Consultation on a freight specific charge for biomass

In our January conclusions we explained that, reflecting the responses we received to our earlier consultation, we would make a decision on whether to levy a freight specific charge on biomass as part of the periodic review (PR13). This consultation set out our proposals for levying a freight specific charge on biomass.

A freight specific charge balances payments for freight costs more fairly between businesses, taxpayers and passengers, recognising the wider benefits that rail freight brings against the costs of subsidising rail freight that would not otherwise travel by road.

There are wider economic and social benefits of moving freight by rail rather than road. For example, without rail freight there would have been an additional 6.7 million road journeys in 2007-08. However, ORR’s work also showed that rail freight traffic creates costs of £280-400 million each year through factors such as the wear and tear on the tracks. Under the current charging regime freight companies only pay a small proportion of those costs, around 21-28%, with passengers and taxpayers covering the shortfall. Freight train operators currently pay minimal fixed costs, whereas in 2011-12 passenger train operators paid £887 million in fixed charges to Network Rail.

In this consultation, we proposed to:

• levy a charge on biomass, noting that the biomass transported by rail faces little competition from road and is a close substitute to ESI coal
• set a cap on biomass traffic at £4.04 per kgtm (calculated on the same basis as the other market segments to which the charge applies)
• phase the charge in from April 2016, using the same profile for all market segments to which the charge applies
• levy a freight only line charge for biomass (which Network Rail will calculate – for comparison Network Rail estimate the charge for coal for CP5 to be £0.68 per kgtm), also phased in according to the same profile.