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Road pricing

Road pricing is a generic term for charging for the use of roads using direct methods, charging the users of a specific section of the road network for its use. Examples include traditional methods using toll booths such as turnpikes and toll roads, as well as more modern schemes employing electronic toll collection such as the London Congestion Charge, the Singapore Area Licensing Scheme, the Trondheim Toll Scheme, the Highway 407 bypass of Toronto, Ontario and HOT Lanes (such as SR-91 in Orange County, California and Interstate 15 in San Diego, California. It is in contrast to indirect charges such as gas taxes, or other types of taxes.

The aims of road pricing are several. The most obvious is financing: raising money to pay back the construction of the road or to build new facilities. This may become more important in the future if gasoline is replaced as a source of fuel for automobiles by hybrid vehicles or alternative fuel vehicles (such as fuel cells) which consume little or no gasoline and thus don't generate gas tax revenue. A second aim is management, by varying charges by time of day (sometimes called congestion pricing or value pricing), users can be discouraged from making trips during the peak times and encouraged to travel in the off-peak, thus balancing flows and reducing congestion loss. In the absence of pricing, individual drivers do not consider the congestion costs they impose on others. Similarly, by varying charges by location (like the London Congestion Charge), travelers can be dissuaded from driving to a specific place. A third aim is to discourage driving altogether, which is often supported by environmentalists.

A fourth aim, more applicable to rural areas, is to directly charge for any public bad that arises from use of a road, for example, charging more for use of roads that enable poaching, illegal logging, and even road accidents. This aim is shared by some schemes of pay at the pump automobile insurance, which may apply a higher charge near roads with more accidents. It is thought that these measures engage more people in watching and preventing these activities, reporting unsafe vehicles and impaired driving, as they increase road use price under these schemes, making these "everyone's problem".

The disadvantages of road pricing are largely related to perceptions of fairness. By charging for something that was once "free" it may be seen as unfair. The burden falls more heavily on the poor drivers than the rich. (Though this should be compared with the burden of other financing systems, such as the gas tax, which is also regressive). New toll roads in a largely free system may be seen as punishing one area when others don't pay for roads. Proponent of pricing would counter the fairness or equity argument by stating that prices create choices, and choices are fair because people are not identical, sometimes people have high values of time (e.g when they are late for an appointment), sometimes they have lower values of time (e.g. when they are enjoying the drive). The proponents would thus suggest that making all drivers pay the same tax to receive the same service isn't fair if people aren't the same.

Another important question is what is done with the revenue. Marginal cost pricing, which economists favor, often raises more money than is needed for the road itself. The revenue can be used to offset gas taxes, to pay for public transport, or to build new infrastructure, among other uses.

See also : transport economics, urban economics, pricing, list of economics topics.