InterUrban Road Charges on Freight Vehicles:

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• Inter-Urban Road Charges on Freight Vehicles
• Getting There
• IMPRINT EUROPE
• Implementing Pricing Reform in Europe
• Final Conference, 4-5 Feb 2004, Brussels
• José M. Viegas
• TIS.pt, Transport, Innovation and Systems, s.a
• Lisboa, Portugal viegas_at_tis.pt

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Favourable Application Area of User Pays
principle

• Besides general recognition of the soundness of
  the user pays principle applied to transport
  infrastructure, road freight transport has
  systematically been considered one of the first
  areas of application
• EC White Paper on Fair Payment for
  Infrastructure Use, 1998
• Directive 1999/62/EC of the European Parliament
  and of the Council on the charging of heavy goods
  vehicles for the use of certain road
  infrastructures
• EC White Paper on European Transport Policy for
  2010Time to decide, 2001
• Proposal of EP and Council for amending Directive
  1999/62/EC, July 2003
• Several other initiatives (ECMT round table in
  1998, DESIRE RD project of the 5FP launched in
  2000)

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Main Difficulties

• The main difficulties for consensus on
  application of this principle come from multiple
  directions
• Very different fiscal situations of HGVs in
  member countries (purchase tax, annual
  circulation tax, fuel taxes)
• harmonised charging rules at the point of use may
  simply increase production costs without reducing
  distortions
• Charging principle Prices based on average costs
  (cost recovery) or on marginal costs (greater
  efficiency of use of current resources) ?
• Road transport as critical underpinning of the
  Single Market but also generator of significant
  external costs (adequate level of charges)
• Some countries already have motorway tolls, but
  under different objectives and rules (financing
  of construction under private concessions)
• Application of Revenues (road only or cross-modal
  subsidisation)

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A review of relevant items

• This presentation successively looks at
• The conclusions of ECMT RT 118 (Dec 2000)
• The conclusions of DESIRE RD project (Feb 2003)
• Proposal for a Directive amending Directive
  1999/62 (Jul 2003)
• The conclusions of the IMPRINT thematic network
  (Dec 2003)
• and then tries to show where we are and should be
  moving

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ECMT Round Table 118 (2000)Main conclusions
Objectives and means

• Adequate provision and operation of interurban
  road infrastructure is a complex problem,
  involving multiple objectives and constraints,
  for which various instruments are available, not
  only prices
• the best mix of instruments for any particular
  case depends on the hierarchy of the objectives
  as well as on the characteristics of the
  situation at hand
• The most frequent objectives are
• Financing construction, operation and maintenance
  of the road network
• Internalising external effects of road transport
• Providing quality of service to the user, while
  ensuring efficiency of the system (fighting
  congestion)
• In all cases, the road transport sector should
  cover at least all its internal and external
  costs at the network level

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ECMT Round Table 118 (2000)Main conclusions
Justification of tolls

• No strong reason for general recourse to
  interurban motorway tolls, as vehicle taxes and
  fuel taxes can meet financing needs and cover all
  external costs
• Some situations might justify the application of
  interurban road tolls
• Acceleration of construction and quality upgrade
  of road network
• But the level of the toll should not be so high
  that it restrains mobility
• Fair allocation of costs to foreign vehicles
  using the motorway network without having paid
  vehicle taxes or fuel taxes in the transit
  country
• Especially high costs in some parts of the
  network (congestion and or environmental
  sensitiveness)
• Against strong peak factors, time-modulated tolls
  should be introduced (and adequate solutions for
  a flexible management of the modulation adopted)
• If congestion occurs not only in the motorway but
  also on the road network around it, a traditional
  toll might only divert vehicles away from the
  motorway into those (even more) congested roads,
  thus favouring adoption of an area-wide toll,
  possibly km-based.

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ECMT Round Table 118 (2000)Main conclusions
Acceptance of tolls

• The most important aspects to consider for
  acceptance of pricing measures are
• Alternatives must exist to road tolled sections,
  and not be degraded in parallel with introduction
  of the tolling scheme
• Application of the revenue collected should to a
  significant extent be towards improvement of the
  tolled components or of the alternatives (road or
  other modes)
• Tolling should be applied to new components or to
  previously existing components where some
  guarantee of service is introduced
• As much as possible, total driving costs on
  previously existing sections should remain
  constant, only with a transfer from fixed to
  variable costs (from the users point of view)
• On first introduction, toll levels and overall
  complexity of the scheme should be relatively
  low, and later be gradually adjusted over time,
  as acceptance and understanding to longer
  constitute a problem
• If equity problems are identified, they should be
  treated carefully
• Wide Information and communication about the
  objectives and rules of the scheme

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DESIRE RD ProjectMain Conclusions Diversity
of objectives, conditions, price levels and
institutional designs

• Considerable diversity of objectives and
  framework conditions surrounding the introduction
  of road tolls, partly dynamic, partly rather
  stable
• there is and there will be for a long time
  legitimate reason for diversity of tolling
  strategies by national governments
• Identity of transport prices does not make sense
  since countries are not facing identical
  situations of density and sophistication of
  supply of transport infrastructure and services,
  and of density of demand
• Different tolling schemes, as well as the
  possible need to involve private financing of
  infrastructure, lead to different recommendations
  regarding the institutional design, from
  all-public to all-private. However,
• In all cases, ownership of transport
  infrastructure should stay in public hands, as
  well as the decision to build it and to what
  standards
• The State should always ensure independent audit
  of the processes of revenue collection and
  application, as well as of the processes of
  handling customer complaints

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DESIRE RD ProjectMain Conclusions Tolling
Forms and technologies

• Two basic forms most adequate
• NET, with charges applied on a network of higher
  quality (motorway)
• DAREA, with charges applied on all roads within a
  given perimeter
• Technological solutions available for comfortable
  and transparent application of EFC in the various
  tolling schemes studied. The choice of the most
  adequate technology depends not only on the basic
  form of tolling (NET vs. DAREA) but also
• for a NET scheme on whether tolling has been
  considered in the design of the motorways or not
  (retrofitting)
• for a DAREA scheme, on the main objectives
  underlying the introduction of the tolls, and
  with them the need for variability of tariffs
  (i.e. time modulation of the tariff or higher
  tariff levels in more sensitive areas)
• for any scheme, on the desired other functions to
  be developed on top of the tolling technology
• for any scheme, on the transaction costs and
  enforcement difficulties associated with the
  various technologies

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DESIRE RD ProjectMain Conclusions Economic
Impacts

• Introduction of road tolls (in either basic
  form) is expected to have very limited effects of
  modal shift
• Operating cost increases being translated
  specially into choice of alternative road
  corridors (if only some countries introduce road
  charges), as well as better commercial and
  logistic organisation.
• However, some reduction of trade and slowdown of
  economic growth should be expected due to higher
  transport costs
• When NET schemes are introduced in regions of
  high density and quality of road network, there
  is a considerable risk of traffic detour to
  secondary roads, with strong external costs to
  the populations living close to those roads
• In such cases a mixed NET / DAREA scheme might
  be considered a good solution, with DAREA being
  adopted only in the regions where the risk of
  traffic detour is significant
• But this solution has considerable problems of
  acceptability for reasons of fairness

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DESIRE RD ProjectRecommendations on revision of
Dir 99/62

• Expand the freedom of Member States to levy
  charges for heavy goods vehicles beyond
  motorways, at least widening the exception rules.
  
• Do not force Member States to price the usage of
  all inter-urban roads by goods vehicles
• Do not force Member States to set road charges to
  the full average costs for motorway construction,
  maintenance and operation, and allow for setting
  lower charge levels.
• Average costs strongly increase when traffic
  volumes are low, creating severe problems in some
  peripheries of the EU, strongly affecting the
  competitiveness of these regions
• In NET charging schemes, allowing charges to
  exceed average infrastructure costs, e.g. by
  including environmental costs, would increase the
  problem of detour traffic and could bring an
  element of arbitrariness into play as the
  determination of the external costs of transport
  is much dependent on the methodology applied.
• Since congestion is mostly caused by local and
  regional traffic of private cars, application of
  high regulatory charges to HGVs to fight
  congestion in densely populated areas may be
  considered as a barrier to trade, and requires
  some kind of positive discrimination in favour of
  long distance traffic crossing them.

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Proposal for a Directive amending 1999/62Key
changes - I

• The main points of the amendment are
• Charges applied by actual use (distance based),
  not by permission to use (Vignette)
• Weight threshold to pay is 3.5 ton instead of 12
  ton
• Imposition of charges on other primary roads
  (not motorways) to minimize risk of detour
  (respecting general Treaty rules) is allowed
• Basic charges related to construction,
  maintenance and operation costs, plus uncovered
  accident costs,
• but not congestion or environmental costs (which
  can be applied under limits as variable rates)

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Proposal for a Directive amending 1999/62Key
changes - II

• The items for variation of the rates are
• Type of vehicle damages it imposes and emissions
• Time of day and level of congestion (up to 100
  above cheapest period)
• Special attributes of a particular road, as
  environmental sensitivity, population density or
  accident risk (differentiation mandatory after
  2008)
• Environmental sensitivity of the region (after
  consultation with EC, no more than 25 of base
  rate)
• After introduction of road charges, national
  governments may introduce proportional
  compensation (tax cuts) on HGV costs
• Application of the revenue for the maintenance of
  the infrastructure and for the benefit of the
  transport sector as a whole
• Imposes creation of independent supervision
  authority to check on transparency,
  non-discrimination and application of revenues
• Pre-existence of concession contracts for
  motorways is acknowledged, allowing divergence of
  conditions from those set in Directive

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Conclusions from IMPRINT Thematic Network

• Even if IMPRINT addressed pricing reform in all
  modes and scopes, some conclusions are especially
  important in this context.
• It is important to make the link between pricing
  and investments
• Make simple and modest reforms first and ensure
  that each new phase of reform moves prices in the
  right direction, even if short term
  considerations might dictate otherwise. Increase
  sophistication over time.
• Consult and promote widely - clear simple
  information and explanation is needed
• Monitoring to demonstrate impacts is important as
  part of a phased reform, as well as to enable
  others to learn from experience
• Review acceptability and effectiveness openly
  after a pre-specified period

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Synthesis - I

• General agreement on the adequacy of distance
  based pricing
• Conclusions of ECMT RT 118, DESIRE and IMPRINT
  very compatible
• Directive proposal incorporates many suggestions
  from these and is a step in the positive
  direction but
• Some clash between national sovereignties in
  fiscal domain and European competence on
  infrastructure charging
• Diversity of starting fiscal conditions creates
  difficulties for harmonised pricing rules ? vague
  statements about compensation ? haulage industry
  fears of real increase of costs
• It shows limited understanding of concession
  contracts, and of the new to continue to make new
  such contracts, by allowing exceptions only for
  existing concessions
• It makes no connection between payment and
  guarantee and quality of service (as it exists on
  motorways under concession) ? this guarantee
  would be critical for sustained acceptance of
  road charges
• Difficult balance between pro-environment
  attitude and prevention of barriers to trade
  (solution by limit on mark-ups)
• It may substantially increase trading costs for
  peripheral countries, and this does not seem to
  have been considered

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Synthesis - II

• There are also points of difficult acceptance by
  (some) national governments
• Constraints on the application of revenues
• Supervision authority
• Impact for external trade of peripheral countries
• Limited mark-up for environmental sensitivity
• None of these problems seems to be without
  solution along the traditional lines of European
  compromise.
• Adequate monitoring in each of these areas should
  allow an improved version in a few years