Joakim Bansholm Nilsson Opinion - 27/June/2022

Transport needs a tax on the source of energy, not the kilometres

A proposed tax on Danish road users is misguided and difficult to enforce. Taxing the type of vehicle would help increase the uptake of electric-powered trucks in the haulage sector, says Joakim Bansholm Nilsson from Volvo Denmark

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy


 

Danish government is off course to deliver emissions reductions in transport

Heavy-duty trucks remain one of the great headaches in our decarbonisation efforts. But progress is too slow, many barriers have yet to be addressed and we have yet to see substantial carbon reductions.

Even though trucks currently make up just 2% of road vehicles in Europe, they still emit almost a quarter (23%) of all road traffic CO2 emissions. In a business as usual scenario truck emissions in Europe will increase by 21% before 2030.

A political agreement on the green transition of road transport from December 2020, saw the Danish Parliament adopt a kilometre-based toll for trucks over 12 tonnes effective from 2025.

The move is in line with several other EU countries such as Germany and Sweden and the EU’s recent revision of the Eurovignette directive, which moved toll charges for trucks from time-based to kilometre-driven-based taxation by 2030.

The Danish government is currently working on a national green strategy for heavy transport including the specifics on the new road tax as part of the political agreement. The strategy is expected to be presented later this year.

The stated goal of the government’s plans and the new toll is to push for a one million tonne reduction in the carbon footprint of heavy transport by 2030. Today, the Danish truck fleet emits 1.7 million tonnes of CO2 every year. To put that into perspective Denmark’s total national emissions every year is around 45 million tonnes of CO2.

Without further regulation, Denmark’s heavy road transport is expected to emit 1.5 million tonnes of CO2 in 2030 corresponding to a decrease of only 0.2 million tonnes compared to 2020.

 

 

WRONG DIRECTION

Formulating a national green strategy, including a revision of taxes and new economic incentives, are an effective and very much-needed instrument for accelerating the decarbonisation of heavy road transport. But there is a risk Denmark is going about this in the wrong way.

From a climate and decarbonisation perspective, the suggested tax model—based on kilometres driven—is an inefficient and unconstructive way of taxing the transport sector.

It will be difficult to manage and the administrative burden will be costly. It will also potentially distort competition because when every kilometre counts, costs will vary depending on where and how far each truck is driving.

 

CARBON TAX

Instead, Denmark should pursue a model where it is not the number of kilometres trucks drive that is taxed, but the energy they consume. Denmark should adopt a tax on diesel or a general tax on CO2 emissions instead.

This is by far the best and most effective way to ensure a tax model that encourages further investments in trucks with a more energy-friendly profile. It is also a model that would be easier to control and administer.

This is also the recommendation from the independent Danish expert advisory, the Climate Council, which directly points out that a tax on carbon and an increase in the tax on diesel are a more precise means of targeting emissions other than tolls.

The council says that a carbon tax would be the most effective way to move the heavy transport sector in a more climate-friendly direction. It argues is also that a more broad carbon tax would be a technological neutral tax model, which would ensure that the government does not target or invest in the wrong technologies.

In regards to a tax increase on diesel, the Council recommends that the price be raised by €0.067 per litre to favour more energy-friendly transport. This is also in line with other countries such as Germany that have already raised the price of diesel.

Consequently, there is a need for the government in Denmark, but also in several other European countries, to look closely at the incentives and tax models for the heavy transport sector and abandon the idea that every kilometre should come with a price tag.

This is important if we are to make sure that the transport sector contributes with the carbon reductions necessary to meet our climate targets. •

 


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