Tuesday, 23 April 2013

Denmark abandons lorry road pricing programme

I wrote several months ago about Denmark's programme to introduce a distance based lorry road pricing system, which would apply to lorries over 12 tonnes and on all major motorways and highways across the country.

It now appears that the project has been suspended because the estimated revenues will be insufficient to justify the estimated costs.

The project was being managed by the Ministry of Taxation, and was intended to replaced the Eurovignette for heavy vehicles operating in Denmark.

A press release in late February explained the decision.

The key statement is below:

The investment cost and the future operating expenses for Lorry Road Pricing in Denmark has shown to be significant. Expenses concerns, inter alia, investment in the technical equipment, such as On-Board Units needed in every vehicle and the enforcement gantries to be deployed. In addition to that comes also the operating cost.

Altogether the Government is not convinced that benefits from Lorry Road Pricing in Denmark compare favorably with the associated administrative cost. On this basis the Governments has decided to refrain from introducing Lorry Road Pricing, as planned, from 2015.

So it is about cost.  There isn't a complete loss of hope though:

If it proves possible to introduce Lorry Road Pricing in Denmark in a period of years without significant economic cost ? e.g. in the light of technological advances or operational experiences in other countries ? the Government will reconsider its decision.


This is, of course, very disappointing for those of us supporting a progressive shift towards user pays and more innovative forms of road pricing.  The scale of the system proposed was certainly small, and Denmark does not have extensive transit traffic, although it is located between the Scandinavian peninsula and the rest of Europe, there are alternatives to highways, given extensive ferry traffic.

I've observed for a while that there is a growing difference between some of the distance based systems developed and introduced in Europe, and that which has been developed for the United States and in New Zealand.  Insufficient work has been done to explain this, but consider that in New Zealand there are two competing providers of electronic weight/distance based road user charging for heavy vehicles (and a basic prepay paper based system), operating across a network of all roads, with non compliance rates (in revenue terms) of less than 10% and operating costs (including compliance costs for users) between 5-10% of revenue (on charges that reflect the share of highway costs attributable to heavy vehicles), it seems remarkable that Denmark cannot develop a system that can keep costs below 10% of revenue overall.

My only suggestion is whether Denmark can introduce distance based charging not on a "big bang" basis of shifting all Danish trucks over in one lot, but gradually. 

Options worth considering would appears be:
- Having distance charging as an optional alternative to the Eurovignette for the first three years (using better electronic enforcement of the Eurovignette as a step towards enforcement of distance charging);
- Introducing the distance charge as a partial replacement to purchase and registration taxes as a first step  (Eurovignette replacement as a second step), with it being mandatory for newly registered vehicles first;
- Open up the market to multiple providers based on a basic standard of charging specific rates for certain vehicle types;
- Expand scope to vehicles down to 3.5 tonnes, again making it a tradeoff against other taxes.

I'm not privy to all of the details in Denmark, but I am not convinced that distance based road pricing cannot be introduced economically at present.

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