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8 Road Pricing: Public Perceptions and Program Development
1.1.4 Areawide Pricing
While the U.S. pricing programs to date have focused largely on the introduction of variable
pricing on single facilities, more of the urban road pricing efforts abroad have involved areawide
or cordon-based congestion pricing. Areawide pricing involves charging a fee to travelers entering
and sometimes driving within a congested zone or area, typically in city centers, as a measure to
reduce traffic congestion and encourage a shift to modes other than the auto. Generating revenues
to fund transit improvements has also been an objective in many cases. Some overseas pricing proj-
ects have focused on pricing traffic entering entire urban regions. Others have introduced conges-
tion pricing on expressway networks. The charge may vary by time of day or vehicle characteristics,
may be in effect all day or during peak hours only, or may vary dynamically with the level of con-
gestion. Although congestion reduction is often the primary objective, cities also seek to reduce
emissions, noise, and traffic accidents and to improve pedestrian access and enjoyment of public
spaces and businesses. Areawide pricing, where fees are charged for entering and driving within a
designated zone, is similar in concept to "cordon pricing," where drivers are charged when they
cross the cordon surrounding a congested zone. Outside the United States, areawide pricing has
existed in Singapore since 1975 and has been implemented in several cities, mostly in Europe over
the past decade, notably in London in 2003 and Stockholm (cordon pricing) in 2006. Within the
United States, areawide pricing was proposed in New York City in 2007 and in San Francisco in
2008. Neither plan has been implemented.
1.1.5 Distance-Based Pricing or Mileage Fees
The projects in this category convert some of the fixed costs of owning and operating a vehicle
to variable costs. One example is more variability in insurance and/or leasing costs based on
mileage. Another approach is a form of road pricing with travel prices based on vehicle miles trav-
eled (VMT), a user-pay principle encouraging consumers to make cost-efficient travel decisions
and to reduce driving at congested times and places. An added objective of VMT or mileage fees
is to preserve or increase transportation revenues. Some states and research organizations are
looking toward revenues from VMT fees to fully or partially replace existing gas taxes in the future.
However, in line with the goal of targeting congestion, all the cases discussed here either vary
charges based on congestion levels and traffic management objectives or are evaluating charges
for this purpose.
Experience in the United States with distance-based pricing has been in two forms. One form is
pay-as-you-drive (PAYD) insurance implemented by the private sector where the insurance pre-
miums or the costs to the driver of insuring or leasing a vehicle vary by the distance driven. The
other form is mileage fees implemented by the public sector for purposes of travel management
and transportation finance. PAYD insurance is distinct from public sector mileage fees. PAYD
involves voluntary participation by drivers and has so far been implemented only by private sector
insurance companies with the goals of promoting safety and increasing cost-effectiveness for
drivers. Reducing overall fuel consumption and VMT typically are not primary goals. Never-
theless, PAYD insurance rates can be designed to vary by time of day and location. For example,
PAYD insurance tests in Atlanta and Houston varied per-mile insurance rates by a variety of risk
factors including time of day, location of travel, and accident probability based on driver charac-
teristics such as age, sex, and safety record.
Public sector mileage-fee programs can be found in the United States and overseas. Internation-
ally, mileage fees have been implemented by governments on light-duty vehicles and/or trucks. The
goal of the approach is a combination of traffic management and transportation finance. Germany,
Switzerland, Austria, the Czech Republic, Hungary, and Slovakia are successfully operating such
systems. In the United States, Portland, Seattle, the Twin Cities region, and Atlanta have conducted
