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Congestion charging mechanisms for roads : an evaluation of current practice


  • Hau, Timothy D.


The author explores 20 criteria for a good road pricing system and presents case studies illustrating the costs, revenues, and benefits of alternative congestion charging mechanisms. The author finds that manual tollbooths are not suitable for congestion charging because they are land-, labor-, and time-intensive. Cordon pricing (as in the Bergen toll ring) can be an effective instrument for charging for congestion if half the toll lanes are reserved for seasonal pass holders traveling through the pricing points at regular highway speed. Enforcement of those driving in reserved lanes can be carried out by periodic videographs of vehicle license plates. Area licensing schemes require that vehicles entering the central business district during peak hours prominently display a monthly or daily license. Enforcement is undertaken at gantry points by traffic wardens who perform visual checks on the nonstop traffic. The enforcement costs of area licensing schemes are prohibitive at motorway speeds but relatively low-cost in a standard congested urban setting with limited gateways. Area licensing schemes, also known as supplementary licensing, carry the lowest cost per transaction. Electronic road pricing with automatic vehicle identification (an off-vehicle recording system) is electronic toll collection by time of day writ large and made obligatory on vehicle owners in a jurisdiction. The cost of the electronic equipment is not trivial, but is outweighed by the benefits. Sensitivity analysis performed on the Hong Kong electronic road pricing scheme in 1983-85 shows that even after excluding time savings, the savings in operating costs produce benefit figures that are greater than system costs. The invasion-of-privacy issues that led to the political failure of the Hong Kong electronic road pricing scheme can not be overcome by giving road users access to confidential numbered account arrangements with a prepaid cash deposit. The capital cost of electronic road pricing with smart card technology (an on-vehicle charging system) is higher than the cost for automatic vehicle identification technology alone, but benefits still outweigh costs (as in the Dutch proposal). Together, the benefit-cost ratio and the cost per transaction are acceptable but this technology is still not widely used commercially. The author argues that electronic approaches to direct road use charging are superior to manual approaches for road users, road authorities, and society as a whole. And rapid progress in microelectronics, cryptology, and microwave technologies will continue to yield large-scale economies in the manufacturing of automatic vehicle identification equipment, read-write transponders, smart cards, and the hardware and software that go with them. The author ranks electronic road pricing with automatic vehicle identification alone higher than electronic road pricing with smart card-type AVI based on an unweighted index of all criteria. And generally, the area licensing scheme is superior to cordon pricing. If budgets allow, authorities should investigate the feasibility of electronic road pricing. If the budget is tight, they should look into the area licensing scheme with its low cost and high benefit-cost ratio (the latter being the most important of the 20 criteria the author uses). Both conceptually and practically, the author finds that it is important to earmark the proceeds of road pricing to implement marginal cost pricing in the road sector.

Suggested Citation

  • Hau, Timothy D., 1992. "Congestion charging mechanisms for roads : an evaluation of current practice," Policy Research Working Paper Series 1071, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1071

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    Cited by:

    1. Stephen Ison & Tom Rye, 2005. "Implementing Road User Charging: The Lessons Learnt from Hong Kong, Cambridge and Central London," Transport Reviews, Taylor & Francis Journals, vol. 25(4), pages 451-465, October.
    2. Maitra, B. & Sikdar, P.K. & Dhingra, S.L., 2004. "Modeling of Congestion: A Tool for Urban Traffic Management in Developing Countries," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 27, pages 45-56.
    3. Winston Harrington & Richard D. Morgenstern & Peter Nelson, 2000. "On the accuracy of regulatory cost estimates," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 19(2), pages 297-322.
    4. Jenn, Alan, 2019. "Lessons Learned for Designing Programs to Charge for Road Use, Congestion, and Emissions," Institute of Transportation Studies, Working Paper Series qt9n8571hf, Institute of Transportation Studies, UC Davis.
    5. Badami, Madhav G., 2004. "Environmental policy-making in a difficult context: motorized two-wheeled vehicle emissions in India," Energy Policy, Elsevier, vol. 32(16), pages 1861-1877, November.
    6. Small, Kenneth A. & Gomez-Ilbanez, Jose A., 1998. "Road Pricing for Congestion Management: The Transition from Theory to Policy," University of California Transportation Center, Working Papers qt8kk909p1, University of California Transportation Center.
    7. Morgenstern, Richard & Harrington, Winston & Nelson, Per-Kristian, 1999. "On the Accuracy of Regulatory Cost Estimates," Discussion Papers dp-99-18, Resources For the Future.
    8. Velaga, Nagendra R. & Pangbourne, Kate, 2014. "Achieving genuinely dynamic road user charging: issues with a GNSS-based approach," Journal of Transport Geography, Elsevier, vol. 34(C), pages 243-253.
    9. Eskeland, Gunnar S. & Feyzioglu, Tarhan N., 1997. "Is demand for polluting goods manageable? An econometric study of car ownership and use in Mexico," Journal of Development Economics, Elsevier, vol. 53(2), pages 423-445, August.
    10. Amy Finkelstein, 2007. "E-ZTax: Tax Salience and Tax Rates," NBER Working Papers 12924, National Bureau of Economic Research, Inc.
    11. Johnston, Robert, 1997. "A Comparative Systems-level Analysis: Automated Freeways, Hov Lanes, Transit Expansion, Pricing Policies And Land Use Intensification," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt6mt9f54w, Institute of Transportation Studies, UC Berkeley.
    12. Piotr Olszewski, 2007. "Singapore motorisation restraint and its implications on travel behaviour and urban sustainability," Transportation, Springer, vol. 34(3), pages 319-335, May.
    13. Harrington, Winston & Krupnick, Alan J. & Alberini, Anna, 2001. "Overcoming public aversion to congestion pricing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(2), pages 87-105, February.
    14. Small, Kenneth A., 1997. "Economics and urban transportation policy in the United States," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 671-691, November.
    15. Burris, Mark W. & Pendyala, Ram M., 2002. "Discrete choice models of traveler participation in differential time of day pricing programs," Transport Policy, Elsevier, vol. 9(3), pages 241-251, July.
    16. Johnston, Robert A. & Ceerla, Raju, 1993. "A Continuing Systems-level Evaluation Of Automated Urban Freeways: Year Three," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt0gv0s4x4, Institute of Transportation Studies, UC Berkeley.
    17. Ingram, Gregory K. & Zhi Liu, 1999. "Determinants of motorization and road provision," Policy Research Working Paper Series 2042, The World Bank.


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