A number of countries have talked about a kilometre charge, and some – notably Germany and Switzerland – have introduced charging for goods transported by road. But the Netherlands want to become the first European country to implement such a charge for private car drivers following last month’s proposals put to the Dutch parliament. This is indeed a historic move that should be welcomed.
But, the devil is in the detail. There are four significant things that should change in the proposed Dutch charge.
Firstly, the kilometre charge will replace the existing road tax and vehicle registration (or purchase) tax, and the amount of money raised by the kilometre charge must not exceed the combined income of the two taxes being replaced. The idea is that motorists will pay for using their vehicles rather than owning them, but registration or purchase taxes encourage the introduction of low-CO2 technology. Therefore the unacceptable effect of abolishing the registration tax will be that cars become less fuel-efficient. If the expected 15% reduction in kilometres driven does not materialise, we end up emitting more CO2.
Secondly, the prospect of having regionally differentiated congestion fees is still unclear. The proposal makes a congestion charge possible after the full introduction of the kilometre charge (2018-2020), but it does not specify how such a charge should diminish congestion and new road building. If you don’t charge people more for where their vehicles do most damage – and congestion is one of the negative impacts of too many vehicles on the road – then the charging system does not achieve its objective of steering mobility in an environmentally, and economically, better direction.
Thirdly, the government proposes to cap the total revenue at €6.6bn (2007 price levels). This has been much less widely reported than the proposed maximum charge of €0.067 per km. If the current proposal becomes law, the charge will begin at €0.03 in 2012 and rise steadily to its maximum by 2018. The capping of total revenue means that if mobility increases, the price per kilometre will fall! This would undermine the core objective of the law – a more conscious use of mobility – and will make environmental objectives harder to achieve. It should change.
Finally, the government proposes lower charges for trucks than for cars. As a result of the pledge not to raise average taxes for each category of vehicles, the proposed maximum charge for trucks will be only 2.4 cents per kilometre. In other countries trucks pay rates of 15 to 80 cents per km. You would pay less for driving a truck to the beach than driving your car.
There are times when we have to accept some Realpolitik, and when a new form of charging is being introduced, perhaps this is one time. But the danger of accepting a compromise to get a new form of taxation through the legislative process is that, when it comes into effect, it does not solve the problems it is supposed to solve, which can give the public a negative view of what should be a positive form of charging. That’s why the Dutch government better try to get the scheme right, rather than make political concessions that could ruin it in the long term.