Denmark successfully introduces RUC for heavy trucks, Netherlands will be next

To little fanfare, on the 1st of January it was mandatory for trucks operating on national highways and some municipal roads, in Denmark, with a gross maximum weight of 12 tonnes and above, to pay a road user charge (called a truck toll in the EU) based on distance.

The main website for the charge is here.

It applies to all trucks, whether registered in Denmark or not, and by applying to all national highways and some municipal roads, it means around 10,900km of road is subject to the charge.

Denmark heavy truck RUC road network until 2028

However, this is only the first stage in a programme to introduce RUC to all vehicles over 3.5 tonnes, on all public roads in Denmark. 

The stages are as follows:

• 1 January 2025: Trucks with GVW of 12 tonnes and above travelling on all national highways and some municipal roads.
• 1 January 2027: All trucks (GVW of 3.5 tonnes and above) travelling on all national highways and some municipal roads.
• 1 January 2027: All trucks (GVW of 3.5 tonnes and above) on ALL public roads (around 75,000km).

The system parallels withdrawal of Denmark from the Eurovignette programme, which charges trucks on a day, week, month or annual basis to operate in specific countries (now just Sweden, the Netherlands and Luxembourg).  Of course the Eurovignette only applies to trucks 12 tonnes and above. The charge will be new to vehicles below that.

Rate structure

There are three weight categories for 12 tonne and above:

• 12-18 tonnes
• 18-32 tonnes
• 32-44 tonnes

Fees vary by CO2 emission class, with surcharges for operating in low emission zones. This is primarily a charge based on changing behaviour for environmental purposes, and is less about infrastructure costs.  

Four of the five CO2 emission classes have charges that vary by registered maximum allowable weight of the truck combination. The zero emission class has the same charge regardless of size - being DKK0.13 per kilometre (US$0.018 per km). This is indicative of how much importance is being given to encouraging zero emission trucks.

The highest fee is for trucks over 32 tonnes at the highest emissions category, at DKK1.1 per kilometre US$0.16 per km). 

How is distance measured and reported, and how is it paid?

Denmark has been technology neutral and has enabled an open market in EETS service providers for its system. Three companies to date are registered to offer RUC collection services:

• BroBizz (a subsidiary of Sund & Bælt Holding A/S, the Danish SOE responsible for setting up the entire system)
• Telepass (a long standing Italian EETS provider) and
• ØresundPAY (the service provider for the toll crossing to Sweden)

All three provide their own GNSS enabled OBUs (on board units) to be installed either professionally or by the vehicle owner, in their vehicles.  One provider includes the ability to use an app to measure and report distance.  The market is open, there could be more providers (and likely will be) in the years ahead.

Occasional users can buy a "toll ticket" which is literally a permit to travel a set distance within Denmark on specific roads, and is designed for trucks making rare trips into the country.  Toll tickets are only available digitally.

The system is enforced with a network of Automatic Number Plate Recognition (ANPR) cameras fixed by the roadside, and also a fleet of enforcement vans which check whether the number plate of a truck is registered either with a service provider or a toll ticket has been paid for it.

Non payment is subject to a fine of DKK4500 (US$634).

What's significant about Denmark?

Besides being another country in Europe with heavy vehicle RUC, Denmark is showing how a RUC system can be introduced entirely serviced through an open market of service providers, with a technology-neutral approach. GNSS OBUs, OEM telematics or mobile phone apps might all be used. Denmark is also introducing heavy RUC on all roads, which is rare in Europe. Only Switzerland and Iceland have RUC systems that apply to distance travelled on all roads (although the Belgian heavy RUC system does measure distance on all roads, it applies a zero tariff to many of them).

The only significant negative news is that some truck operators believe that some operators have been incorrectly fined.

What about light vehicles?

Denmark has already been running a light vehicle road pricing trial based on distance. time and location.  It was focused not just on pricing EVs, but on managing congestion.  Two concepts are being tested - distance-based pricing and time-based (time being the duration of time driving). Both with location and time-of-day elements to it. 2,200 participants in the pilot.

It started in July 2023 and ends in July 2025. So there will be considerable interest in the outcomes of that trial. It will be evaluated subsequently and the results will no doubt inform policy discussions on road user charging in Denmark. It will be helpful that the heavy vehicle system is operational and will have been proven to work effectively. 

Who's next? 

The Netherlands will have a heavy vehicle RUC system from July 2026, it will also replace the Eurovignette as well as part of the motor vehicle tax for such vehicles ( a fee chargeable every three months similar to registration).  It will be for all trucks 3.5 tonnes and above and only on major highways and some major local roads. 

The Dutch system will require OBUs to measure and report distance, and will use DSRC as the enforcement technology (communicating with roadside and mobile enforcement units to check if vehicles have operating OBUs). 

A consortium called "Triangle" led by Via Verde of Portugal (including Ascendi and Yunex) has been contracted to introduce the system, supplying OBUs and the remainder of the system, although it will be open to competing service providers.  Via Verde will be the "base" supplier of account management services to those not using EETS providers

Vitronic has been separately contracted to provide the enforcement infrastructure (roadside and mobile).  The core back office system is being owned and operated by RDW (the Netherlands Vehicle Authority, which is responsible for the RUC system).

Will Denmark be the next European country to develop light-vehicle RUC?

According to the Ministry of Transport website of Denmark (in Danish), the Danish Government has agreed to a pilot of road user charging (RUC).  The Technical University of Denmark with state-owned infrastructure company Sund & Baelt  is to undertake a study as follows:

DTU's development experiments with road pricing are carried out with a randomly selected representative group of citizens. DTU's primary focus is to investigate the effects of introducing tolls on the roads that are challenged by congestion and thereby collect experiences of behavioral changes among motorists. The experiences from the experiment can form the basis for a possible further work with tolls for passenger cars.

So the idea appears to be to test RUC on congested roads, with a subset of users, to understand behaviour change to inform further work on road pricing. Sund & Baelt already operates the tolling systems on Denmark's tolled crossings - the Great Belt Fixed Link between the islands of Funen and Zealand, connecting the main islands of Denmark with the European continent, and the Øresund Bridge between Denmark and Sweden. 

2,000 citizens will be subject to the pilot which will take a total of three years, with tariffs that will vary by location based on congestion. It is clear it will only be for light vehicles (those under 3.5 metric tons Gross Vehicle Weight). The pilot budget is DKK20 million (~US$2.9m).

Meanwhile, a petition signed by 50,000 citizens is requesting that the Great Belt Fixed Link toll be removed. The toll is DKK250 (US$37) per car, which is high, but the cost of the bridge and tunnel link was DKK21.4b in 1988 (US$3.1b), so it is reasonable to recover those capital costs from the users (particularly for a Government committed to encouraging greater use of public transport).  The Local reports that the debt for the bridge won't be fully repaid under 2032. 

Comment 

It's clear that revenue from fuel tax is putting pressure on lots of jurisdictions, but it is curious that Denmark appears to be focusing on reducing congestion, which is a difficult objective to achieve unless all light vehicles are put onto a RUC system.  I'll look forward to more information in due course.  

Denmark to introduce distance-based road user charging for trucks UPDATED

As part of climate change policy the Danish Government announced in December 2020 that it is introducing distance-based road user charging (RUC) for heavy goods vehicles (press release in Danish).  In Europe this is typically referred to as "truck tolling" although it is distance based charging and is applied across a wide network, not point based charging on a specific road (which is the traditional definition of tolls).  This is part of a national policy goal to reduce emissions by 70% by 2030.

The intention is to introduce the new system from 1 January 2025, which will replace Denmark's participation in the Eurovignette (time-based) RUC scheme.  The objective of the new RUC scheme is to improve incentives to change the heavy vehicle fleet towards lower emission vehicle, but will be designed to reflect:

• Infrastructure, road wear costs;
• Noxious emissions;
• Climate change impacts; and
• Noise.

As with the Eurovignette, it will apply to Danish and foreign registered trucks (apparently not buses) with a gross maximum laden weight of 12 tonnes or more. Eurovignette is estimated to generate DK0.5 billion (US$79.8 million) revenue from Denmark at present from such vehicles, of which 20% is from foreign vehicles.  The proposed new RUC system should generate the same amount of revenue in the years 2025-2027 and then increase to DK1 billion (US$159.6 million) from 2028 onwards (which assumes a sizeable increase in charges). 

Estimated costs for establishing the system are DK200 million (US$32 million), with ongoing operating costs of DK175 million (US$23 million), with depreciation at DK25 million p.a. (US$4 million).  Within those costs are enforcement, estimated to cost around DK10 million (US$1.6 million) p.a., which is expected to be fully recovered from fines.  

These forecast costs are a far cry from levels seen in previous estimates or from schemes introduced ten or more years ago.  This is due to significant drops in the cost of GNSS telematics OBUs, drops in the cost of mobile data communications thanks to 4G (and soon 5G) technology. reductions in the costs of enforcement equipment and systems (notably ANPR cameras) and the emergence of a competitive market in RUC service provision in Europe.  The latter is particularly notable, as early schemes (such as the German LKW-Maut) had a single provider of services, but in the past decade a more open market approach has emerged, putting pressure on both equipment and operating costs.  This was pioneered in New Zealand in 2011 with its introduction of eRUC, and the introduction of a certification system for service providers supporting the electronic option to charge RUC in that country (which now has three service providers), followed by Oregon which has done the same for heavy RUC and its light RUC pilot. In Europe it was pioneered in Hungary shortly thereafter.

I suspect the costs for enforcement are too low, unless the labour costs are seen as overlapping with safety enforcement activities (so the incremental cost of enforcing RUC is insignificant). 

Interestingly, the press release indicates there has been extensive dialogue with the Danish trucking industry and the introduction of RUC may parallel some liberalisation of rules around the use of double trailers and reform of the mass and dimensions rules around trucks. This could help with acceptability by enabling higher productivity vehicles (larger trucks) to operate on Danish roads, with greater capacity (and as a result using less fuel and producing less emissions to move the same freight). 

The project is being managed by Sund & Bælt. a Danish Government owned company that is responsible for several very large infrastructure projects (it is best known for being responsible for crossings such as Storebælt fixed link between Zealand and Sprogø, the Danish part of the Øresund fixed link and the under construction Fehmarnbelt fixed link between Germany and Lolland, Denmark).  It is to be responsible for implementation and operations, as well as enforcement. The reason for granting authority to Sund & Bælt is because it was assessed as having experience with similar tasks and having the necessary competencies, as it has over 20 years experience in operating tolling, it is believed to have some of the project and operational competencies around customer service, technical monitoring, charging systems, technical knowledge and communication. 

It's worth remembering that Denmark pursued heavy vehicle RUC before, which I wrote about in 2012 and 2013 when it was abandoned.  It appears the primary reason it was abandoned was cost, although Hungary and other European countries have subsequently been able to address this (suggesting that perhaps the concept of operations and the procurement approach taken at the time was not optimal).  

There are limited details of what the Danish scheme will look like, including its scope (both in terms of applicable vehicles and the network subject to RUC), but it could apply to all goods vehicles over 3.5 tonne and given experience of all European heavy RUC schemes (except Switzerland and Iceland) it will likely apply to motorways and national highways (although it could apply to all roads if desired).  There is also little indication of forecast revenues and costs, although EU Directive 1999/62 does set some clear rules around rate setting, so Denmark cannot over recover such costs.  

Denmark has had to its south the German LKW-Maut scheme, which charges all heavy goods vehicles over 7.5 tonnes on all German Federal Highways since 2005, and of course multiple other similar schemes in other European countries such as Belgium, Switzerland, Hungary and Slovakia.  The system is required to be interoperable, so it is possible that vehicles with accounts and devices for the German LKW-Maut scheme will be able to be used for the Danish system.  Denmark notes it needs to have dialogue with neighbouring EU Member States to ensure compliance with EU law.

The Eurovignette remains of course in Luxembourg and Sweden, given the Netherlands previously announced it is introducing a heavy vehicle RUC system (and Sweden continues to develop such a scheme).  Given these trends, will it be that Luxembourg has the rump of the Eurovignette, which once applied across central Europe (including Germany) or will Luxembourg introduce its own heavy RUC scheme, taking advantage of the fact that its neighbours (bar France) all have heavy RUC schemes?

UPDATE:  Hat Tip to Søren Have from Denmark who via Twitter directed me to additional sources of information on the project, in Danish.  Documentation in available here (in Danish), but through Google Translate I can add the following points (and have edited above).

The technical solution, unsurprisingly, is a GNSS telematics on-board unit, which is estimated to cost DKK1000 (US$160) including installation, with an option for cheaper self-installed units. Devices are not expected to be purchased, but rather supplied as part of service provider contracts. No manual option will be provided, reflecting the extent to which vehicles particularly from Germany are expected to be equipped (as well as those registered in Denmark that regularly travel to Germany). 

Project schedule appears to be as follows:

• Political clearance by mid 2021
• Establishment of project and organisation by mid 2021
• Legislation for implementation introduced mid 2021, passed mid 2022
• Procurement and delivery of solution from mid 2021 through to early 2024
• Negotiations with service providers early 2022- late 2024
• Preparation and operation of testing and commissioning early 2023 - early 2025

The scheme is forecast to reduce total truck traffic by 2-3% primarily by:

• Reducing demand for road freight;
• Productivity improvements in the road freight sector that are expected to parallel the move
• Modal shift (although this is questionable).

Certainly if the increase in revenue after 2027 is primarily due to significant increases in charges there would be expected to be a demand impact.

Tolling Review: Australia as the next frontier?

In the latest Tolling Review magazine, published with Thinking Highways, there is an article authored by me about the prospects for road pricing in Australia.  In short, I think it has good prospects for being the country that can progress it the furthest in the coming decade (and that was before this speech and this report).

Cover of the latest Tolling Review

You can read the whole issue here, my article is on page 20, but there are plenty of interesting articles in this issue including Justin Hamilton's article on page 12 about Russia's Platon heavy vehicle road user charging system, Bob McQueen's article about how the likes of Uber and Waze would run toll roads, Pedro Pinto's piece on Portugal's successful expansion of tolling.

So just download the whole magazine and read it.

Croatia considering introducing vignettes

Croatia is the newest EU Member State and as a result now has greater trade (and movement of people - notwithstanding the migrant/refugee crisis) with its neighbouring EU Member States Slovenia, Hungary and beyond.  Main highways in Croatia are managed commercially by a state owned enterprise called Croatian Motorways. 

Croatian Motorways charges tolls on its roads both through manual and electronic means, with both open (pay once) and closed (ticket collected at start and paid for at the end) systems in place. Electronic tag accounts get a discount of 21.74% on manual toll rates (rising to 33.48% between 1 November and 31 March).  Tolls vary by individual road and appear to reflect differing infrastructure costs.  An interactive map of the network is here.

However, according to Croatian news website Vecernji (Hat Tip: Ptolemus) the newly elected centre-right coalition government includes the Croatian Social Liberal Party which opposes more PPP concessions, so there is discussion about both increasing tolls and introducing vignettes (which presumably would apply to all other roads).   Croatia's problem comes down to growing debts for existing roads that need renegotiation and repayment.  

Neighbours Slovenia and Hungary both have vignettes for light vehicles on motorways/major highways, whereas Slovenia has tolls for heavy vehicles only and Hungary has a weight/distance heavy vehicle road charging system.  However, having both vignettes and tolls would add a level of complexity that would mean some foreign motorists would think that paying for a vignette would also cover tolls.

Total Croatia News reports that Goranko Fižulić, former minister of economy, published a letter to the transport minister Siniša Hajdaš Dončić with five reasons why Croatia should introduce vignettes:

- Revenue: "Slovenia has introduced vignettes and in 2013 collected revenues of 327 million euros. In the same year, Croatia had revenues of 185 million euros". This is a function of vignettes applying across a wider network than tolls, but also Slovenia geographically having proportionally higher transit traffic.

- Lower employee costs: "Slovenian motorway company DARS has 1,237 employees, and HAC (Croatian Motorways) has 2,503 employees, with one third of them working on the collection of tolls. HAC spends 32 percent of revenues on salaries and other employee costs while DARS spends just 10,39 percent." More electronic tolling may reduce this, but vignettes require staff for enforcement too.  It is not clear that a change would make much of a difference.

- Annual vignette (product most likely to be used by Croatian motorists) would only be 546 kuna (around $81): "just from domestic and foreign passenger cars, the total revenues would climb to 509 million euros".

- Successful use of vignettes in other countries:  "Vignettes were successfully introduced, along with Slovenia, in Austria, Switzerland, Slovakia, Hungary, Romania, and Bulgaria. Germany will also introduce them starting on 1 January 2016".  Germany has faced delays for car vignettes, but of the others four have embraced distance charging for heavy vehicles (along with Germany) with two others seriously considering it.

- Better use of motorways lowering costs of maintenance of other roads and improving safety: "Domestic vehicles would use motorways in far greater numbers, which would reduce the cost of maintenance of other roads, increase safety and reduce the number of traffic accidents. The cost of using motorways would be drastically reduced for regular users of highways and the economy as a whole"

Fuel tax in Croatia is around €0.42 per litre for petrol and €0.33 for diesel, this is 23rd in the EU for petrol and 26th for diesel, suggesting scope to increase diesel (particularly given its relative environmental impact), but none of this revenue is linked to road spending.   It is lower than fuel tax in Slovenia and Hungary (indicating Croatia may gain a little from trans-border users filling up in Croatia in preference to its EU neighbours. 

A better response may be to look at distance charging for heavy vehicles to replace or supplement  tolls on a few routes, as such a system should see revenue grow as freight traffic grows through the country (and can be used to charge on a wider network).  If tolls are abolished, a light vehicle vignette would make sense as an interim measure as well.  Croatia's E70 motorway is a key corridor linking Serbia (and Macedonia/Bulgaria) to Slovenia, Austria, Italy and Germany, the potential for revenue growth should be considerable. 

Croatia with the key E70 corridor highlighted

With the success of Hungary's distance based heavy vehicle charging system,  Croatia could do worse than look at that model (Slovenia has previously investigated and abandoned this option because of cost, but it was looking to use a different procurement approach to that which has been adopted in Hungary).  However, it needs to look at existing tolls and other charges, and decide whether it wants to add to what it already has, or be bold and make a shift towards distance based charging (that may have targeted rates for existing toll roads).  Hungary transitioned from manual tolls to vignettes to distance charging for heavy vehicles over the past 20 years (and from tolls to vignettes for light vehicles).  Croatia could do the same, but given the distances for much transit traffic through Croatia, I'd suggest it skip vignettes for heavy vehicles and just go for distance.   

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.

Finland's path to road pricing raises some big questions

I wrote on 27 March that the a Finnish Government Working Group had recommended that the country move away from fixed taxation of motor vehicles towards a distance based approach.  I've now had a chance to read the full report (in English) of the Working Group and to digest its analysis and approach, and it demonstrates the one rule of thumb I've often seen in road pricing studies across the world - every country has considerably different contexts, but many common issues.

To read the report yourself, it is available here as a pdf.   

For those who don't want to dive into the detail, I'll summarise my key thoughts and views first, and then put down some more detailed reflections afterwards.  It's particularly pertinent given the upcoming ITS Europe Congress in June, being held in Helsinki.

Finland, most of the population is along the southern coast

On 3 February 2012 a working group was established to explore how Finland could move towards "fairer and smarter transport systems and study long term strategies to introduce road pricing systems, with a specific mandate to assess the feasibility of GPS road pricing".   The focus was on looking at global experience, what objectives road pricing could serve, what technical solutions could be viable, what impacts would arise and how and over what timescale it could be introduced.  The working group was also to look at privacy and whether any other services could be provided using the GPS platform.

This follows previous investigations into congestion pricing for Helsinki alone, which came to the conclusion that the best approach would be some form of distance based charging that varies by time and place.

Summary

The key points from the study are as follows:

- Existing fixed taxes for cars should be replaced with a distance based tax.  Those taxes include car tax (paid on first registration of vehicles in Finland) and annual vehicle tax and vehicle motive force tax.

- The tax considered for the purposes of the study would be €0.033/km (US$0.074/mile) on all cars with another €0.02/km (US$0.045/mile) for non-petrol cars to offset the lower diesel tax.   Some variants on this were tested based on a regional differentiation.

- The distance tax would not replace fuel tax.  Finland's fuel tax rates are €0.6729/l (US$3.52/gallon) for petrol and €0.4966/l (US$2.60/gallon) for diesel, compared to the EU legal minimum rates of €0.359/l for petrol (about US$1.89/gallon) and €0.33 (US$1.72/gallon) for diesel.  (note these are US Gallons for the sake of comparison, not imperial).

- Motoring taxes in Finland already recover more than five times the state spending on road maintenance, with none of the money hypothecated for roads, so the argument for distance tax was not based on revenue generation or protection,  but rather dynamic improvements in economic and environmental outcomes.  By law, such a charge can currently only be a tax in Finland.

- Shifting from fixed taxes to fuel taxes was considered, but ruled out because it would not offer the potential to target congestion and environmental impacts by location and time of day.

-  The distance tax would not apply to buses and coaches because no fixed taxes apply to them.

-  The distance tax would also not apply to HGVs because the fixed taxes that apply to them could not be reduced sufficiently to make the tax work, as the rates are not far above EU minimum rates.

- The net impact of a shift to distance tax by 2025 is estimated as being a 30 million reduction in annual car trips, with a 4% drop in CO2 emissions from cars and around the same proportionate drop in serious car accidents.

Change in passenger km estimated in 2025 from introducing distance charging in Finland

- Most car users would pay less, with commuters in cities and high usage rural users paying more.  The net effect is to reduce barriers to car ownership, but encourage car usage when and where alternatives are not available.

- The estimated capital costs for such a system, for 3.5 million cars, were €89m-133m (US$123m-US$183m) (which I believe to be far too low), but operating costs were estimated at between €116m-133m (US$161m-US$183m) per annum.  The report indicated more scrutiny is needed over these costs.

- However, these higher costs compared to the current tax system would be recovered by the reduced costs to the economy of fewer accidents and emissions.  The savings from reduced congestion were not calculated, but given evidence from previous studies ought to deliver substantially higher economic gains, even if charges did not vary by time of day or location.

- It was considered that the primary benefit from the change would be to allow for charging by specific road and time of day, so congestion charging could be introduced equitably, targeting congestion and locations where there are reasonable public transport alternatives.

- It was strongly recommended that any distance tax have strong privacy protection, so that all data on specific trips be kept with the on board unit and in the possession of the vehicle owner, with only charging data released.  Other data could only be accessed if the owner wished to query the tax calculation or if there is suspicion of systematic fraud.

- There could be industry development potential in allowing such a system, as it would encourage local business to develop complementary systems and potential applications to use alongside the distance tax.

So, Finland is considering a car only based distance tax to replace taxes on owning cars.  That's interesting and revolutionary, but I also think it is missing some key points, which I come to below.  These are:

- Fuel tax ought to be included down to EU minimum rates;

- By including fuel tax, all other vehicles should be taxed by distance and mass;

- The rates of distance tax should reflect, at a minimum, infrastructure costs;

- By shifting to distance tax Finland cannot evade a strong case for partial hypothecation of revenues, in which case it may be wise to consider part of the charge not being a tax, legally speaking;

- The capital and operating costs need far closer scrutiny;

-  The benefits of shifting to distance based charging may be overstated around accidents, due to technology around automation, but understated by excluding the deadweight costs of existing taxes.

Germany expands road pricing: Part 2 light vehicle vignettes

As I reported around a week ago, Germany is taking two significant steps forward in expanding charging of road vehicles, on both motorways and major federal highways.   I wrote previously about the changes to the truck toll system, this article is not as long as much less detail is available, but this time it focuses on the introduction of a new time-based charge for light vehicles, otherwise known as a vignette that will

 predominantly apply to cars.   The term for that in German is PKW-Maut (effectively "passenger car toll").  However, it is not a toll, either in conventional parlance nor under European law (which counts it as a "road user charge" although it applies regardless of how frequently you use the charged road during the period of te vignette).

What vehicles?

Germany's car vignette: the problem is making it tax neutral for Germans

Nearly a year ago I wrote that Germany is considering introducing a vignette system for private cars using its motorways, primarily as a way of raising money from foreign motorists.

Now EurActiv reports that the newly agreed "grand" coalition government in Germany, between the centre-right CDU/CSU of Angela Merkel and the centre-left SPD, includes agreement to proceed with such a system.

For those unfamiliar with the vignette systems of Europe, the concept is relatively simple.  It involves prepaying for access to a highway network (typically all or most of the motorways of the country), and the pre-purchase can cover set periods that can range from 1 day to 1 year, with most systems offering three products (something between 4 and 10 days, another for 1 or 2 months and another for a year).   Traditionally, vignette systems have required vehicles to display a sticker on the windscreen proving payment has been made, but more recently systems in Hungary and Romania are electronic.  All that is needed is for the relevant authority to have a record of payment associated with a number plate, so that those without vignettes can be targeted and stopped by Police.

The decision to introduce vignettes for cars is driven by politics, as German motorists know only too well that if they drive into three of the countries that border Germany they face vignettes (Switzerland, Austria and the Czech Republic, with a fourth coming with Belgium), whilst in France they will pay tolls on the extensive tolled motorway network.  Beyond that, other countries in eastern Europe have vignettes, whilst those in southern Europe have extensive toll roads.   Whilst motorists from many countries drive through Germany, with the perception that they don't pay.

German autobahn network

Doesn't Germany already charge foreign vehicles?

Now it is well known that for trucks 12 tonnes and over, there is the LKW-Maut distance based truck tolling system, which recovers infrastructure costs from those vehicles.  For cars there is nothing (beyond a handful of toll roads), except of course, fuel taxation.  Whilst it is possible to drive across Germany without buying fuel, it is far less likely than driving across Slovenia.  However, it is commonplace in Europe to treat the taxation of motor fuels as not being in any way a tax on road transport, even though it is, in effect, so. The preference is to treat this as just another tax (even though it is levied exclusively on one source of energy, used primarily for one purpose).  

In Germany, petrol is taxed (as of July 2013) at up to €0.6698 per litre (less for lower sulphur content) and diesel at  €0.4857 per litre, none of which is hypothecated for transport spending.   Of course, the amount of fuel tax paid when using German roads will be dependent not only on the amount of driving on German roads, but how much a motorists fill their fuel tanks before and after a trip, making fuel tax a poor proxy for payment for road use (although it certainly is a tax collected because of road use).

Avoiding discrimination

The EU Treaty makes it clear that EU Member States should not discriminate against citizens from other EU Member States.  That means that any vignette in Germany must apply to cars registered in Germany as well as other countries.  Of course, on the face of it, that means an increase in taxation for Germans, which is not exactly what politicians are seeking.   So proposals so far have included the concept of a "discount" for German motorists.

Now the issue becomes rather subtle here, as EurActiv reports Siim Kallas, "the EU commissioner for transportation, has rejected new plans for tax rebates in Germany" in that German motorists cannot be exempt from the vignette nor can they get a rebate for it.

Yet other forms of taxation would appear to be able to be reduced.  Motor Vehicle Tax (a tax on ownership) could be reduced proportionately, so that most Germans do not pay more in tax.  Yet with one politician saying that he wants to raise something like  €800 million rather than  €100 million a year from the vignette, it seems unlikely that this could be possible, alongside reducing other taxes.   The Green Party seems to support introducing a vignette, but without any cut in other taxes (matching its antipathy towards private motoring).

What should Germany do?

If a vignette was introduced, similar to Austria, the key issue remains as to how to deal with other taxes.

Austrian car vignette

News Briefs - Hungary, India, USA

Hungary - Budapest unlikely to introduce congestion charge in short term

Following on from the report last year that the Hungarian Government had suspended development of a congestion pricing scheme for Budapest (which had received money for its metro system from the European Commission contingent on introduction of such a scheme), Caboodle reports that the Budapest Public Transport Centre, CEO David Vitezy, says that it wont happen in the next two to three years.

He says that until there is more public transport capacity, it can't be done.  He wants the fourth metro line (under construction) and some new tram lines built first.  I'm slightly curious about this, given Budapest functioned for many years with the existing public transport network and much less car traffic, and has had relatively static/declining public transport usage for some years.

However, I suspect the politics around this are too difficult for now.

India - Andhra Pradesh state may establish hypothecated roads fund

According to The Hindu, the Andhra Pradesh Road Development Corporation (APRDC) is considering replicating what has been done in four states (Assam, Kerala, Maharashtra and Uttar Pradesh), by setting up a dedicated roads fund which would receive revenue from motoring specific taxes.  The primary reason being to allow for better quality and longer term funding decisions on road infrastructure, than ad hoc annual funding decisions competing with other public spending.   In addition, it is intended to support the autonomy and accountability of the APRDC in delivering improvements to the network.   Taxes on motor vehicle ownership and fuel, tolls, and other revenue sources may be dedicated to the roads fund.  A key priority is to fund major safety improvements to reduce the high accident and road fatality rate on the state's roads.

USA - Texas - article on tolling

The Texas Tribune has an excellent four part series of articles on toll roads in the state.

- Part One. Includes an interactive map of toll roads in Texas, which looks like not much given the size of the state, but are clustered around major cities.

- Part Two.  Describing the rise of tolling in Texas.  Noting that fuel taxes have not risen in Texas in 20 years, that more than 150 miles of toll roads have been built in the past six years and the growth in private sector interest in building, owning and operating such roads.

- Part Three. Focusing on HOT and other toll lanes in Texas.

- Part Four.  On the failed Trans-Texas Corridor proposal and what came after.

Denmark presses ahead with Lorry Road Pricing

Whilst Copenhagen's latest attempt to progress congestion pricing appears to have stalled, Denmark is pressing ahead with heavy vehicle tolls in the form of a distance based road user charging system.

The project is led by the Ministry of Taxation and I have kindly been supplied information from the Project Manager Klaus Østergård Jensen available (only some in English) on its website.

Key facts

• The policy objectives are to generate additional revenue, apply the "polluter-pays" principle and implement as soon as possible whilst minimising risk.
• The charge will apply to all Heavy Goods Vehicles (HGVs) having a maximum permissible laden weight of 12 tonnes or over;
• There are 34,000 trucks registered in Denmark that will be liable;
• About another 80,000 trucks registered outside Denmark will be liable;
• 3,800 km of road will be subject to the charge (covering motorways and trunk roads);
• Estimated price per km will be €0.20 (D.Kr 1.49, US$0.26/km or US$0.42 per mile);
• 1.6 billion vehicle kms are estimated to be moved by trucks 12 tonnes or over by 2015
• The tariff will be set as a calculation of: infrastructure costs per km + administration costs per km + environmental costs per km.
• The charge will replace Denmark's participation in the Eurovignette (which charges HGVs on the basis of pre-purchased time periods on the trunk roads network - prices here).  The Eurovignette is a trans-national road user charge applied in five EU Member States that covers usage of roads in all of those countries with one charge.  The Eurovignette will no longer apply in Denmark.

The infrastructure cost calculations will need to be carried out to satisfy the European Union Directive 1999/62 (disclaimer - I have advised the European Commission on the implementation of that Directive in several Member States) which provides a framework for calculating the appropriate allocation of costs to HGVs for tolling purposes.  There will be two broad vehicle categories:

- Vehicles with four or more axles;

- Vehicles with three or two axles.

Presumably, following the German approach, the higher tariff will apply to the vehicle with more axles on the fair presumption that it is most likely to be heavier.

Administration costs will presumably be a function of the contract with the provider and operator of the tolling system.

The environmental factor will be based on a three-tiered charge with the cheapest tariff applying to vehicles classified as having Euro VI engines, the middle tariff for those EEV, Euro V, Euro IV and "retrofitted" Euro III engined vehicles, and the highest tariff for all vehicles with a standard Euro III engine classification or lower.

65% of all truck traffic is carried on the network that is to be charged, which indicates a not insignificant amount of delivery activity.  Bear in mind that Denmark is a transit nation for traffic between the European mainland and the Scandinavian peninsula.   One of the issues remains is that there are a number of cases of local roads that run parallel to major highways that may see significant diversion of traffic when the toll is introduced.  It is understood that the Government is considering options as to how to address this (presumably either imposing the toll on those roads as well, or removing it from highways with such a risk).

Roads subject to Denmark's lorry road user charge

Procurement is to be through a Public-Private Partnership with the intention being that a Special Purpose Vehicle be set up to be responsible for the design, testing, implementation and operation of the charging system.  The expectation is that investors will finance the capital costs of the system, and be provided "periodic payments" for the performance of collecting the revenue for the Ministry of Taxation.  The proposal is for a minimum contract period of 10 years, which covers the initial implementation and is likely to easily exhaust the depreciated life of the charging equipment (which typically becomes obsolete within 5-7 years).   In the longer term it may be interesting to see if a more diversified, competitive service provider structure is adopted, to put pressure on costs and customer service standards.

What is to be put out to tender appears to be the charging service (from supplying and installing equipment, to establishing and managing accounts, and collecting revenue) and the revenue assurance service (verifying payment has been collected and identification of those who do not pay).   Enforcement and scheme ownership and management will remain with the state.   It appears that there will not be competing service providers.

A very simple depiction of the expected high level procurement relationship is seen here:

Denmark HGV Road User Charging basic contracting structure

Legislation is to put through Parliament in 2013, with the intention that the tendering and contracting process proceeding from Spring 2013 through till the end of that year.  The summary schedule is depicted below:

Denmark Truck tolling high level implementation schedule

Comment

The Danish programme has parallels to several of those already in place, such as Germany and Slovakia, and  whilst it is not technology specific, I would be surprised if it did not use a GNSS (i.e. GPS) based system.  Despite such systems becoming more commonplace, the keys to making it success will be around:

- High standards of customer service, particularly for the implementation phase and particularly for foreign lorries;

- Serious discipline on operating costs (it is no coincidence that the operators of some of these systems have done remarkably well out of them, so there should be plenty of competition from investors, but also pressure to get transaction costs down within three years of the inauguration);

- Serious, detailed work on the diversion risk, based on some surveys of local AND foreign lorries using high risk parts of the network, and so designing the scheme to minimise this risk.

I sincerely wish Denmark good luck in implementing the system, and will provide updates when they become available.   Once it is implemented, it will join Switzerland, Germany, Austria, Slovakia, Poland, New Zealand (and France and Belgium both forthcoming) in having nationwide distance based road charging systems for trucks.

European Commission consults on road charging

The European Commission has released a series of consultation documents intended to seek guidance on what its role should be for tolling/road user charging/road pricing policy and regulation.

The consultation is being carried out using a choice of a long or a short online questionnaire.

The background document is published here.

Consultation is open until 4 November 2012.

The consultation questionnaires ask about attitudes to road charging across a range of dimensions, such as congestion pricing, heavy goods vehicle charging, charging for air pollution, climate change and noise, whether there should be an emphasis on distance based charging, consideration of what taxes might be reduced if road charging is introduced.  There are questions about whether there should be a mandatory single European tolling service available for full interoperability, and what money received from road charging should be spent on (e.g. roads, cutting other taxes, "sustainable transport", a new EU fund for transport or cutting budget deficits generally).  There are specific questions about personal experiences (e.g. how much would you need to be charged at peak times to change mode of travel, have you experienced discriminatory practices with road user charging in different EU Member States).  It also asks about perceptions regarding standards of maintenance in one's home country and across the EU.  Another question is whether there should be a shift away from manual tolls to fully electronic free flow tolling, and if that should be mandatory.

It is a questionnaire obviously and logically targeted at European citizens and residents, and should be responded to by both commercial and private road users.  

However, it is far ahead of what individual countries elsewhere do in this sector, as it presumes those answering are intelligent and can understand basic concepts of charging and funding.  It should be, at least, an intellectual starting point for many policy thinkers.

The background document makes a few points that may be of interest:

The European Commission's approach to road charging is reflected in the 2011 Transport White Paper which said:

Users should pay at least the marginal costs of the wear and tear of the infrastructure and the main external costs (i.e. noise, pollution and congestion), while for other costs, such as construction costs, the choice of options should be kept wider.

This justifies EU taxpayer contributions to capital expenditure on major highway projects through structural funds.   However, it is an explicit statement that road infrastructure and externality costs should be charged for directly.

It is generally accepted that the cost of greenhouse gas (GHG) emissions, which for road transport consist mainly of carbon dioxide (CO2), are best internalised through other tools such as fuel taxes. 

Fuel taxes are seen as a way of internalising CO2 "costs", but not as an optimal way of recovering infrastructure costs or managing congestion.

A Commission  proposal to review the Energy Taxation Directive, currently discussed in the European Council, is however proposing the clear separation of the CO2 component of fuel taxes.

What this means is that fuel taxes would be disaggregated into infrastructure charging and CO2 components (and presumably general revenue raising), which would add to transparency in discussions about reforming road charging and the partial or full replacement of fuel taxes with other charges.

The current regulatory role of the EC on road charging is confined to heavy goods vehicles:

Road charging of heavy goods vehicles (HGVs) on the TEN-T and motorway network is regulated at the EU level, while no legislative framework exists for cars, vans and motorbikes at the moment.  

The consultation is, in part, seeking for views on this.  The reason HGVs are regulated at present is because their movement is integral to the single European market (and avoiding distortions that mean a Member State charges foreigners more than it charges nationals).   The key directives are Directive 1999/62/EC (on charging HGVs), Directive 2004/52/EC (on a European Electronic Tolling Service) and most recently a communication on explaining how the non-discrimination principle applies in the context of vignettes for cars.

Problems

One is financing infrastructure

"The Commission has estimated that 1.5 trillion euro over 20 years is the minimum investment needed to keep pace with the increase in transport demand. 500 billion  euro will be needed by 2020 to complete the TEN-T network. Without these investments, Europe will progressively lose the asset of efficient transport infrastructure capable of supporting long-term, sustainable economic growth."

In times of fiscal consolidation, there is even less justification to call upon the tax payers to finance the maintenance of the transport infrastructure and therefore the network managers have no choice other than to increasingly rely on the users to pay for the it (this is called the 'user pays principle').

Other are better use of price as an instrument to improve transport efficiency, lack of harmonisation between charging systems technically, contractually and in price terms.

Another problem is the lack of transparency and the risk of discrimination in the way in which tolls and charges are fixed, updated and levied...In the field of distance-based charges, road users are generally not consulted or  informed about the rationale behind yearly updates of toll levels. This creates the risk of toll chargers abusing their monopolistic position and making unjustified profits on the tolls.  

The survey itself indicates that traffic congestion costs the European Union 1% of GDP per annum, and EU cities 2% per annum.

In conclusion it is hoped this questionnaire will inform policy, but I fear it will get insufficient publicity to really have enough of a sample from Member States to be meaningful.  I hope I am wrong and I hope the European Commission publishes the results in due course.

So, if you are a European citizen or resident - go on and answer the questionnaire.  If you are not from the EU, then you can still respond and declare your interest as being "international", and it will be given due weighting I am sure.

Disclosure of interest: I provided policy, regulatory and economic advice to the European Commission on tolling/road user charging matters from 2009-2011.

Stockholm congestion pricing has had long term effects on traffic levels

The European Commission DG Environment reports on a study that indicates that the congestion tax in Stockholm has managed to sustain and enhance benefits in congestion reduction over time.   The EC believes this has positive implications for the concept's application in other cities.

Stockholm congestion tax cordon map

The report says:

The results of this study suggest that congestion charging can work over the long-term, supporting plans to introduce such charges in other cities across Europe. The findings also demonstrate that some concerns about the charges, such as increased congestion on other routes, are not supported by the evidence, and that public acceptability may increase over time.

Non-exempt* traffic had reduced by 29% across the Stockholm cordon when the congestion charge was introduced in 2005, and that level of reduction has been sustained even though prices have not increased (so have reduced in real terms by around 2% per annum).  It appears that the charge has had a long term effect on changing driving patterns into central Stockholm.   However, researchers acknowledge that over time there will need to be real increases in prices.

Another criticism about congestion charging, that it increases traffic on roads adjacent to the charging zone, appears to have been without foundation, as there has been no significant increases in traffic or congestion on other routes, except that attributable to population increases.

Finally, public acceptability for the scheme is now 70%, up from 36% in 2006 (and a narrow majority in favour of the charge in a referendum), indicating that the benefits of permanent reductions in traffic volumes and improved mobility are now widely accepted.

In conclusion, the Stockholm scheme has not only worked, but sustained a step change in traffic patterns in the city and not distorted traffic movements outside the zone.  

It's worth noting that the Stockholm scheme is slightly more sophisticated than the London one, as it has higher charges at peaks compared to the interpeak period, and no longer has an exemption for so-called "green" vehicles, because the emphasis of the tax is to reduce congestion - and all cars contribute to that.  The other interesting dimension to the congestion tax is that most of the revenue is being used to support enhancements to roads outside the charging zone, which appears to be a key part of the charge gaining acceptance by people in Stockholm.

Finally, the official title of the charge is the "congestion tax" because under Swedish law, it is the only way the charge is enforceable.

* Exempt vehicles are only buses, emergency vehicles, motorcycles, diplomatic and foreign registered vehicles and those of holders of a disability parking permit.

Tolling of cars in the European Union

Following on from yesterday's post, the European Commission also released this map of national tolling arrangements in the EU.

Tolling in Europe (cars only)

This time there are fewer categories, as it only involves light vehicles.

Toll with physical barriers (distance-based charge)

6 Member States have extensive toll road systems, using manual tolls (universally with electronic options).  These being Ireland, France, Spain, Italy, Greece and Poland.  Of course there are manual tolls in other EU Member States (Germany, Netherlands, Denmark/Sweden, UK), but so few as to not comprise a network of toll roads.   However, the depiction of these as involving distance based charges is a misnomer.  Whilst there is some corollary to distance, it isn't about pure distance and is not always based on this.  Still it gives a clear picture of where conventional tolling has been dominant for charging cars.

Vignette (time-based charge)

7 Member States have vignette systems, whereby access is bought in advance for periods ranging from 4 days to one year.  These countries are Austria, Czech Republic, Slovakia, Slovenia, Hungary, Romania and Bulgaria. Of interest is that Hungary and Romania have fully electronic systems, with a vignette needing only to be bought online with a number plate registered, rather than the stickers offered in other countries.

Vignette under preparation

Belgium is the only EU Member State currently considering introducing a vignette for private cars.  However, it will be of interest as to whether Germany chooses to do so, given its size and the extent of foreign car traffic in the country.

Electronic Network wide toll (distance based charge)

Curiously, Portugal gets this classification because it does have a growing number of fully electronic free flow toll roads. Yet it still has manual toll roads too, and it is not the only country with free flow tolls (Ireland has it for one road).  In fact, the only real difference between Portugal and Spain is technology, it is still a country with some major toll highways.

Neither vignettes nor tolls

12 EU Member States - the UK, Germany, Netherlands, Luxembourg, Denmark, Sweden, Finland, Estonia, Lithuania (despite the colour on the map) and Latvia are all classified as having no such charging systems.  Malta and Cyprus come into this category as well (and Belgium would be included if it were not for its decision to pursue vignettes).

 
Conclusion

EU Member States tend to go three ways on charging cars.  Either they embrace tolling for major motorways extensively (which involves charging trucks as well), or they charge vignettes if there is sufficient transit traffic to justify it, or they don't bother at all (using fuel tax and ownership taxes to raise revenue). 

What trends are appearing?  Clearly manual tolls will evolve over time to include electronic tolls, but this is hindered by enforcement difficulties across borders.   In addition, vignettes appear to be gaining in popularity as a way of raising revenue from foreign traffic (but needing to charge all vehicles equitably to be compliant with EU law).  Rumour has it that Germany is considering such a move, which would transform the impacts of vignettes in Europe considerably.