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New EU truck rules could raise road taxes, squeeze smaller carriers

European Union truck regultaions are set to change in January, with monitoring of carbon emissions that will allow the authorities to tax the worst polluters. Credit: Art Konovalov

New European emission rules set to enter into force on 1 January 2019 will measure carbon emissions from heavy duty vehicles (HDVs) which will enable authorities to target the most polluting lorries with higher road usage charges, in a move that could hit smaller truck operators the hardest.

Presented as “promoting the uptake of the most fuel-efficient heavy-duty vehicles” in a European Commission memo dated 31 May 2017, the memo goes on to say that the rule “is essential for achieving a low-carbon and competitive road transport sector in the EU.”

Carbon emissions from HDVs accounted for a quarter of all road transport emissions in 2014 and 5% of all EU greenhouse gas emissions, with those figures set to increase substantially by 2030 to around 32% of all road emissions, according to the Commission.

In addition, new registrations of HDVs increased from 262,000 in 2010 to 380,000 in 2016 and is expected to increase to over 500,000 trucks a year by 2030.

In order to curb the emissions from HDVs and for the EU to meet its carbon emissions reduction targets, European officials will monitor trucks operating within the EU and compare year-on-year figures, while new trucks will also come with emissions data from the manufacturers.

“As of 1 January 2019, lorry manufacturers will have to calculate the CO2 emissions and fuel consumption of new vehicles they produce to place on the EU market, using the new Vehicle Energy consumption Calculation Tool (VECTO),” according to the 2017 memo.

But blanket testing of all HDVs for carbon emissions would be “too burdensome,” said the European Commission. That’s why officials are working with the industry to develop VECTO, a simulation software tool, that will reliably measure fuel consumption and emissions for “specific mission profiles” based on input data from specific engine components.

This data will then be sent to the European Environment Agency, which will collate the data and make the aggregated data publicly available. From this data the EU authorities will also be able to “design and implement policies to promote more fuel-efficient lorries, for instance through taxation and road user charges. It will also enable analysis of the data, such as assessing the penetration level of CO2 reduction technologies.”

A fragmented European trucking industry could also see the cost of meeting new emissions standards soar with smaller operators unable to meet the costs of compliance. That in turn could lead to consolidation in the industry.

Consolidation in the sector is not how the EC expects changes to happen with officials claiming that it “will be particularly beneficial for the many transport companies in the EU that are [small and medium enterprises] operating only a few vehicles. They will be able to compare and purchase more efficient lorries, allowing them to save money on fuel bills, which make up more than a quarter of their operating costs.”

However, similar environmental rules levied on freight carriers in the U.S. have seen the opposite effect. Small and medium size enterprises get squeezed out by higher compliance costs, which are easier for bigger companies to absorb.

“It’s often the bigger companies to work with regulators to effect changes like these, both because of their ability to weather higher regulatory costs and the reduction in competitive pressures as smaller companies go under or consolidate,” said Ibrahiim Bayaan, chief economist at FreightWaves.

For its part, the European Commission believes that the new regulation will foster innovation and competition between lorry manufacturers who will produce more efficient vehicles as a result. The Commission said that the US, Canada, China and Japan had already introduced fuel efficiency measures and the EU is in danger of falling behind its major competitors.

Costs for the monitoring element of the regulation is estimated at around €3,500 ($3,980)/ year for each member state, but there is no estimation of the costs that industry will need to meet in order to meet the new regulations.

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Nick Savvides, Staff Writer

Nick came to FreightWaves in December 2018 from Fairplay, a shipping market publication. He covers the shipping, freight and logistics industry in Europe. Since starting his career as a journalist in 1990, Nick has worked for a number of significant freight publications abroad, including International Freighting Weekly, the online news service for Containerisation International, ICIS, the chemical industry reporting service, as well as Seatrade in Greece. Nick also worked as a freelance journalist writing for Lloyd’s List, The Observer, The Express and The European newspapers among others before joining Seatrade Newsweek in Athens.
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