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PA IN THE MEDIA

Road pricing is the way to cheaper cars, cleaner air and fewer traffic queues

Read the article in Danish here.

Achieving the government's ambitions for 70 percent lower CO2 emissions by 2030 requires a greener car fleet.

Anders Eldrup's car commission will soon be suggesting how, on the one hand, we can motivate people to replace petrol cars with greener options, such as electric cars, and, on the other hand, ensure that the state's revenue of approximately DKK 50 billion annually from car taxes can be maintained.

A combination of the abolition of registration tax and green car taxes and a gradual transition to smart road pricing, where we only pay for how far we drive, where we drive and when, is, in our view, the most effective tool for delivering on the government’s ambitions.

Road pricing is not a new invention. Most of us have paid to drive across the Great Belt Bridge where the price is basically the same regardless of the time of day, and the revenue pays for the bridge and its maintenance.

Advanced versions using GPS devices
You can experience another form of road pricing if you take your car to Norway and drive into Oslo city centre. Here you have to pass through several toll zones the further into the city you drive.

Prices vary depending on the time of day and whether you are driving in the inner or outermost ring. You'll pay more if you drive during rush hour than if you wait until the evening. The aim is to reduce traffic and CO2 emissions during peak hours.

The most advanced form of road pricing – smart road pricing – consists of a small GPS device that you place in the car. Alternatively, you can use small radio sensors of the kind we already know about from Brobizz, and cameras with automatic licence plate recognition.

This calculates the price based on the number of kilometres you drive, but the time of day and the type of section of road can also be included when setting the price. For example, it could be more expensive to drive in Aarhus Midtby during rush hour than on a country road outside rush hour. You will receive a bill each month which will vary in size depending on how much you have driven.

Making it cheaper to buy a new car
Over half of your new car's price is currently a registration fee. This means that even before you have driven the first kilometre, you have paid registration tax for the entire life of the car.

The starting point is that the more expensive and polluting car, the higher the registration tax. Whether you drive a little or a lot in the car doesn't matter. Smart road pricing, also known as time- and location-dependent road pricing, allows the charge to be shifted to the actual use of the car.

The same can be done with green taxes. In this way, there will be greater correlation between the individual car's impact on society in terms of CO2 emissions, road wear and the contribution to accidents and what it costs the motorist to drive it.

A number of advantages
For the individual motorist, the introduction of smart road pricing and the removal of the registration tax and green taxes will make it cheaper to buy a new car, but more expensive to drive it. This has a number of advantages:

Greener fleet: If it becomes cheaper to buy a new car, more people will buy a new and more environmentally friendly car instead of keeping the old one or buying second-hand. The removal of the registration tax will also encourage the sale of electric cars, which are still more expensive for the  manufacturer than cars running on petrol or diesel. At the same time, if we introduce tariffs which mean that petrol and diesel cars pay more per kilometre than an electric car, that can create an additional incentive to choose a greener car.

Safer car fleet: Newer cars are significantly safer than older cars. Partly because they have more safety equipment such as side airbags, but also because newer cars are increasingly automated. That trend is expected to continue. A newer fleet will improve road safety.

Fewer car queues and less congestion: When you pay a price per trip instead of paying registration tax in advance and green taxes biannually, you will be more likely to consider whether there are good alternatives to driving by car. If the price is set so that it is more expensive to enter the big cities during rush hour than outside rush hour, it will mean less congestion and a better distribution of traffic.

The challenges can be overcome
The last time we considered smart road pricing in Denmark was in the early 2010s and the focus was on trucks. General scepticism and uncertainty about the technology meant that we did not get started with it.

However, now GPS technology and smartphones have become widely available, automatic licence plate recognition is used successfully on the Great Belt Bridge, and digital payment solutions are part of everyone's everyday lives.

The challenge is not individual technologies, but rather to make them work in an overall smart road pricing system that is both easy to use, but also safe in terms of digital privacy and that charges correctly – every time.

Although it makes immediate sense to pay more if you drive a lot, there is a risk that road pricing will reward those who only take short trips around a holiday home and punish those who cannot afford a new car and who use their car every day to drive to work far from their home.

There are many requirements for calculating the tariffs in a future road pricing system: the price structure must be seen as fair and it must be carried through to its implementation. It should also provide an incentive to buy greener cars and to use the car less during rush hour. Finally, it must be able to count to 50 billion a year.

Some questions remain
Smart road pricing also raises some more overarching questions.

Will it change our relationship with our cars when we have to pay per trip instead of paying upfront? What will it mean for the experience of freedom that many associate with owning a car? And will smart road pricing, together with increasing automation of cars, help us reach a position where fewer people own a car and more people use new forms of transport, such as driverless taxis?

Introducing smart road pricing will not be easy. Today, Singapore is the place that has come closest to introducing smart road pricing for all cars, but there is still some way to go.

A number of countries in Europe have introduced smart road pricing for trucks. In Denmark, we will have to take one step at a time, ensure good transitional arrangements, learn as we go along and possibly start in the big cities with cameras that recognize licence plates instead of using GPS transmitters in the car.

We hope that Anders Eldrup's Car Commission will put smart road pricing on the agenda during the autumn.

Peter Westh Christensen and Mikkel Arvedsen are Road Pricing experts at PA Consulting

Contact the authors

PA Consulting in Denmark

Andreas Møller

Andreas Møller

Frank Madsen

Frank Madsen

PA Transformation and Financial service expert

Henrik Ringgaard Pedersen

Henrik Ringgaard Pedersen

Sourcing and IT transformation and financial service expert

Jon Plate

Jon Plate

Innovation and sustainability expert

Martin Tillisch

Martin Tillisch

Financial Services expert

Mikkel Pødenphant

Mikkel Pødenphant

Government and public sector expert

Mitzi Geisler

Mitzi Geisler

Agile and IT transformation and life science expert

Richard Grint

Richard Grint

Financial crime expert

Susanne Gildberg

Susanne Gildberg

Financial services and risk management and compliance expert

Søren Knudsen

Søren Knudsen

IT transformation, digital and life sciences expert

Søren Lehn

Søren Lehn

Government and public sector expert

Tina Hjort Ejlertsen

Tina Hjort Ejlertsen

Nordic Lead on Agile Transformation

Troels Gregersen

Troels Gregersen

Business design and public sector expert

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