Can Road Tolls and Congestion Taxes SAVE Money ?

traffic-congestion-gridlock-rush-hourCanada’s Ecofiscal Commission issues a report titled “We Can’t Get There From Here: Why Pricing Traffic Congestion is Critical to Beating It.” The commission recommends road tolls and congestion taxes as a way to save money for drivers, businesses, and the economy in general.

The CBC story reports that congestion costs Toronto $7 billion per year, and Vancouver $1.4 billion. According to Professor Chris Ragan, “We’ve got a very scarce commodity called road space during peak times, and it’s unpriced.”  If we don’t charge for peak-time road use, “we will stay stuck in traffic. We will see our kids less, the prices of our goods will be high, our health will be less, and our environment will be poor.”

Traffic congestion is a classic externality problem, creating external costs in lost work time, environmental damage, health problem, added trucking costs, ….. If properly priced charges are attached to road space, those multi-billion costs will be reduced, and the savings will be far greater than the taxes paid.

There is also a 5 minute video on the report that students might prefer to the print summary.