Supply Chain Scanner - Week of April 7, 2025

Weekly blog by Emily Atkins

Congestion pricing: Who benefits?

When the city of London, the capital of the UK and one of the world’s busiest cities, was about to introduce congestion pricing in 2003 residents were opposed to the plan. But when Londoners saw the results, they changed their minds. Within two weeks more than two-thirds were in favour of the idea.

Congestion pricing charges drivers a fee during work days to enter the centre of the city in an attempt to alleviate vehicle congestion, improve traffic flows, speed up deliveries and alleviate delays in public transit. Londoners quickly came to see the benefits. In London the application of congestion tolls was found to reduce congestion by 30 percent in the core of the city and boosted the number of bus riders by 40 percent. Air pollution dropped by 12 percent initially.

However, London’s story is not all clear air and wide-open boulevards. After the congestion charge was introduced the city was overrun with Ubers, taxis and delivery vans, as e-commerce shopping boomed. Bike and bus lanes took space from cars. At present congestion has returned so badly that the mayor of London commissioned a report that found London’s gridlock has returned to pre-pandemic levels.

London isn’t the only city that has tried the congestion tax. In Stockholm, Sweden, core charges were launched in 2006. They also met with skepticism. But here, too, traffic volume has declined and air quality has improved. The number of vehicles in Stockholm streets fell by 20 percent in a year.

Singapore is perhaps the OG for congestion charges. The city-state has been tinkering with a toll system since the 1970s. At present it operates a vast system of toll gantries and controls the number of vehicle permits available, effectively limiting the number of cars on the road. The system is working, with traffic flowing smoothly in the populous urban area.

An additional benefit to the tolls is the revenues they raise. In Stockholm the congestion charge revenues have been applied to infrastructure projects like subway expansion and roadbuilding. If these funds are applied to public transit projects, the benefits can be amplified, further reducing pollution and improving the quality of life in cities.

But this is a logistics blog, right? So, Let’s look at the costs and benefits for last-mile delivery providers. Business in the city goes on, with or without the charges. Deliveries need to be made to businesses and residences alike within the toll zones, which means delivery companies will have to pay the cost.

With potentially multiple deliveries a day within a congestion zone, and in commercial vehicles that attract larger tolls because of their size, couriers and delivery companies can bear the brunt of the program’s costs. In New York City, for example, which introduced congestion pricing in January 2025, a small truck pays US$14.60 per trip while a larger truck pays $21.60. According to estimates by Descartes, based on a delivery frequency of six days a week, that could add up to $4,500 a year for the small truck and $6,700 for the larger vehicle. For a fleet of 20 trucks, the cost could be $135,000 per year.

That’s a hefty cost increase for the delivery company. So what are their options? Making deliveries during off-peak toll periods, such as over overnight, can reduce costs, as well as helping avoid parking tickets and getting access to less busy roads. However, this is not a feasible option for companies making e-commerce deliveries or time-sensitive courier drops. And it might incur more costs to attract drivers who want to work the graveyard shift.

Automated route planning that takes the tolls into account is one solution that will likely help last-mile providers adapt to congestion charges. Even without the tolls, these tools can provide significant cost saves in terms of time, fuel and fleet utilization.

Another option is to adopt hyperlocal distribution using non-traditional vehicles working from small hubs deep within the urban core. Micro distribution centres can be replenished during off-peak hours, and the goods sent to their final destination using vehicles like motorcycles, or cargo bikes.

So far congestion pricing has not been introduced in Canada. Toronto was going to try it in 2016 with tolls on the Gardiner Expressway and Don Valley Parkway, but the provincial government at the time nixed the idea suggesting that the city’s transit system was not robust enough to take on the new passenger load.

But it may arrive in due time. Congestion pressures are not easing as populations grow and cities sprawl. At least by then we will have the many years of experience of companies providing delivery services in New York, London, Singapore and Stockholm – and no doubt others – to show the way.

What’s your take on congestion charges? Should Toronto try it?

Join the conversation on Canada’s Logistics Community forum!

Emily Atkins
President
Emily Atkins Group

Emily Atkins is president of Emily Atkins Group and was editor of Inside Logistics from 2002 to 2024. She has lived and worked around the world as a journalist and writer for hire, with experience in several sectors besides supply chain, including automotive, insurance and waste management. Based in Southern Ontario, when she’s not researching or writing a story she can be found on her bike, in a kayak, singing in the band or at the wheel of her race car. LinkedIn: https://www.linkedin.com/in/emilyatkinsgroup/