Impact of the Belgian Truck Kilometre Charge on the Food Industry

Estimate of direct cost increase and economic impact using two scenarios

In this study, executed for Fevia (Federation of Belgian Food Industry), TML calculated the economic impact of the kilometre charge for trucks on the Belgian food industry. We calculated the direct cost effect on the transportation of food products (processed and non-processed) and the revenues for the government. Next to this, we also calculated the wider economic impact for the sector using the general equilibrium model EDIP, which allowed us to estimate the expected effect of the direct cost on import-export of food products, the trade balance, employment in the food industry, and purchasing power of households.

We calculated the effects for two scenarios

We formulated a first basis scenario that corresponds to the modalities of the kilometre charge in its most probable form. Our calculations were based on publicly available data on freight transport, economic indicators at sector level, and relationships between sectors (input-output tables). We also used specific information for the food industry, which we collected through a survey with companies active in the food industry. In the second, alternative scenario, we calculated the impact on the food industry of some (less realistic) modifications of the kilometre charge. These modifications aimed at reducing the impact of the kilometre charge for the food industry. For instance, we included an exemption from the charge for all transport of unprocessed agricultural products. We also exempted the transport to and from intermodal transport hubs and ports, and introduced a difference in kilometre tariff between day and night. This way, we could estimate whether these measures would be beneficial for the food industry.

Direct impact of the kilometre charge

We estimated the revenues for the several Belgian regions as a result of the kilometre charge for trucks at 956 million euros per year. Around 215 million euros would be collected from transit traffic. For the transport of all food products (processed and non-processed, including transit), we estimate a direct cost increase of between 149 and 218 million euros per year. Without transit, we arrived at a figure between 115 and 170 million euros per year. When we considered the (partial) removal of costs for the Eurovignette, the direct increase in cost for the transport of food products also dropped. We then obtained a figure of between 133 and 195 million euros  per year. In the alternative scenario, costs were around 20% lower for transport of food products. This could be explained mainly by the exemption of the kilometre charge for the transportation of agricultural products.

Impact on the food industry

The introduction of the kilometre charge means an increase in transport costs for food. These costs are partially transferred to the final consumer. Higher prices for food lead to a decline in domestic demand by 0.27% or 85 million euros. The export position of Belgian food products also decreases, with exports falling by 0.32% or 60 million euros. The price for importing food products also increases, which means a decrease in demand for import goods by 0.11% or 15 million euros. In total, there is a negative effect on the balance of payments in Belgium resulting from trade in food products of 45 million euros. The added value in the food industry declines by 67 million euros profit decreases by 32 million euros. The employment in food industry drops with the loss of 456 jobs, or 343 full-time equivalent jobs. The net tax income for the government increases by 727 million euros. The number is lower than the direct income of 956 million euros. The difference is caused by the loss of income from the Eurovignette, the expected increase in jobless people as a result from the reduction in demand, and the lower profitability of industry. This has a negative effect on the tax revenues from labour and capital, it also causes an increase in government expenditures on unemployment allowances.

Households also pay?

In the end, we also expect an effect on the purchasing power of households. In our study, there was a loss in purchasing power by 0.14% or 232 million euros. This result was, however, strongly dependent on the use of public funds from the kilometre charge by the government. Little was known about this at the time of the study, so the impact on households is quite uncertain. We assumed that the government would use the additional revenues on general government outlays for education, health, road infrastructure, etc. This results in a drop in purchasing power for the households, but households could then benefit from an expansion in provision of public services. In another scenario where the additional funds are used to reduce labour taxes, the net effect on purchasing power could be positive. In the worst scenario, the funds are used in inefficient public expenses, and in this case there would be a negative effect on purchasing power without an associated improvement in the provision of public goods. There were insufficient objective indications available to make strong statements in this respect. Therefore our calculations just give a first indication.

reports

Final report

period

2014 - 2015

funded by

Fevia – Beroepsfederatie voor de Belgische voedingsindustrie

researchers

Thomas Blondiau, Rodric Frederix, Christophe Heyndrickx

contact

Rodric Frederix

+32 16 74.51.25
reference: 14078