Road Pricing: Denmark

Showing posts with label Denmark. Show all posts

Thursday, 25 May 2023

Denmark implementing heavy vehicle RUC from 2025 - but not without protest

Initial Danish heavy vehicle charge network

From 2025 Denmark will be the 12th jurisdiction in Europe to have some form of distance-based road user charging (RUC) (or tolls) for heavy vehicles. Some may argue about the definition (as two of these are essentially network tolls using tolling technology) but the others are Iceland, Switzerland, Germany, Austria, Czechia, Slovakia, Poland, Hungary, Belgium, Bulgaria and Russia.

Key elements of the new scheme, called the "Kilometer-based toll":

On 1 January 2025 all heavy vehicles with a Gross Vehicle Weight of 12 tonnes or above will have to pay per-kilometre road user charges based on the vehicle's weight and emissions rating. This will apply on the national road network and other main roads, including public roads in "environmental zones". This is a network of around 7,300 km (around 9.7% of public roads, but the roads that carry most of the freight traffic).
On 1 January 2027 the charge will be extended to all heavy vehicles of 3.5-12 tonnes Gross Vehicle Weight as well.
On 1 January 2028 the charge will apply to all public roads in Denmark (a network of around 75,000km).
On 1 January 2025 Denmark will withdraw from the Eurovignette scheme, which applies to trucks 12 tonnes and above, and requires trucks to prepay a set number of days they are driving on the national road network (trucks can buy an annual Eurovignette).

Average charges will be DKK1.2 per km in 2030 (US$0.17 per km).

The policy focus is on reducing CO2 emissions. It will apply to all trucks with a gross vehicle weight of 12 tonnes or more. It will be expanded to heavy vehicles of 3.5 tonnes and above from 1 January 2027.

It is being introduced alongside multiple complementary measures:

Rules on weights and dimensions for trucks on Danish roads are to be eased, enabling larger and heavier trucks to operate
Improvements to rail freight in Denmark including a loans scheme for rail freight operators.

There will be a single rate geographically across all major roads in Denmark (it will not apply to local roads), with a higher rate for cities with low emission zones. The charge will automatically collect higher fees for the low emission zones. There will be no VAT as it is legally a tax.

Exemptions

Only the following heavy vehicles will be exempt:

National armed forces and emergency services vehicles;
Vehicles adapted and used exclusively for fire and rescue;
Police vehicles; and
Vehicles belonging to the "road services" (believed to be maintenance/operations)

Implementation

Unlike almost all other implementation of heavy vehicle RUC anywhere, Denmark is taking a technology neutral approach to how data is measured and collected from heavy vehicles to enable collection of the charge. Given the number of similar schemes in Europe, it called for accreditation to be a certified service provider, meaning that as long as a private commercial toll/RUC service provider could meet the performance requirements specified, it could be certified to collect the charge. Denmark has received six application to do so after the deadline of 30 April (to enable initial operation) from the following firms:

Brobizz (Denmark)
SkyttelPASS A/S (Norway)
Telepass S.p.A. (Italy)
tolltickets GmbH (Germany)
Toll4Europe GmbH (Germany)
ØresundPAY (Sweden)

This does not necessarily mean all or any of these operators will be certified, but indicates Denmark has taken an open system approach in encouraging competition in delivering RUC services to heavy vehicles in the country.

The project is being led by the Danish Road Directorate, but the contract for establishing it was granted to

Sund & Bælt, a Danish government enterprise responsible for some major infrastructure projects such as the Øresund Crossing between Denmark and Sweden.

The remuneration of EETS providers will be done under two categories:

A fixed percentage of the revenue collected (1.5% for the calendar year 2025 and 2% for the subsequent year)
A fee based on the number of active OBEs (On Board Equipment). An active OBE is an OBE that has been provided by the EETS Provider and installed in a vehicle registered with the EETS Provider, and for which circulation on the tolled road network has been detected at least once for the respective calendar month. (DKK60 per month (US$8.66) for the calendar year 2025, down to DKK15 per month the following year (US$2.17).

Consider if a Class 5 above 32 tonne truck travelled 100,000km in a year (outside LEZs), it would generate DKK20,000 (US$2885) in gross revenue, so the EETS provider in the first year would obtain DKK300+DKK720=DKK1020 (US$147). So volumes of business matter (and it also encourages EETS providers to target the higher emitting vehicles that generate them more revenue).

Number of vehicles and kilometres driven

Number of trucks registered in Denmark in 2021

Initial installation will be for 35,500 locally registered vehicles, but the foreign vehicles are not included in this.

Distance driven on Danish roads by heavy vehicles

The total distance to be driven by vehicles subject to the RUC is depicted above.

User experience

It is expected that regular users of the Danish road network will have a contract with an EETS provider (European Electronic Tolling Service) which will supply or use telematics installed in the vehicle. The vehicle owner will pay the EETS provider, which will then pay the charges to the government. Denmark is neutral about whether the EETS provider uses On Board Units already installed on trucks, new ones or uses the telematics system already built into some trucks.

Occasional users of the network (visiting trucks from foreign countries that infrequently enter Denmark will be able to buy a single trip ticket for a specific journey online, through the website of the "toll charger" (which is Sund & Bælt).

Charges

The rates table applying from 1 January 2025 is seen below, it differentiates between three weight categories and five emissions categories with higher rates in low emission zones.

Denmark heavy vehicle RUC charge table

As can be seen rates range from DKK0.20 to DKK2.03 per kilometre (US$0.03 and US$0.29 per kilometre or US$0.048-US$0.47 per mile). Note this replaces a rate structure of the Eurovignette below:

Eurovignette in DKK

This starts at DKK89 for one day on the network (US$12.85) to up to DK1755 for one year (US$2534), which depending on how much distance a truck travels on the network will determine if it is going to be paying more or less with the new kilometre-based RUC.

Impacts

The burden on Danish business is estimated to be DKK2.5b (US$370 million) offset by DKK1b (US$140m) due to the measures to enable larger trucks on the roads, so the net impact will be US$230m per annum by 2030.

It is estimated to reduce emissions by 0.4 million tonnes by 2030, but with 0.3 million tonnes coming from the road user charge and 0.1 million tonnes by allowing larger trucks on the network.

Summary leaflet here

Opposition

An organised opposition group "the Road Tax Committee" has been set up to oppose the proposal and it has been engaging in protests by blockading roads. Some of the trucking industry is calling for a delay to implementation until 2030, largely so there are more lower and zero emission trucks available to purchase, so they would not face the highest charges. The "Road Tax Committee" has since dissolved, but protests and opposition continue.

All of this indicates how important it is to get some support from the trucking industry before introducing charge that are, by and large, likely to charge many of them much more than they do now.

It seems challenging to introduce any form of road user charging without intending to ensure that net revenues will be used to, at least, ensure the road network is well maintained and managed, but there is little expression of this. The messaging is focused on fighting climate change, and nowhere else has this been seen by the trucking industry as a policy it can support. France tried this previously with the abortive Ecotaxe proposal (which I wrote about extensively over nine years ago).

In every other European jurisdiction that has managed to implement heavy vehicle RUC, the objective has been clear - the need to raise revenue from the vehicles that generate the most damage to the road network, including those from foreign jurisdictions. A secondary objective with some has been to encourage more environmentally friendly vehicles, but that is reflected in preferential rates for low emitting vehicles, it is not the primary objective. I would not be surprised if protests continue in Denmark until there is some recalibration of the objectives and policy.

Hopefully Denmark can reach a point where it finds compromises that brings the trucking industry with it, whether it be about timing, the rate structure, the use of net revenues or any combination of the above (or even consolidating other taxes), so that it too can join the list of jurisdictions with RUC. Bear in mind that it will need to progress it to replace fuel tax revenue in the medium to long term as well.

Tuesday, 8 March 2022

Will Denmark be the next European country to develop light-vehicle RUC?

According to the Ministry of Transport website of Denmark (in Danish), the Danish Government has agreed to a pilot of road user charging (RUC). The Technical University of Denmark with state-owned infrastructure company Sund & Baelt is to undertake a study as follows:

DTU's development experiments with road pricing are carried out with a randomly selected representative group of citizens. DTU's primary focus is to investigate the effects of introducing tolls on the roads that are challenged by congestion and thereby collect experiences of behavioral changes among motorists. The experiences from the experiment can form the basis for a possible further work with tolls for passenger cars.

So the idea appears to be to test RUC on congested roads, with a subset of users, to understand behaviour change to inform further work on road pricing. Sund & Baelt already operates the tolling systems on Denmark's tolled crossings - the Great Belt Fixed Link between the islands of Funen and Zealand, connecting the main islands of Denmark with the European continent, and the Øresund Bridge between Denmark and Sweden.

2,000 citizens will be subject to the pilot which will take a total of three years, with tariffs that will vary by location based on congestion. It is clear it will only be for light vehicles (those under 3.5 metric tons Gross Vehicle Weight). The pilot budget is DKK20 million (~US$2.9m).

Meanwhile, a petition signed by 50,000 citizens is requesting that the Great Belt Fixed Link toll be removed. The toll is DKK250 (US$37) per car, which is high, but the cost of the bridge and tunnel link was DKK21.4b in 1988 (US$3.1b), so it is reasonable to recover those capital costs from the users (particularly for a Government committed to encouraging greater use of public transport). The Local reports that the debt for the bridge won't be fully repaid under 2032.

Comment

It's clear that revenue from fuel tax is putting pressure on lots of jurisdictions, but it is curious that Denmark appears to be focusing on reducing congestion, which is a difficult objective to achieve unless all light vehicles are put onto a RUC system. I'll look forward to more information in due course.

Monday, 2 August 2021

Denmark to introduce distance-based road user charging for trucks UPDATED

As part of climate change policy the Danish Government announced in December 2020 that it is introducing distance-based road user charging (RUC) for heavy goods vehicles (press release in Danish). In Europe this is typically referred to as "truck tolling" although it is distance based charging and is applied across a wide network, not point based charging on a specific road (which is the traditional definition of tolls). This is part of a national policy goal to reduce emissions by 70% by 2030.

The intention is to introduce the new system from 1 January 2025, which will replace Denmark's participation in the Eurovignette (time-based) RUC scheme. The objective of the new RUC scheme is to improve incentives to change the heavy vehicle fleet towards lower emission vehicle, but will be designed to reflect:

Infrastructure, road wear costs;
Noxious emissions;
Climate change impacts; and
Noise.

As with the Eurovignette, it will apply to Danish and foreign registered trucks (apparently not buses) with a gross maximum laden weight of 12 tonnes or more. Eurovignette is estimated to generate DK0.5 billion (US$79.8 million) revenue from Denmark at present from such vehicles, of which 20% is from foreign vehicles. The proposed new RUC system should generate the same amount of revenue in the years 2025-2027 and then increase to DK1 billion (US$159.6 million) from 2028 onwards (which assumes a sizeable increase in charges).

Estimated costs for establishing the system are DK200 million (US$32 million), with ongoing operating costs of DK175 million (US$23 million), with depreciation at DK25 million p.a. (US$4 million). Within those costs are enforcement, estimated to cost around DK10 million (US$1.6 million) p.a., which is expected to be fully recovered from fines.

These forecast costs are a far cry from levels seen in previous estimates or from schemes introduced ten or more years ago. This is due to significant drops in the cost of GNSS telematics OBUs, drops in the cost of mobile data communications thanks to 4G (and soon 5G) technology. reductions in the costs of enforcement equipment and systems (notably ANPR cameras) and the emergence of a competitive market in RUC service provision in Europe. The latter is particularly notable, as early schemes (such as the German LKW-Maut) had a single provider of services, but in the past decade a more open market approach has emerged, putting pressure on both equipment and operating costs. This was pioneered in New Zealand in 2011 with its introduction of eRUC, and the introduction of a certification system for service providers supporting the electronic option to charge RUC in that country (which now has three service providers), followed by Oregon which has done the same for heavy RUC and its light RUC pilot. In Europe it was pioneered in Hungary shortly thereafter.

I suspect the costs for enforcement are too low, unless the labour costs are seen as overlapping with safety enforcement activities (so the incremental cost of enforcing RUC is insignificant).

Interestingly, the press release indicates there has been extensive dialogue with the Danish trucking industry and the introduction of RUC may parallel some liberalisation of rules around the use of double trailers and reform of the mass and dimensions rules around trucks. This could help with acceptability by enabling higher productivity vehicles (larger trucks) to operate on Danish roads, with greater capacity (and as a result using less fuel and producing less emissions to move the same freight).

The project is being managed by Sund & Bælt. a Danish Government owned company that is responsible for several very large infrastructure projects (it is best known for being responsible for crossings such as Storebælt fixed link between Zealand and Sprogø, the Danish part of the Øresund fixed link and the under construction Fehmarnbelt fixed link between Germany and Lolland, Denmark). It is to be responsible for implementation and operations, as well as enforcement. The reason for granting authority to Sund & Bælt is because it was assessed as having experience with similar tasks and having the necessary competencies, as it has over 20 years experience in operating tolling, it is believed to have some of the project and operational competencies around customer service, technical monitoring, charging systems, technical knowledge and communication.

It's worth remembering that Denmark pursued heavy vehicle RUC before, which I wrote about in 2012 and 2013 when it was abandoned. It appears the primary reason it was abandoned was cost, although Hungary and other European countries have subsequently been able to address this (suggesting that perhaps the concept of operations and the procurement approach taken at the time was not optimal).

There are limited details of what the Danish scheme will look like, including its scope (both in terms of applicable vehicles and the network subject to RUC), but it could apply to all goods vehicles over 3.5 tonne and given experience of all European heavy RUC schemes (except Switzerland and Iceland) it will likely apply to motorways and national highways (although it could apply to all roads if desired). There is also little indication of forecast revenues and costs, although EU Directive 1999/62 does set some clear rules around rate setting, so Denmark cannot over recover such costs.

Denmark has had to its south the German LKW-Maut scheme, which charges all heavy goods vehicles over 7.5 tonnes on all German Federal Highways since 2005, and of course multiple other similar schemes in other European countries such as Belgium, Switzerland, Hungary and Slovakia. The system is required to be interoperable, so it is possible that vehicles with accounts and devices for the German LKW-Maut scheme will be able to be used for the Danish system. Denmark notes it needs to have dialogue with neighbouring EU Member States to ensure compliance with EU law.

The Eurovignette remains of course in Luxembourg and Sweden, given the Netherlands previously announced it is introducing a heavy vehicle RUC system (and Sweden continues to develop such a scheme). Given these trends, will it be that Luxembourg has the rump of the Eurovignette, which once applied across central Europe (including Germany) or will Luxembourg introduce its own heavy RUC scheme, taking advantage of the fact that its neighbours (bar France) all have heavy RUC schemes?

UPDATE: Hat Tip to Søren Have from Denmark who via Twitter directed me to additional sources of information on the project, in Danish. Documentation in available here (in Danish), but through Google Translate I can add the following points (and have edited above).

The technical solution, unsurprisingly, is a GNSS telematics on-board unit, which is estimated to cost DKK1000 (US$160) including installation, with an option for cheaper self-installed units. Devices are not expected to be purchased, but rather supplied as part of service provider contracts. No manual option will be provided, reflecting the extent to which vehicles particularly from Germany are expected to be equipped (as well as those registered in Denmark that regularly travel to Germany).

Project schedule appears to be as follows:

Political clearance by mid 2021
Establishment of project and organisation by mid 2021
Legislation for implementation introduced mid 2021, passed mid 2022
Procurement and delivery of solution from mid 2021 through to early 2024
Negotiations with service providers early 2022- late 2024
Preparation and operation of testing and commissioning early 2023 - early 2025

The scheme is forecast to reduce total truck traffic by 2-3% primarily by:

Reducing demand for road freight;
Productivity improvements in the road freight sector that are expected to parallel the move
Modal shift (although this is questionable).

Certainly if the increase in revenue after 2027 is primarily due to significant increases in charges there would be expected to be a demand impact.

Monday, 13 January 2014

Danish Productivity Commission promotes road pricing, but politicians reject it

Denmark is getting to be a little more like the Netherlands when it comes to road pricing. The issue is regularly on the agenda, and swings from being promoted to being rejected on a regular basis.

Since I started this blog, there was debate about congestion charging for Copenhagen in 2011, with the new government at the time supporting such a charge (with debate focused on a cordon charge for the city).

However, in 2012 government had gone cold on the idea, because only one of the parties in the ruling coalition (the Socialist People's Party) supported it, with the Social Democrats far less keen. The debate having moved on from being opposition to congestion pricing, to opposition to the proposed cordon type implementation of it. There was also less support because the expected net revenues couldn't fund expectations of radically lower public transport fares.

Meanwhile, Denmark's focus on road pricing moved over to charging heavy goods vehicles by distance. This had also been supported by the new government in 2011 and was looking to charge all trucks 12 tonnes and above to use all main roads. The driver being to increase revenues and reduce the environmental impact of trucks, but it was also to replace Denmark's participation in the multi-country time based charge called the "Eurovignette".

Yet April last year I reported on how the lorry road pricing programme had also been shelved. The reason being that expected costs were going to be too high relative to revenues.

So now with the Copenhagen Post reporting that Denmark should have some form of road pricing, I am sceptical that anything will come of it in the short term.

The report focuses on charging for congestion, suggesting something different to what was envisaged for the Copenhagen congestion charge or the lorry road pricing scheme.

The report stated that the Commission proposed: "charging drivers 2.5 kroner (about US$0.46) for every kilometre they drive in the city centre during rush hour in exchange for reducing or abolishing other car levies"

In other words, instead of it being an additional tax, it would be a more efficient way of charging for road use, compared to the punitive taxes imposed on owning and buying cars in Denmark.

Denmark abandons lorry road pricing programme

I wrote several months ago about Denmark's programme to introduce a distance based lorry road pricing system, which would apply to lorries over 12 tonnes and on all major motorways and highways across the country.

It now appears that the project has been suspended because the estimated revenues will be insufficient to justify the estimated costs.

The project was being managed by the Ministry of Taxation, and was intended to replaced the Eurovignette for heavy vehicles operating in Denmark.

A press release in late February explained the decision.

The key statement is below:

The investment cost and the future operating expenses for Lorry Road Pricing in Denmark has shown to be significant. Expenses concerns, inter alia, investment in the technical equipment, such as On-Board Units needed in every vehicle and the enforcement gantries to be deployed. In addition to that comes also the operating cost.

Altogether the Government is not convinced that benefits from Lorry Road Pricing in Denmark compare favorably with the associated administrative cost. On this basis the Governments has decided to refrain from introducing Lorry Road Pricing, as planned, from 2015.

So it is about cost. There isn't a complete loss of hope though:

If it proves possible to introduce Lorry Road Pricing in Denmark in a period of years without significant economic cost ? e.g. in the light of technological advances or operational experiences in other countries ? the Government will reconsider its decision.

Commentary

This is, of course, very disappointing for those of us supporting a progressive shift towards user pays and more innovative forms of road pricing. The scale of the system proposed was certainly small, and Denmark does not have extensive transit traffic, although it is located between the Scandinavian peninsula and the rest of Europe, there are alternatives to highways, given extensive ferry traffic.

I've observed for a while that there is a growing difference between some of the distance based systems developed and introduced in Europe, and that which has been developed for the United States and in New Zealand. Insufficient work has been done to explain this, but consider that in New Zealand there are two competing providers of electronic weight/distance based road user charging for heavy vehicles (and a basic prepay paper based system), operating across a network of all roads, with non compliance rates (in revenue terms) of less than 10% and operating costs (including compliance costs for users) between 5-10% of revenue (on charges that reflect the share of highway costs attributable to heavy vehicles), it seems remarkable that Denmark cannot develop a system that can keep costs below 10% of revenue overall.

My only suggestion is whether Denmark can introduce distance based charging not on a "big bang" basis of shifting all Danish trucks over in one lot, but gradually.

Options worth considering would appears be:

- Having distance charging as an optional alternative to the Eurovignette for the first three years (using better electronic enforcement of the Eurovignette as a step towards enforcement of distance charging);

- Introducing the distance charge as a partial replacement to purchase and registration taxes as a first step (Eurovignette replacement as a second step), with it being mandatory for newly registered vehicles first;

- Open up the market to multiple providers based on a basic standard of charging specific rates for certain vehicle types;

- Expand scope to vehicles down to 3.5 tonnes, again making it a tradeoff against other taxes.

I'm not privy to all of the details in Denmark, but I am not convinced that distance based road pricing cannot be introduced economically at present.

Tuesday, 12 March 2013

News briefs - Australia, Denmark, Indonesia, Italy, USA

Australia - Heavy vehicle charges review starts

Transport and Logistics News Australia reports on how the National Transport Commission is consulting on proposed changes to the heavy vehicle charges system (most of which are about how the charges are calculated).

The article is perhaps more interesting for its summary of how Australia charges trucks to use its roads. It is not road pricing or tolls, but a reasonable means of trying to be as efficient as possible in using fuel tax and ownership taxes.

Rather than the widely used non-system of political/bureaucratic guesses as to what might be charged, it involves calculating costs attributable to heavy vehicles, costs attributable to all vehicles and then setting charges to recover from heavy vehicles their share of infrastructure costs. 60% are recovered from fuel tax and 40% from vehicle ownership taxes. Fuel tax is collected at the Federal level, but ownership taxes at the state level.

The principles applied are as below:

Full recovery of allocated infrastructure costs while minimising both the over and under recovery from any class of vehicle;
Cost-effectiveness of pricing instruments;
Transparency;
The need to balance administrative simplicity, efficiency and equity (e.g. impact on regional and remote communities/access);
The need to have regard to other pricing applications such as light vehicle charges, tolling and congestion;
Ongoing cost recovery in aggregate;
The removal of cross-subsidies between vehicle classes.

Now without distance and weight based charging, the system is going to be very much second best, but this system for setting charges is more advanced than that used to set charges in much of North America and Europe. It is, at least, based on setting clear objectives with the need for transparent economic analysis to be used to base charges, and it does provide a framework which could be easily adapted to weight/distance based road user charging.

Denmark - Environmental Economic Council calls for road pricing to replace ownership and purchase taxes

The Copenhagen Post reports that the head of Det Miljøøkonomiske Råd, the environmental economic council, Hans Jørgen Whitta-Jacobsen, has suggested replacing the extortionate vehicle ownership taxes with a distance based road pricing system. Vehicle purchase taxes cost 105% of the purchase value of a car up to 79,000 DKK (US$13,778) and 180% for every Kroner of value above that. This imposes an enormous tax on the purchase of a new car. Ownership taxes start at DKK120 (US$21) for the most fuel efficient diesel cars up to DKK15090 (US$2632) for the least efficient. All of this makes car ownership expensive, and so doesn't target driving on the most congested roads (so penalises rural areas and those who without jobs accessible by public transit, walking or cycling). His biggest concern is that such taxes discourage motorists from buying newer, more fuel efficient low emission vehicles.

Indonesia - PT Jasa Marga expecting increased revenue from growing network

The Jakarta Post reports that PT Jasa Marga, Indonesia's largest state owned toll road company, is expecting a 16.1% revenue increase this year, worth a total of US$671 million. It has a network of 545km of toll roads with four new toll roads to open this calendar year (Nusa Dua-Ngurah Rai-Benoa road in Bali, Kebon Jeruk-Ciledug road in Jakarta, Gempol-Pandaan road in East Java and the Ungaran-Bawen road in Central Java).

Jasa Marga is looking to facilitate up to 1.2 billion vehicle trips nationwide in 2013, 9.1 percent higher from the 1.1 billion vehicles last year. 80% of trips are on toll roads in greater Jakarta, indicating the sheer density of usage in that city. Notable in the report is the roll out of the new e-Toll pass, which involves the use of a DSRC on-board unit, and a contactless smart card with prepaid credit that can be topped up. Only 11% of transactions are at present using this technology, the intention is to lift this to 30% within two years. Now the toll booths with this technology are not free flow, the tag activates the barrier arm, but the intention is to expand the number of toll booths that are electronically equipped to 111 by the end of 2013. I would have thought that given the chronic congestion in Indonesia, lifting up take of electronic tolling to 50% of trips within two years should be a realistic goal.

Italy - Atlantia diversifies into airports

According to Reuters, Atlantia, Italy's largest toll road operator, is to buy Gemina, the airport operator best known for owning Aeroporti di Roma (which owns Rome's Fiumicino and Ciampino Airports). The report said:

The deal will allow Atlantia, which also operates about 1,800 km of motorways in Brazil and Chile, to branch out into airport concessions in Latin America. It will not, however, generate meaningful cost synergies, a Milan-based analyst said.

USA - California- Santa Clarita (LA) looking at tolls to help fund new lanes

The website of radio station KHTS reports that Santa Clarita city (part of the LA metro area) is investigating whether to accelerate the widening of the I-5 freeway (the main northern freeway out of LA) between Highway 14 and Castaic by tolling the additional lanes. The project would cost $310 million and the city has 75% of the funds needed to progress it (when divided over 30 years), and is hoping tolling the additional lanes may provide the remainder. The proposal is to make the project into a PPP, with a private concessionaire recovering the cost over 35 years, using tolls on the new lanes only. The intention is for pricing to be dynamic maintaining a minimum speed of 45mph. Curiously, the proposal maintains the HOT lane concept, by keeping the lanes free for vehicles with three or more occupants, which seems crazy if the key desire is to raise revenue. The only purpose to keep HOT lanes is consistency, but beyond buses there is little good reason for new lanes to be free for any cars. There is sense in applying the HOT principle if the lanes are underutilised HOV lanes, but why should well occupied cars occupying the same road space get access for free? What evidence is there that this actually changes behaviour on any meaningful scale? (besides a car with three people in it can split a toll three-ways surely)?

USA - Texas - Cintra wins concession for North Tarrant Express expansion

International Construction reports that Ferrovial subsidiary Cintra has won the concession to build the North Tarrant Express expansion in Texas. Cintra is to be responsible for developing a 6.5 mile extension, with the state responsible for another 3.6 miles, but Cintra responsible for the tolling, operation and maintenance of the lot, with the total cost of both segments being US$1.38 billion. The contract involves building two new managed lanes which will be tolled, but also the maintenance and operation of the untolled lanes.

The report says that "the Cintra-led consortium, NTE Mobility Partners Segments 3 LLC, also involves Meridiam Infrastructure and Dallas Police and Fire Pension System"

Thursday, 29 November 2012

Denmark presses ahead with Lorry Road Pricing

Whilst Copenhagen's latest attempt to progress congestion pricing appears to have stalled, Denmark is pressing ahead with heavy vehicle tolls in the form of a distance based road user charging system.

The project is led by the Ministry of Taxation and I have kindly been supplied information from the Project Manager Klaus Østergård Jensen available (only some in English) on its website.

Key facts

The policy objectives are to generate additional revenue, apply the "polluter-pays" principle and implement as soon as possible whilst minimising risk.
The charge will apply to all Heavy Goods Vehicles (HGVs) having a maximum permissible laden weight of 12 tonnes or over;
There are 34,000 trucks registered in Denmark that will be liable;
About another 80,000 trucks registered outside Denmark will be liable;
3,800 km of road will be subject to the charge (covering motorways and trunk roads);
Estimated price per km will be €0.20 (D.Kr 1.49, US$0.26/km or US$0.42 per mile);
1.6 billion vehicle kms are estimated to be moved by trucks 12 tonnes or over by 2015
The tariff will be set as a calculation of: infrastructure costs per km + administration costs per km + environmental costs per km.
The charge will replace Denmark's participation in the Eurovignette (which charges HGVs on the basis of pre-purchased time periods on the trunk roads network - prices here). The Eurovignette is a trans-national road user charge applied in five EU Member States that covers usage of roads in all of those countries with one charge. The Eurovignette will no longer apply in Denmark.

The infrastructure cost calculations will need to be carried out to satisfy the European Union Directive 1999/62 (disclaimer - I have advised the European Commission on the implementation of that Directive in several Member States) which provides a framework for calculating the appropriate allocation of costs to HGVs for tolling purposes. There will be two broad vehicle categories:

- Vehicles with four or more axles;

- Vehicles with three or two axles.

Presumably, following the German approach, the higher tariff will apply to the vehicle with more axles on the fair presumption that it is most likely to be heavier.

Administration costs will presumably be a function of the contract with the provider and operator of the tolling system.

The environmental factor will be based on a three-tiered charge with the cheapest tariff applying to vehicles classified as having Euro VI engines, the middle tariff for those EEV, Euro V, Euro IV and "retrofitted" Euro III engined vehicles, and the highest tariff for all vehicles with a standard Euro III engine classification or lower.

65% of all truck traffic is carried on the network that is to be charged, which indicates a not insignificant amount of delivery activity. Bear in mind that Denmark is a transit nation for traffic between the European mainland and the Scandinavian peninsula. One of the issues remains is that there are a number of cases of local roads that run parallel to major highways that may see significant diversion of traffic when the toll is introduced. It is understood that the Government is considering options as to how to address this (presumably either imposing the toll on those roads as well, or removing it from highways with such a risk).

Roads subject to Denmark's lorry road user charge

Procurement is to be through a Public-Private Partnership with the intention being that a Special Purpose Vehicle be set up to be responsible for the design, testing, implementation and operation of the charging system. The expectation is that investors will finance the capital costs of the system, and be provided "periodic payments" for the performance of collecting the revenue for the Ministry of Taxation. The proposal is for a minimum contract period of 10 years, which covers the initial implementation and is likely to easily exhaust the depreciated life of the charging equipment (which typically becomes obsolete within 5-7 years). In the longer term it may be interesting to see if a more diversified, competitive service provider structure is adopted, to put pressure on costs and customer service standards.

What is to be put out to tender appears to be the charging service (from supplying and installing equipment, to establishing and managing accounts, and collecting revenue) and the revenue assurance service (verifying payment has been collected and identification of those who do not pay). Enforcement and scheme ownership and management will remain with the state. It appears that there will not be competing service providers.

A very simple depiction of the expected high level procurement relationship is seen here:

Denmark HGV Road User Charging basic contracting structure

Legislation is to put through Parliament in 2013, with the intention that the tendering and contracting process proceeding from Spring 2013 through till the end of that year. The summary schedule is depicted below:

Denmark Truck tolling high level implementation schedule

Comment

The Danish programme has parallels to several of those already in place, such as Germany and Slovakia, and whilst it is not technology specific, I would be surprised if it did not use a GNSS (i.e. GPS) based system. Despite such systems becoming more commonplace, the keys to making it success will be around:

- High standards of customer service, particularly for the implementation phase and particularly for foreign lorries;

- Serious discipline on operating costs (it is no coincidence that the operators of some of these systems have done remarkably well out of them, so there should be plenty of competition from investors, but also pressure to get transaction costs down within three years of the inauguration);

- Serious, detailed work on the diversion risk, based on some surveys of local AND foreign lorries using high risk parts of the network, and so designing the scheme to minimise this risk.

I sincerely wish Denmark good luck in implementing the system, and will provide updates when they become available. Once it is implemented, it will join Switzerland, Germany, Austria, Slovakia, Poland, New Zealand (and France and Belgium both forthcoming) in having nationwide distance based road charging systems for trucks.

Monday, 22 October 2012

Copenhagen congestion charging looking less likely

Last year, the government in Denmark changed, with the election of a leftwing coalition which included in its coalition agreement a commitment to introducing congestion pricing in Copenhagen. I wrote optimistically at that point, as it appeared that the real debate was not about "if" it should be introduced, but "how".

Original cordon concept for Copenhagen congestion charging

Yet no one should underestimate the politics around congestion charging. The real push for charging in Denmark has been from the Socialist People's Party (a green/socialist party) which had it as a core part of its platform to reduce traffic and emissions in Copenhagen, and to boost walking, cycling and public transport as an alternative. The party leader pushed in the elections that he would slash public transport fares with the revenues from the charge, which gained support among non-motorists in Copenhagen. However, the SPP has only 16 out of the 179 seats in the Danish Parliament, compared to the senior partner, the Social Democrats (a centre-left party) which has 44 seats, and is significantly more sensitive to public opinion.

The core problem is that the modelling of future revenues proved disappointing. According to the Copenhagen Post, the revenues were estimated to be less than half of the DKr.2 billion (US$352 million) originally forecast, dashing hopes that congestion charging could fund a major cut in fares and major capital works on the scale envisaged.

Opposition to the concept was strong among business leaders, and the opposition Venstre party (free market liberals - which is ironic given the attribution by some that congestion pricing is a market oriented approach), but it was the opposition from local leftwing politicians, aligned to the two main parties in government, that made it increasingly embarrassing for the central government.

So the result is that congestion charging has been shelved, for now. The government announced it is spending DKr 1 billion (US$176 million) on improving public transport and reducing fares in February 2012, and created a Congestion Commission to look at long term solutions to addressing congestion and air pollution in the city.

Yet that Commission is having problems of its own. It cannot get agreement among its 24 members about potential solutions. It is meant to report on recommendations by 1 January 2012, but the Commission is deeply divided between business representatives (opposing charging) and environmentalists (supporting it).

A Copenhagen Post article claims the government is optimistic an outcome will be reached, but the Venstre Party believes it is too divided.

I previously wrote about how I thought Copenhagen should go about it, describing the main proposal for a cordon around central Copenhagen. For it should not simply consider the single cordon, it should not just consider a cordon ala London, but consider how similar type systems exist in Italy and Singapore.

The key is really to not be wedded to a single concept, to consider experiences elsewhere and to develop options that not only mean pricing is more discreetly targeted at congestion, but that the net revenues are used for some combination of new capital investment in the transport network of the charged zone and/or tax relief for businesses in the zone.

It is notable already that there is support by some other political parties for congestion pricing in Copenhagen, but not the cordon solution previously described. The Radical Left party (Radikale Venstre - socially liberal centrist party) is also part of the coalition, with 17 seats. It is glad the concept has been scrapped, but it support GPS based distance based road pricing. The party's transport spokesman, Andreas Steenberg, claims the opposition Venstre and Conservative People's Parties share that view.

Bearing in mind that Denmark is also pursuing GPS based road pricing for heavy vehicles (more on that soon), this is consistent with such an approach.

Conclusion

It appears unlikely that Copenhagen will get congestion charging in the near future, partly because only one of parties in government is still pushing it, but also because the concept being supported is insufficiently flexible or targeted enough to avoid criticism from businesses that the impact will be blunt.

My guess is that the Congestion Commission will agree that pricing could reduce congestion and emissions, but disagree about how it should be implemented and what it should look like. I suspect the cordon option, unless radically altered, will be gone, but that talk of GPS based pricing will remain. If so, whilst GPS based distance charging in an urban environment would have many advantages, one of them is not cost and another is not rapid deployment.

It can be sure that if there is a lot of support in Denmark for the broad idea of charging to manage traffic demand, then the GPS option will remain for some time. The political advantage of that is that it can always be said to be too risky to do at present, but that offers little for relieving traffic congestion in Copenhagen.

Monday, 17 October 2011

Copenhagen congestion charge looks likely with change in government

In August 2011 I wrote on how the debate on congestion pricing in Copenhagen has largely evolved from "whether" to do it, to "how" to do it. The recent change of government in Denmark from a centre-right to a centre-left coalition means that it looks like the debate has moved further in that direction, which looks like the one reflected by Lord Mayor of Copenhagen Frank Jensen, and Mayor of Rødovre Erik Nielsen. The new government supports introducing a congestion charge, but the Mayor says the exact location and price of the charge is still up for debate.

According to the Copenhagen Post they just want to debate the how, not the whether:

we are thoroughly convinced that far more people will benefit from the congestion charge through a reduction in the amount of time they spend on the road and in terms of a cleaner environment. Major investments in infrastructure and public transport will alleviate some of these inconveniences, but it is paramount that we discuss where exactly the borders of the congestion charge zone should be drawn in order for it to have the greatest possible impact and fewest possible inconveniences for people living in the region. A congestion charge is a way of financing major improvements in our transport infrastructure. By improving public transport and lowering ticket prices, we hope that many commuters will transfer from privately owned vehicles to public transportation so that the Copenhagen air will be cleaner and the city will be more accessible for everyone

So there is a strong belief that the charge will be transformational for Copenhagen, which may well be true. It is not a timid vision

The Copenhagen Post reports some details about what a charge would look like:

by 2012 toll facilities would be set up at the city’s northern edge, along Ring Road 2, and through inner Amager to the south. Fees to enter or leave the zone would vary depending on the time of day, but according to the proposal rush hour fees would be 25 kroner (US$4.66). The yearly cost to a commuter crossing the toll ring daily during the rush hour would amount to 11,100 kroner (US$2,069).

Concept for Copenhagen congestion charge

The map on the right is a depiction of what the cordon would look like and is what Tetraplan consultants modelled for the charge.

A Worldwatch Institute report states:

A study by Tetraplan consultants shows that a congestion charge can reduce road traffic by 23 %, air pollution by 5 to 10 % and CO2 emissions by 10 to 15 %.

The Social Liberal Party argued that there should be national road pricing by distance using GPS. The Copenhagen Post also quotes an expert who also is not keen on the cordon:

Harry Lahrmann, a traffic researcher with Aalborg University, also argued that road pricing is a more effective solution and that the congestion charge would create more traffic from motorists taking detours.

“Experience from England and Sweden suggests that while traffic within the zone decreases, it increases outside it,” Lahrmann said. “Motorists will still be queuing on the Køge Bay Motorway if a congestion charge is introduced. Road pricing using GPS is the only real solution.”

However, with the change in government it appears that there is a far greater chance of this solution being implemented. This is despite criticism from motorists' lobbying group FDM, which argues that car drivers in Denmark are already heavily taxed (with 25% VAT on the purchase price and a 105% purchase tax on vehicles up to a price of around US$14,000 (180% on every DKK above that)). The Danish Chamber of Commerce claims that the charge would damage trade and business in Copenhagen.

Criticism is lining up according to the Copenhagen Post, as one survey indicates only a third support the idea. The Danish Construction Association claims it wont be financially viable until 2025. The Copenhagen Post reported that traffic and pollution expert Kåre Press-Kristensen from the Ecological Council, told Politiken newspaper that the zone would have a negligible impact on fine particles air pollution, which can cause respiratory illnesses...If the goal of the congestion zone is to reduce pollution, then I’d have to say that as it stands it won’t have much effect. I would anticipate that pollution will drop by between seven and ten percent, with a five percent margin of error". One reason being that Copenhagen already has good air quality.

The Copenhagen Post itself thinks the better option is national road pricing saying wisely:

a more equitable way to accomplish the same goals would be a national road pricing system that charges drivers based on where, when and how many kilometres they drove, rather than on whether they crossed an arbitrary line.

Another benefit road pricing has over a congestion charge is that it could replace the current tax and registration system, which punishes car ownership, not car use, and makes it cheaper to buy new, fuel-efficient cars. Due to the high purchase price of new cars, Denmark currently has the oldest average age of cars on the road of any country in Europe. Moreover, its “weight charge” puts relatively heavier, but more efficient, hybrid cars well out of the price range of the average family.

The Copenhagen Post is right, but road pricing should not exclude congestion pricing as well. It's solution that distance charging should be done by odometer is mistaken, because that is fraught with enormous potential with fraud (New Zealand's experience with light vehicle road user charging, which I am familiar with, shows the risks of that approach). However, is it not refreshing that a major newspaper is arguing about how to introduce road pricing, rather than simply opposing it?

What intrigues me is the statement that the charge will in part be used to subsidise lower public transport fares.

Two billion kroner (US$373 million) total is expected to generated from tolls, however, and this money would be put towards reducing the price of public transport by 40 percent, resulting in an average savings of 5,192 kroner (US$968) a year.

The advocates of congestion charging in Copenhagen are hoping for a major mode shift, and given they are advocating reducing public transport fares, this is likely to happen. Yet this doesn’t appear to be economically rational.

The fundamental reason why urban public transport demands subsidies is because much of the capacity is needed only for peak trips largely in one direction. During interpeak periods, between half and three-quarters of public transport network capacity sits idle. The subsidies effectively meet this, and the economic justification is because, in the absent of efficient road pricing, car commuting is underpriced at peak times. Once peak time car commuting is efficiently priced, it will in itself encourage more trips to go by public transport, but there is then a case for increasing fares so that those users now pay the full costs of their trips.

In short, setting aside social policy reasons for public transport subsidies, the economic efficiency argument for urban public transport subsidies is eroded when you have congestion charging because you no longer need to price public transport cheaper than car traffic through subsidies. The congestion charge should price road traffic at a rate to ensure the network operates efficiently.

Beyond the economics, I believe the Copenhagen Post is right in pointing out that communication to the public is critical. Motorists need to get something in return, which means that at least some of the revenue should go to improving roads, or in reducing some motoring taxes (in particular, Denmark's punitive tax on new cars must have a negative impact on those wishing to buy new more fuel efficient cars). I have watched how failed communications strategies and overall strategies brought down plans for congestion pricing in Edinburgh and Manchester. Copenhagen needs to learn the unpublished lessons learnt from those disasters.

Some of them are:

- Get your concept well designed, ensure it does reduce net congestion, that it targets congestion well and does not have too many exemptions;
- Decide what you will do with the net revenue, and make sure motorists get some of it back in some way;
- Take charge of the communications strategy and make sure you spend good money on leading the clear simple messages of the proposal and you can answer all of the critics;
- Spend good time talking to business and road user groups, make sure they understand what your objectives are and why you are choosing the option you have selected;
- Don't get blinded by technology, be clever with vendors.

I hope Copenhagen can find a solution that meets its needs, but I would urge it to avoid using charge revenue to cut public transport fares, or to ignore giving motorists anything at all. I have sympathy for the view that perhaps a distance based approach could create less distortions, but there is no reason why a small area charge can't deliver some benefits for the city. However, the solution should not be dictated by what economic modellers can model, traffic engineers can imagine or what looks elegant on a map - it should be determined by whether it can deliver net benefits to the city.

I suspect the next four years for road pricing in Denmark will be interesting indeed. For not only does the new government want to introduce congestion pricing in Copenhagen, but it wants to introduce road pricing for trucks across the country. More on that later.

Wednesday, 24 August 2011

Copenhagen debates road pricing

You know that debates about transport policy in a city have matured when the debate about road pricing isn't about whether to do it, but how to do it and how much it will cost.

Copenhagen has long talked about some form of congestion charging, following on from experiences of their brethren in Stockholm and of course, London. This report (PDF) commissioned by the Forum of Municipalities for Copenhagen a few years ago, gives a graphic description of how Copenhagen congestion pricing might work. It modelled results for a variable all day cordon charge, operating in both directions as follows:

Monday-Friday:

25 DKK (US$4.84) 0600-1000, 1400-1800

10 DKK (US$1.94) 0500-0600, 1000-1400, 1800-2300

Saturday-Sunday

10 DKK (US$1.94) 1000-1700

It is notable that weekend congestion is considered serious enough to charge for as well. The proposal was for improvements to public transport, cycling, park and ride and some selected road improvements (and major ITS infrastructure to manage traffic) to be financed in advance and paid for by the charge. The result modelled was a 23% reduction in traffic within the cordon, and 4% reduction across greater Copenhagen. More generally, the report indicates positive environmental results, and the negative effects on users are fairly minimal and evenly distributed. The report is light, but most interesting to me was the proposal to have a commercial company responsible for the system and the management of the revenue, which is likely to deliver better results to users and in terms of risk management.

The most recent debate has come about because the opposition Social Democrat and Socialist People's Party have come out campaigning for a Copenhagen congestion pricing scheme.

The Copenhagen Post reports them saying "A congestion charge in Copenhagen will raise 2.2 billion kroner a year if we charge 40 kroner during rush hour and 20 kroner outside of rush hour with the system costing 200 million kroner a year to run". 2.2 billion DKK is about US$425 million, 40 DKK about US$7.75 and 20 obviously about US$3.87.

The idea is essentially for a cordon based charge, and the centre-left Social Democrats want all of the net revenue to be used to improve public transport, or reduce public transport fares. Quite how much spare capacity Copenhagen public transport has to cope with the mode shift is unclear, particularly when such a flat and easily walked (and cycled) city may mean reduced public transport fares shift people from walking and cycling.

The Socialist People's Party is a more hardline leftwing party akin to the "Green" parties of other countries, so the two left wing parties are clearly appealing to environmentalists and non-car users in the country.

Now you'd expect criticism of the scheme from the government to be all about favouring motorists and opposing road pricing. However, it is more nuanced than that if you read responses to the proposal in the Copenhagen Post. Whilst motorist lobbyists and businesses have said road transport is already too heavily taxed in Denmark, the centre-right (leading party in government) Liberal Party slammed the proposal as being too expensive for motorists, and for putting an unnecessary barrier up in the city. It also claimed public transport couldn't cope with the mode shift, and that the charge would be "arbitrary" in terms of its effects.

However, the centre-right Social Liberal Party (which is in opposition) suggested distance based national road pricing would be preferable, by saying that:

"The brilliance of road pricing is that you can regulate how much motorists pay according to how much they drive, where they drive, when they drive and what they drive. And motorists from areas without public transport would not pay".

Now that doesn't mean Copenhagen will be getting congestion pricing anytime soon, but it does mean the debate has been moving on. The key to making progress is likely to be talking about a tradeoff between implementing national road pricing, there being a congestion "premium" for Copenhagen, and partially offsetting existing taxes on motoring.

I don't doubt that congestion pricing could make a positive difference for Copenhagen, but in a land where motoring is so highly taxed, merely taxing it more to pay for public transport is not only unlikely to get sufficient support to proceed, but also failing to deliver real benefits to motorists that do not generate the congestion and environmental problems that advocates are seeking to address.

Surely a leading candidate in Denmark is to replace very high registration and ownership taxes with a form of road pricing.