The Impact of Road Pricing on Shippers and Freight Carriers: the Distribution of Costs and Benefits



The Impact of Road Pricing on Shippers and Freight Carriers: the Distribution of Costs and Benefits

Authors

D M Vonk Noordegraaf, Delft University of Technology and TNO Mobility and Logistics, NL; O A W T van de Riet, Delft University of Technology, NL

Description

This paper gives insight in the impact of road pricing on the behavior of shippers and freight carriers in the supply chain. The responses of individual firms determine the distribution of costs and benefits.

Abstract

The impact of road pricing on shippers and freight carriers: the distribution of costs and benefits

The effects of road pricing have often been studied. However, to the authors? knowledge previous research has focused to only a limited extent on freight transport and not at all on the factors that determine the impact of road pricing on individual firms and their related behavioral responses. Consequently it is not known how the costs and benefits are distributed through the supply chain. The aim of this paper is to fill this gap.
This paper provides an insight into the impact of road pricing on the Dutch shippers and freight carriers that operate in a supply chain. Road pricing might result in both an increase in the transport costs due to the charges and in the benefits in terms of travel time savings. The sum of these costs and benefits is important when a firm is considering its response to road pricing, i.e. no changes, changes in the arrangement of transport and logistics and pass on the cost or claim the benefits. Especially the latter response can affect the behavioral responses of other firms in the supply chain. Hence, the total impact of road pricing on firms is the result of a chain of reactions.
The core of the approach is an exploratory multiple case study focused on the Rotterdam port area. In total 21 face-to-face interviews with shippers and freight carriers were held. The case study included a variety of firms, of different sizes and from several sectors (manufacture of chemical products, manufacture of food and other products, wholesale, retail and transport).
The conclusion of the study is multi-fold:
1. Firms perceive road pricing as a burden for most of them. Most firms expect that the direct costs induced by road pricing (mainly the road pricing charges) will be higher than the direct benefits (travel time savings), resulting in a cost increase.
2. Many firms expect that the proposed Dutch road pricing policy will not hold sufficient incentives to significantly change their behavior. Road pricing is only one of the factors in a firm?s decision on their behavioral response. Even if the sum of the costs and benefits causes a need for changes, these changes can prove to be not cost-beneficial, do not fit the current arrangement of transport and logistics or prove to be infeasible. Therefore road pricing does not necessarily lead to changes in the behavior of firms that result in less congestion.
3. Road pricing can affect firms indirectly due to the cost and benefit claims of other actors in the supply chain. In the case of costs for the carriers, many carriers will try to pass at least part of the costs on to the shippers. In the case of benefits for the carriers, shippers will claim lower transport prices or an increased service level. To what extent a shipper accepts the cost claims and a carrier accepts the benefits claims depends on the mutual dependencies in the supply chain.
4. The costs and benefits can be unequally distributed and the incentives are not necessarily always well-targeted. Although the overall effect of road pricing on firms could be insignificant, it will have a high impact on some firms (costs or benefits) and for others no impact at all. The specific business situation determines what the total costs and benefits for a firm will be. Furthermore, the incentives are not necessarily well-targeted. Some firms (e.g., freight carriers) will be severely affected while their maneuvering space is limited because another party (e.g., the shipper) is in control of the transport and logistics. If this freight carrier cannot pass on the charge to the shipper, the shipper will have no incentive to change the arrangement of his shipments.
The main policy implications of these conclusions are that:
- First, a refinement of the road pricing policy for freight transport is might be needed.
- Second, it might be wise to ensure that the road pricing policy design leaves sufficient room for refinements.

Publisher

Association for European Transport