In the News Teaching Activity – is New York City’s congestion charge working? (Feb 2025)

New York City’s congestion pricing program has cut traffic, improved public transit use, and reduced commute times in its first month.

By imposing tolls on vehicles entering lower Manhattan, the program tackles congestion and pollution while funding transit improvements. Since its launch, traffic has dropped significantly, with one million fewer vehicles entering the zone. Cities like Stockholm saw traffic decline by 25% after similar policies, leading to cleaner air and better infrastructure. While concerns remain, early data suggests New York’s congestion pricing is delivering measurable benefits, following successful models in London, Stockholm, and Singapore.

A million cars have disappeared: What NYC is like after one month of congestion pricing - Fast Company

1. What negative externalities is the congestion toll in Manhattan aiming to reduce?

2. Using an MSB/MSC diagram, show how the congestion charge can 'internalise the externality' and increase social welfare.

3. Discuss whether this congestion charge policy is likely to be more effective if the revenue raised is hypothecated for improvements to public transport in NYC.