Ministers propose that companies carrying out roadworks at peak times pay councils to rent the road space.
As the 12-week consultation began, Transport Secretary Philip Hammond said such disruption was "expensive".
The National Joint Utilities Group's Les Guest welcomed the consultation but said charges must be avoidable.'£4bn congestion cost'
Announcing the scheme, Mr Hammond said: "Everyone knows how frustrating it can be when you are sat in a traffic jam, unable to get to work or drop off the children at school because someone is digging up the road.
"This disruption is expensive as well as inconvenient, with one estimate valuing the loss to the economy from road works congestion at £4bn a year. We simply cannot afford this.
"That is why I am putting forward proposals which would incentivise utility companies and local authorities to carry out their works at times when they will cause the minimum disruption to the travelling public."
The Department for Transport (DoT) has published a consultation and draft guidance to councils who might be considering lane rental schemes, outlining how they could be implemented.
It said it was contemplating such schemes in only one urban and one non-metropolitan area, initially.
Early evidence from those schemes would inform decisions on whether lane rental could usefully be applied more widely, it said.
It suggested lane rental charges should be avoidable - for instance, by companies carrying out work during quieter periods or, if appropriate, at night - and proportionate to the costs of congestion.
Councils are also being encouraged to apply the same principles to their own works.
Under the plans, any revenue raised from the lane rental charges would be used by councils to fund measures which could help to reduce future road works disruption.'Irritation'
Alasdair Reisner, director of external affairs at the Civil Engineering Contractors Association, said its members had been in favour of lane rental schemes for years.
"Road works are a major cause of congestion on our roads and irritation for motorists, and anything that reduces their impact is welcome," he said.
Mr Guest, chief executive of the NJUG, said the organisation supported the aim of reducing the disruption sometimes caused by works.
But he said: "For any lane rental scheme to be truly effective, it must only be targeted at the busiest streets in England, charges must be avoidable - for example if utilities choose to work out of hours - and they must apply equally to local authorities' own works, which after all account for half of all works carried out.
"Unfortunately under the current proposals local authorities are encouraged but not legally obliged to apply lane rental to their own works, which would detract from the effectiveness of the scheme.
"Similarly existing schemes, such as works-overrun penalties and permits, apply no financial penalty on highway authority works, which as a consequence frequently overrun without any effective sanction."'Implemented quickly'
Councillor Shona Johnstone, vice-chairman of the Local Government Association's economy and transport programme board, said the announcement was a "step in the right direction".
"Councils have long called for the power to introduce lane rental schemes to ease roadwork congestion during rush-hour," she said.
Edmund King, president of motoring organisation AA, said: "For too long road users - whether using foot, cycle, bus, lorry or car - have been bearing the cost of utilities digging up the road via the congestion they cause.
"It is 20 years since the latest roadworks legislation was placed on the statute book, and it is about time these provisions were implemented.
"A large majority of our members (71%) support the need for heavier penalties on utility companies which cause disruption.
"Anything that can stimulate more efficient working to reduce or eliminate this congestion is welcome and we hope the proposals will be positively received and can be implemented quickly."
BBC local government correspondent Mike Sergeant said after the consultation, London could be the first city to adopt a lane-rental system.