The idea behind congestion pricing (i.e., applying a toll in high-traffic times or areas) is that vehicle traffic could decline while local revenues accrue—and pay for benefits like public transit improvements. Would congestion pricing benefit everyone?
Two weeks ago, citing concerns about the costs to everyday New Yorkers, Governor Kathy Hochul of New York State canceled plans to charge vehicles that drive into Lower Manhattan. The program would have started at the end of June, and expected revenues of several billion dollars per year mostly would have financed public transit improvements. Proponents of the plan have emphasized improvements to traffic congestion and air quality in Lower Manhattan, along with widespread economic and environmental benefits that would result from improving public transit. However, substantial opposition to the plan has become apparent, including from suburban residents in Long Island, upstate New York, Connecticut, and New Jersey, as well as from commercial trucking.
To be sure, economic theory suggests that a policy like congestion pricing should improve overall economic well-being by making drivers pay at least some of the costs that they impose on other drivers when they decide to take a trip that increases congestion. And investing in public transportation can reduce congestion further and improve local air quality throughout the region, not to mention reduce greenhouse gas emissions.
However, as with any policy, congestion pricing combined with public transit investments will create winners and losers, and we argue that transportation researchers can do a better job of pinpointing exactly who will benefit—and to what extent—from the overall scheme. This information could be helpful if New York reconsiders the decision to cancel, or if other cities take up the cause by helping policymakers understand public perception and support and address any public concerns.
Part of the problem is that the costs of congestion pricing are obvious to the drivers who pay the charges, but the benefits are more diffuse and depend crucially on how the revenue is spent.
By way of background, a few other cities around the world have adopted some sort of congestion pricing, such as Singapore, London, and Stockholm; New York City would have been the first US city. Congestion pricing for New York City has been in the works for decades; prior to the recent announcement from Governor Hochul, it looked like the policy finally would arrive. The controversy over this approach to generating revenue suggests that a more in-depth analysis of who actually is benefiting and who is being harmed—and to what degree—could help steer policymakers toward more informed decisions about congestion pricing. But the governor’s decision two weeks ago changed that outlook, and in practice, New York City is not alone in struggling to adopt congestion pricing.
Part of the problem is that the costs of congestion pricing are obvious to the drivers who pay the charges, but the benefits are more diffuse and depend crucially on how the revenue is spent. To explain why, we can begin by considering the direct effects of a congestion charge on drivers, putting aside potential public transit improvements for the moment. We’ll focus on people making trips in private cars, leaving the important issues about how congestion pricing affects commercial trucking for another blog post. Here, we assume that people decide whether to drive into Lower Manhattan by comparing the benefits of the trip (e.g., shopping, entertainment) against the time and monetary costs (e.g., tolls, fuel, and parking costs).
Hypothetically, if the program started in late June, we could distinguish between two groups of people who previously made trips into or through Lower Manhattan. The first group decides that, because of the charge, it’s no longer worthwhile to make the trip into Lower Manhattan by car. Either they forgo the trip entirely, travel a different way (such as taking the subway), or take a different route that avoids Lower Manhattan (for those who would have driven through). The congestion charge would make everyone in this first group worse off. We know that because, without the charge, they would have taken the trip by car; but with the charge, they do something else. (Again, we’re putting aside public transit improvements for the moment.)
However, by changing their behavior, this first group reduces congestion in Lower Manhattan, which benefits people in the second group, who make the trip regardless. This second group benefits because of the lower traffic congestion, but these latter drivers also incur the cost of paying the charge. How will this group come out, on balance?
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Answering this question requires an understanding of who will continue driving under congestion pricing, the amount of time they save from lower congestion, and how much they value those time savings. People who may be better off are those who place a high value on time (i.e., who benefit greatly from spending less time stuck in traffic) and who don’t care much about the monetary costs. Others who likely will be worse off are those who place a lower value on time savings and who are affected significantly and financially by the charge. Manhattan drivers vary widely, from affluent individuals to lower-income workers with limited alternatives. Generally, wealthier individuals may place a high value on time and benefit more from time savings, while lower-income individuals may be more concerned about the cost. However, even for the wealthy, the balance between time savings and financial costs is uncertain.
So far, we have considered only the effect on drivers. The broader benefits of congestion pricing that accrue to all, including non-drivers, will depend on what the government does with the revenue.
New York State had intended to devote most of the revenue to improving public transit, such as making subway stations handicap accessible and electrifying the city fleet of transit buses. The benefits of that spending would have spread across the region, with public transit riders throughout the region benefiting from improvements to the system. Residents and businesses also would benefit, even if they don’t use public transit themselves, to the extent that public transit boosts overall economic activity. If these investments reduce driving and increase zero-emission transit buses across the region, the broader public would benefit from fewer individual drivers and from the reduced noise and air pollution due to clean buses.
But we don’t really have a good idea of the magnitude of the benefits, nor of how these benefits are distributed across diverse populations. Would some people—those who change their travel behavior because of the congestion charge—benefit from the public transit improvements, leaving them better off overall? Or would they take a rideshare (such as Uber or Lyft) to travel into Lower Manhattan instead, avoiding the charge and contributing to congestion? As for the people who pay the charge, would they benefit from better public transit; for example, because of a more vibrant regional economy? And what about suburban residents, many of whom have opposed congestion pricing? Would they benefit indirectly from public transit improvements?
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While advocates of congestion pricing have touted the benefits of better public transit and air quality, transportation researchers likewise haven’t provided precise information about where those benefits will occur and who will enjoy them. To what degree are individuals benefiting from less air pollution, and how do these benefits accrue across different population groups?
Also, public-transportation researchers haven’t provided specific information about who will pay the costs. What are the demographics of people who opt to pay the charge, for example?
A lack of good answers to these questions, and a failure to communicate good answers to the general public, may help explain why some groups oppose congestion pricing before it’s implemented and why the governor changed her mind about the program at the last minute. (Afterward, however, public opinion about congestion pricing often turns more favorable, such as in Stockholm.)
We could learn something from experiences in other cities; in fact, a good deal of research covers these questions for other cities. However, that research tends to consider one aspect of behavior change at a time (e.g., changes in bike riding), and it seldom considers congestion pricing from the perspective of an individual resident.
Given the monetary cost of the congestion charge, savings in travel time, benefits to health and air quality, and other effects—which individuals are worse off, and which are better off? We don’t really know yet. Quantitative answers to these questions could help policymakers address potential criticisms—both by adjusting how costs are imposed and how benefits are generated—in hopes of making the programs more effective, equitable, and embraced.
