FIA Eurocouncil’s position on the Internalisation of External Costs in Transport
Publication date: 02 April 2009
The European Commission published in July 2008 its initiative “Greening Transport” containing proposals aimed at improving the environmental sustainability of transport. It is accompanied by a Communication outlining a “Strategy for the internalisation of external costs” , an inventory describing the EU actions that have already been taken to put transport on a more ecological basis, a proposal to revise the Directive on road tolls for lorries (Eurovignette) as well as a Communication on reducing rail noise.
In its proposal for a strategy the European Commission proposes a common framework to calculate external costs based on a study , compiling an overview of the level of external costs in the transport sector and developing a concept for charging external costs.
The FIA Eurocouncil is of the opinion that the Commission’s approach regarding the internalisation of external costs in the transport sector is not based on a sound scientific analysis. It takes the view that a much broader and intensive discussion of the topic is needed. It has to be taken into account that mobility is one of the greatest achievements of our modern European societies. Road transport is not only an important economic factor but also a driver of productivity all across the EU Member States. In the current times of a serious economic crisis it must be realised that road transport is an essential factor of production. Any constraint put to it will result in further negative results for Europe’s economy as a whole. With this regard the FIA Eurocouncil would like the European Commission to take the following points into consideration in its debate in order to
1. acquire a more comprehensive view not only on costs, but also on benefits of road transport, so to ensure that citizens and motorists in particular are not being unduly punished;
2. re-focus its efforts on reducing downsides of traffic rather than merely charging for them: technical innovations should be supported and the transport infrastructure should correspond to the society’s needs; regulatory measures should be taken where needed;
3. make an analysis in order to have a clear understanding of those existing fees, taxes and charges put presently on road users in Member States and their relation to already existing compensation for external costs; otherwise the presentation of external costs could offer governments a pretext to enforce tax increases to attain higher budget revenues;
4. aim, in this respect, at a better linkage of the different transport modes when internalising external costs instead of playing them against each other; this would contribute to promoting the benefits of each mode of transport instead of weakening them in an attempt to meet ideological expectations.
Avoiding downsides of traffic rather than charging for them
The FIA Eurocouncil believes that the theoretical construct of “internalising external costs” is not a viable approach for reducing the negative impact of transport. The path chosen by the European Commission is likely to only raise the costs of mobility, generating additional revenue for the governments, without preventing negative effects in the future or even compensating for them. Charging for external costs will neither raise noticeable benefits for the environment nor traffic fluidity or safety.
The FIA Eurocouncil believes that it is necessary to mitigate the negative effects of traffic to a maximum extent. However, it is of the strong view that the proactive support of technical innovation, the removal of bottlenecks by improving infrastructure and traffic management and a consistent development of the existing regulatory instruments are much more effective means than the proposed pricing models.
Technology and behavioural changes have already reduced significantly the impact of cars on the environment in the last decades: Whilst emissions of CO2 from transport overall are rising, CO2 emissions from cars have been stable for ten years or more. New cars today produce a fraction of the toxic emissions of those made twenty years ago thanks to ever more stringent Euro norm regulations. The promotion of eco-driving techniques by organisations such as the FIA is leading to changes in driver behaviour and decreased emissions. Today’s vehicles are quieter; roads are safer with the number of fatalities and of injuries decreasing year on year in most EU countries. All of this means that the environmental and social costs of motoring are already falling, and will continue to do so.
The achievements over the past years with regard to pollution and road casualties demonstrate the effectiveness of technological innovations (e.g. catalytic converter, fine particle filter, Electronic Stability Control) in conjunction with regulatory instruments (e.g. Euro emission norms). In some cases, extensions of capacity, which are long overdue, would reduce congestion and generate greater benefits for society than, for instance, a reduction in traffic. Instead of indiscriminate charging for external costs – which in addition cannot even be reliably calculated - cost efficient environmental, safety and infrastructural measures to reduce the negative effects of transport should be carried on.
Costs and benefits
Like most human activities, traffic and transport generate external costs, but also external benefits, such as enhancing social inclusion, improving the division of labour, increasing productivity and supporting the economic prosperity. The European Commission solely focuses on costs leaving the fact aside that road transport is a key factor for Europe`s economy. A study conducted for the German automobile club ADAC has shown that there is a strong linkage between road traffic and prosperity (measured in GDP per capita). This is valid for freight traffic as well as passenger traffic though the linkage between the level of individual traffic and prosperity is particularly pronounced in the bulk of the EU member states. In Germany alone, 5,8 million jobs are dependent on road transport. The gross value added generated by these jobholders accounts for 381,5 billion € / year. Against this background, the FIA Eurocouncil is critical of the one-sided approach focused solely on external costs of transport since this can lead to a distorted view and a simplistic response which increases the price of mobility.
Moreover, an accurate and proper assessment of the external costs is still needed. The study on which the European Commission bases its policy proposals is merely a compilation of research results obtained on the basis of challengeable assumptions. The Handbook is a meta-analysis of third-party studies without an independent plausibility test. The method to calculate external costs still has many deficiencies and needs to be revised before being brought to the core of binding legislative proposals.
Some negative effects such as noise, habitat fragmentation and habitat loss, sorrow and grief, and climate change are difficult to express in monetary values, since there is no real market price for the preservation of life and environmental quality. Without a functioning market, however, an economically satisfactory calculation will methodologically not be possible. The considerable spread shows a large amount of uncertainty concerning the level and structure of external costs.
The FIA strongly rejects the view that traffic congestion and accidents are to be accounted as external costs. Congestion costs are internalised by the motorists who find themselves in the traffic jam. Congestion is not a negative effect that road users cause for society as a whole but a burden that motorist and road hauliers have to carry alone – many times due to insufficient investment in infrastructure. The money generated by motorists through taxes and charges simply is used for other purposes than road transport. Charging congestion costs would mean to punish road users additionally which is, in the FIA’s view, not justifiable.
Real-term costs of accidents are covered by insurance companies and thus are also internalised. Only air pollution, climate and noise costs can be regarded as external costs.
The FIA believes that it is very important to define the scope of the costs which are to be considered. In this respect contributions and subsidies to transport, for instance public transport, need to be accounted for as external costs. Unlike rail transport, the road infrastructure requires no public subsidies. If rail transport were required to pay for all infrastructure and external costs under the same criteria as are requested for road transport, rail transport would no longer be competitive at all. In the EU, considerable subsidies are paid to the railways and urban public transport in particular. Subsidies represent costs for the general public, who are not compensated for these by the recipients of the subsidies. They are not included in the market price and they are not incurred by those who generate them. Subsidies must therefore be added to the external costs. FIA calls for the European Commission to publish an assessment of infrastructure costs and revenues for all modes of transport in Europe to enable a complete discussion of transports economical balance sheet.
Costs of motoring already fully covered
Analyses on traffic costs but also cost-benefit analyses have been carried out in many European countries over the past years. In general, the level of cost coverage of road traffic has been assessed to be much higher than rail traffic, passenger car traffic higher than freight traffic.
The Commission explicitly takes account of the "polluter pays" principle laid down in Article 175(5) of the Treaty. The FIA calls on the Commission, however, to take account of all forms of internalisation of external costs which already exist, i.e. such as fuel taxes, road tolls and regulatory measures. All over Europe, motorists face high fiscal burdens already today. Since infrastructure expenditure is drastically below the revenues collected from specific motoring taxes and charges, motorists multiply pay their use of road infrastructure. Already today, the extra revenue generated from motorists’ fees and taxes more than cover road traffic externalities if those are calculated correctly. Thus, the real issue is that motoring taxes are levied with little or no focus on achieving environmental, social and consumer objectives, in particular, those which minimise the impact of cars on the environment, making roads safer for everyone, and building and maintaining road networks fit for the users who pay for them through motoring taxes.
Charges for external costs are fees (earmarked) and not taxes (for the general budget). According to the equivalence principle the revenues of charging have to be earmarked and re-invested in road transport. A cross-subsidisation between the modes as proposed by the European Commission should not take place. The goal is a funding system, in which the annual investments in road construction do not depend on political eventualities of the general budget. User tolls should be earmarked and can be fed into an independent motorway funding company.
About the Fédération Internationale de l’Automobile
The Eurocouncil of the Fédération Internationale de l’Automobile (FIA), the leading motoring and touring organisation, represents via its 71 national motoring and touring organisations in 47 European countries, 34 million European motorists. Europe’s motoring and touring organisations have as their highest priority to put their members’ interests at the centre of Europe’s sustainable mobility policy in order to make mobility more sustainable, i.e. more reliable, cleaner and safer while keeping it affordable for all.
The FIA and its member motoring and touring organisations have since their foundation been strongly committed to improving mobility by proposing constructive solutions to the benefit of consumers:
- In the field of road safety, the FIA and its member clubs have initiated programmes informing car drivers which car to buy (Euro NCAP) and which roads and tunnels are the safest (EuroRAP, EuroTAP).
- On emissions, the FIA and its member clubs have developed a programme (EcoTest) to measure vehicle emissions and inform consumers.
- FIA member clubs work together with national and local authorities to enhance traffic fluidity through varied measures including upgrading infrastructure, improving traffic management and proposing alternatives to car mobility. In order to lower the negative effects of congestion, the traffic needs to be better managed, more alternatives to the car are needed (e.g. park & ride) and in some places more and better infrastructure must be built. Such measures help to increase the efficiency of the transport system.
The FIA Eurocouncil has expressed itself on many occasions on the issue of the internalisation of external costs of transport, generally related to the recasts of the Eurovignette Directive in 2006 and in 2007. The FIA Eurocouncil will continue to do so to ensure that the concerns of mobile citizens and consumers are taken into consideration.
1 European Commission, Communication from the Commission to the European Parliament and the Council - Greening Transport, COM(2008) 433/3, Brussels, July 2008.
2 European Commission, Communication from the Commission - Strategy for the internalisation of external costs, COM(2008)435, Brussels, July 2008.
3 European Commission, Proposal for a Directive of the European Parliament and of the Council amending Directive 1999/62/EC on the charging of heavy goods vehicles for the use of certain infrastructures, COM(2008) 436, Brussels, July 2008.
4 CE Delft, Handbook on estimation of external cost in the transport sector, Delft, December 2007.
5 Baum, H., Geißler, T., Schneider J., Bühne J.-A., External Costs in the Transport Sector – A Critical Review of the EC Internalisation Policy, Institute for Transport Economics at the University of Cologne, May 2008.