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Internalising the Environmental Costs of Road Freight Transport in the UK
Two-thirds of the freight tonnage moved in the UK goes by road. Our economy and social well-being are critically dependent on the road haulage system. Most of the cost of this system is borne by lorry operators and passed on to customers. Some of the wider environmental and congestion costs, however, are imposed on the community at large. If the polluter pays principle were applied, all these external costs would be completely internalised by taxation. Environmental groups have argued for many years that lorries should be taxed at a level that achieves full internalisation. This report assesses the degree to which the external costs of road freight transport in the UK are currently being internalised by taxation. The analysis focused on three types of cost: environmental costs (comprising climate change, air pollution, noise and accidents), congestion costs and infrastructure costs. Lorries’ contribution to the cost of providing, operating and maintaining road infrastructure is not an externality as such, but has to be calculated to determine its share of road freight taxation. It is out of the remaining taxes that the environmental and congestion costs should be recovered. Current estimates of infrastructural, environmental and congestion costs have been obtained from official government sources and disaggregated by vehicle type and gross weight class. Two scenarios have been constructed: a ‘base-case’ using emissions data for lorries from the government’s National Atmospheric Emissions Inventory, and the other, a ‘worst-case’ scenario, based on the assumption that all trucks emit the maximum amount of pollutants permitted by EU regulations. Using mid-range estimates, the total infrastructural, environmental and congestion costs attributable to UK-registered heavy goods vehicles (HGVs) in 2006 were £7.1 billion for the base-case and £7.6 billion for the worst- case scenario. The taxes paid by HGVs covered approximately two-thirds of these costs (in the base-case scenario). The proportion of the total cost internalised varied by vehicle class, with the lightest category of rigid vehicles covering only 55% of their allocated costs, but the heaviest rigid vehicles covering 79%. Overall, the analysis suggested that taxes on lorries would have to rise by around 50% to fully internalise infrastructural, environmental and congestion costs.
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