Internalisation of external costs for specific modes of transport (road, rail, iww, ports, airports)

FACT SHEET NO.: Cat-No. 1/Subcat-No. 1.2-5

1. Pricing

1.2 Internalisation of external costs

Internalisation of external costs for specific modes of transport (road, rail, iww, ports, airports)

Development of a system institutionalizing the "polluter pays" and/or "end user pays the full cost including societal costs" principles, with a view to devising a charging system for application to all modes of transport and their users. In order to define external costs properly it is important to distinguish between: (a) social costs and (b) private costs, sometimes referred to as internal costs. External costs refer to the difference between social costs and private costs. The measure plans to charge this to the consumer [1] [11].
Social costs reflect costs occurring due to provision and use of transport infrastructure. Examples being: capital costs, wear and tear of infrastructure, congestion, accidents (i.e. medical care, economic loss, suffering/grief, etc), noise (i.e. loss of housing value), air pollution (i.e. affecting health), environmental cost, climate change (i.e. global warming), etc. Private costs are directly borne by the transport user. Examples being: wear and tear of vehicle use, fuel/energy, own time, transport fares, transport taxes/charges, etc.

Not available, as it is not implemented. Some sectors have communicated their concerns, and say that transport is only one of many industries. Like power generation, construction, chemical production (etc), this industry generates external costs. All these industries bring benefits to our economy and external costs. There seem to be no justification for singling out transport.

This policy require additional costs to be paid by all transport end-users. For example social costs like accidents, congestion, pollution, etc. These are deemed to be costs imposed on society. The policy aims at "polluter pays" and/or "end-user pays the full cost including social costs". Transport-related accidents, air pollution, noise, climate change impact, congestion, etc. generate high social costs that are usually not covered by users, but have to be borne by the society as a whole. Ignoring these externalities would result in market inefficiencies in favour of more harmful transport modes. Determination of such external costs is thus a prerequisite to develop strategies for their internalization into total costs and for the implementation of sustainable transport policies [11].
The measure will lead to efficient use of the existing infrastructure. Furthermore, as users will pay for the additional costs they generate for society, this will help to ensure fair treatment of both transport users and non-users.

Undetermined. However, it is very likely that transport modes generating a relative low amount of social costs (like rail) will become more competitive as they become more cost attractive. This will lead to a shift in transport mode and/or to changes in the transport chain [12].

Undetermined.

Undetermined.

Undetermined.

Undetermined.

Undetermined. However this policy measure will increase user costs. Especially transport modes with a relative high amount of social costs will need to inprove their loading factor and/or load size, to remain competitive.

Undetermined. However, the measure will eventually result in more energy efficient and more environmental friendly transport modes, as these will become more cost attractive. This will encourage producers (e.g. car manufacturers, bus operators) to develop more energy efficient and environmetal friendly vehicles due to a sharp increase in demand.

[1] CE Delft (2008): Handbook on estimation of external costs in the transport sector
[2] European Aviation Industry (2008): Joint Statement
[3] European Parliament (1999): Directive 1999/62/EC, on the charging of heavy goods vehicles
[4] Press release of European Commission (2008): External Cost In Transport
[5]Commission Legislative and Work Programme (2008): Roadmap, list of initiatives
[6] Stakeholder Conference (2008): External Costs and Air Transport.
[7] Stakeholder Conference (2008): External Costs and Maritime / Inland Waterways transport
[8] Stakeholder Conference (2008): External Costs and Rail Transport
[9] Stakeholder Conference (2008): External Costs and Road Transport Pricing
[10] Stakeholder Conference (2008): Handbook on external cost estimation in the transport sector
[11] Council of European Union (2008): Greening Transport
[12] UNIFE The European Railway Industries (2008): Internalisation of external costs of transport - revision of eurovignette directive
[13] Progtrans (2010): Internalisation of external costs
[14] CE Delft (2007): Methodologies For External Cost Estimates And Internalisation Scenarios