Wednesday, 30 November 2011

Network wide truck tolls - from vignettes to distance charging

Truck tolling, lorry road user charging, heavy vehicle network pricing, whatever it is called the main reason for establishing a road pricing just for heavy vehicles across an entire network has been economics.

A long time ago it was American Association of State Highway and Transportation Officials that identified that although trucks are a relatively small proportion of traffic on roads, they are responsible for a disproportionate amount of wear and tear. Subsequent studies have indicated that as much as 90% of the marginal road wear and tear costs attributable to road use are the responsibility of heavy vehicles. The introduction of distance/weight taxes in some US states was a response to this, to ensure trucks paid closer to their fair share compared with fuel taxes. The problem with diesel tax being that while fuel consumption increases as trucks get heavier, it does not increase anywhere near the proportionate increase in road damage caused by heavier weights (in part because the larger the diesel engine the more efficient it becomes).

Charging trucks according to the distance they use the road network becomes a fair proxy for how much “road” is consumed. By charging by weight, prices can reflect the wear and tear accurately. The initial systems in states in the US saw distance measurement undertaken through odometer declarations, making them fraught with risk of fraud and inefficient to collect. Today only four states still have such systems (Oregon, Kentucky, New Mexico and New York) as the trucking lobby pushed for these rather dated systems to be closed in other states. However, the economic principle still stands. New Zealand adopted a similar system in 1978 and still applies it today and applies it to all diesel powered light vehicles too, as it abolished diesel tax.

In Europe, the rise of the single European market saw a dramatic rise in cross border road freight, further enhanced by the Schengen Agreement which abolished border control between most EU Member States on the continent. Whilst some countries had toll systems on major motorways (e.g. France, Italy, Spain and Portugal), other adopted vignette systems appeared whereby truck operators would prepay for a set period of access. Vignettes would be sold for a year, a month or a week. Over time a unified product usable across multiple countries was offered called the Eurovignette. A truck could have a one year Eurovignette allowing for a year’s access across all of the Eurovignette countries, greatly reducing compliance costs. Today, the Eurovignette still operates for Denmark, Sweden, the Netherlands, Belgium and Luxembourg, but several other countries have moved towards distance charging. Hungary, Romania, Bulgaria and Lithuania all have their own national heavy vehicle vignette systems, whereas Austria, Switzerland, the Czech Republic, Slovakia, Hungary, Bulgaria, Romania and Slovenia all have vignette systems for light vehicles as well (links to most of these in the sidebar under network road pricing).

The key advantage of distance charging over a vignette is that it is usage based rather than the purchase of access based on time. A vignette may pre-purchase a year’s access, but does not reflect how often or how far a truck may drive in that year. As such, it is more based on the size of the vehicle fleet rather than intensity of usage. Distance charging enables growth in road freight traffic to be reflected in revenue. It also enables charges to vary by location or time of day.

Switzerland chose to move to distance charging in 2001, following a national referendum. Its system involves charging all vehicles over 3.5 tonnes on all roads, and measures distance using the tachograph signal derived from axle rotations, correlated against a GPS signal to minimise fraud. The on board unit in the truck ( or bus) stores data on distance travelled on a smartcard that is then used to declare travel to the tax department.

Germany took technology much further in 2005 with its LKW Maut system on the motorways and selected highways. It charges all vehicles over 12 tonnes based on distance, but does so by using GPS measuring distance correlated to a map of the charged network, with the total distance travelled communicated through the mobile phone network. Despite extensive teething problems, it became the first fully functioning GPS based distance charging system.

Other countries have also introduced truck toll systems across national networks with Austria (2004), the Czech Republic (2007) and Poland (2011), all adopting the more conventional Dedicated Short Range Communication (DSRC) system involving low cost tags in vehicles that are detected as the vehicles pass under motorway gantries. Slovakia most recently introduced a GPS based system similar to Germany, and New Zealand started offering a GPS based option in 2010. France is developing a GPS truck toll system to apply to the untolled motorways and major highways with the intention that it start operation in 2012.

All of the EU Member States that have moved to national truck toll systems once had vignette systems. Indeed, the two countries to most recently announce development of truck tolling systems are current participants in the Eurovignette. Belgium announced last year its intention to implement a nationwide all roads GPS based heavy vehicle toll system. The recently elected Danish government has also announced interest in a similar system. Sweden has also been investigating a GPS based national heavy vehicle toll system for the past four years.

In that context, the UK choosing to introduce a heavy vehicle vignette seems backwards, but I think it is simply catching up. With the exception of France, all of the other countries in Europe with or moving towards nationwide distance based truck toll systems started with vignettes. In the UK, a vignette system will generate revenue from foreign lorries, can be implemented at relatively low cost (as it is not substantially different from vehicle excise duty) and so can build up infrastructure for servicing customers for a fairly basic charging scheme. That could be a platform for a system that would generate revenue based on usage, rather than buying access, and could have prices to encourage off peak driving and usage of motorways rather than other routes.

However, I think the likelihood is that more European countries will move to distance based charging. Hungary and Slovenia are both known to be interested, but face current political difficulties in doing so. I believe it is inevitable that Romania and Bulgaria will do so too. More interesting may be whether other countries with extensive tolls, like Italy and Spain, follow France in introducing truck tolling on untolled routes. The obvious country to follow the UK on vignettes is Ireland, assuming Northern Ireland is included in the UK scheme. It may be that Spain, Italy and Greece introduce vignettes first as well, for the same cautious reasons as the British.

Beyond Europe, it is positive that Australia is looking at distance based charging of heavy vehicles. Given the sheer size and weight of some trucks in Australia, operating on lightly used highways over vast distances, there is considerable potential to adjust pricing to better recover infrastructure costs.

The benefits of truck tolls are primarily in generating greater revenues than access charges (vignettes) and better targeting cost recovery than any combination of fuel taxes and annual vehicle licensing fees. If done well, it can help even the market with rail freight, and encourage use of more appropriate vehicles for different tasks and incentivise use of more environmentally friendly vehicles. Truck tolls can help improve resource allocation and help ensure revenues for maintenance in particular, match demand.

The wider trend is to move from charging trucks for road use based on fuel and annual licensing fees, to distance/weight charging. Doing so will provide a more sustainable source of revenue, enable better targeted charging and demystify road pricing among the commercial road user sector. However, a wider goal can be to provide a platform for charging other vehicles. Commercial vehicles make a profit from the roads and are used by regular drivers who can easily be made familiar with a road user charging system, so provide one place to start for a shift from fixed and fuel related taxes to charging usage.

Fortunately, there is today sufficient experience from a growing list of countries to enable others introducing such systems to learn from their mistakes. On that note, anyone observing history of heavy vehicle road pricing needs to be aware of what went wrong in Germany, the Czech Republic and Slovakia, why the first UK LRUC programme was stopped, and how a small New Zealand firm is managing to successfully roll out a commercial electronic road user charging service at a substantially lower cost that many other systems. However, as with any major transport public policy led programme it should be objectives led and with an eye on the future. It would appear that embracing vignettes for lorries in the UK, that it is stepping down a path that many on the continent have gone down and found it leads them to go further in due course.

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