It’s time to introduce dynamic pricing on the city’s highways in order to relieve congestion, writes Brady Yauch. 

With Toronto’s traffic woes costing the city as much $6 billion annually, it’s time policymakers take a cue from cities in the United States and introduce dynamic tolling to clear the region’s congested highways.

The evidence is already in: dynamic tolling is a success.

Dynamic tolling operates on a fairly simple model: when the demand for driving on a highway is at its highest, so too should be the cost. The current model in Toronto – in which the price of using a highway at any given time is free – ensures that a market, where the demand for highways is matched with supply, fails to materialize. The result is congestion, which has become a defining characteristic of driving in Toronto.

But it doesn’t have to be this way.

A landmark study from the U.S. that examined a number of dynamic tolling projects implemented between 1991 through 2006 found that pricing was able both to reduce congestion and increase throughput, while also offering a number of environmental and energy benefits. The study also found that the supposed equity issues that critics said would occur as a result of dynamic tolling – where wealthy drivers would be able to use so-called Mercedes lanes, while everyone else would be stuck in traffic – failed to materialize, with use of dynamic tolls essentially even across different income groups.

One of the earliest highways in the United States to move forward with dynamic pricing was San Diego’s I-15 after residents and policymakers found themselves in a never-ending battle with congestion. After noting that the current carpool lanes simply weren’t being used and worried about the growing cost of expanding the highway, officials decided to open the lanes to all drivers, but at a cost. During rush hour the cost – which is displayed on entrance ramps and changes as often as every six minutes – of using the highway can increase to as much as $8. Yet that cost ensures that everyone using the lane will be able to drive at a particular speed.

The result? While overall traffic on the highway increased, drivers using the dynamic tolling lanes shaved as much as 20 minutes off their commute.

And that’s just the beginning, as other cities that implemented dynamic price systems to their highways also reported significant decreases in travel times and positive reactions from drivers. In Houston, for example, lanes with dynamic pricing posted 21 percent increase in drivers, yet the average speed was more than double than it was for free lanes. And in Minneapolis, traffic increased by as much as 33 percent in the tolled lanes, yet that growth had no negative impact on the average speed of users.

The study also found that in some cases, as more drivers switched to the toll lanes, congestion in the general use lanes decreased.

The report concludes that while the public was widely sceptical of dynamic price systems for highways before they were implemented, they were generally welcomed after the projects got underway.

Dynamic tolling is the first and most significant step needed to introduce a market-based system into the highway system and provide consumers (drivers in this case) the ability to choose how much their time is worth when it comes to commuting. For decades, the various governments that have controlled Toronto’s highways have seen to it that market forces were blocked from ever entering the road system.

It’s time policy makers in Toronto follow suit and do the same.

Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI). You can reach Brady by email at: bradyyauch (at) consumerpolicyinstitute.org