Impact of the Belgian Truck Kilometre Charge on the Food Industry
14078
2015
TML investigated the economic impact of road pricing for freight transport on the food industry. The study included calculations of direct transport costs and industry impacts through the general equilibrium model EDIP, analysing both a base case and an alternative scenario to evaluate the impact of different adjustments.
In this study, commissioned by Fevia, Transport & Mobility Leuven calculated the economic impact of road pricing for freight transport on the food industry. We calculated the direct cost of transporting food products (processed and non-processed) and the revenue for the government. We also calculated the economic impact for the industry through the general equilibrium model EDIP. This allowed us to estimate the expected impact on import-export of food products, trade balance, employment in the food industry, and household purchasing power.
A calculation for two scenarios
We formulated a first baseline scenario corresponding to the modalities of road pricing in its most likely form. Our calculations were based on publicly available data on freight transport, economic indicators by sector, and linkages (input-output) between economic sectors. Here we also used specific information for the food industry, collected through a survey.
In a second alternative scenario, we calculated the impact of some (less realistic) adjustments to road pricing on the food industry. These adjustments aimed to reduce the impact of road pricing. For instance, we exempted all transport of unprocessed agricultural products, exempted transport to and from intermodal hubs and ports, and introduced a difference in the rate between day and night transport. In this way, we were able to estimate whether these measures are interesting for the food industry.
Direct impact road pricing
We estimated the total revenue for the various Belgian regions as a result of the kilometre charge for freight transport at €956 million per year. Of this, about €215 million would come from transit. For the transport of all food products together (processed and unprocessed, including transit), we estimated the direct cost increase to be between 149 and 218 million euro per year. Without transit, we arrived at an amount between 115 and 170 million euros per year. When we take into account the (partial) elimination of the cost for the Eurovignette, the direct cost of transporting food drops and we arrived at an amount between 133 - 195 million euros per year. In the alternative scenario, the costs were about 20% lower for food transport, mainly explained by the elimination of the kilometre charge for the transport of agricultural goods.
Impact on the food industry
With the introduction of the kilometre charge, there is an increase in the transport cost for food. This cost is partly passed on to the end consumer. As a result of higher food prices, domestic demand decreases by 0.27% or €85 million. The export position of Belgian food products on the foreign market also declines by 0.32% or 60 million euro. Furthermore, the price of food imports also increases, reducing demand for imported goods by 0.11% or 15 million euro. In total, there is a negative effect on Belgium's trade balance due to food products of 45 million euro. Value added in the food industry falls by 67 million euro and profits decrease by 32 million euro. Employment in the food industry falls by 456 jobs, or 343 full-time equivalents. Net tax revenue for the government increases by €727 million. This amount is lower than the direct revenue of 956 million euro. The difference is caused by the loss of revenue from the euro road vignette, an expected increase in the number of unemployed due to the fall in demand and reduced profitability of industry. This weighs on revenues from taxes on labour and capital and causes costs to rise due to unemployment benefits.
Do households also pay?
Finally, we expect an impact on household purchasing power. In our study, purchasing power decreased by 0.14% or €232 million. However, this result depended heavily on what the government does with the funds generated by the road pricing. Little was known about this yet, so the impact on households is therefore still quite uncertain. We assumed that the government uses the additional revenue for general public investments (such as education and health care, roads, ...). This has the effect of reducing households' purchasing power, but in addition, households can enjoy a broadening/improving supply of public goods. In another scenario, where the funds are used to reduce labour costs, the net effect on purchasing power could be positive. In the worst scenario, the funds are used for inefficient public investment: then there is a negative effect on purchasing power without an improvement in the supply of public goods. There were insufficient objective data available to make definitive statements in this area. Our calculations therefore only give a first indication.
In this study, commissioned by Fevia, Transport & Mobility Leuven calculated the economic impact of road pricing for freight transport on the food industry. We calculated the direct cost of transporting food products (processed and non-processed) and the revenue for the government. We also calculated the economic impact for the industry through the general equilibrium model EDIP. This allowed us to estimate the expected impact on import-export of food products, trade balance, employment in the food industry, and household purchasing power.
A calculation for two scenarios
We formulated a first baseline scenario corresponding to the modalities of road pricing in its most likely form. Our calculations were based on publicly available data on freight transport, economic indicators by sector, and linkages (input-output) between economic sectors. Here we also used specific information for the food industry, collected through a survey.
In a second alternative scenario, we calculated the impact of some (less realistic) adjustments to road pricing on the food industry. These adjustments aimed to reduce the impact of road pricing. For instance, we exempted all transport of unprocessed agricultural products, exempted transport to and from intermodal hubs and ports, and introduced a difference in the rate between day and night transport. In this way, we were able to estimate whether these measures are interesting for the food industry.
Direct impact road pricing
We estimated the total revenue for the various Belgian regions as a result of the kilometre charge for freight transport at €956 million per year. Of this, about €215 million would come from transit. For the transport of all food products together (processed and unprocessed, including transit), we estimated the direct cost increase to be between 149 and 218 million euro per year. Without transit, we arrived at an amount between 115 and 170 million euros per year. When we take into account the (partial) elimination of the cost for the Eurovignette, the direct cost of transporting food drops and we arrived at an amount between 133 - 195 million euros per year. In the alternative scenario, the costs were about 20% lower for food transport, mainly explained by the elimination of the kilometre charge for the transport of agricultural goods.
Impact on the food industry
With the introduction of the kilometre charge, there is an increase in the transport cost for food. This cost is partly passed on to the end consumer. As a result of higher food prices, domestic demand decreases by 0.27% or €85 million. The export position of Belgian food products on the foreign market also declines by 0.32% or 60 million euro. Furthermore, the price of food imports also increases, reducing demand for imported goods by 0.11% or 15 million euro. In total, there is a negative effect on Belgium's trade balance due to food products of 45 million euro. Value added in the food industry falls by 67 million euro and profits decrease by 32 million euro. Employment in the food industry falls by 456 jobs, or 343 full-time equivalents. Net tax revenue for the government increases by €727 million. This amount is lower than the direct revenue of 956 million euro. The difference is caused by the loss of revenue from the euro road vignette, an expected increase in the number of unemployed due to the fall in demand and reduced profitability of industry. This weighs on revenues from taxes on labour and capital and causes costs to rise due to unemployment benefits.
Do households also pay?
Finally, we expect an impact on household purchasing power. In our study, purchasing power decreased by 0.14% or €232 million. However, this result depended heavily on what the government does with the funds generated by the road pricing. Little was known about this yet, so the impact on households is therefore still quite uncertain. We assumed that the government uses the additional revenue for general public investments (such as education and health care, roads, ...). This has the effect of reducing households' purchasing power, but in addition, households can enjoy a broadening/improving supply of public goods. In another scenario, where the funds are used to reduce labour costs, the net effect on purchasing power could be positive. In the worst scenario, the funds are used for inefficient public investment: then there is a negative effect on purchasing power without an improvement in the supply of public goods. There were insufficient objective data available to make definitive statements in this area. Our calculations therefore only give a first indication.
