 1996; Mayeres, 2001).


Critics also argue that road pricing is horizontally inequitable because it represents double taxation. They argue that motorists already pay for highways through fuel taxes and other roadway user fees. This argument can be challenged on two grounds. First, roadway user fees do not cover the full costs of roadway use. In the U.S., a third of roadway costs are funded through general taxes, and there are several other additional uncompensated external costs of vehicle use, including roadway land value, traffic services, parking subsidies, delay to nonmotorized travel, crash risk imposed on other road users, and environmental damages (Transportation Costs and Benefits). This suggests that additional road user fees can be justified on horizontal equity grounds. Second, the vehicle trips that are tolled tend to have relatively high roadway capacity costs. Accommodating an additional peak-period vehicle trip often costs 25-50¢ per vehicle mile, many times greater than the 3-5¢ per mile paid in existing road user fees (Transportation Costs and Benefits). Road tolls and congestion pricing can be considered an additional payment for the higher costs imposed by driving on major new highways, which reduces existing cross-subsidies from motorists who seldom drive on such facilities to those who do frequently. Motorists who regularly commute on urban highways are consuming expensive road space and so their fuel taxes underpay their true costs, while motorists who do not make special demands on the road system may overpay.


Horizontal and vertical equity objectives often conflict. For example, some people argue that horizontal equity demands that vehicle user fees be dedicated to roadway improvements. For this reason, many U.S. states have constitutional amendments that dedicate all vehicle fuel taxes to roadway expenditures, and some people argue that road tolls should only be used to fund highways (Roth 1996). However, this virtually guarantees that such fees will be regressive overall, since the revenues cannot be used in ways that significantly benefit non-drivers, such as improved non-motorized facilities or transit services. The requirement that vehicle user fees be dedicated to roadway improvements is not justified if vehicle traffic imposes residual external costs. Least Cost principles may also justify using congestion toll revenues to fund alternative transportation improvements, without contradicting horizontal equity, if that is the most cost effective way to reduce traffic congestion (cheaper than expanding highway capacity).


Pricing that corrects existing policies that favor automobile travel over other modes can increase fairness. For example, Parking Cash Out gives non-motorists a benefit comparable in value to free parking provided to motorists. Applying general sales tax to vehicle fuel may increase horizontal equity (fuel taxes dedicated to roads are a road user fee), unless there is a justification for providing a tax discount to motorists.


Some pricing strategies involve subsidies, but these are not necessarily unfair if automobile travel receives greater subsidies. A subsidy to reduce transit fares may simply represent an alternative way for non-drivers to receive their share of transportation resources, comparable to road and parking subsidies that benefit motorists. Even if alternative modes have a greater subsidy per mile, non-drivers tend to travel much less per year than motorists, and so per capita subsidies may be smaller (Social Benefits of Public Transit).


Vertical Equity

Vertical equity refers to the distribution of impacts between groups with different needs and abilities. It implies that policies should insure that people who are economically, socially or physically disadvantaged are not made worse off, and if possible they are made better off. Impacts on people who are severely disadvantaged (people living in poverty or who have severe physical disabilities) are particularly important for equity analysis.


There is a long history of incorporating vertical equity objectives into transportation policies (i.e., insuring that lower income people have Basic Access). Adam Smith, the founder of modern economics, wrote that, “When the toll upon carriages of luxury coaches, post chaises, etc. is made somewhat higher in proportion to their weight than upon carriages of necessary use, such as carts, wagons, and the indolence and vanity of the rich is made to contribute in a very easy manner to the relief of the poor, by rendering cheaper the transportation of heavy goods to all the different parts of the country.” (Smith, 1776, chapter 5)


Many vehicle pricing strategies are considered regressive, meaning that they impose a greater burden on lower-income consumers than on higher income consumers. A given road toll, parking fee or fuel tax represents a greater portion of household budgets for a low-income motorist than for a higher income motorist. Ryan and Stinson (2002) evaluate the distributional impacts of revenue-neutral tax shifts, with higher fuel taxes or mileage fees matched with reductions in general taxes now used to subsidize roads. The results indicate that some lower-income households are better off and others worse off, depending on their location, vehicle type and mileage, and the type of tax reform employed. Schweitzer and Taylor (2008) find that highway user fees are progressive compared with using general sales tax to fund highways.


However, the regressivity of pricing depends on the travel options available to disadvantaged groups and how revenues are used (Litman, 1996; Mayeres, 2001). For example, charging for parking at a totally Automobile Dependent worksite burdens lower-income people more than the same fee applied at a more multi-modal worksite, because fewer low-income employees drive, and the incremental cost to shift modes is smaller. As a result, pricing tends to be more equitable if it is part of an overall TDM program that improves Transportation Options, particularly for lower-income people.


Using revenues to reduce equally regressive taxes or provide services such as transit improvements, or returning revenues as a rebate to all residents in an area, can be neutral or progressive with respect to income.


Anti-Pricing Perspective

Automobiles are normal consumer products that most households own and rely on. But automobiles are expensive. Consumers think, “I already spend thousands of dollars a year on my car – I can’t afford to spend more for additional fees. I need my car and everybody has one. Its not fair to charge me more!”


But here are some counter-arguments:


·         Although some automobile use may be considered “essential,” a large portion is discretionary, including recreational travel and non-essential errands, commuting when other travel modes are available, and the additional travel resulting when people choose to live in dispersed locations.


·         Consumers already pay the indirect costs of automobile facilities through higher taxes, additional costs for retail goods (for parking at stores) and lower wages (for employee parking). Road pricing simply charges motorists directly rather than indirectly, which is more fair and efficient. Put another way, the additional consumer costs of road pricing can be offset by reductions in other consumer costs, such as taxes and retail prices.


·         Since vehicle ownership and use increase with income, wealthier people receive the greatest share of automobile subsidies. Lower income people are better off receiving direct subsidies that can be used for any mode rather than subsidized automobile travel.



Transition and Transaction Costs

Transition costs are the temporary costs for markets to adjust to different prices. For example, many motorists may regret purchasing a fuel inefficient vehicle if fuel prices increase more than they expected. A business that purchased a larger vehicle than necessary, on the assumption that fuel prices would stay low has excessive overhead costs that reduce productivity. Similarly, consumers or businesses that choose more automobile-dependent locations may face transition costs until they can adjust to higher than expected transportation costs.


Transaction costs are ongoing costs associated with collecting fees and enforcing regulations. Pricing incurs additional equipment and administrative costs for collecting fees, handling revenue and enforcing regulations. These overhead costs often absorb 10-40% of total revenue from road and parking pricing. Pricing can also impose time and inconvenience costs on motorists, particularly with conventional tollbooths and parking meters. These are the true resource costs of pricing to consider in economic evaluation (Levinson and Odlyzko, 2007).


Improved pricing methods and management strategies can greatly reduce these transaction costs, making pricing more cost effective and convenient to consumers (Pricing Methods).



Evaluating Economic Transfers

Pricing revenues are economic transfers, not true resource costs. User fees and taxes represent costs to consumers and revenue to facility owners or governments. Any analysis that accounts for fees should account for revenues and vise versa.


Congestion pricing strategies usually make most road users directly worse off (Hau, 1992). Net benefits to society occur when revenues are considered, and so the overall value of the project, and its public acceptability, depend on how revenues are used. If they are used productively (substituting for a less efficient tax, returned to residents as a rebate, or used to fund a valuable service) road pricing can provide net benefits overall.



Spillover Impacts

Charging for roads or parking can spillover problems if motorists shift travel to unpriced roads or park in other areas that have free parking. The additional costs in these areas should be considered when calculating benefits and evaluating equity impacts.



Economic Development Impacts

Low transportation costs are considered important for economic development. For example, free parking is often used to attract customers and to reward employees. Businesses in downtown areas where parking is priced often feel at a competitive disadvantage compared with suburban businesses that provide free parking. Similarly, many people worry that road pricing would reduce business activity in certain areas, and create a financial burden on industries that are highly dependent on trucking.


However, businesses ultimately bear the costs of unpriced parking, directly or through taxes that they must pass on to customers. Shippers have high hourly costs. Pricing that reduces parking facilities or congestion delays can increase business productivity and profits overall.



Best Practices

Below are best practices for implementing efficient pricing. Also see congestion pricing guidelines by Vickrey (1992), and AASHTO (2003). Lindsey (2006) and Parry (2008) provide an excellent review of congestion pricing issues.


·         Define the goals and objectives of pricing, such as whether it is primarily for demand management, revenue generation, or a combination of both.


·         Define the incremental costs and Base Case.


·         Use consumer surplus analysis to evaluate consumer impacts, rather than simply measuring changes in travel time.


·         Indicate economic transfers, including how revenues are used or the source of subsidies.


·         Use a wide scale and scope when evaluating pricing strategies, and account for spillover impacts.


·         Evaluate equity from various perspectives, including horizontal equity and vertical equity.



Wit and Humor

So this guy walks into a bar, looking VERY depressed. With a deep sigh, and the start of a tear in one eye, he orders FIVE 40-year-old singlemalt Scotches--which run about twenty bucks apiece.

The barman lines them up, and as the guy knocks them back, says, “Mister, you look as depressed as anyone I ever seen in this place.”

The guy says, “You’d be sad too, if you had what I got.”

“Man! What do you got?”

The guy finished the last drink, and says, “Only fifty cents.”



Related Chapters

For more information on the concepts and techniques discussed in this chapter see TDM Evaluation, TDM Planning, Measuring Transportation, Comprehensive Transportation Planning, Parking Evaluation, and Evaluating Transportation Options. For information on the effects of pricing on travel behavior see Transportation Elasticities and Trip Reduction Tables.



Examples and Case Studies

Puget Sound Traffic Choices Study (http://psrc.org/projects/trafficchoices/summaryreport.pdf)

In 2002, the Puget Sound Regional Council (PSRC) received a Federal Highway Administration grant to conduct a pilot project to see how travelers change their travel behavior (number, mode, route, and time of vehicle trips) in response to variable charges for road use (variable or congestion-based tolling). The project, called the Traffic Choices Study, placed Global Positioning System (GPS) tolling meters in the vehicles of about 275 volunteer households. The project observed driving patterns before and after hypothetical tolls were charged for the use of all the major freeways and arterials in the Seattle metropolitan area.


The primary aims of the Traffic Choices Study were to (1) accurately describe the behavioral response to the congestion-tolling of roadways, (2) better understand issues of policy related to the implementation of road network tolling, and (3) test an integrated system of technical solutions to the problem of tolling a large network of roads without deploying substantial physical hardware on the roadside. The study has met these goals and is the most comprehensive study of demand response to network tolls in existence.


The study was conducted between July 2005 and March 2006. Each participant was given a $1,016 debit account. A meter similar to those used in taxis was installed in their car and, with the help of global positioning satellites that keep track of where and when they drive, it subtracts a toll that varies depending on the time of day and the route. For instance, if participants drove on Interstate 405 on a weekday between 4 p.m. and 7 p.m. – peak commuting hours –50 cents a mile was subtracted from their account. If they make the same trip using city streets after 7 p.m. the computer subtracted only 5 cents a mile. That means the 17-mile trip to the Greenwood neighborhood cost as much as $8.50 during peak periods, as little as 85¢ during evenings, and there are no tolls between 10 p.m. and 5 a.m. The dash-board meter keeps track of what each trip costs.


Primary conclusions from the study include:


1. Observed response of drivers to tolls suggests there is a dramatic opportunity to significantly reduce traffic congestion and raise revenues for investment.

1.1  Motorists made small-scale adjustments in travel that, in aggregate, would have a major effect on transportation system performance.

1.2  When approached systematically, variable road tolling, with investments of toll revenues, could make excessive reoccurring congestion a thing of the past.

1.3  The scale of the revenues confirms the theoretical expectation that “optimal” tolls would support expanding transportation supply when and where it is needed most.

1.4  While most revenues are generated on a small portion of the toll roads, the secondary road network (arterials) should not be ignored, as diversion causes real problems with revenue loss and displaced traffic.

1.5  Users demonstrating a willingness to pay for high value roadways could expect that improvements would be forthcoming.

1.6  Done right, network tolling could provide broad benefit, including lower vehicle emissions, fewer accidents, travel time savings, improved roadway performance reliability, and lower operating costs.

1.7 A conservative analysis of the benefits of network tolling in the Puget Sound region indi­cates that the present value of net benefits could exceed $28 billion over a 30-year period.


2. Not all aspects of a road network tolling system have been fully demonstrated yet. But the core technology for satellite-based (and whole road network) toll systems is mature and reliable.

2.1 The tolling system performed as expected, and met basic system operating requirements. Further work on system refinement and design of enforcement and billing systems would be required prior to any full system deployment.

2.2 Tolling of dense road networks with facilities that have only minimal access controls requires special attention to issues of GPS accuracy, and the overall approach to facility use determination.

2.3 The approach to processing road use information (within the on-board device or in the toll system back office) has implications for user privacy, system stability, and data communica­tions costs.

2.4 Enforcement would require other facility use verification approaches (DSRC, video capture, mobile enforcement) in addition to the GPS-tolling technology.

2.5 Installing in-vehicle tolling devices is a costly logistical challenge, but relying on equipment to come standard with new automobiles won’t be practical if it doesn’t represent a trusted platform for road tolling.

2.6 The costs for GPS-based tolling systems are dominated by the initial investment in in-vehi­cle tolling equipment, and the communication of data during operations. Over the last few years, costs have declined dramatically and are expected to continue to come down.


3. A large-scale U.S. deployment of a GPS-based road tolling program will depend on proven sys­tems, a viable business model, and public acceptance of underlying concepts.

3.1 The public sector business case is based on the sizable social benefits of road tolling. There are ways to generate revenues that are less administratively burdensome, but these displace economic activity, and fail to address traffic congestion.

3.2 A transition to road network tolling would be costly and complex. It must be seen to be worth the sizable upfront effort.

3.3 Road tolling will be seen as unfair unless people understand that directly charging users addresses existing inequalities across users of the transportation system, and improves over­all economic efficiency, leaving society with greater resources available to address remaining issues of fairness.

3.4 Concerns over user privacy depend on what data leaves the vehicle, and what safeguards are in place to limit its availability and use. A road tolling system can be developed such that user privacy is maintained. But like so many things, this would come at a price.

3.5 Some experience and familiarity with road tolling makes people more open to the concept, but all programs are unique and will succeed or fail on their own merits. Road users are particularly interested in the question of how revenues will be used.



Impact of Road Pricing On Lower-Income Households (Plotnick, Romich and Thacker 2009)

A study of the impacts of tolling Puget Sound region highways found that most poor households would not be substantially affected. Impacts depend on which highways are tolled, the price structure, how much poor travelers depend on those highways, the quality of travel alternatives, and how revenues are used. Lower-income travelers who use routes to be tolled and do not have ready alternatives will have their economic well-being decreased. For the small number of poor households without alternatives, the financial effect of tolling could be large. One hypothetical simulation suggests that a poor household could pay up to 15 percent of its income on tolls.


The question of whether tolls disproportionately affect the poor relative to the non-poor requires a both a definition of equity and a full policy proposal that specifies how tolls will be collected and how tolling fits into larger public revenue flows. One equity concern is whether relative effects on different groups differ. Our simulation shows that the average poor household will pay a greater percentage of its annual income on tolls than will the average non-poor household. That is, the poor will pay a relatively larger share of their income than the non-poor. Whether relative budget burden is the correct definition of equity and whether the disproportionate burden could be offset by other revenue considerations are larger political questions



Land Use Impacts (Guo, et al. 2011)

The study, Intersection of Urban Form and Mileage Fees: Findings from the Oregon Road User Fee Pilot Program found that households in denser, mixed use, transit-accessible neighborhoods reduced their peak-hour and overall travel significantly more than comparable households in automobile dependent suburbs. The analysis suggests that congestion pricing both supports and is supported by smart growth land use policies that create more accessible, multi-modal communities.



Energy Price Reforms (Koplow 2010)

In a 2009 policy statement the G20 nations (“Group of Twenty” nations that include the largest economies in the world) committed to “rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption.” The benefits could be substantial: International Energy Agency (IEA) and Organisation for Economic Cooperation and Development (OECD) modeling has estimated that phasing out fossil-fuel consumption subsidies would reduce greenhouse-gas (GHG) emissions 10% globally by 2050 relative to a business-as-usual scenario. Additional economic and social benefits from phasing out production subsidies were not modeled, but could also be substantial.


Experts recommend a number of institutional reforms to help reduce and eliminate international fossil fuel subsidies:

·         Establishing an independent oversight and review board to review submittals for accuracy and coverage, with the ability to go back to member to fill in gaps.

·         Standardize the submittal process for subsidy information as well as requiring standardized reporting of the claimed justifications for keeping particular subsidies outside the purview of the G20 phase out.

·         Establishing a technical committee of independent experts to discuss and resolve independent reporting issues.

·         Initiating discussion and research on an appropriate secretariat to oversee reform efforts.



Commuter Preference Survey (Washbrook 2002)

A state-preference survey of suburban automobile long-distance commuters indicate that financial incentives are the most effective strategy for reducing automobile trips. A CA$5.00 (US$3.00) per round-trip road toll is predicted to reduce automobile commuting by 25%, and a CA$5.00 parking fee would reduce automobile commuting by 20%.


Executive Summary: Introduction of drive alone road and parking charges, singly or in combination, was shown to have the greatest ability to reduce drive alone market share for the commute to work. Increases in drive alone in-vehicle time had a moderate effect on market share, as did improvements in the time attributes of carpooling. Improvements in the time attributes of express bus service had a very small ability to reduce drive alone market share. In summary, among commuters who presently drive alone, the greatest reduction in SOV demand can be achieved by increasing the costs of SOV travel, not by making alternatives more competitive beyond a base level of service.


Survey respondents held strong opinions on the concept of road charges and parking charges.  Successful introduction of such charges on SOV’s would require a careful program of public support building which explained the reasons for introducing the charges, the environmental and social benefits expected to result from the charges, and the uses to be made of resulting revenues.  Comments from respondents suggest that support would be highest if revenues collected from charges were committed to transportation system improvements.


The results of the study show that, if properly introduced, road and parking charges could be an effective way of reducing the negative social, economic and environmental impacts of single occupant vehicle use, and of helping Canada meet its air quality and emission commitments.



Pigouvian Taxes Debated (www.pigouclub.com)

The Pigou Club is an organization of economists who support special taxes to internalize currently externalized costs, particularly Carbon taxes and other Fuel taxes. The NoPigou Club (http://nopigouclub.blogspot.com) is an organization of economists who oppose such taxes. Debates between these organizations provide a good summary of the merits of significant fuel tax increases. In particular, supporters point out that raising fuel taxes is justified on theoretical grounds, in order to internalize currently external costs, which increases economic efficiency and equity. Opponents argue that governments are unable to determine what level of tax is truly optimal, that fuel taxes are a poor instrument for internalizing many transportation costs (congestion, parking subsidies, accidents and even roadway costs and most pollutants), that governments may use revenues inefficiently, that increased fuel taxes are harmful to the economy, and that such taxes are unfair and politically unpopular.



Public Attitudes Toward Road Pricing

Public attitudes toward road pricing are a key factor in road pricing implementation, including whether pricing can be implemented and how pricing programs should be structured. Below is a list of research on public attitudes toward road pricing:


DfT (2006), Public attitudes to congestion and road pricing, Department for Transport, UK (www.dft.gov.uk/stellent/groups/dft_transstats/documents/pdf/dft_transstats_pdf_611869.pdf).


Fujii, S., Gerling, T., Jakobsson, C., Jou, R.-J. (2004), “A Cross-Country Study Of Fairness And Infringement On Freedoms As Determinants Of Car Owners’ Acceptance Of Road Pricing, Transportation, 31, pp. 285-295.


Jaensirisak, S., Wardman, M., May, A. D. (2005), “Explaining Variations In Public Acceptability Of Road Pricing Schemes,” Journal of Transport Economics and Policy, Vol. 39, No. 2, pp. 127-153.


Loukopoulos, P., Jakobsson, C., Gerling, T., Schneider, C. M., Fujii, SE (2005), “Public Attitudes Towards Policy Measures For Reducing Private Car Use: Evidence From A Study In Sweden,” Environmental Science & Policy, Vol. 8, pp. 57-66.


Lyons, G., Dudley, G., Slater, E., Parkhurst, G. (2004) Evidence-Base Review: Attitudes To Road Pricing, in Final Report to the Department for Transport, UK. Bristol: Centre for Transport and Society (www.dft.gov.uk/stellent/groups/dft_roads/documents/page/dft_roads_029785.doc).


Schade, J. & Schlag, B. (2000) “Acceptability of urban transport pricing” VATT Research Report No 72, (www.vatt.fi/julkaisut/t/t72.pdf)


Jens Schade and B Schlag, (Eds.) (2003) “Acceptability Of Transport Pricing Strategies,” Elsevier (www.elsevier.com).


Schlag, B.; Schade, J. (2000) “Public acceptability of traffic demand management in Europe,” Traffic Engineering + Control, Sept. 2000, Vol 41 No 8, p. 314-318.



See also European Transport Pricing Research (www.transport-pricing.net) especially CUPID (www.transport-pricing.net/cupid.html) and PROGRESS (www.progress-project.org).



Equitable VMT Reduction Strategies (Carlson and Howard 2010)

The report Impacts Of VMT Reduction Strategies On Selected Areas And Groups, sponsored by the Washington State Department of Transportation, investigates the equity impacts of the state’s vehicle miles travelled (VMT) reduction targets (18% reduction by 2020, 30% reduction by 2035, and 50% reduction by 2050), and ways to minimize negative impacts on disadvantaged populations. It identified various VMT reduction strategies and evaluated their impacts on five groups and areas, including small businesses, low-income residents, farmworkers, distressed counties, and counties with more than half the land in federal or tribal ownership. It identified ways to implement VMT reduction programs with the most postitive or least negative impacts on disadvantaged groups.



Spitsmijden: Dutch Experiments With Peak Avoidance Incentives (Donovan 2011)

An series of experiments performed in the Netherlands offered financial incentives between €2 to €7 (Euros) per day to selected travellers if they avoided travelling at peak times.  Results suggest the incentives have had a major effect on travel behaviour, with approximately 20-50% of participants either changing their departure time, switching routes, or shifting to another transport mode. Table 6 summarizes these results.


Table 6            Summary of Spitsmijden Experiments (Donovan 2011)



Modifications to travel behaviour

Departure time

Route changes

Mode shifts

No trips

1. Zoetermeer






2. Gouda






3. Hollandse Brug






4. Moerdijk Brug






Financial incentives caused travelers to change their peak-period automobile travel in various ways.



London Congestion Pricing

Litman (2003) describes the City of London’s congestion charging program, which requires motorists entering the city’s central area to pay a daily fee (initially ₤5, raised in 2006 to ₤8). Payment may be made by Internet, telephone or at payment stations. Compliance is tracked by matching license plate numbers of vehicle in the area (collected electronically by cameras) with payment records.


Martin Richards’ 2006 book Congestion Charging in London: The Policy and the Politics details the theory and practice of implementing London’s congestion pricing program, including background information on the historical and political context. It includes a review of the development of congestion pricing theory (including Vickery, Friedman, the Smeed Report, Roth and recent efforts to promote ‘Value Pricing’ in the U.S.), examples of road pricing methods, discussion of road pricing experience throughout the world, discussion of the reasons that London Mayor Livingstone decided to implement road pricing and its role in the city's overall transportation improvement program, description of the pricing system that was implemented (including where, when and how motorists pay, and how payment is verified and enforced), the process for implementing the plan, political response (including descriptions of supporters, skeptics and critics), analysis of the first years' experience with the program (travel changes, costs, revenues, and impacts on congestion, safety, emergency services, parking, and business activity), a summary of key lessons learned, and discussion of the future of congestion pricing.


Prud'homme and Bocarejo (2005) criticize London’s pricing program on grounds that the benefits (primarily reduced congestion delay to motorists and bus travelers) is less than the program’s operating costs. However, a response by Mackie argues that congestion reduction benefits are higher, that there are other categories of benefits to consider, and that experience in London will allow development of more cost effective pricing programs in other cities.



References And Resources For More Information


AASHTO (2003), User Benefit Analysis for Highways, American Association of State Highway Officials (www.aashto.org).


Richard Baker, et al. (2008), Moving Beyond Lexus Lanes: Equity Considerations For Managed Lanes, Transportation Research Board 87th Annual Meeting (www.trb.org); summary at http://pubsindex.trb.org/view.aspx?id=848563.


Matthew Bomberg, Richard T. Baker and Ginger Goodin (2009), MileageBased User Fees – A Path Toward Implementation; Phase 2: An Assessment of Technology Issues, UTCM 09-39-07, Texas Transportation Institute (http://utcm.tamu.edu); at http://utcm.tamu.edu/publications/final_reports/Goodin_tech_09-39-07.pdf.


Peter Bonsall, et al. (2007), “Responses to Complex Pricing Signals: Theory, Evidence and Implications for Road Pricing,” Transportation Research A, Vol. 41, Issue 7 (www.elsevier.com/locate/tra), August, pp. 672-683.


Paul J. Burke (2014), “Green Pricing in the Asia Pacific: An Idea Whose Time Has Come?” Asia & the Pacific Policy Studies, Vol. 1, No. 3, pp. 561–575 (DOI: 10.1002/app5.39); at http://onlinelibrary.wiley.com/doi/10.1002/app5.39/pdf.


Jeffrey Buxbaum, Christopher Wornum and David Williams (2008), Do Tolling Applications Meet Their Objectives? Framework for Evaluation, Transportation Research Board 87th Annual Meeting (www.trb.org); summary at http://trid.trb.org/view.aspx?id=847931.


Daniel Carlson and Zachary Howard (2010), Impacts Of VMT Reduction Strategies On Selected Areas and Groups, Washington State Department of Transportation (www.wsdot.wa.gov); at www.wsdot.wa.gov/research/reports/fullreports/751.1.pdf.


CESifo (2005), “City Toll” (various articles on roadway congestion pricing), Dice Report: Journal of Institutional Comparisons, Vol. 3, No. 3 (www.cesifo-group.de/DICE).


CFIT (2002), Paying For Road Use, Commission for Integrated Transport (www.cfit.gov.uk/reports/pfru/index.htm).


CFIT (2006), World Review of Road Pricing Phase 1 - Lessons for the UK, Commission for Integrated Transport (www.cfit.gov.uk/docs/2006/wrrp1/index.htm).


Citizens Against Tolls (www.endtolls.com).


Harry Clarke and David Prentice (2009), A Conceptual Framework For The Reform Of Taxes Related To Roads And Transport, School of Economics and Finance, La Trobe University, for the Australia Treasury Australia's Future Tax System review; at http://apo.org.au/research/conceptual-framework-reform-taxes-related-roads-and-transport.


David Coady, et al. (2010), Petroleum Product Subsidies: Costly, Inequitable, and Rising, International Monetary Fund (www.imf.org); at www.imf.org/external/pubs/ft/spn/2010/spn1005.pdf.


Steven Danna, Keibun Mori, Jake Vela and Michelle Ward (2012), A Benefit-Cost Analysis of Road Pricing in Downtown Seattle, Evans School Review 2, pp. 26-46; at http://tinyurl.com/mw3rqjy.


A. de Palma and R. Lindsey (2011), “Traffic Congestion Pricing Methodologies And Technologies,” Transportation Research C, No. 19, Transportation Research Board (www.trb.org), pp. 1377–1399; abstract at http://worldcat.org/issn/0968090X; version at http://hal.archives-ouvertes.fr/docs/00/41/45/26/PDF/2009-30.pdf.


DfT (2006), Public Attitudes To Congestion And Road Pricing, Department for Transport (www.dft.gov.uk).


Stuart Donovan (2011), Introducing Spitsmijden: Experiments With Peak Avoidance Incentives In The Netherlands, Victoria Transport Policy Institute (www.vtpi.org); at www.vtpi.org/spitsmijden.pdf.  


Tony Dutzik, Benjamin Davis and Phineas Baxandall (2011), Do Roads Pay for Themselves? Setting the Record Straight on Transportation Funding, PIRG Education Fund (www.uspirg.org); at www.uspirg.org/reports/usf/do-roads-pay-themselves.


ECMT (2004), Managing Transport Demand through User Charges: Experience to Date, European Conference of Ministers of Transport and OECD (www1.oecd.org/cem/topics/env/London04.htm).


EEA (2004), Transport Price Signals: Monitoring Changes in European Transport Prices and Charging Policy in the Framework of TERM, Transport and Environment Reporting Mechanism (TERM), European Environment Agency; Technical Report No 3/2004



EEB (1994), Guide to Benefit-Cost Analysis in Transport Canada, Economic Evaluation Branch, Transport Canada (www.tc.gc.ca); at www.tc.gc.ca/bca/intro_e.htm.


European Transport Pricing Initiatives (www.transport-pricing.net) includes various efforts to develop more fair and efficient pricing. The European Transport Pricing Initiative Newsletter (www.mcicam.net/MCICAM-news.pdf) provides updates on these programs. Specific European transportation pricing research projects are described below:


AFFORD (www.vatt.fi/afford) is an evaluation of optimal transportation pricing policies.


CAPRI (www.its.leeds.ac.uk/projects/capri) is disseminating research on transportation pricing.


CUPID (Co-ordinating Urban Pricing Integrated Demonstrations), European Transport Pricing Initiative, Project No. GRD1-1999-10958, European Commission, Competitive and Sustainable Growth Programme (www.transport-pricing.net/reports22.html), November, 2001. 


ExternE (http://externe.jrc.es) involves research into external costs of transport.


Generalization of Research on Accounts and Cost Estimates (www.grace-eu.org) is a research program developing methods of calculating marginal costs of road and rail transport and apply them to transport pricing reform in Europe.


IMPRINT: Implementing Pricing Reform in Transport (www.imprint-eu.org) and IMPRINT-NET (www.imprint-net.org) are efforts to promote implementation of fair and efficient transport pricing.


MCICAM (Marginal Cost Pricing Integrated Conceptual and Applied Model Analysis) (www.mcicam.net) is investigating marginal cost transportation pricing.


PETS (www.cordis.lu/transport/src/pets.htm) assesses current pricing of transport modes in European Union member countries.


PROGREURSS (Pricing ROad use for Greater Responsibility, Efficiency and Sustainability in citieS) (www.progress-project.org) involves research on road pricing.


REVENUE: Revenue Use from Transport Pricing (www.revenue-eu.org) assesses current practice of transport revenue use and develops guidelines for good use of the revenues from social marginal cost based pricing.


TRACE (www.hcg.nl/projects/trace/trace1.htm) provides costs of private road travel and their effects on demand, including short and long term elasticities. Sponsored by the European Commission, Directorate-General for Transport.


TRENEN (www.cordis.lu/transport/src/trenen.htm) is an effort to develop models for transport, environment and energy.


UNITE (www.its.leeds.ac.uk/projects/unite) involves transport cost accounting.



FHWA (2006), Congestion Pricing: A Primer, Office of Transportation Management, Federal Highway Admimistration (www.ops.fhwa.dot.gov); at www.ops.fhwa.dot.gov/publications/congestionpricing/congestionpricing.pdf.


FHWA (2008), Income-Based Equity Impacts of Congestion Pricing: A Primer, Office of Transportation Management, Federal Highway Administration (www.ops.fhwa.dot.gov); at http://ops.fhwa.dot.gov/publications/fhwahop08040/fhwahop08040.pdf.


Lasse Fridstrøm, Harald Minken, Paavo Molanen, Simon Shepherd and Arild Vold (2000), Economic and Equity Effects of Marginal Cost Pricing in Transport: Case Studies from Three European Cities, Norwegian Center for Transport Research (www.toi.no); at http://data.vatt.fi/afford/reports/deliverable-2a.pdf.


Lasse Fridstrøm and Knut H. Alfsen (2014), Norway’s Path To Sustainable Transport, TØI Report 1321/2014, Norwegian Centre for Transport Research (www.toi.no); at www.toi.no/getfile.php/Publikasjoner/T%C3%98I%20rapporter/2014/1321-2014/sum-1321-2014.pdf.


Ginger Goodin, Richard T. Baker and Lindsay Taylor (2009), MileageBased User Fees – A Path Toward Implementation; Phase 2: An Assessment of Institutional Issues, UTCM 09-39-07, Texas Transportation Institute (http://utcm.tamu.edu); at http://utcm.tamu.edu/publications/final_reports/Goodin_inst_09-39-07.pdf.


Phil Goodwin (1997), Solving Congestion, Inaugural Lecture for the Professorship of Transport Policy, University College London; at http://discovery.ucl.ac.uk/1244/1/2004_22.pdf.


Phil Goodwin and Stefan Persson (2001), Assessing the Benefits of Transport, European Conference of Ministers of Transport; OECD (www.oecd.org).


Allen Greenberg (2006), Applying Mental Accounting Concepts in Designing Pay-Per-Mile Auto Insurance Products, Transportation Research Board Annual Meeting (www.mdt.mt.gov/research/docs/trb_cd/Files/06-2976.pdf), 2006.


GTZ (2009), International Fuel Prices 2009, Deutsche Gesellschaft für Technische Zusammenarbeit (www.gtz.de); at www.gtz.de/en/themen/29957.htm.


Zhan Guo, et al. (2011), The Intersection of Urban Form and Mileage Fees: Findings from the Oregon Road User Fee Pilot Program, Report 10-04, Mineta Transportation Institute (http://transweb.sjsu.edu); at http://transweb.sjsu.edu/PDFs/research/2909_10-04.pdf.


Tim Hau (1992), Economic Fundamentals of Road Pricing, Report Nos. TWU 1 and TWU 2, Infrastructure and Urban development, World Bank (www.worldbank.org); at www.worldbank.org/html/fpd/transport/publicat/pub_tran.htm and at www.econ.hku.hk/~timhau.


Timothy D. Hau (1998), “Congestion Pricing and Road Investment,” in Road Pricing, Traffic Congestion and the Environment: Issues of Efficiency and Social Feasibility (K.J. Button and E.T. Verhoef, eds.), Edward Elgar (www.e-elgar.co.uk), pp. 39-78; at www.econ.hku.hk/~timhau/download.html.


Joseph Henchman (2013), Gasoline Taxes and Tolls Pay for Only a Third of State & Local Road Spending, The Tax Foundation (www.taxfoundation.org); at http://taxfoundation.org/article/gasoline-taxes-and-tolls-pay-only-third-state-local-road-spending.


David A. Hensher and Phil Goodwin (2004), “Using Values of Travel Time Savings For Toll Roads: Avoiding Some Common Errors,” Transport Policy, Vol. 11, No. 2 (www.elsevier.com), April 2004, pp. 171-181.


Jose Holguin-Veras, Mecit Cetin and Shuwan Xia (2006), “A Comparative Analysis of US Toll Policy,” Transportation Research A, Vol. 40, No. 10 (www.elsevier.com/locate/tra), pp. 852-871.


Edward Huang, Henry Lee, Grant Lovellette and Jose Gomez-Ibanez (2010), Transportation Revenue Options: Infrastructure, Emissions, and Congestion, Belfer Center, Harvard Kennedy School (www.belfercenter.org/enrp); at http://belfercenter.ksg.harvard.edu/files/Transportation%20Revenue%20Options%20Workshop%20Report%202010%20for%20web.pdf.


ICF International with RAND Corporation (2009), Implementable Strategies for Shifting to Direct Usage-Based Charges for Transportation Funding, Web-Only Document 143, National Cooperative Highway Research Program (NCHRP), Transportation Research Board (www.trb.org); at http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_w143.pdf.


ICF International (2010), Road Pricing: Public Perceptions and Program Development, Project 08-73, NCHRP 686, National Cooperative Highway Research Program (


IFS (2001), Virtual Learning Arcade – London Transport (http://vla.ifs.org.uk/models/mets22.html), Institute for Fiscal Studies (www.ifs.org.uk). For technical information on this model see Tackling Traffic Congestion: More about the METS Model, (www.bized.co.uk/virtual/vla/transport/resource_pack/notes_mets.htm) and (www.bized.co.uk/virtual/vla/transport/index.htm), and Tony Grayling and Stephen Glaister, A New Fares Contract for London, Institute for Public Policy Research (www.ippr.org.uk), ISBN 1 86030 100 2, 2000.


Per Kågeson (2003), Efficient Charging Of Heavy Goods Vehicles, Swedish Institute for Transport and Communications Analysis (www.sika-institute.se).


Dominika Kalinowska and Karl W. Steininger (2009), “Distributional Impacts Of Car Road Pricing: Settlement Structures Determine Divergence Across Countries,” Ecological Economics, Vol. 68/12, October, pp. 2890-2896; at www.diw.de/documents/publikationen/73/100012/dp907.pdf.


David A. King, Michael Manville and Donald Shoup (2007), “The Political Calculus of Congestion Pricing,” Transport Policy, Vol. 14, No. 2 (http://shoup.bol.ucla.edu/PoliticalCalculus.pdf), March, pp. 111-123. Also see David A. King, Michael Manville and Donald Shoup (2007), “For Whom The Road Tolls,” Access, Number 31, University of California Transportation Center (www.uctc.net).


Doug Koplow (2010), G20 Fossil-Fuel Subsidy Phase Out: A Review Of Current Gaps And Needed Changes To Achieve Success, EarthTrack (www.earthtrack.net); at www.earthtrack.net/files/uploaded_files/OCI.ET_.G20FF.FINAL_.pdf.


Dr. Maree Lake And Prof. Luis Ferreira (2002), Demand For Toll Roads: A Summary Of Elasticities, Travel Time Values And Modelling Approaches, Transport Research Consortium Queensland University Of Technology (http://eprints.qut.edu.au/archive/00002495/01/2495.pdf).


Lisa Larsen, Mark Burris, David Pearson and Patricia Ellis (2012), “Equity Evaluation of Fees for Vehicle Miles Traveled in Texas,” Transportation Research Record 2297, Transportation Research Board (www.trb.org), pp. 11-20, http://pubsindex.trb.org/view.aspx?id=1128614; at https://ceprofs.civil.tamu.edu/mburris/Papers/TRR%202297%20-%20MBUF%20Equity.pdf.


Douglas Lee (2008), Toward the Evaluation of Value Pricing, Transportation Research Board 87th Annual Meeting (www.trb.org).


Anthony Leiserowitz, Edward Maibach, Connie Roser-Renouf, and Nocholas Smith (2011),  Climate Change In The American Mind: Public Support For Climate & Energy Policies In May 2011, Yale Project on Climate Change Communication, Yale University and George Mason University (www.environment.yale.edu); at http://environment.yale.edu/climate/files/PolicySupportMay2011.pdf.


Jonathan Levine and Yaakov Garb (2000), Evaluating the Promise and Hazards of Congestion Pricing Proposals; An Access Centered Approach, Floersheimer Institute for Policy Studies (www.fips.org.il).


Jonathan Levine and Yaakov Garb (2002), Congestion Pricing's Conditional Promise: Promotion of Accessibility or Mobility, Transport Policy (www-personal.umich.edu/~jlevine/downloads/pricing.doc).


David Levinson (2002), Road Pricing and Compensation for Delay, Transportation Research Board Annual Meeting (www.trb.org).


David Levinson (2002), Financing Transportation Networks, Edward Elgar (www.e-elgar.com), ISBN: 1840645946.


David Levinson and Andrew Odlyzko (2007), Too Expensive to Meter: The Influence of Transaction Costs in Transportation and Communication, University of Minnesota Digital Technology Center (www.dtc.umn.edu); at www.dtc.umn.edu/~odlyzko/doc/metering-expensive.pdf.


Robin Lindsey (2006), “Do Economists Reach A Conclusion on Road Pricing? The Intellectual History of an Idea,” Econ Journal Watch: Scholarly Comments on Academic Economics, Volume 3, No. 2 (www.econjournalwatch.org/pdf/EJWCompleteIssueMay2006.pdf), May, pp 292-379.


Heike Link and John Polak (2003), “Acceptability of Transport Pricing Measures Among Public and Professionals in Europe,” Transportation Research Record 1839, Transportation Research Board (www.trb.org), pp. 34-44.


Todd Litman (1996), “Using Road Pricing Revenue: Economic Efficiency and Equity Considerations,” Transportation Research Record 1558, TRB (www.trb.org), pp. 24-28; at www.vtpi.org/revenue.pdf.


Todd Litman (2001), What’s It Worth? Life Cycle and Benefit/Cost Analysis for Evaluating Economic Value, Presented at Internet Symposium on Benefit-Cost Analysis, Transportation Association of Canada (www.tac-atc.ca), at www.vtpi.org/worth.pdf


Todd Litman (2003), London Congestion Pricing: Implications for Other Cities, Victoria Transport Policy Institute (www.vtpi.org); at www.vtpi.org/london.pdf.


Todd Litman (2006), Parking Taxes: Evaluating Options and Impacts, VTPI (www.vtpi.org); at www.vtpi.org/parking_tax.pdf.


Todd Litman (2006), “Transportation Market Distortions,” Berkeley Planning Journal: Sustainable Transport in the United States: From Rhetoric to Reality? (www-dcrp.ced.berkeley.edu/bpj), Volume 19, 2006, pp. 19-36.


Todd Litman (2007), Socially Optimal Transport Prices and Markets, VTPI (www.vtpi.org); at www.vtpi.org/sotpm.pdf.


Todd Litman (2008), Transportation Elasticities: How Prices and Other Factors Affect Travel Behavior, Victoria Transport Policy Institute (www.vtpi.org); at www.vtpi.org/elasticities.pdf.


Todd Litman (2009), Carbon Taxes: Tax What You Burn, Not What You Earn, Victoria Transport Policy Institute (www.vtpi.org); at www.vtpi.org/carbontax.pdf.


Todd Litman (2012), Pricing For Traffic Safety: How Efficient Transport Pricing Can Reduce Roadway Crash Risk, Paper P12-5310, Transportation Research Board Annual Meeting (www.trb.org); at www.vtpi.org/price_safe.pdf.


Todd Litman (2012), “Changing North American Vehicle-Travel Price Sensitivities: Implications For Transport and Energy Policy,” Transport Policy, (http://dx.doi.org/10.1016/j.tranpol.2012.06.010); full report at at www.vtpi.org/VMT_Elasticities.pdf.


Todd Litman (2013), Transport Elasticities: Impacts on Travel Behaviour: Understanding Transport Demand To Support Sustainable Travel Behavior, Technical Document #11, Sustainable Urban Transport Project (www.sutp.org) and GIZ (www.giz.de); at www.sutp.org/index.php/en-dn-tp.


Todd Litman (2014), The Mobility-Productivity Paradox: Exploring The Negative Relationships Between Mobility and Economic Productivity, presented at the International Transportation Economic Development Conference, 9-11 April 2014, Dallas, Texas (https://tti.tamu.edu/conferences/ited2014); at www.vtpi.org/ITED_paradox.pdf.


Todd Litman (2014), Congestion Evaluation Best Practices, Paper 12, International Transportation Economic Development Conference, 9-11 April 2014, Dallas, Texas (https://tti.tamu.edu/conferences/ited2014); at www.vtpi.org/ITED_congestion.pdf.


Todd Litman (2014), Economically Optimal Transport Prices and Markets: What Would Happen If Rational Policies Prevailed?, presented at the International Transportation Economic Development Conference, 9-11 April 2014, Dallas, Texas (https://tti.tamu.edu/conferences/ited2014); at www.vtpi.org/ITED_optimal.pdf.


Todd Litman (2014), “How Transport Pricing Reforms Can Increase Road Safety,” Traffic Infra Tech, April-May 2014, pp. 68-71 (http://emag.trafficinfratech.com ); at www.vtpi.org/TIT-pricesafety.pdf.


Todd Litman and Allen Greenberg (2000), Response to Mark Delucchi's “Should We Try to Get the Prices Right?”, VTPI (www.vtpi.org).


David Luskin (1999), Facts and Furphies in Benefit-Cost Analysis: Transport, Bureau of Transport Economics (www.bitre.gov.au); at www.bitre.gov.au/publications/24/Files/r100.pdf.


I. Mayeres (2001), Equity and Transport Policy Reform, Club of Jules Dupuit, University of Montreal (www.ajd.umontreal.ca/source-pdf/AJD-46%20Mayeres-I-Equity%20and%20TrasportPolicy%20Reform_ajd.pdf).


MC ICAM (Implementation of Marginal Cost Pricing in Transport - Integrated Conceptual and Applied Model Analysis) (http://vplno1.vkw.tu-dresden.de/psycho/projekte/mcicam/e_mcicam.html), a program at the Traffic and Transportation Psychology department at the Dresden University of Technology (www.verkehrspsychologie-dresden.de) explores issues related to the problems and opportunities of implementing more efficient transportation pricing.


B. Starr McMullen, Kyle Nakahara, Smita Biswas, Lei Zhang and Divya Valluri (2008), Techniques for Assessing the Socio-Economic Effects of Vehicle Mileage Fees, OTREC 07-03, Oregon Department of Transportation; at www.oregon.gov/ODOT/TD/TP_RES/docs/Reports/2008/ODOT-VMT_Fee_Impacts.pdf.


Robert H. Muller (2001), Tollroad Feasibility Studies; An Historical Perspective, Transportation Research Board Annual Meeting (www.trb.org).


NCHRP (2006), Estimating Toll Road Demand and Revenue, NCHRP Synthesis 364, Transportation Research Board (www.trb.org); at: http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_syn_364.pdf.


Noxon Associates (2008), The Case For TDM In Canada: Transportation Demand Management Initiatives And Their Benefits – A Handbook For Practitioners, Association for Commuter Transportation of Canada (www.actcanada.com); at www.actcanada.com/EN/Downloads/Case%20for%20TDM%20in%20Canada%20FINAL%20October%202008.pdf.


NSTIFC (2009), Paying Our Way: A New Framework Transportation Finance, Final Report of the National Surface Transportation Infrastructure Financing Commission (http://financecommission.dot.gov); at http://financecommission.dot.gov/Documents/NSTIF_Commission_Final_Report_Advance%20Copy_Feb09.pdf.


Ian Parry (2008), Pricing Urban Congestion, Discussion Paper 08-35, Resources for the Future (www.rff.org); at www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=20666.


Parsons Brinckerhoff (2013), Improving our Understanding of How Highway Congestion and Price Affect Travel Demand, Report S2-C04-RW-1, Strategic Highway Research Program (SHRP 2), Transportation Research Board (www.trb.org); at http://onlinepubs.trb.org/onlinepubs/shrp2/SHRP2_S2-C04-RW-1.pdf.


Jonathan R. Peters and Jonathan K. Kramer (2012), “Just Who Should Pay for What? Vertical Equity, Transit Subsidy and Road Pricing,” Journal of Public Transportation, Vol. 15, No. 2, pp. 117-132; at www.nctr.usf.edu/wp-content/uploads/2012/07/JPT15.2Peters.pdf.


The Pigou Club (www.pigouclub.com) is an organization of economists who support special taxes to internalize currently externalized costs, particularly petroleum and carbon taxes. The NoPigou Club (http://nopigouclub.blogspot.com) is an organization of economists who oppose special taxes to internalize currently externalized costs, particularly petroleum and carbon taxes.


Andrew T.W. Pickford and Philip T. Blythe (2006), Road User Charging and Electronic Toll Collection, Artech House (www.artechhouse.com).


Robert Plotnick, Jennifer Romich and Jennifer Thacker (2009), The Impacts of Tolling on Low-income Persons in the Puget Sound Region, Washington State Transportation Center, University of Washington, for the Washington State Department of Transportation (www.wsdot.wa.gov); at www.wsdot.wa.gov/research/reports/fullreports/721.1.pdf.


Richard H. Pratt (1999-2007), Traveler Response to Transportation System Changes, TCRP Report 95, TRB (www.trb.org); at www.trb.org/TRBNet/ProjectDisplay.asp?ProjectID=1034.


Remy Prud'homme and Juan Pablo Bocarejo (2005), “The London Congestion Charge: A Tentative Economic Appraisal,” Transport Policy, Vol. 12, No. 3 (www.elsevier.com), May 2005, pp. 279-287; and response by Peter Mackie, pp. 288-290.


PROSPECTS (2003), Transport Strategy: A Decisionmakers Guidebook, Konsult, Institute for Transport Studies, University of Leeds (www.konsult.leeds.ac.uk); at www.konsult.leeds.ac.uk/public/level1/sec00/index.htm.


Jolanda Prozzi, et al. (2009), Actual vs. Forecasted Toll Usage: A Case Study Review, Center for Transportation Research, University of Texas at Austin (www.utexas.edu); at www.utexas.edu/research/ctr/pdf_reports/0_6044_1.pdf.


PSRC (2008), Traffic Choices Study: Summary Report, Puget Sound Regional Council (http://psrc.org); at http://psrc.org/assets/37/summaryreport.pdf.


RAND (2008), Moving Los Angeles: Short-Term Transportation Policy Options for Improving Transportation, Rand Corporation (www.rand.org); at www.rand.org/pubs/monographs/2008/RAND_MG748.pdf.


RAND (2009), Equity and Congestion Pricing: A Review of the Evidence, Environmental Defense Fund, (www.edf.org) at www.edf.org/documents/9876_Rand_TR680_.pdf and www.rand.org/pubs/technical_reports/TR680.


Fiona Rajé (2003), Impacts Of Road User Charging/Workplace Parking Levy On Social Inclusion/Exclusion: Gender, Ethnicity And Lifecycle Issues, University Of Oxford Transport Studies Unit (www.tsu.ox.ac.uk/research/impacts.html).


REVENUE (www.revenue-eu.org), Revenue Use from Transport Pricing, is a European Union sponsored research program concerning the use of transportation pricing reform revenues For information see, State of the Art and Conceptual Background (www.revenue-eu.org/deliverables.htm), 2004.


Andrea Ricci, et al (2006), Pricing For (Sustainable) Transport Policies – A State Of The Art, Deliverable 1, Project contract no. 006293, IMPRINT-NET: Implementing pricing reforms in Transport – Networking (http://vplno1.vkw.tu-dresden.de/psycho/download/imprint-net_d1.pdf).


Martin G. Richards (2006), Congestion Charging in London: The Policy And The Politics, Palgrave (www.palgrave.com/products/Catalogue.aspx?is=1403932409).


Gabriel Roth (1996), Roads in a Market Economy, Avebury Technical (Aldershot).


Barry Ryan and Thomas F. Stinson (2002), Road Finance Alternatives: An Analysis of Metro-Area Road Taxes, Center for Transportation Studies, University of Minnesota



Elena Safirova, Kenneth Gillingham and Sébastien Houde (2007), “Measuring Marginal Congestion Costs Of Urban Transportation: Do Networks Matter?,” Transportation Research Part A, Vol. 41, No. 8 (www.sciencedirect.com), pp. 734-749.


Robert Salter, Subash Dhar and Peter Newman (2011), Technologies for Climate Change Mitigation: Transport Sector, Risø Centre on Energy, Climate and Sustainable Development, United Nations Environmental Program (www.uneprisoe.org); at http://tech-action.org/Guidebooks/TNAhandbook_Transport.pdf.


Georgina Santos and Laurent Rojey (2003), “Distributional Impacts Of Road Pricing: The Truth Behind The Myth,” Transportation, Vol. 31, No. 1, February 2004 , pp. 21-42; at www.ltrc.lsu.edu/TRB_82/TRB2003-001211.pdf.


Bruce Schaller (2010), New York City’s Congestion Pricing Experience and Implications for Road Pricing Acceptance in the United States, Transportation Research Board Annual Meeting (www.trb.org); at www.nyc.gov/html/dot/downloads/pdf/schaller_paper_2010trb.pdf.


Geertje Schuitema (2010), Priceless Policies: Factors Influencing The Acceptability Of Transport Pricing Policies, University of Groningen (www.rug.nl); at http://dissertations.ub.rug.nl/faculties/ppsw/2010/g.schuitema.


Lisa Schweitzer and Brian Taylor (2008), “Just Pricing: The Distributional Effects Of Congestion Pricing And Sales Taxes,” Transportation, Vol. 35, No. 6, pp. 797–812 (www.springerlink.com/content/l168327363227298); summarized in “Just Road Pricing,” Access 36 (www.uctc.net/access);  Spring 2010, pp. 2-7; at www.uctc.net/access/36/access36.pdf.


Lisa Scheitzer And Briand Taylor (2010), “Just Road Pricing,” Access 36 (www.uctc.net/access); Spring 2010, pp. 2-7; at www.uctc.net/access/36/access36.pdf.


Donald Shoup (2011), “Free Parking Or Free Markets,” CATO Unbound (http://www.cato-unbound.org/2011/04/04/donald-shoup/free-parking-or-free-markets).


Kenneth Small (1999), “Project Evaluation,” in Transportation Policy and Economics, Brookings (www.brookings.edu); at (www.uctc.net/papers/379.pdf).


Adam Smith (1776), An Inquiry into the Nature And Causes of the Wealth of Nations, The Adam Smith Institute (www.adamsmith.org.uk).


Steven Spears, Marlon G. Boarnet and Susan Handy (2010), Draft Policy Brief on the Impacts of Road User Pricing Based on a Review of the Empirical Literature, for Research on Impacts of Transportation and Land Use-Related Policies, California Air Resources Board (http://arb.ca.gov/cc/sb375/policies/policies.htm).


TCRP (2003), Road Value Pricing: Traveler Response to Transport System Changes, Transit Cooperative Research Program Report 95; Transportation Research Board (www.trb.org); at (http://gulliver.trb.org/publications/tcrp/tcrp_rpt_95c14.pdf).


Traffic and Transportation Psychology (2002), Barriers of Road Pricing Implementation Conference Proceedings, Dresden University of Technology (www.strafica.fi/mcicam/conferences/dresden/conferences-dresden.htm).


Transport Policy (2005), “Special Issues On Road Pricing,” Transport Policy (www.elsevier.com), Vol. 12, No 5, Sept. 2005 and Vol. 13, No. 2 March 2006.


Transportation Alternatives Congestion Pricing Webpage (www.transalt.org/campaigns/sensible/congestion.html) provides information on congestion pricing, with particular emphasis on implementation in New York.


TRB (1994), Curbing Gridlock; Peak-Period Fees to Relieve Traffic Congestion, Committee for Study on Urban Transportation Congestion Pricing, National Research Council Special Report 242, National Academy Press (www.trb.org); at http://www.nap.edu/openbook.php?isbn=0309055040


TRB (2006), The Fuel Tax and Alternatives for Transportation Funding, Special Report 285, Transportation Research Board (www.trb.org).


TRB (2011), Equity of Evolving Transportation Finance Mechanisms, Special Report 303, Transportation Research Board (www.trb.org); at http://onlinepubs.trb.org/onlinepubs/sr/sr303.pdf.


TRB Congestion Pricing Committee Website (www.trb-pricing.org) provides information on activities and resources of the Transportation Research Board concerning road pricing.


TRISP (2005), “Evaluation Implications Of Sub-Optimum Pricing,” Economic Evaluation Notes, UK Department for International Development and the World Bank (www.worldbank.org); at http://go.worldbank.org/ME49C4XOH0. Summarizes transport project evaluation methods suitable for developing country applications.


TRUCE (Tool for Rush-hour User Charge Evaluation) is a spreadsheet developed by the FHWA, to help estimate the potential the costs, benefits and revenues from highway congestion pricing; at http://ops.fhwa.dot.gov/tolling_pricing/value_pricing/tools/index.htm.


David Ungemah and Tina Collier (2007), “I'll Tell You What I Think!: A National Review of How the Public Perceives Pricing,” Transportation Research Record 1996, Transportation Research Board (www.trb.org) pp. 58-65.


Value Pricing and Congestion Pricing Homepage (www.valuepricing.org), Hubert H. Humphrey Institute of Public Affairs at the University of Minnesota.


Dirk Van Amelsfort and Viktoria Swedish (2015), Introduction to Congestion Charging: A Guide for Practitioners in Developing Cities, Asian Development Bank (https://openaccess.adb.org) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ); at https://openaccess.adb.org/handle/11540/4318


William Vickrey (1992), Principles of Efficient Congestion Pricing, Columbia University; at www.vtpi.org/vickrey.htm.


William Vickrey (1994), Public Economics; Selected Papers by William Vickrey, Cambridge University Press (www.uk.cambridge.org).


Martin Wachs (2003), Improving Efficiency and Equity in Transportation Finance, Center on Urban and Metropolitan Policy, Brookings Institute (www.brookings.edu/es/urban).


John Walker (2011), The Acceptability of Road Pricing, Royal Automobile Club Foundation for Motoring (www.racfoundation.org); at www.racfoundation.org/assets/rac_foundation/content/downloadables/the%20acceptability%20of%20road%20pricing%20-%20walker%20-%20main%20report%20(may%2011).pdf.


Kevin Washbrook (2002), Lower Mainland Commuter Preference Survey, School of Resource and Environmental Management, Simon Fraser University (www.sfu.ca).


Kevin Washbrook, Wolfgang Haider and Mark Jaccard (2006), “Estimating Commuter Mode Choice: A Discrete Choice Analysis Of The Impact Of Road Pricing And Parking Charges,” Transportation, Vol. 33, pp. 621–639.


Asha Weinstein and Gian-Claudia Sciara (2004), Assessing The Equity Implications Of HOT Lanes, Santa Clara Valley Transportation Authority (www.vta.org); at www.vta.org/projects/hot_lanes/hot_equity.pdf.


Asha Weinstein Agrawal, et al. (2011), Getting Around When You’re Just Getting By: The Travel Behavior and Transportation Expenditures of Low-Income Adults, Report 10-02, Mineta Transportation Institute (www.transweb.sjsu.edu); at www.transweb.sjsu.edu/MTIportal/research/publications/documents/2806_10-02.pdf.


Clark Williams-Derry (2011), Toll Avoidance And Transportation Funding: Official Estimates Frequently Overestimate Traffic And Revenue For Toll Roads, Sightline Institute (www.sightline.org); at www.sightline.org/research/sprawl/toll-avoidance-and-transportation-funding.


Lei Zhang and Yijing Lu (2012), “Marginal Cost Vehicle Mileage Fee,” Transportation Research Record 2297, Transportation Research Board (www.trb.org), pp. 10-10; at http://trb.metapress.com/content/q050l35u7r726813.

This Encyclopedia is produced by the Victoria Transport Policy Institute to help improve understanding of Transportation Demand Management. It is an ongoing project. Please send us your comments and suggestions for improvement.




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