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Defra/Treasury Red diesel call for evidence on Non Road Mobile Machinery.


Freight on Rail is pleased to comment on the Government’s call for evidence on ref diesel for Non-Road Mobile Machinery (NRMM) to review the existing time based system and to make the case for a distance based lorry charging system.

Freight on Rail.Freight on Rail, a partnership of the rail freight industry, the transport trade unions and Campaign for Better Transport, works to promote the economic, social and environmental benefits of rail freight to local, devolved and central Government.

Summary

Freight on Rail supports the main theme of the call for evidence to reduce emissions; in principle there is a strong case for reducing diesel emissions where alternatives exist. However, the Government needs to support alternatives by giving incentives and supporting research into alternative fuels, as promised in the Defra Clean Air Strategy of May 2018.  In the case of passenger rail, increasing costs would be counter-productive as it would lead to higher fares and flight to car use instead. If the Government were to increase red diesel rates for rail to try to reduce emissions, modal shift from rail to road would be a perverse outcomes so the Government must understand the potential for unintended consequences of such an action. 
The Government has issued a challenge to the rail industry to remove diesel only locomotives by 2040. There is now a task force working on options. However, there are no real alternatives which offer the benefits of electrification. If the Government commits to electrify key rail freight routes over a period, the rail freight industry will be able to make a business case for buying new electric locomotives for the longer term and using extra ones in the interim. Julian Worth, an experienced rail freight specialist has written an article explaining how electrifying 320 extra miles could fill in gaps in electrification on key rail freight routes which could facilitate two-thirds of rail freight using electric traction 1.  

End tax loophole on refrigerated lorry units.

Red diesel subsidies were never intended to support commercial machinery on UK roads.

Freight on Rail urges the Government to end a “tax loophole” which allows refrigerated lorries to use cheaper ‘red diesel’, other fleet operators use it to run unregulated secondary engines which power their refrigeration units.

Continuing to charge less for the fuel for these units will undermine efforts to clean up cities’ air quality by removing any incentive to move to cleaner fuel types. By hardly taxing diesel used for refrigeration units the Government is providing a perverse incentive for supermarkets and other companies to carry on using diesel, when instead they should be adopting alternative cleaner technologies. The current tax arrangements actually encourage the use of diesel refrigeration engines continuing to exist on supermarket lorries. Transport refrigeration units emit up to 93 times more NOx and 165 times more PM than the standards Euro 6 diesel car.

Construction plant NRMM

Need real incentives into alternatives to support business

Incentives are needed for companies to purchase new less polluting equipment like fork lift trucks and cranes. This type of equipment has much shorter asset life than rail freight locomotives which have an asset life of 30-40 years.

Rail freight

While the Government is looking to increase revenues, any move to change rail’s red diesel rates needs to be balanced against the economic, social and environmental benefits of rail.

Any pre-emptive move against red diesel for rail freight would be counter-productive as rail freight produces far lower CO2, NOx and particulate emissions per tonne carried in addition to its congestion and safety benefits.

As recognised in the DfT Carbon Review of February 2017 - Shifting freight from road to rail can result in significant CHG emission savings as well as economic and safety co-benefits, rail freight  imposes much lower external costs on society than HGVs. If freight is forced back to road, society and the economy will have to pay for all these external and congestion costs.

The latest analysis by KPMG shows that rail freight generated economic benefits for UK Plc of £1.73bn in 2016, which included productivity benefits of £1.17bn for Britain’s businesses and externality benefits of £0.56bn, through lower road congestion and environmental gains. Productivity and externality benefits were also been disaggregated to a regional level to demonstrate rail freight’s role in supporting regional economies 2.

Congestion costs UK £30 billion a year according to Inrix’s latest figures with the UK ranked the fourth most congested developed country and third most congested in Europe. Rail freight is part of the solution; shippers and construction firms are crying out for more rail freight services which are constrained by the capacity limitations of the  rail network.  

There is overwhelming public support for rail freight. A recent latest questionnaire and report by Brake 3, the road safety charity, showed that 79 per cent of car drivers want more freight transferred to rail and believe that the Government should upgrade the rail network to facilitate this; there is considerable suppressed demand for both intermodal and construction traffic due to the lack of capacity.

The relative safety costs of the different modes need to be taken into account.

Government figures show that the HGV involvement rate in fatal collisions on minor roads is almost seven times higher than cars (685)4 with the DfT valuing the prevention of each road fatality at £2 million 5.

The case for rail freight being eligible for red diesel at the current rate

Any reduction in the current red diesel arrangements for rail would be damaging to rail freight, which has to compete directly with HGVs. Rail freight pays less fuel tax but it pays freight access charges for every tonne-km moved which road freight does not incur. Therefore it is not gaining an advantage through red diesel use. Fuel duty has been frozen since 2011 and rail freight charges have increased by 22 per cent during this period.

Furthermore, the proposed freight access charges for the next two control periods CP6/7 would increase charges by 29 per cent in the ORR draft determination of June 2018 6. Rail freight, has a key role in reducing freight’s adverse impacts on the economy and society, in terms of reducing road congestion, road infrastructure damage, road collisions, air pollution and CO2 emissions, recognised by the Government. For example, The DfT Rail Freight Strategy September 2016, spells out these socio-economic advantages:-

135 - At the same time, we recognise the positive benefits of rail freight for the UK – including its environmental and air quality benefits relative to road freight and its impact on reducing road congestion. These benefits are not currently recognised in the track access charging regime.

Rail freight efficiency improvements

In terms of its impact on the wider rail network, rail freight has radically improved its use of capacity on the rail network by running fewer longer trains. Since 2003, the number of freight trains on the on the network has fallen by 45 per cent yet the amount of freight moved on each train has increased by over 75 per cent 7. Rail freight only accounts for 2.5 per cent of delays to passenger services – a 40 per cent improvement since 1994 8. Freight performance continues to improve with over 94 per cent of freight trains experiencing less than 15 minutes of network caused delay 9.

Air pollution
Rail freight is part of the solution to reduce air pollution. Rail produces 90 per cent less PM10 particulates and up to 15 times less nitrogen dioxide emissions than HGVs for the equivalent journey. HGVs account for around 21% of road transport NOx emissions while making up just 5% of vehicle miles – DfT Freight Carbon Review February 2017

Reducing HGV particulates from tyres and brakes will be challenging.

A shift to rail freight will play an important long-term role in reducing non-exhaust particulates (PMs). While the latest Euro VI engine technology reduces exhaust particulates, non-exhaust particulate pollution from HGV tyres and brakes will remain a serious problem for which there is no current solution, especially for trucks which have large tyres. 

Non-exhaust particulate emissions will also continue to be a considerable health risk for electric cars and vans, a point which has not been widely acknowledged to date. 

Climate change

Freight is a big CO2 emitter

  • As rail freight produces 76% less CO2 emissions than the equivalent HGV journey, increasing rail freight is an important part of the DfT’s policy to reduce freight’s emissions and help the UK meet its legally binding Climate Change targets. Source DfT Rail Freight Strategy September 2016
     
  • HGVs contribute 17 per cent of surface access CO2 emissions, despite making up only 5 per cent of road vehicles whereas both passenger and freight rail together are less than 2 per cent. Source DfT Rail Freight Strategy September 2016

Congestion benefits

  • Road congestion is claimed to cost businesses £17 billion per annum.
    FTA 2015
     
  • An average freight train can remove 70 HGVs journeys from our roads
    - Value of Freight July 2013 Network Rail
     
  • The largest freight trains in the UK can remove up to 160 HGV journeys from our roads
     -  Value of Freight July 2013 Network Rail
     
  • One train can carry enough materials to build 30 houses
    Mineral Products Association November 2016
     
  • DfT estimates the cost of congestion being £0.99 per lorry miles on the most congested roads.
  • Latest Government figures show that nationally 30 per cent of lorries are driving around
    completely empty and only 34 per cent of lorries were full in volume terms. Source
     
  • Road infrastructure costs of HGVs
    The standard industry workhorse, the 16.5 metre 44 tonne truck, is up to 136,000 times more damaging to road surfaces than a Ford Focus, based on the 4th power law. Therefore some of the heaviest road repair costs are therefore almost exclusively attributable to the heaviest vehicles.

Despite this, FTA commissioned  research by RepGrapth  wrongly claimed that HGVs pay three times their infrastructure costs even though  HGVs areare only paying 11 per cent of their infrastructure costs.  RepGraph Heavy Goods Vehicles: Do they pay their way? - impacts on road surfaces, is available from the FTA website.

Heavy Goods Vehicles: Do they pay their way? - impacts on road surfaces, produced by RepGraph for FTA (Freight Trade Association), found HGVs pay three times more than their estimated damage costs to infrastructure. But the report is flawed, based on out-of-date figures and incorrect assumptions..

So, rather than paying three times their costs as claimed in the RepGraph report, with the corrected damage figure of £3 billion, HGVs are in fact only paying 11 per cent (£340 million)  through Vehicle excise duty (VED) and the Road User Levy. This is calculated by adding £50 million from foreign vehicles paying the Road User Levy to the VED total for 2016.

The RepGraph report conflates two different and recognised costing methods. The first is the marginal external cost, which includes additional congestion and road maintenance as costs, but assumes the road network has been built and does not include an allowance for this. This approach seeks to match the marginal cost per mile of the external impacts of HGVs to the perceived cost per mile of using a particular HGV. Obviously, the impacts of a 44 tonne articulated vehicle are much greater than a 7.5 tonne rigid HGV. The second is the fully allocated cost model, which similarly identifies costs according to HGV characteristics, but includes the capital cost of the road network. This can be either as a notional depreciation and/or cost of capital, or on the basis of the typical annual spend on road construction. In the fully allocated cost model case, congestion is often left out of the cost side since it is borne by road users as a group. However, it should be noted that strictly speaking a significant amount of the congestion costs are borne by cars and are not part of the road freight user group.

http://bettertransport.org.uk/media/20-march-2018-FTA-false-claims

Government needs to look cross modally at freight policy

The Government needs to take a holistic view of freight, as its own Ports Connectivity Study highlighted, and to look at all the costs of the different modes.  Road and rail complement each other so cross modal analysis of policies need to be taken.

Rail freight, which imposes far lower external and congestion costs on society and the economy than HGVs, has to compete with HGVs which are heavily subsidized.

Research funding given to HGV sector
The Government has funded £200m research into alternative fuels for HGVs in the past eight years so now it must also support research for rail freight alternatives if electrification is to be excluded.

DfT Road To Zero report 9th July 2018

The Government is not treating the two different freight modes equally. The Road to Zero report  is far more lenient with heavy goods vehicles HGVs  compared to rail freight by  requesting a voluntary target of 15 per cent cut in CO2 by 2025. Road freight accounts for a fifth of transport carbon emissions, even though it only makes up five per cent of road mileage. Without an overall freight strategy that includes stretching and mandatory targets, there is a risk that rail freight, the safer, cleaner low-carbon option, will be severely damaged by the ban on diesel-only locomotives and the halting of electrification, while little is done to cut the larger emissions from heavy goods vehicles.

The external and congestion costs of HGVs need to be appraised in the analysis of red diesel rates for rail freight.

Rail freight has to compete with HGVs despite the market distortion
Rail freight has to compete with HGVs on price despite the fact that HGVs only internalise around 32% of the costs they impose on society. The latest MTRU research, commissioned by Campaign for Better Transport shows that heavy goods vehicles (HGVs) receive a £6 billion subsidy each year in terms of the congestion and road infrastructure damage, increased road crashes, air and CO2 emissions. HGVs are almost seven times more likely than cars to be involved in fatal accidents on local roads.

The latest MTRU report of January 2018 and the Department for Transport (DfT) table below shows that two thirds of marginal costs of the large HGVs are not being met by the haulage operators. In 2016, 9 billion vehicle miles were run by articulated HGVs alone (this figure does not include rigid HGVs (source: TRA3105)) implying a marginal cost shortfall of about £6 billion. In 2014 the figure was £6.5 billion. These numbers vary a little from year to year according to traffic and the severity of impacts such as pollution or casualties. However, they remain substantial and completely unmet. The issue of all the congestion, road damage, collision and pollution costs is discussed fully in this Freight on Rail report, Read the original research here

DfT marginal external cost tables

For articulated HGVs DfT produce Mode Shift Benefit (MSB) tables, most recently updated in 2015 with estimates for 2020 values at 2015 prices. These calculate the marginal costs so that investment in alternatives which reduce articulated vehicle miles can be tested for value for money. These showed a rise in costs from the original 2009 estimates, in particular those for road infrastructure and for carbon.  The tables below show the comparative values.

Table 1 Mode Shift Benefits 2015 and 2009

Pence per articulated HGV mile
Table 1           Mode Shift Benefits 2015 and 2009
Pence per articulated HGV mile

 

Motorways
(by level of congestion)

Roads

 

 

High

Low

A

Other

Weighted Average 2015

Weighted Average 2009 report

Congestion

99

24

72

78

57

52.4

Accidents

0.5

0.5

5.6

5.5

2.7

2.8

Noise

9

7

8

14

8

7.0

Pollution

0

0

0.1

0.2

0.1

2.5

Greenhouse Gases

6

6

7

9

7

3.8

Infrastructure

7

7

24

171

18

9.0

Other (roads) i

6

6

6

6

6

6.4

Gross Total

127.5

50.5

122.7

283.7

98.8

83.9

Taxation

-31

-31

-32

-40

-32

-34.1

 

 

 

 

 

 

 

Marginal cost gap

96.5

19.5

90.7

243.7

66.8

49.8

Road Tax as % Gross marginal cost

24%

61%

26%

14%

32%

41%

i. These include a range of effects including for the MSB report: up and downstream processes; soil and Water Pollution; nature and Landscape; driver frustration / stress; fear of accidents; community severance (including restrictions on cycling and walking); visual intrusion

These conclusions are in line with two other separate reports.  MDS Transmodal study in 2007 found a very similar amount of underpayment: £6billion. Transport & Environment research  issued in April 2016 found that HGVs were only paying 30% of their external costs.
It is therefore crucial that the government recognises HGV costs in its discussions about rail freight costs because rail freight has to compete directly with road.

Alternatives to diesel traction

Rail Electrification

1.7 The Government’s announcement on halting further rail electrification projects is disappointing and short sighted. Electric traction is the tried and tested alternative to diesel which increase capacity as well as hugely reducing emissions. The answer is for the Government to get a grip on the costs of installing electrification, not halt adoption of the most sustainable fuel source, being rolled out across the rest of Europe, when there is no alternative fuel in the pipeline to match it.  EU statistics show that the UK is now trailing at a woeful 20th in the league table of electrified lines in Europe. Furthermore, in April’s Modern Railways 10, Julian Worth,a rail freight expert, makes the case for a modest re-wiring of around 320 key miles over a 30 year period which could see two-thirds of rail freight moved by electric traction. If Government commits to investment over a period, then the rail freight operators can build the business case for investing in more electric locomotives.
As Committee on Climate Change latest report, issued on 28th June said, more freight should be transferred to rail.

The  Government statement  about wanting to ban rail freight diesel only locomotives from 2040 needs to be examined in the context of the different carbon treatment of diesel HGVs, (Road To Zero) which are not being banned from 2040 otherwise there could be unforeseen consequences if freight is forced back onto the road. As acknowledged by the Government, rail freight produces far less CO2 and air pollution per tonne carried as the equivalent HGV journey.

Bi-modes

A combination of electric traction and battery technology for traction in rail freight terminals needs more research. With the exception of the DRS class 88 locomotives, there are no current freight bi-mode locomotives operating in the UK.

What the rail freight industry is doing to reduce emissions

Operators have replaced older locomotives with class 70s and 68s. Recently purchased freight locomotives have superior emission standards, including the Class 68s, 70s and 88s, as well as the last of the Class 66s. 

DRS has invested in a fleet of 10 class 88 dual electric and diesel locomotives which can go anywhere on the rail network.

The Freight Operators are continually acting to reduce the amount of fuel used.  Measures have included driver training, roll out of in cab advisory systems and the fitment of start – stop technology to some of the locomotive fleet (which turns the engine off whilst idling in terminals).  This work has been led by individual freight operators. 

The rail freight operators are sponsoring RSSB to do a more detailed freight study. This will look at both short and long term measures, carbon emissions and air quality. The remit will be wider than the ministerial challenge to eliminate diesel by 2040 and will include retrofitting.

Work to looking to update the rail freight emissions data, including updating air quality emissions comparisons between modes is being led by the Freight Transport Association (FTA) using AETHER consultants. Firstly, the incorrect class 66 NOx emissions in the Defra tables, out by a decimal place, is in the process of being formally corrected. AETHER now know why the error occurred too.

A current programme of work is to ensure that the statistics are based on the current locomotive fleet and to consider ways of producing more specific data for rail.  This work has been led to date by the FTA Rail Council.

Rail Freight Group and RDG Freight Group are participating in the Steering Group for the rail decarbonisation strategy led by Michael Brown, which will consider longer term traction requirements for freight, including their impact on emissions reduction.  Separately, some freight operators have been in discussion with University research teams to identify potential for developing future options.

The industry welcomes the commitment in the Defra Clean Air strategy to support modal shift to rail freight, as listed below.

Modal shift
Section 5.7 - We will support industry research into rail freight emissions and air quality to enable better comparisons with HGV emissions, to understand how a shift from road to rail can best be used to deliver a reduction in emissions of air pollutants.

The industry is investigating whether retrofitting of class 66 locomotives to reduce air pollution is viable. There are large numbers of class 66s with the same engine specification which would make retro-fitting financially viable if a solution can be found to where to locate it within the locomotive. Selective Catalytic reduction (SCR) has fixed euro VI engines and is now the basis of bus retro-fitment schemes   The technology does not exist at the moment so Government support in the Clean Air Strategy, as shown below, is crucial to investigate options. 

developing and deploying cost-effective options for shifting more freight from road to rail, including low emission rail freight for delivery into urban areas with zero emission last mile deliveries. 

Gas alternatives

LNG used in rail by both USA and Russia but they both have large supplies. It works best for high load continuous operations. In urban or start/stop environments however the carbon output can be worse than diesel. There are also torage issues with it needing to be  kept at -230C for LNG.
Co-firing of LNG messes up (SCR) after treatment.

Hydrogen
We also support the industry wide research into hydrogen fuel cells but there is little expectation that fuels cells will be sufficient for HGVs by 2040 

Furthermore, we welcome the commitment to develop options to reduce emissions from freight, informed by the National Infrastructure Commission’s Freight Study. We have submitted a detailed response to the NIC Freight Study 11; we believe that the best way to reduce HGV emissions and congestion, is a distance based road charging system, instead of the current time based one. Because there would be a direct relationship to the amount of use of the network which would incentivise more efficient use of the road network and thereby reduce lorry miles.   
As well as the research into longer term traction strategies, shorter term research is also being considered into options for improving current fleet. Customers are considering the implications of air quality in their terminals and are looking at how best to address this. The Freightliner lorry fleet will be exclusively euro VI engines shortly.

HS2 – minimum emissions standards should be set to make the use rail freight obligatory for delivery of aggregates for HS2 construction purposes.

 

1. http://www.freightonrail.org.uk/PDF/Modern-Railways-April-2018.pdf 
2. Rail Freight Working for Britain Rail Delivery Group June 2018
3. http://www.brake.org.uk/media-centre/1846-drivers-raise-motorway-safety-fears-as-lorry-traffic-hits-record-high
4. Table TRA 0104
https://www.gov.uk/government/statistical-data-sets/tra01-traffic-by-road-class-and-region-miles
Table RAS 30017
https://www.gov.uk/government/statistical-data-sets/ras30-reported-casualties-in-road-accidents
5. RAS60001 2016
6. http://orr.gov.uk/__data/assets/pdf_file/0010/27757/pr18-draft-determination-overview-june-2018.pdf
7. Freight moved and number of freight train movements ORR 2017
8. Freight & Passenger rail performance ORR
9. Freight delivery metric ORR 2017
10. http://www.freightonrail.org.uk/PDF/Modern-Railways-April-2018.pdf 
11. http://www.freightonrail.org.uk/ConsultationsNationalInfrastructureCommissionFreightStudyCallForEvidence.htm




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