Most roads are completely free to use. This leads to high demand and, as a result, traffic congestion. Congestion pricing attempts to reduce congestion, decrease travel times, and increase reliability by forcing drivers to pay for using roads. Rather that simply levying flat tolls, congestion pricing works by varying the cost of driving depending on traffic levels. When traffic is high prices rise in an attempt to curb demand. Drivers unwilling to pay the high price will potentially adjust their travel behavior to avoid the congestion, leading to more efficient use of road space.
While congestion pricing is meant to reduce traffic, it also generates revenue. This money can be used put towards improving public transportation so that people have a realistic alternative to driving.
Congestion Pricing Basics
Congestion pricing encompasses several different strategies for applying a price to heavily traveled road networks. True "congestion pricing", as opposed to basic tolling, is based off the economic principle of Pigovian taxes whereby consumers pay a fee equal to the negative externality they inflict onto society.  Negative externalities of congestion can be seen in the extra "cost" of travel time and unreliability, as well as the negative environmental impacts from excess pollution. By increasing the price the market should respond by decreasing demand and easing congestion.
The basic concept is to raise the price of travel as the number of travelers increases, especially when the level of traffic begins to decrease the time and reliability of travel. In the United States, the "high occupancy toll" (HOT) lane is one of the most common forms of congestion pricing. HOT lanes are typically converted from existing high-occupancy vehicle (HOV) lanes, retaining the basic concept of free travel by carpools and buses while adding the option for solo drivers to pay to use the lane. This strategy allows motorists who value a faster and more reliable trip on the highway to pay for such an alternative. HOT lanes do not replace general travel lanes, meaning people can continue to drive for free on the same roadway. True congestion pricing on HOT lanes requires that the price paid by solo drivers increases as the volume of cars increases. If so many vehicles are buying into the HOT lanes that traffic begins to back up, the price may climb significantly, or in some cases, the HOT lanes may revert temporarily back to HOV-only.
Other congestion pricing tools besides HOT lanes include zone pricing, tolls across an entire roadway, and area-wide driving charges.
- Area pricing - In an area pricing system, motorists must pay to drive into a certain area. This has never been implemented in North America, but can be seen in some European cities. It was introduced in London in 2003; most motorists entering the central city between 7:00am and 6:30pm Monday through Friday must pay a fee to do so. The revenues from the zone pricing have been directed towards improved public transport, and together have reduced traffic by as much as 15% without significant increases on surrounding local roads.
- Cordon pricing- Cordon pricing is very similar to area pricing however drivers must pay every time they cross a boundary, whereas area pricing schemes typically charge once per day. Cordon charges also typically exclude trips that stay within the boundaries as enforcement is only done along the boundary. The best known example of a cordon pricing scheme is Stockholm, Sweden. 
- Tolls across an entire roadway - The concept of a toll road is not unfamiliar to Americans, but these tolled facilities usually have a fixed fee. More modern systems adjust the charge to meet demand, which can encourage off-peak travel.
- Time/Distance and/or Place-based pricing - The most experimental system of congestion pricing involves charging drivers on a per-mile or minute basis for all driving within a certain area. Some have even proposed adjusting the price based on the fuel efficiency of the vehicle. Oregon is currently piloting a project that would use this sort of pricing to replace the fuel tax, which is becoming less and less effective as a funding mechanism as fuel efficiency increases. n 2005, Germany adopted a distance-, place-, and emission-based pricing system for all heavy-duty trucks operating on its 12,000-kilometer national highway system, but there are no time-of-day congestion charges involved.
Of all the strategies for congestion pricing, converting HOV lanes to HOT lanes is by far the most common and best-studied. As such, it is was the one we will focus on going forward.
Implementing HOT Lanes
Getting a HOT lane project off the ground can be difficult. Motorists are used to driving for free, so any new plan to charge them for it is likely to be challenged. Starting a project requires strong leadership that can carry implementation through setbacks. The organization pushing for the lane needs to find allies in three groups: the legislature, other organizations, and the public.
- Legislature - Because HOT lanes are relatively new, they are vulnerable to legal challenges. Working with the legislature to build trust is an important step to getting permission to move ahead. This can be done by clearly outline the authority structure and goals of the project.
- Other organizations - Plans for HOT lanes generally have multiple stakeholders. Successful implementation requires clear coordination, often in the form of legal agency agreements.
- Public - In order for the public to accept any congestion pricing plan, they need to know what the money is going towards. Educational campaigns can help explain the benefits of the program. In addition, pledging to use money for public transit or other improvements can be beneficial.
Once a project has been approved, it is time to actually implement it. It’s important to have a thorough plan in place at this step, as any issues can be very costly and eliminate forward momentum. Pilot projects are a low-risk way to start. Before the full project begins, make sure to clarify what vehicles are exempt (emergency, transit, HOV, etc.) and coordinate with law enforcement on their responsibilities. If using mitigation strategies like improved transit, roll them out before tolling starts. Once the project is moving, constant monitoring is necessary to keep it on the right track.
HOT Lane Technology
Unlike traditional toll roads, HOT lanes typically do not involve tollbooth payment. Instead, drivers pay the toll with electronic transponders placed in their cars. The transponders are loaded with money (online, over the phone, or at an office) and communicate with overhead electronic scanners on the roadway. Cameras are often used alongside the scanners in order to record the license plate numbers of drivers trying to use the lanes without paying.
One of the most frequent arguments against HOT lanes is that they disproportionately hurt low-income motorists; the term “Lexus Lanes” has been used to paint the lanes as being only for the rich.
While it is true that the lanes can be expensive to use, studies have shown that drivers of all income levels use them. And because HOT lanes do not replace general travel lanes, they should not have a negative impact on free traffic. Lastly, road pricing is a less regressive way to pay for road maintenance than fuel taxes, vehicle registration fees, or sales taxes.
This is not to dismiss equity concerns, however. There are certainly equity issues that must be addressed. Credit card-based transponders are inaccessible to the unbanked, so some programs are starting to accept cash payment. In cases where pricing is deemed to be unreasonable for low-income drivers, toll exemptions and rebates have been enacted. Lower tolls for low-income drivers are especially important if entire roadways are tolled and easy alternatives do not exist, such as in the case of a toll bridge.
Congestion pricing is fundamentally aimed at reducing demand for driving. Some of this reduction comes from eliminating trips, but people do still need to get around. One way to deal with some of the equity problems arising from HOT lanes is to use a portion of the revenue to fund transit improvement.
- San Diego - San Diego’s I-15 moved to a congestion pricing system in 1998. City of Poway Mayor Jan Goldsmith championed the project, rallying support in the region. The toll varies as often as every six minutes and raises about $2 million a year, half of which is spent on transit. Bus ridership along the corridor has risen 25% since the program started.
- Orange County - Four variably priced express lanes were opened on State Route 91 in 1995. The tolls are changed every three months to account for traffic volumes. Average peak-hour speeds on the express lanes is 60-65 miles per hour, as opposed to 15-20 miles per hour in the general lanes. Not only has the project been financially successful, but it has allowed drivers to travel much more quickly.
- New York City (Manhattan) - In March 2019, New York Governor Andrew Cuomo approved a state budget that included the approval of congestion pricing in Manhattan, with an expected start date in 2021. New York City will use a cordon pricing scheme that will charge drivers to enter Manhattan below 60th Street. Governor Cuomo deferred decision on many of the other details, including the pricing scheme, to the Triborough Bridge and Tunnel Authority, which is part of the Metropolitan Transportation Administration (MTA). Revenue generated from the program will go 80 percent to the MTA's subway and bus network, and 10 percent each to the Long Island Railroad and the Metro-North Railroad.
- The Economist, Pigouvian Taxes, https://www.economist.com/economics-brief/2017/08/19/pigouvian-taxes
- Federal Highway Administration. (2008). "Congestion Pricing: A Primer."
- Litman, T. (2011). "London Congestion Pricing: Implications for Other Cities."
- Stockholm's Congestion Pricing, Tools of Change Landmark Case Study, https://www.toolsofchange.com/userfiles/Stockholm%20Congestion%20Pricing%20-%20FINAL%202014.pdf
- Ecola, Liisa and Thomas Light, Equity and Congestion Pricing: A Review of the Evidence. Santa Monica, CA: RAND Corporation, 2009. https://www.rand.org/pubs/technical_reports/TR680.html.
- “Income-Based Equity Impacts of Congestion Pricing.” Federal Highway Administration.
- LACMTA. (2010). "Metro ExpressLanes Project: Final Low-Income Assessment."
- Hu, W. (2019, April 2). "Over $10 to Drive in Manhattan? What We Know About the Congestion Pricing Plan." The New York Times.
- McKinley, J. and V. Wang. (2019 March 31) "New York State Budget Deal Brings Congestion Pricing, Plastic Bag Ban and Mansion Tax." The New York Times.
- This document provides an extensive guide to the details of all the stages of implementing a lane pricing program.