And why is it controversial/contentious(like NYC for example)?
In: Economics
Well I happen to come from the place (Singapore) that first introduced this kind of restricted area road congestion pricing so I’m quite familiar with this.
As a whole, congestion pricing is a kind of variable or dynamic pricing that charges users for the congestion they create during periods of excess demand. Technically things like peak vs non-peak metro, bus, or train tickets can be included in the definition, but in common parlance the term refers to road or traffic congestion pricing.
The idea is to reduce the number of vehicles in the city center (or other designated area) by charging a toll if you enter the area – using the price mechanism. (The actual implementation varies among cities that enact such policies.) People would thereby be incentivized to either use public transport, carpool, or defer their travel until later hours, reducing the road traffic (and pollution, noise, etc.).
The actual efficacy of each system is very hard to analyze due to many related factors at play, but to answer your question, this kind of pricing is controversial for many reasons:
It may instead redirect vehicles to other routes bypassing the restricted zone rather than reduce overall vehicle usage. These routes may be longer or less efficient or slower, thus contradicting the initial goals of the pricing in the first place – because each vehicle would be out longer, contributing more to traffic and pollution. Also note that lower congestion on roads can incentivize more people to drive, which is another counteracting factor.
It has elements of being a regressive tax, in that all road users with the same amount of road usage pay equal charges, so those (among people that regularly do that drive) with lower income are more affected by the pricing compared to those with higher income.
It can also negatively affect businesses, especially ones just inside the restricted zone, due to the increased cost to the consumer to travel there.
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