Transportation & Logistics Analysis

The implications of road transportation charging

April 27 2021

The charging of road transportation in Europe is a subject as essential as it is sensitive. Each development requires a clear definition of the objectives pursued, without losing sight of the emotional dimension of the subject.  

The inventory of taxes, duties or other charges levied on road freight transportation in European countries shows a certain convergence of the main types of levies. But this common framework does not prevent the existence of significant disparities from one country to another.

Charging, for what reason?

In 1999, the European Union legislated for the first time on the charges levied on trucks for the use of certain infrastructures, with the aim of "harmonizing the conditions under which national authorities may apply taxes, tolls and user charges on goods carried by road ”.

The text has been revised several times. The European directive 2011/76 / EU has thus set a new framework for the charging of trucks in the European Union. These common rules govern the application of tolls and user charges (also called vignettes) for trucks (over 3.5 tonnes) using certain infrastructures. They specify that the costs of building and operating the infrastructure can be financed through taxes collected from road users. The "Eurovignette" directive allows, but does not impose, the levying of charges for the costs of negative transport externalities, such as pollution, congestion or noise. A new revision is in development. It aims in particular to integrate the issue of CO2 emissions into the scheme.

Charging, according to the directive, is therefore a source of infrastructure financing on the one hand and a lever for changing behavior on the other. Some countries have shown themselves to be pioneers. The most striking example is undoubtedly Germany, which introduced in 2005 an electronic toll system, the LKW-Maut, which frees up resources to finance transportation infrastructure while differentiating between types of vehicles since the cost per kilometer depends on the level of motorization and the number of axles of the vehicles.

From the painful 'écotaxe'...

France wanted to follow down the same path. In 2007, within the framework of the Grenelle Environment Forum launched by President Nicolas Sarkozy, the principle of creating an “eco-mileage-charge for trucks using the unconcessioned road network” was enacted. The 'écotaxe" should have come into force in 2011, but it was repeatedly postponed, against a backdrop of technical complexity and fierce opposition from carriers. When the left came to power in 2012, it took up the torch. In spring 2013, everything was ready for the scheme, with its fleet of 200 camera gantries, to start up on January 1, 2014. By charging 800,000 trucks on the unconcessioned network, the State hoped to generate around 890 million euros in net revenue per year, of which € 684 million would be allocated to financing transportation infrastructure ... But in the fall, the protest started in Brittany by the "Red Bonnets" movement (the demonstrators wore Jacques Cousteau-style bonnets) spread to all of France. The government backed down and “suspended” the écotaxe, before it was definitively abolished by the National Assembly in 2016.

In a report, the Court of Auditors evokes a "failure of public policy" and estimates the shortfall at more than one billion euros per year, to which is added a loss of 1.3 billion related to the termination of the contract with Ecomouv, the company which had been appointed to collect the tax.

... to the timid return of the "specific contribution"

In 2021, the subject of road transportation charging resurfaced in France with the Climate and Resilience bill, leaving an impression of "déjà vu" as there were so many points of similarity: the idea has now resurfaced in a similar but even more violent crisis situation. In 2021, as in 2012, the country is now facing the prospect of bankruptcies and painful social plans, resulting in a probable "agglomeration of aspirations" between employers and their employees ...

The approach is, however, more cautious. Anxious to break the Parisian and authoritarian Jacobin injunction regularly criticized in previous measures, the government has chosen to decentralize while leaving the regions the choice to decide whether or not to apply a “specific contribution” to the circulation of road freight transportation vehicles.

The text is currently continuing its legislative course, but professional road transportation organizations have already made known their vigorous opposition. The eco-charge is not the only contentious subject. TICPE (domestic tax on energy products) exemptions are also being targeted. In a joint press release published on April 12, the professional federations denounce "measures which will weigh heavily on the finances of French transportation and logistics companies, on employment and on the citizens' wallets" and warn about "an unprecedented rise in transportation prices for manufacturers and producers, which will be passed on to consumers”.

It is difficult to know at this stage if this prognosis will hold true. History shows that the evolution of transportation prices is above all dependant on the balance between supply and demand. But the current debate also has the merit of reminding us that, contrary to popular belief, road transportation is already contributing. "Axle tax, fuel tax, warehouse tax, parking and toll taxes, trucks already pay nearly 7 billion euros per year", the FNTR estimates.

Different types of charging

We can sort the taxes and fees collected into four distinct categories that ultimately allow us to compare their impact on a typical trip within a country or territory. This distribution is explained in the study Road Haulage Charges and Taxes of the International Transport Forum of the OECD.

1. Tax for the ownership of HGV

Truck taxes are imposed on the basis of vehicle ownership in the country of registration. The levy is therefore applied according to the nationality or the territoriality of the carrier and according to the fiscal policy of the country. In Spain, this tax is set by the regions. In Germany, cleaner vehicles benefit from tax breaks.

2. Fuel tax

Fuel taxation remains the largest tax and charge paid by road carriers. Excise duties on fuel are falsely perceived as directly related to use. In reality, the levy has a weak territorial character because carriers can choose to refuel in one country and drive in another. There is therefore no correlation between the routes taken and the fuel tax revenues in a given country. Directive 2003/96 / EC sets a minimum tax of 0.33 EUR / liter on diesel but does not define a maximum level.

Another limitation of this type of taxation is emerging. The long-term decline in the use of fossil fuel carries with it the threat of massive losses in tax revenue for governments. A simulation for Slovenia, cited in an ITF report, indicates that the country must absolutely switch from taxes on fuel to taxes on distance traveled if it is to be able to maintain its tax revenues at their current levels by 2050.

Reducing dependence on fossil and carbon fuels must therefore be accompanied by a complete overhaul of the systems for value-added tax collection.

3. Time based charges

These are flat-rate taxes linked to a particular territory and not to the level of use. This type of direct charge is gradually losing ground: for example, the Eurovignette is now only in force in 4 countries: Sweden, Denmark, the Netherlands and Luxembourg. The sticker paid in one of these countries allows you to travel on the road network of the other three (except for some bridges or toll tunnels). However, it can no longer be said that these fees will disappear. France is planning an identical regionalized system, and cities such as Milan or Stockholm have applied similar charges to reduce the traffic of polluting urban delivery trucks.

4. Toll roads and distance-based charges

This time, charging is very strongly correlated with use. This system has long been practiced on the French and Italian motorways, and has become widely used in Europe; from motorway tolls with barriers, in 2001 we moved into the electronic era in Switzerland and the satellite electronic toll system was adopted by Germany in 2005 and then by Austria, the Czech Republic and Slovakia. The charges are linked to the distance traveled and differentiated by category of truck and even according to the time of day (the price is for example higher at night in Austria).

The challenge of the last mile

For decades, European countries have researched, debated, and disagreed on the idea of generalizing a road user charge to all vehicles, paying the price for wear and tear on infrastructure and for externalities. Resistance from interest groups or politicians has prevented their inclusion in legislation or their implementation.

But the fight against global warming is gradually closing in. In several countries, there are local congestion charges or tolls for access to certain structures (bridges or tunnels). In addition, several countries have set up reduced emission zones and zones where the circulation of so-called polluting trucks is prohibited. In this, the cities of London, Berlin or Gothenburg were pioneers and the region of Styria in Austria designated an area of 5,700 km2 where trucks with motorization levels poorer than or equal to the Euro 3 standard are banned.

According to a study by the World Economic Forum, the development of e-commerce will result in 36% more delivery vehicles in city centers by 2030. Without effective intervention, emissions from urban last-mile deliveries and traffic congestion could increase by more than 30% in the world's top 100 cities. Regardless of negative externalities (noise, congestion, pollution), the e-commerce economy brings new challenges to the table. The massive increase in volumes is accompanied by greater complexity of deliveries (management of appointments, increase in the number of references, reduction in the number of items per order, etc.).

New infrastructures, new transport equipment and new tools are necessary to ensure the fluidity of deliveries, in an urban ecosystem that was not designed for this type of logistics scheme. The issue of financing this necessary adaptation, as well as its technological and analytical dimensions (relying in particular on data sharing) must now figure among the priorities of local authorities if we want to avoid thrombosis.

Taxing road transportation and logistics professionals may help fill in the ever-more gaping holes in the budget. But this will not replace the global reflection on a national logistics plan guaranteeing the economic competitiveness of the country, of which ecological and energy transition is an integral part.

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With more than 20 years of experience in the international supply chain, William works as a road transportation expert for Upply. Entrepreneur by nature, he has successively worked in operational and functional management among various industries, such as chemistry, automotive and building materials; alternately shipper and service provider.