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Pricing heavy vehicle use

I’ll give a plus to Tony Abbott if he seriously pursues the suggestion of charging heavy trucks for the damage they do to roads by using GPS technology that measures the mass of the truck, the distance it travels and the roads it travels on.  There are transaction cost issues here but this “telematic” technology is, anyway, already used by trucking operators to manage the behaviour of their fleets – checking that safety breaks are being taken and so on.

The basic economics is that almost all damage done to roads is caused by heavy vehicles and this damage is concentrated on roads with thin pavements.  There are strong incentives to use ever-larger trucks to exploit economies of scale in trucking. There are also strongly increasing scale economies in investing in pavement thickness. However in a country like Australia, where traffic densities are low compared to European and American roads, there is no economic case for building all our roads with maximum durability like the Hume Highway.

The procedure of banning trucks from certain roads is inefficient.  It is better to charge them the damage cost and then to leave it to the trucking operator to decide whether the road should be used.

Charging truckers high fixed registration fees to cover damage costs doesn’t work since these charges apply irrespective of distances travelled and road types employed. Moreover replacing these charges (which do cover damage costs) with efficiency-based charges should enable lower costs to be imposed on truckers – they should be able to share in the efficiency dividend.

A famous problem in trucking is the “last mile problem”.  The benefit of using a truck rather than, for example, a train is that it enables “point-to-point” pick up and deliveries of goods.  But should a truck be allowed to pick up or deliver on low quality roads using low quality bridges where possibly huge damage costs are imposed?  With the pricing reform suggested the problem is solvable. A central agency assigns prices to using particular roads and agrees to pay these revenues to the local governments in charge of the local roads. Local government then does the cost-benefit calculations to determine whether it is desirable to allow large trucks to access local roads.  Will the revenues generated exceed the increased damage costs or not? If so allow access. This is a much better solution than a blanket solution of always allowing or not allowing such heavy vehicle traffic.

Years ago COAG were close to agreeing to such pricing proposals. I don’t know what happened subsequently but the whole propose got put on the back burner.  As I say, I’ll give Tony Abbott a tick if he puts this proposal back on the COAG agenda. Here is a longer piece I wrote on the economics of heavy vehicle pricing.

4 comments to Pricing heavy vehicle use

  • Uncle Milton

    “It is better to charge them the damage cost and then to leave it to the trucking operator to decide whether the road should be used.”

    “It is better to charge them the damage cost and then to leave it to the consumers of carbon-intensive products to decide whether they buy the products.”

    “I’ll give Tony Abbott a tick if he puts this proposal back on the COAG agenda.”

    Good luck with that.

  • hc

    This was one of the items that COAG in the past were close to agreeing too. One difference from the climate issue is that the costs of road maintenance (something less than $4b per year) does accrue directly to government. I am impressed with the calibre of some of the people pushing for this type of user charging.

  • Robert Merkel

    I wished I shared your optimism but the new government has already acquired an appalling track record with regards to rewarding sectional business interests ahead of the wider community. Look at the reversion of the FBT changes, the plan to reverse the financial advice changes, abolition of the carbon price…is there a parasitic business this government doesn’t love?

  • Absolutely brilliant!

    A bit like the carbon tax, except that the damage caused by trucks is more obvious – so there is more of a chance of implementation. Will the trucking companies run a scare campaign, telling us that we’ll end up paying more at the supermarket checkout?

    If we can get this sort of detail right, Australia will be a pretty good country.

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