Should China Implement Congestion Pricing?

Abstract

Over the past two decades, China has experienced a dramatic increase in auto ownership and use, with the number of privately owned vehicles increasing more than 70 folds in twenty years, from 0.82 million in 1990 to 59.39 million in 2010. Urban roads in major Chinese cities have, thus, become much more congested. Congestion pricing, theoretically, helps to internalize traffic externalities and reduce congestion. Practically, it has been implemented in a number of countries. This article presents the economic theory of congestion pricing and discusses international practices of congestion pricing. Based on the theory and practices, the article proposes implications for China and argues that China should consider implementing congestion pricing to combat traffic congestion in major cities.