EU debates how transport should pay for ‘green costs’

A recently launched consultation on greening transport has reignited debate over internalising environmental costs. François Le Goff reports on the options the commission is considering ahead of its strategy proposal next June
Applying the ‘polluter pays’ principle to the transport sector has been on the EU agenda for years, but little progress has been made to achieve this goal.
This is particularly true for road transport, which according to the European environment agency accounts for more than 80 per cent of transport’s “external” costs. These are costs arising from air pollution, noise, congestion and accidents caused by transport users. Transport also contributes to climate change.
There are plans to tackle aviation’s rising greenhouse gas emissions with the EU emissions trading scheme (ETS). Shipping is also being considered for inclusion in the scheme. But the environmental impacts of these sectors are much lower, at least for now (see figure 1).
The problem with tackling road transport head-on is that it is an important revenue source for governments with taxes and charges. EU efforts to factor the sector’s impacts into prices have met with resistance from governments ferociously guarding their national rights over fiscal policy. Member states have also opposed any attempt to limit their ability to allocate revenues as they wish.
Apart from a few exceptions, EU law does not require member states to vary charges according to pollution levels, and when it does there are conditions attached. This is the case of the 2006 ‘Eurovignette’ directive on heavy vehicles using Europe’s main motorways. Member states can derogate from a 2010 requirement to charge lorries over 3.5 tonnes according to their Euro emission class if this “seriously undermines” tolling systems. Or they can divert vehicles onto non-charging roads, and certain roads can be exempt if there is a risk of regional isolation.

Making progress
However, efforts to apply the polluter pays principle to transport are about to get a boost as the European commission is developing a strategy for “internalising” the environmental costs of all modes of transport. The strategy is due in June, possibly with a proposal to revise the Eurovignette directive.
The commission will present a model for calculating the costs of all transport modes that could be a basis for future calculations. It will take greater account of the costs and provide more transparency in transport prices, it says.
Huib van Essen of CE Delft, the Dutch consultancy hired by the commission to do the work, says that calculating environmental costs is no longer a technical challenge. “There are quite a lot of materials for that,” van Essen says.
The main challenge is political. There are legal barriers too, he says. In the inland waterway sector, for example, the 1868 Mannheim convention on the Rhine river does not allow governments to levy charges.
Another of the commission’s objectives is to reduce disparities in charging policies across Europe and prevent abusive practices (see figure 2). Such disparities can create market distortions, it says. It began to address the issue earlier this year by proposing to better coordinate fuel taxes (see ENDS Europe Report 13, pp 16-17).
The commission’s transport department recognises that it faces a political challenge. Reforming national charging policies for transport is a “difficult issue”, an official told ENDS .
Ahead of issuing its strategy paper in June, the commission is exploring a range of policy options that could lead to fresh legislation. An impact assessment is being carried out too.

Policy options
One option is to include rail, maritime and inland waterway transport in the ETS. But practicalities would differ for each mode of transport. Road transport looks unlikely to be included for now. “Depending on the modalities of such inclusion, this might affect the purchase or the use of vehicles,” the commission said in a consultation document released in November.
There are already firm plans to include aviation in the ETS. These were backed by the European parliament in November (see p 3). The commission seems undecided about maritime transport. Its impact assessment will certainly cast light on its intentions in this area.
Other options for making transport greener include taxes on CO2, air pollutants and noise. But the commission says the effectiveness of taxes is limited because they do not reflect the true environmental costs for each transport user.
As a result the commission pledges to examine electronic charging for using road transport infrastructure. “The commission intends to take existing charges and taxes into account in order to avoid double charging,” the document adds. Electronic charging is seen as more efficient than taxes and distance-based systems because it can differentiate the effects of emissions relative to location, time, distance and road type.
This technology could be used to introduce a congestion charge on all EU roads, the commission says. According to Huib van Essen, electronic charging systems are still expensive but are becoming cheaper.
Germany has introduced a satellite-based scheme for lorries after great technical difficulties, and the Czech Republic is considering it. Other member states such as France and Italy have road tolls in place. A complete switch to electronic systems is very unlikely as replacing existing road tolls would be very expensive.
The commission is also looking at revising the Eurovignette directive, which is thought not to provide much environmental protection. The law states that the commission should propose changes by June “if appropriate”. It could propose to remove some of the directive’s restrictions in order to allow greater internalisation of environmental costs.
The commission is seeking feedback on its ideas for a new push to make transport greener by the end of December. Most important will be the views of EU governments, especially as all EU decisions on tax matters require unanimity among member states (see figure 3).

Time for debate
In March EU tax commissioner László Kovács said he believed governments would support the commission’s drive for green taxes if they were serious about the EU’s environmental objectives. However, eastern European countries relying on road transport to export their goods to other EU countries are likely to resist proposals that could lead to higher charges.
Their response will very much depend on how ambitious the commission’s plans are. But difficulties in this area mean that there may be more chance of internalising transport’s environmental costs through other instruments such as emissions trading.
Transport operators will make a crucial contribution to the debate. There is already strong evidence that any proposal to take greater account of environmental costs will not have an easy ride, particularly in the road transport sector. “The road sector has nothing to fear from an economic appraisal of its CO2 performance,” the European road federation (ERF) says in a discussion paper published in April. Communication officer Francesco Falco adds: “Unlike cars, trains do not emit on the spot but where does the electricity come from?”
According to ERF, the road transport sector already pays more than it should for its environmental costs. But the money goes into public coffers and little goes back to the sector, it says. Instead of imposing higher charges, more should be invested in road improvements to reduce the sector’s impacts.
ERF’s discussion paper cites a recent Norwegian study showing that such improvements could cut carbon dioxide emissions by 38 per cent and pollutant levels by 75 per cent. The area where ERF is the most adamant is congestion. It believes congestion is not an “externality” because it affects transport users and not society at large. Users should therefore not pay for congestion costs, it says.
Public acceptability of road pricing will also be crucial. According to an EU poll released in July, a majority of citizens claim to be willing to pay more to use less polluting transport, though most of them would not be willing to pay more than ten per cent extra. And most of them are against forcing road users to pay tolls for congestion and environmental damage.
Amid all the uncertainties, there is evidence to suggest that the commission will not propose fresh legislation, except maybe for the Eurovignette directive. “One must be realistic,” an official told ENDS, hinting at the commission’s cautious approach on transport pricing.
Even without legislative proposals the strategy may still have an impact because it will give political support to measures under consideration by some member states. Several countries including France, the UK and the Netherlands are exploring the possibility of making road transport users pay for environmental costs.

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