When the CO2 truck toll comes into force on December 1, 2023, freight forwarding and logistics companies will have to pay a surcharge of around €200 per ton of CO2. Trucks with a gross vehicle weight of more than 7.5 tons are affected. From July 1, 2024, the toll will then also apply to trucks with a gross vehicle weight of more than 3.5 tons. Zero-emissions vehicles such as electric vehicles and hydrogen vehicles, as well as vehicles with a hydrogen fuel cell, will remain exempt from toll until the end of 2025.Thereafter, only 25% of the regular rate is to be levied on zero-emissions vehicles.
Road freight operators could face up to 83% increase in road toll charges under the proposed rule, with the increase being the highest for operators with older vehicles.
The amount of the individual surcharge depends on the emission class.
Rationale
The toll tax is intended to accelerate the reduction of greenhouse gas emissions and reach climate reduction goals by increasing pressure on hauliers to invest in electric transport fleet. However, Dirk Engelhardt, President of the Federal Association of Road Transport, Logistics and Utilization (BGL), believes that in the end it will be the consumer who will become the funder of the construction and renovation of railroads and roads as hauliers will pass on the cost increase to shippers and eventually to the end consumer. In addition, while the objective of the new tax is to speed up the transition to emissions-free vehicles, the nationwide fuelling and charging infrastructure is still underdeveloped.
Implications
The increase in road tolls will have negative financial implications, and burden both shippers and consumers with higher prices.
- Increased operating costs
The doubling of road tolls will directly affect hauliers’ operating costs. Transport companies will face financial challenges due to the increased tolls. Higher toll charges will add a financial burden, affecting profit margins and rate strategies. The increased costs could have a ripple effect, leading to adjustments in transportation rates and overall supply chain expenses. While some operators may try to absorb the costs, the majority may be forced to pass them on to their clients through higher freight rates.
Currently around 12% of hauliers’ costs in Germany are attributed to tolls. Once the CO2 toll comes into force this share will increase to about 20%. For instance, a haulier with 130 trucks currently pays around €200,000 a month in tolls. From December it will be €400,000. This is an enormous burden that hauliers will have to pass on to customers.
Logistics operators have already announced rate increases as a response to the toll increase. Maersk for instance stated that “the rise in toll fees will increase cargo transport costs and as such, bring a need for Maersk to increase rates for truck transport in Germany. Taking into account the increased toll, we will revise the tariff for Q4 of this year”. Similarly, DB Schenker announced that it will “pass on these tax adjustments directly to the client”.
- Modal shift
The sharp rise in road tolls might encourage hauliers to explore alternative modes of transportation to reduce/minimise costs. This could result in a shift from road transport to rail or waterways, especially for long-haul journeys, as these modes are proving to be a financially attractive alternative to road. As a result, rail and inland waterway operators may experience an increase in demand. However, capacities in rail and waterways are limited so it will be crucial for businesses to react quickly.
- Environmental impact
A modal shift to rail or waterways should have positive implications in terms of reducing carbon emissions and promoting sustainable transportation practices.
However, the transition to electric trucks is not as straightforward and will require some time. Electric trucks are also up to 3.5 times more expensive than a diesel truck. However, once the surcharge of €200 per tonne of CO2 comes into force, all zero-emission vehicles will offer clear cost benefits compared to conventional diesel-powered heavy goods vehicles.
According to BGL, currently, 0.03% of the trucks operating on German roads every day are electric. Considering the high costs of electric trucks, it will take a few more years until the fleet of 800,000 trucks is replaced with emissions-free vehicles.
Last but not least, the lack of charging infrastructure remains one of the biggest barriers and continue to limit growth of electric trucks. Germany still requires a public charging infrastructure for heavy-duty commercial vehicles along motorways that includes some 40,000 overnight charging systems and 2,000 high-power megawatt charging systems (MCS), which can charge batteries within the legally prescribed 45-minute rest period after 4.5 hours of driving.
- Regional disparities
The impact of increased road tolls may not be evenly distributed across Germany. Industries located in remote areas or with limited access to alternative transport modes such as rail or waterways may face higher logistical challenges and increased costs, potentially impacting their competitiveness.
In addition, the toll tax is expected to increase the costs of road transports crossing Germany in transit. This puts Germany at a disadvantaged position as higher transportation costs could reduce the competitiveness of German goods in international markets, potentially affecting exports.
- Domino effect
The introduction of the CO2 toll might be introduced in other countries. Germany could therefore trigger a domino effect that would have a major impact on road transport across Europe.
Author: Viki Keckarovska
Source: Ti Insights