Evaluating effects of differentiating heavy vehicle fees

Many countries have introduced different types of distance dependent heavy vehicle fees (HVF). The effects on demand for transport vary depending on the level of the fees and depending on the scheme design. Studies of road pricing for passenger cars have found that a very simple distance dependent fee is capable of capturing up to 90 per cent of the potential efficiency gains . For passenger transport most of the efficiency gains come from reduced congestion. This is closely related to the overall level of transport demand. However, heavy vehicles are not similar causing congestion. The efficiency gains are thus not equally related to congestion reduction. It is thus interesting to analyse the effects on heavy vehicles from more sophisticated schemes. The HVF schemes in Germany, Austria and Switzerland all differentiate the fees according to environmental standard of the vehicles, but the possibilities for differentiation are much broader than this simple approach; spatial differentiation, time of day differentiation, vehicle size differentiation, differentiation with respect to the type of goods carried etc. The European Commission has proposed a new directive that states that the fees in principle should reflect the external costs of heavy vehicle transport. The directive limits the possibilities such that total revenue must not exceed the direct costs of constructing, operating and maintaining the infrastructure as well as a restriction on the span of the fees. The directive still leaves many possibilities for the individual states to design a HVF scheme. The discussion of HVF is in many countries unfinished and many different schemes are on the agenda. An important part of the discussion is the effectiveness in relation to the stated objectives of the various schemes. There is not much knowledge of this relationship with respect to heavy vehicles. It is important to know how differently differentiated schemes affect transport demand and thus the revenue raised as well as how efficient the schemes are. It may prove to be very expensive to implement a very sophisticated scheme aimed at internalising all external effects. The scheme may then be more damaging than a simpler scheme that does not internalise all externalities simply because the resources used for fee collection create larger inefficiencies than those created by the driving trucks. This paper compares the potential effects on shifting transport demand between different types of vehicles using different forms of differentiation. The main purpose is to show whether there are welfare gains to be gained from differentiation of the vehicle fees. The relation between the introduced incentives and the actual behaviour of the drivers will be established through a number of elasticities. There are studies indicating that the total transport demand and the modal choice are only marginally influenced by distance dependent vehicle fees. The paper investigates the third option. A starting point is the current use of the vehicles. The stock of vehicles is categorised to give an indication of the potential impact and to emphasise where the impact may be largest. For each of the identified vehicle types is linked current transport demand including an OD table. The OD table is included to separate transit and international traffic. Transit traffic is a source of revenue that does not influence the domestic economy besides the revenue, which makes it interesting to know the size of. to calculate the different impacts caused by the changes in transport demand. The external effects include as far as possible environmental costs, accident costs, wear and tear, and to some extent congestion. The latter effect is limited though because heavy vehicles are not the main cause of congestion in Denmark and the effect will thus be limited. The actual impacts are calculated using a set of elasticities linking the vehicle fee to transport demand. The analysis indicates the potential welfare gains of different HVF schemes. For the covering abstract see ITRD E135582.