What 'Congestion Pricing' Means For Drivers And Their Wallets

The concept of congestion pricing has received a lot of public attention lately. This is largely due to New York City's new law on drivers entering Manhattan during peak hours. After much debate, the program finally went into effect on January 5, 2025. Much like how toll roads currently work, drivers pay a fee to use the bridges or tunnels into Manhattan during peak rush hour time periods every day (on top of how much more people are already paying for things like car insurance).

First, it's important to realize why congestion pricing might become more commonplace in the future. There are many potential reasons for a city to enforce congestion pricing. For starters, as the name suggests, it can help to reduce traffic congestion during peak rush hour times. Reducing road congestion can not only lead to fewer traffic related incidents but also help to improve the air quality in the geographic regions in which congestion pricing is put into place. The general concept is that these added fees will incentivize consumers to find other modes of transportation for getting to and from certain areas. In a place like New York City, this largely means having more commuters use public transportation options rather than their cars when entering the city. Similarly, congestion pricing can also encourage people with more flexibility in their schedule to travel during less busy travel times. As an added bonus, this congestion pricing can also serve as a revenue generator for a city and/or public transportation system.

Since New York City is the first U.S. city to implement a congestion pricing system (however, cities like London and Paris have already implemented similar concepts), its specific model serves as the best example of how congestion pricing can work. Obviously different cities or geographic regions will have different priorities and ways of applying their own congestion pricing model but ultimately, these areas will most likely use New York City's system as a model when looking to adopt similar concepts.

Like a toll road, drivers with an E-ZPass (an electronic toll collection system that operates in 17 states) are charged a fee to enter what New York is calling the Congestion Relief Zone (which, for now, includes streets and avenues south of 60th in Manhattan). During peak hours this fee is $9 per vehicle, which drivers will only be charged once per day. During off-peak hours, the toll rate is just $2.25. However, drivers without an E-ZPass will be charged $13.50 for peak hours, and $3.30 for off-peak. For now, peak traffic hours are defined as between 5AM and 9PM on weekdays, and 9AM until 9PM on weekends.

Some critics of the program suggested that congestion pricing would unfairly financially affect lower-income drivers, however a Community Service Society (CSS) report found that just 2% of the city's working poor would potentially be affected by the new congestion fee. Similarly, 56% of city residents living in the outer-boroughs (aka not Manhattan) used public transportation, not cars, to commute to their city jobs.

Since the program was implemented in New York City, there have already been noticeable changes in traffic patterns across major thoroughfares. According to travel time data from The Economist, lighter traffic was noticeable on most of the routes into Manhattan (although drivers on the Brooklyn Bridge, in particular, were still plagued by significant congestion with travel times being reduced by just 1% during peak hours). While the program is still very new, it is definitely off to a promising start which could motivate other major cities to eventually follow suit. With that in mind, it's worth noting that the implementation of congestion pricing as an incentive for drivers to find other methods of transportation hinges considerably on a city's existing public transportation infrastructure. All of this is to say that certain car-culture oriented cities might not have a reasonable alternative to offer drivers when considering congestion pricing.

It's also worth mentioning how congestion pricing could ultimately affect prices across other areas. For example, heavy-duty trucks (like the kind that transport freight and other shipped goods) are financially hit the hardest by New York City's congestion pricing. These trucks have to pay $21.60 to enter Manhattan during peak hours, and the fee schedule is only going to get more expensive. These truck fees are scheduled to rise to $28.80 in 2028 and $36.00 in 2031. This could further impact shipping and freight prices, which already face steep increases thanks to Trump's proposed tariffs on products from countries like China, Mexico, and Canada.