Understanding the effects of introducing lorry charging in Europe

From July 2010, the Belgian Presidency of the European Union is set to restart talks on a revision of the EU rules that govern national road charging schemes, the so-called Eurovignette directive.

The debate over the latest proposal to revise the law, has centred on whether member states should be allowed to include external costs, such as the costs of climate change, and congestion caused by lorries into road charges. Such a move would be in line with the polluter pays principle.i

The road industry has argued against this, saying the ‘polluter pays (but the) problem stays’, in other words, higher fees would not reduce pollution or congestion. This reflects the false assumption that road freight transport demand is relatively ‘inelastic’ – meaning that it does not react strongly to changes in price.

In fact there has been remarkably little research that explains how and why demand for truck transport reacts to price changes. This suggests a number of important questions on the impact of introducing kilometre charges:

• Will the number of trucks on the road and the distances they travel decrease? And by how much?
• Will roads become less congested, safer and freight transport less polluting?
• What is the effect on revenues?

To answer these questions T&E commissioned the consultancy Significance to investigate to what extent hauliers and shippers respond to changes in transport costs, and what happens to overall demand for freight transport by road if prices change. The study examines all relevant scientific sources on the sensitivity of road freight demand to price changes (‘price elasticity of demand’ in economic parlance), and checks the results against evidence from the lorry charging schemes already in place in Germany, Austria and the Czech Republic.