HGV road user charging policy in Europe:Implications for Irish freight transport stakeholders

Dr Amaya Vega and Dr. Natasha Evers SEMRU, Whitaker Institute

NUI Galway

AVIVA Stadium, November 3rd, 2015

THE NATIONAL SUSTAINABILITY SUMMIT 2015

This research is funded through the Beaufort Marine Research Award, with the support of the Marine Institute and the Irish Maritime Development Office (IMDO)

INDEX

BACKGROUND

RATIONALE

QUALITATIVE DATA METHODS

RESEARCH FINDINGS

CONCLUSIONS

EU sustainable freight transport policy - Member States (MS) required to implement measures for internalising or reducing transport externalities

EU directives for HGV road user charges have played a central role in European transport policy.

Road charging for the private car has been left as a matter for the Member Sates

BACKGROUND

Eurovignette Directive (1999/62/EC as amended by 2006/38/EC and 2011/76) sets out the common regulatory framework setting up HGV distance-based road charges and HGV time-based road charges (vignettes) for the use of certain infrastructure.

2011/76 EU Directive integrated elements aimed at better reflecting the ‘polluter pays’ principle

EU POLICY DEVELOPMENTS

No MS has started internalising external costs - an increasing number of Member States use a form of HGV road user charging Sweden, Denmark, the Netherlands, Belgium and Luxemburg

(shared ‘Eurovignette’). Belgium starting new national distance-based system in April 2016.

April 2014 - UK government introduced a HGV road user charge. Time-based charge of up to £1,000 a year or £10 a day and will apply to lorries weighing more than 12 tonnes using UK roads.

Potential impact? Will Ireland’s future economic recovery be challenged?

RATIONALE FOR THE STUDY

IRELAND’S GEOGRAPHY AND PERIPHERALITY: HISTORICALTRADE DEPENDENCY ON UK

Ireland’s trade dependency on the UKland bridge goes beyond the bilateralmovement of goods.

Approximately 90% of total ro/ro freightmovements with Continental Europeuse the British Land Bridge network(Trant and Riordan, 2011)

HGV section of the haulage sector (>10tonnes) accounts for 20.7% of registeredvehicles, but it is responsible for 88.5%of total activity in terms of tonne/km(CSO, 2015)

• To explore the potential implications of the 2014 UK HGV road user charge for Irish transport stakeholders

OBJECTIVE

McKinnon (2006) - Initial proposals for the introduction of a HGV road user charging scheme in 2002. Sui and Liwei (2012) for a more recent analysis.

Potential damaging effects that a HGV pricing reform could have on the economy of peripheral regions - TIPMAC (Kohler et al., 2003; 2008) and IASON (Tavasszi, 2004)

Gutierrez et al. (2013) - potential disadvantages of the ‘Eurovignette’ system across Europe with regard to direct revenue transfers between European countries. Geographical location: key factor in determining whether the net balance of toll payments

was positive or negative, with peripheral countries presenting negative balances.

The empirical literature on the impacts of road pricing is extensive -congestion, mobility, carbon emissions, equity or accessibility. Hensher and Puckett (2008) used experimental design techniques to investigate the role of distance-based charges

CURRENT RESEARCH TO DATE

INDEX

BACKGROUND

RATIONALE

QUALITATIVE DATA METHODS

RESEARCH FINDINGS

CONCLUSIONS

• Exploratory Study led to Qualitative Data Collection Methods• Objective is not to generalise but to acquire qualitative insights and

perspectives into the issue, which a survey would not.

• Secondary Data collection

• Primary Data collection:– Semi-structured, in-depth interviews were then conducted with

Irish transport stakeholder categories of Irish road hauliers, Irish freight forwarders, Irish-based exporters and industry associations.

• Interviews lasted 60-90 minutes - recorded and transcribed verbatim. The interviews were framed around a series of questions relating to the topics underpinning our research inquiry.

QUALITATIVE DATA METHODS

INDEX

BACKGROUND

RATIONALE

QUALITATIVE DATA METHODS

RESEARCH FINDINGS

CONCLUSIONS

CONTROL OF THE LOGISTICS CHAIN

SCALE OF BUSINESS

LEVEL OF AWARENESS

FINDINGS

To identify the main decision-maker in intermodal transport choices of Irish export goods.

Findings confirm that a disproportionate cost impact exists on Irish hauliers. Caused by the relatively low bargaining

power of hauliers to push the road charge on to freight forwarders and exporters. The nature of the Irish haulage sector is

that of quasi-perfect competition market

IMPLICATION 1: COST BURDEN

Irish hauliers still operate in the Republic of Ireland, but avoid paying the road charge.

This action will result in the long-term decline of Ireland’s indigenous haulage industry. ‘If it is not sorted in two months, I am moving to UK’ (haulier)

Serious concern for Irish Tax authorities given the potential loss of revenue.

Increase of the cost of commercial transport services to/from peripheral rural areas.

IMPLICATION 2: POTENTIAL EXODUS OF ROI HAULIERS TO UK HGV REGISTRATION

Alternative route/modes to access mainland Europe were limited -‘The UK land bridge is not that you decide to use it, it is that you have to use it because there is no other option. It is too long a distance otherwise’. ‘Yes, it would be great to have a direct service, but you have to have the traffic first’ (Freight forwarders industry representative).

Modal shift towards alternative transport modes from Ireland to Europe, in particular Short Sea Shipping (SSS). ‘Short-sea shipping is by far the cheapest mode …you wonder why companies go by road to Belgium via UK’, (large Freight Forwarder).

IMPLICATION 3: ALTERNATIVE TRANSPORT MODES NEEDTO BE EXPLORED…

IMPLICATION 4: IRISH GOVERNMENT RESPONSE : FORTHCOMING HGV MOTOR TAX REDUCTION 2016

• The general unsuitability of the Irish motor tax system has seen as one of the main barriers to the introduction of a fair HGV road charge system – ‘There is double taxation for Irish hauliers (…) they are paying motor tax here, they are also paying the vignette in Belgium’ (small haulier).

• While there is no apparent opposition to the UK road charge and its rationale is well accepted, the solution relies on the response from the Irish government Irelandto mitigate the impact on the medium sized haulier.

IMPLICATION 5 : OUR EXPORTSGEOGRAPHICALLY AND PERIPHERALLY DISTANCE TO

THEIR MARKETS

Any EU HGV road charging system will have a economically detrimental effect on Ireland, relative to other more EU core economies.

Ireland’s geopolitical relationship with the UK as a mechanism to deal with the recently introduced HGV road charge – ‘we are neighbours, not foreigners’ (large haulier)

Disadvantages associated with Ireland’s peripheral geographic location affect all stakeholder groups in similar way, namely through increased transport costs.

INDEX

BACKGROUND

RATIONALE

QUALITATIVE DATA METHODS

RESEARCH FINDINGS

CONCLUSIONS

CONCLUSIONS

• DO MEMBER STATE TRANSPORT POLICIES INTEGRATE PRINCIPLE OFSUSTAINABILITY?

• ARE MEMBER STATES IMPLEMENTING DIRECTIVE 2011 IN A WAY THAT TAKESACCOUNT OF THE ECONOMIC BALANCE BETWEEN INTERNALISING ANDEXTERNALISING TRANSPORT COSTS?

• ROI GOVERNMENT INITIAL POLICY RESPONSE TO IMPLICATIONS OF MS ROADCHARGE INCREASES - MOTOR VEHICLE TAX REDUCTION 2016.

THE LIKELY IMPACT OF THE UK HGV ROAD USER CHARGE IS GREATER IN THE CASEOF IRELAND BECAUSE OF ITS PERIPHERAL GEOGRAPHICAL LOCATION AND LIMITEDNUMBER OF TRANSPORT MODE ALTERNATIVES TO CONNECT WITH THE MAINEUROPEAN MARKETS.

DISCREPENCY BETWEEN THE TRANSPORT MODE DECISION-MAKER AND WHO PAYSTHE CHARGES.

amaya.vega@nuigalway.ieAMAYA VEGA

natasha.evers@nuigalway.ieNATASHA EVERS