Friday, 11 April 2014

Germany expands road pricing: Part 1 distance based truck tolling

As I reported around a week ago, Germany is taking two significant steps forward in expanding charging of road vehicles, on both motorways and major federal highways.  

1.  Expansion of scope of the LKW Maut truck toll to cover trucks from 7.5-12 tonnes, and to toll over 1,000km more of previously untolled Federal Highways.

2. Introduction of a vignette (pre-paid time based charge) for light vehicles across the autobahn network

It follows from nearly 10 years of operation of the ground-breaking, and initially fraught ridden LKW Maut truck toll system.  This is the first of a two part post about the major changes happening to road charging in Germany, and covers the expansion of the scope of the existing truck toll system.

Terminology in this sector is often troublesome, so let me very clear about the dimensions of the LKW Maut.

Expanding tolling of trucks to smaller trucks and more federal highways

- It is a heavy goods vehicle charge, covering all trucks of 12 tonnes or more GVW.
- All vehicles, regardless of country of registration, are liable to pay.
- It is a charge based on distance travelled, vehicle size (counted by axles) and the vehicle engine environmental rating..
- Distance is measured by each vehicle having an On Board Unit (OBU) that uses GPS against a network map, which segments the tolled network by distance between each highway interchange.  The OBU calculates the toll and transmits data about the charge via the mobile phone network.  The OBU contains all of the data about trips, so it can be interrogated if there is a dispute between the customer and Toll Collect about the bill.
- Under EU law it is a "toll", as the term "road user charge" applies to time based charging not distance.
- Enforcement is undertaken by a mix of fixed enforcement gantries to identify vehicles by automatic number plate recognition, and mobile enforcement vehicles.
- The company operating the toll is called Toll Collect, owned by Cofiroute, Daimler and Deutsche Telekom.
- All distance is at the same price, regardless of location on the tolled network and time of day.  There is no congestion pricing.

The expansion of the scope of this system to lighter trucks is relatively easy, as it means the same system can be implemented on a wider fleet.  Expanding the scope to an additional 1,135km of national highways similarly so, as it is a matter of simply coding the location of vehicles on those roads as creating chargeable events.  There is a map in each OBU, and it simply gets updated by a data broadcast via the mobile phone network to cover the additional roads.   A map of the additional roads is available here (PDF).

German Federal Highways being added to the LKW Maut truck toll network

Of course toll rates for the mid-sized trucks will be lower than the 12 tonne rate, but overall tolls will be coming down because the German Federal Government has been over recovering the long run costs of capital and maintenance attributable to the heaviest trucks.

Unlike toll rates in so many other jurisdictions, in Germany they are informed substantially by rational analysis.  The costs of the charged network are calculated on a fully depreciated basis, so that the full costs of capital can be recovered over the lifetime of those assets.  It means roads are accounted for as capital assets like others, although some factors can be disputed, such as the allocation of depreciation periods, and how the cost of land is treated.

Only routine maintenance and operational costs are treated as current spending, other costs are capitalised including renewals of capital (reseals and bridge replacement).  This also includes interest, which is meant to represent the opportunity cost of capital in the form of the debt government purportedly would have taken out to cover these costs.

These costs are then allocated according to a cost allocation process that determines what proportion of costs, by different asset classes, should be allocated to all vehicles equally or to heavy vehicles only or to some mix.   

If you care to understand it more, and have good German, then you can read one of the reports prepared for the Federal Government here (PDF), although the final decision on toll rates is a political one, it substantially reflected this report at the time.

The big issue for the truck tolls was that tolls were calculated based on interest rates being higher than they actually are, so the Federal Government has been forced (by the European Commission) to adjust them downwards.  As such, it faced lower revenues than planned from the toll, so considered recovering more costs directly by tolling mid-sized trucks, as a way of doing this.  Note that no offsetting tax cuts have been undertaken for those vehicles, such as on fuel tax or vehicle ownership taxes.

In addition, environmental factors have also been included, as has been noted here (in German) from the Ministry of Transport and Digital Infastructure.  This will recover 400 million Euro (US$555 million) per annum, but the drop in interest rates for the remaining tolls is to cost 2 billion Euro (US$2.8 billion) even taking this into account. 

Expanding the tolled highway network will add another 500 million Euro (US$694 million) revenue and expanding the toll system to charge trucks down to 7.5 tonnes will add another 200 million Euro (US$280 million).  The remaining gap is to be accommodated elsewhere in the Federal Government accounts.

Expansion of the truck toll to the additional Federal Highways will be introduced from 1 July 2015.
Trucks between 12 and 7.5 tonnes will be liable for the toll from 1 October 2015
All remaining Federal Highways will be subject to the toll by 2018.

All additional revenue from this expansion will be used on maintenance and upgrades to the tolled highway network.  An estimated 80,000 additional vehicles will be liable for the toll with the introduction of the lower weight threshold.

What it should mean is more equity and competitive balance between trucks at the margins of 10-12 tonnes, although it will raise the same issue for the 3.5-7.5 tonne segment.   I suspect those vehicles will be next in due course, as they are subject to similar distance based tolls in Switzerland, Austria, Czech Republic, Poland and Slovakia.  However, the Minister says to do so would be a burden on smaller business, so it may yet be - rather oddly - that with the proposed vignette for light vehicles, those between 3.5 and 7.5 tonnes will be in the curious position of not paying directly for road use.

- Press release of interview with German Transport Minister (in German)

(Declaration of interest:  I was one of the authors of a report commissioned by the European Commission: Analysis of German Infrastructure Cost Calculations and their Impact on the Heavy Goods Vehicle Tolls on the German Motorway Network – Final Report, Prepared for: Directorate-General Energy and Transport European Commission, Booz & Co, London, 2010).

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