London, a city with a long history of being a dominant financial hub, experienced its worst traffic congestion in 2002. During the early 21st century, the agglomeration of economic activities in the United Kingdom resulted in a surge of automobiles on the roads. The early 21st century saw the financial and service sectors dominate London, and the city’s expanding population only increased travel demand and, thus, congestion. This congestion turned out to be an inescapable situation in London. The effect was visible in the economy as the city began to suffer enormous losses because traffic congestion impacted the economy by reducing the productivity of the people. But how does traffic have an impact on such a big economy?

Matthias Sweet, a researcher at McMaster University, examined the relationship between traffic congestion and the economy. He took data from 88 congested metro areas of the United States between 1993 and 2008, and his findings suggested that a higher level of congestion means faster economic growth but only up to a certain point, beyond which it leads to a downward curve. According to the study, congestion results in slower job growth when it exceeds 35-37 hours of delay per commuter per year. Moreover, if a city has less congestion than the tipping point, paving new highways will be a waste of taxpayers’ money. This study shows that traffic congestion does have an economic impact. But what is the solution? JM Buchanan (1952), Beckman (1956), and Walters (1961) all made the theoretical case for using ‘road pricing’, but their work went unnoticed. However, in 1963, a group of transport economists in the UK succeeded in establishing a panel to investigate various possibilities of road pricing. The policy literally means imposing a price on the traffic, that is, collecting a tax on using a specific road in a specific time period.

Back in 2002, London was experiencing the worst traffic congestion in the history of the United Kingdom, and the city’s air quality started deteriorating day by day. According to a case study conducted by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), the average traffic speed in London was less than 12 km/h. This cost them an estimated €3-4 million per week, along with a loss in employee productivity. London’s then-mayor, Ken Livingstone, decided to introduce the congestion pricing system in 2003. The policy aimed to reduce the usage of private vehicles and encourage the usage of public transport by collecting a fee from drivers when they enter a certain region called congestion charging zones (CCZs) during a certain time period. London was well-equipped with traffic cameras that scanned the licence plates of the vehicles. So, when a vehicle entered a congestion charging zone between 7 A.M. and 6 P.M. on working days, the driver had to pay €5, which was raised to €8 in July 2005 and €11.5 in June 2014 as the congestion price. According to Edoardo Croci’s research report (2016), the scheme covered an area of 22 sq. km in the heart of London. This accounted for 1.3% of the city’s surface area, housing over 1,50,000 inhabitants and attracting 1.1 million visitors. In 2007, the area was extended by almost half of its original size.

According to Transport for London (TfL), when congestion pricing was implemented in 2003, Central London witnessed a drop in traffic congestion of 26% by the year 2006, as compared with 2002. In addition, air pollution, which was at an alarming rate in the early twenty-first century, decreased by 16% from 2002 to 2003. The data also revealed that London saw a reduction in road accidents of about 50-70 per year. While automobile-related casualties were down by 6.2%, those due to bicycles increased by 13.4%. The policy also facilitated the government’s ability to generate a revenue of €140 million in the initial years, which bloomed to €230 million in 2012. This money was spent on improving the city’s infrastructure.

According to an article from National Public Radio, it was revealed that before implementing the scheme in 2002, 40% of London’s public supported the policy, which eventually rose to 59% after its implementation. The same is true for Stockholm, the capital of Sweden, which enacted a similar scheme. The number was just 30% before and rose to 52% after the implementation. This pattern indicates that the scheme succeeded in producing fruitful results. Unsurprisingly so, the car commuters never loved this policy.

Congestion pricing is not a very new concept, but its success can be seen in the story of Central London. Many metropolitan cities like New York, Washington, and Hong Kong are planning to roll out similar policies. NYC intends to launch a scheme by the end of 2023 with the goal of raising money and reducing traffic by tolling drivers. The scheme is expected to generate $1 billion in revenue.

Now, the question that arises is why many cities never implemented congestion pricing. According to Lucius Riccio, a professor in the business department at NYU, congestion pricing is a complex scheme that has huge implementation costs as it requires a proper public transportation system to work. There is also a political aspect to it. Many politicians do not want to touch the concept of congestion pricing, as this scheme is a burden on the pockets of drivers, mostly adults who are also voters.

Congestion is an inconvenience in many cities around the globe, causing economies to face losses due to time lost. According to a report by Uber, India lost ₹1.47 lakh crore in 2018 because of traffic jams in its major metropolitan cities, namely Mumbai, Delhi, Bangalore, and Kolkata. According to research by GoShorty, Mumbai is the most congested metropolitan city in India and the third most congested in the world. Mumbai loses nearly 121 hours per year due to traffic congestion. Similarly, New York City also faced an estimated $11 billion in losses due to traffic congestion, as revealed in a study by INRIX. Countries worldwide can take inspiration from London’s congestion pricing scheme and develop solutions according to their needs in order to cope with traffic congestion. For instance, countries should invest in cycling infrastructure to reduce the share of travel by car. This will be an economical, healthier, and eco-friendly method to deal with traffic congestion. Appropriately implemented, congestion pricing is an effective mechanism to put an end to the never-ending traffic jams.

By Divyansh Rathore