Zone Pricing in Theory and Practice

Amid growing recognition of the costs of downtown congestion and scarcity of revenues for new roads, congestion pricing for downtown areas -- a practice we call “zone pricing” -- has begun to receive wide attention. From 1975-2003, zone pricing failed to spread beyond Singapore, but by the 2000’s technological advances had made the practice more widely practical. Now London, Stockholm, Milan and Gothenburg have schemes of their own, and zone pricing is on the agenda in many world cities. The research summarized in this report has sought to advance practical knowledge of zone pricing in several ways. First, we have created a very detailed, scholarly history of zone pricing, covering the circumstances under which cities have implemented zone pricing, what technologies have been used and what results these cities have obtained. Second, we investigated the theory of “usage tolls.” A drawback of all tradition zone pricing systems is that, for practical reasons, they fail to charge different tolls to drivers who use the network to different degrees: someone who enters the downtown and immediately parks pays the same toll as someone who circles for an hour. But with new technology it will be possible to charge drivers for some index of road use, such as how far or how long they travel inside the network. Our research highlights two major advantages of usage tolling: (i) it can reschedule trips in optimal ways; (ii) it can discourage long trips -- such as those traveling across the downtown between points outside -- from happening by car in the first place. In both cases, an interesting result is the added precision of usage tolls means congestion reduction can be accomplished while charging drivers relatively little. We cite this as a political advantage that will help make zone pricing more palatable.