Friday 11 July 2014

France's Ecotax distance based truck toll to be scaled back

As has been previously reported, the French Government had been committed to implementing a distance/size based heavy goods vehicle charge on all national highways (this excludes the extensive private and public corporation owned toll motorway network), using GPS technology, called Ecotax.  As the name suggested, it was sold on the basis of improving the environment, but was driven by a desire for net revenues from foreign trucks and to rebalance the use of the highway network, by reducing the attractiveness of the untolled national highways that often run parallel (although longer distances) to the tolled motorway network.
The politics behind the concept came under fire late 2013, as the Hollande Government (the laws and contracts for the system having been committed under the previous Sarkozy Government) faced protests on the eve of the system's introduction.   The main complaints being from the trucking sector, opposing additional charges, and businesses in some more distant parts of France, notably Brittany, which have argued it is discriminatory because they are "further away" from other parts of the country.

The calls from the trucking sector for opposing "more tax" are understandable, given no other taxes are being reduced to offset the Ecotax (although the French Government is keen to reduce the budget deficit, given it has not run a budgetary surplus for 40 years and public debt levels are becoming a significant burden).   However, to complain about paying by distance when you locate your business far away from suppliers or customers is almost comedic.  Yes you will pay more, but you use more roads that need maintaining and renewing.  Quite why choosing to live far away from where you want to go, or get things from should be cross-subsidised by others, seems curious.

So the scheme was shelved, until now.

Smaller scale truck toll

So on 23 June it was announced that the Ecotax is to proceed, but on a smaller scale and simply be called a "truck toll".   According to Reuters, Prime Minister Manuel Valls said the new scheme would focus on the roads with the heaviest traffic and will generate 550 million Euros (US$748m) per annum, less than half of the 1.24 billion Euros (US$1.69b) previously forecast. 

It will start on 1 January 2015, following a three month testing period (and changes to the law and no doubt contracts with the suppliers). 

What has been lost?

The network to be tolled is now only 4,000 km long, compared to the 15,000 km that was going to be tolled before (comprising 10,000 km of national highways and 5,000 km of secondary routes that would have been severely affected).  That is a significant reduction in scale, and is seen by comparing the maps of the original scheme and the new one below:

Original planned Ecotax network

Ecotax network from 1 January 2015

Very few highways to the west and the south are now to be tolled, with the emphasis being entirely on state highways which have parallel tolled highways and heavy volumes of traffic.  It's a significant compromise.   Part of this is that all but one road in Brittany is exempt.  In other words, protest in France and politicians cave in.

The Local reports further changes.  It says the charge levels could be 0.13 Euro per km, whereas before the range was from 0.025-0.20 Euro per km.  

Circus, agricultural and milk collection vehicles will be exempt.  The circus example is obviously some minor cultural exemption for little reason that lobbying, but the agricultural lobby, which is a long standing campaigner for some of the most generous subsidies in the world, has won again.   Agricultural equipment being relocated short distances is one thing, it is another for a whole new category of freight vehicles to be exempt, for no other reason than the politics behind expecting one of France's most mollycoddled sectors to be treated like everyone else. 

Still it is significant to introduce it in the first place, and it makes sense in itself, although the argument that other taxes could have been reduced to offset it is a valid one.  Diesel tax in France is 0.44 Euro per litre (US$2.26 per gallon), although EU law sets a floor that would only allow a reduction of around 17%, and the French Government is desperate for more tax revenue, rather than rebalancing the tax system (and reducing tax on diesel would benefit cars with no new toll for them).

The net revenues are said to be dedicated to new urban public transport projects, which of course doesn't have a direct relationship with trucks on intercity highways, but is better than just adding money to general funds.  Of course, not spending the money on roads is a good way of generating opposition.

What isn't clear is how it affects the contract with supplier Atlantia, which will still seek payment for services, from a smaller revenue pool.  It will add to the net costs of the system relative to revenue.

I previously reported the costs as follows:

 - 250 million Euro (US$306 million) per annum consists of operating costs.
- The remainder will be to recover the 600 million Euro (US$735 million) capital costs over the period of the concession, which is 11.5 years.

Those operating costs will not drop by 60% just because the revenue does, I suspect more like 30%, and the capital costs will change little given much of them have been incurred.  So it may come to pass that 40-45% of the revenue generated will be spent on the costs of the system, rather than 20-25%.  That hardly looks like a great deal for anyone paying.

What this doesn't mean

It doesn't mean the technology doesn't work.  It doesn't mean that it isn't a good idea.  

What it does mean is that the biggest problem is the politics of adding a new charge on top of an industry that faces taxes for owning trucks and high fuel taxes.  

Moreover, it does mean that unless you have the politics addressed and have the determination to go through with it, you'll face losses of revenue in backtracking, and it can result in compromises that unfairly target some less vocal groups against the more vocal (and indeed violent). 

The result, will be more traffic on tolled highways, a little less on the newly tolled state highways, and a little revenue for the state, and probably a modest reduction in environmental impact.

What it needs is a more convincing story around where the money will be spent, the rates the charges are set at, and in having some offsetting reduction of other taxes, what it is now is a smaller scale political fudge.