Memorandum submitted by the Social Market
1. The Social Market Foundation welcomes
this opportunity to provide our views on reducing road-transport
emissions in the UK. The following comments have been prepared
by Jeegar Kakkad, Economist.
2. Currently the SMF is conducting a major
research project on road-user charging in the UK. We are using
a programme of seminars and associated papers to pose three basic
questions: what type of scheme is:
(a) technically and politically workable
for the UK;
(b) gives appropriate priority to concerns
about equity; and
(c) allows for significant contributions
to reducing greenhouse emissions.
3. This brief will address what specific
steps the DfT should take to reduce road transport carbon emissions
and congestion over the next decade.
4. The current primary form of road-transport
taxation in the UK, fuel tax has had success in inhibiting motoring,
limiting growth in CO2 emissions and raising revenue.
However, as traffic levels and congestion are predicted, even
under the most optimistic of estimates, to worsen over the coming
decades, the fuel duty is set to become increasingly unlikely
to either cover the costs of, or inhibit, this additional motoring:
the marginal social costs of congestion and carbon emissions can
vary more than differences in fuel duty.
5. Specific to location, road-type, and
time-of-day but largely independent of distance travelled, congestion
is not homogenous. The nature of congestion depends on its location,
with congestion on trunk roads differing from congestion on dense
urban-road networks. The environmental costs of greenhouse gas
emissions are incurred system wide, but also vary by speed, type
of congestion and fuel efficiency.
6. For example, greater allocative efficiency,
or the level of motoring optimal from society's point of view,
on trunk roads and motorways implies increasing the straight-line
traffic flows and speeds, which might increase the level of emissions
on these roads.
In dense urban networks, such as London, much of the reduction
in congestion and carbon emissions stem from reducing the queuing
times at junctions.
7. Consequently, reducing congestion is
not a sufficient condition for reducing either overall traffic
levels or carbon emissions. Rather, by considering carbon emissions
and congestion separately, we believe it is possible to understand
where demand measurement techniques could be used to target reducing
either carbon emissions or congestion, or the both together.
8. Since 1990, CO2 emissions
by road transport have increased 8%. Although the growth in light-delivery
vehicles (LDVs) and heavy-goods vehicles (HGVs) traffic has only
accounted for 29.0% of the total growth in vehicle-kilometres
since 1990, LDVs and HGVs have accounted for over 97.7% of the
increase in road-transport CO2 emissions over the same
period. In contrast, although the level of vehicle-kilometres
driven by passenger cars since 1990 has risen 18.5%, their carbon
emissions have only risen 2.1%.
9. Looking forward to 2010, the DfT estimates
an increase of 15-22% in passenger car traffic; a 19-20% increase
in LGV traffic; and a 5-6% increase in HGV traffic.
Moreover, estimates show that carbon emissions from road transport
are predicted to grow only slightly more slowly from 2005-15 than
in the previous 10 years.
10. We believe these statistics can be decomposed
into two trends:
(i) the fuel tax has encouraged passenger
cars to lower the fuel duty without necessarily reducing mileage,
by switching to more efficient fuels, primarily diesel, which,
on average, gets over 28% more miles per gallon than petrol.
(ii) The increase in just-in-time and e-commerce
deliveries has accelerated the growth of the number of and vehicles-kilometres
travelled by LDVs, fostering increases in fuel consumption and
11. Consequently, carbon emissions could
be reduced if light and partly loaded truck travel was reduced,
particularly for pick-up and delivery services. Trends suggest
delivery-related traffic is on the increase, with just-in-time
and e-commerce deliveries as primary drivers of this growth.
As light commercial vehicles generally travel with spare capacityalmost
40% of all van traffic in 2004 utilised only 0-25% of capacityone
objective for demand management should be to encourage better
organisation and efficiency, which might allow this spare capacity
to be utilised, thus reducing mileage and greenhouse gas emissions.
12. One potential solution for lowering
carbon emissions from both passenger cars and road freight is
to increase the fuel duty. In addition to slowing the growth in
traffic in the UK, one of the effects of the fuel tax has been
for motorists to mitigate increases in fuel duty by switching
to more efficient fuels. Indeed, since 1994, the consumption of
petrol by cars and light goods vans dropped by 11% and 64%, respectively,
while the consumption of diesel for cars and light goods vehicles
more than doubled over that period.
13. However, Euro standards on fuel efficiency
are such that although using diesel reduces CO2 emissions,
it raises road transport NOx emissions, which have increased 472%
since 1990: road-transport's share of overall NOx has risen from
1.8% in 1990 to 12.0% in 2003, even as total passenger car fuel
consumption has remained relatively constant since 1994.
14. As increases in the fuel duty are economically
and politically untenable, other measures could facilitate increases
in fuel efficiency (though not necessarily through increased consumption
of diesel). Tax incentives, for example, to use hybrid passenger
cars and delivery vehicles, and to develop and eventually consume
alternative fuels could all reduce emissions. However, we would
like to stress that reducing greenhouse gas emissions through
such tax incentives lowers the cost of motoring and so could lead
to increases in traffic levels and, therefore, potentially offsetting
increases in greenhouse gas emissions.
15. Another solution could be to use a road-user
charge that differentiates LDVs and HGVs from passenger cars.
As the freight sector, however, has an inelastic demand for motoring,
there are few modal alternatives for LDVs (and to a lesser extent
HGVs). Consequently, one of the primary purposes of differentiated
road pricing would be to decouple the taxation of freight haulage
from passenger cars.
16. For example, the Swiss LSVA lorry charge
is based on distance, weight and emissions class. By explicitly
incorporating emissions and weight classes into the charge, the
Swiss scheme was able to optimise freight and fleet management;
to encourage consolidation and cooperation within the industry;
and to improve allocative efficiency and thus lowering the trend
in mileage for HGVs. Annual increases of 7% in HGV mileage in
the years before the charge were followed by a 4% drop in 2001,
a further 3% decline in 2002 and no change in 2003. Emissions
of NOX, CO2 and PM10 are predicted to drop 6-8% by
17. A charging scheme aimed at reducing
the traffic and greenhouse gas emissions of freight haulage would
invariably differ from a scheme targeting congestion. The former
would ideally include charging by distance, emissions class, and
weight, while the latter would ideally charge by location, time-of-day,
congestion levels, and road-type. All these various charges could
be layered into a single scheme, but at the cost of added complexity
for the motorist.
18. It is important to note, however, that
road-user charging, either for passenger cars of for LDVs and
HGVs, is more than likely a medium to long-term solution. Other
pricing mechanisms, such as steeper gradations in the vehicle
excise duty and tax incentives to use hybrid technologies and
consume bio/alternative fuels could consequently be, especially
over the next decade, as important as road pricing in encouraging
more efficient uses of delivery infrastructures; a reconsidering
of trip planning and transport patterns; enhancing bundling of
consignments; and improving the efficiency of the transport business.
19. The considerable uncertainty over the
economic and political feasibility of the fuel duty to capture
the marginal external costs of motoring has left a role for road
pricing in changing motorists' behaviour and raising revenue.
20. However, how local and national authorities
propose to spend the revenues would be vital to how a road-user
charge would impact on motorists' behaviour. By spending the revenue
in ways that would affect the demand for motoring, such as financing
public transport improvements or reducing the fuel duty, politicians
would be more likely to change individuals' price sensitivity
to the costs of motoring.
21. Road-user charging on a revenue neutral
basis with reductions in the fuel duty could reduce congestion
while taxing motorists in a more efficient way. However, reductions
in congestion, especially on motorways and trunk-roads, may not
translate directly into reductions in traffic and greenhouse gas
22. Consequently, a road-user charge that
would primarily target congestion but that would also be economically
and politically viable; give priority to concerns about equity;
and enable reductions in greenhouse gas emissions would seem to
favour significant levels of investment in complementary transport
services, such as improvements to public transportation and road
maintenance, management and capacity.
23. Over the next decade, we believe pricing
measures, such as steeper gradations in vehicle excise duties
and incentives to increase fuel efficiency, could help facilitate
the changes necessary in the freight hauling and forwarding industries
to reduce carbon emissions and curtail the growth in traffic.
24. In addition, investment over the next
decade in measures complementary to road pricing, such as fostering
the consolidation of the freight industry; investment in public
transportation; and improved road maintenance, management and
capacity, should play a central role in reducing road transport
greenhouse gas emissions and congestion.
25. While road-user charges for passenger
cars, LDVs and HGVs have a central in comprehensive demand management
packages aimed at reducing overall traffic; greenhouse gas emissions
and congestion, we believe road pricing across the UK is realistically
10-20 years away.
26. Although road pricing does have the
ability reduce congestion and carbon emissions, we would like
to stress that reducing congestion is not guaranteed to reduce
greenhouse gas emissions. Nor is reducing carbon emissions at
the expense of increasing other greenhouse gas emissions, such
as NOX and PM10 an environmentally sustainable approach.
27. Rather we believe that the long-term
strategies currently pursued by the DfT, such as the "Congestion
TIF Schemes", can be bolstered by over the next decade by
other demand management measures discussed in this brief.
(14 November 2005). Back
DfT, Traffic Statistics Great Britian:2005 Edition, Defra, e-digest
of Environmental Statistics (22 February 2006), and authors calculations. Back
Cambridge Econometrics, UK Energy-Environment-Economy,
http://www.camecon.biz/cgi-bin/EPW_CGI (2 February 2006). Back
Table 3.4, DfT, Transport Statistics of Great Britain: 2005. Back
In 2004, the Department for Transport revised upwards growth
estimates for light delivery vans. See also, http://www.greenhouse.gov.au/local/reduction/transport/measures_freight.html,
(13 February 2006). Back
DfT, Survey of Van Activity: 2004, 30 June 2005. Back
Table 3.1, DfT, Transport Statistics of Great Britain: 2005. Back