Internalisation of external costs (TERM 026) - Assessment published Jan 2011
- 28 Jun 2006 - Progress in charge structures and internalisation policies
- 28 Oct 2005 - Progress in charge structure and internalisation policies
- 28 Sep 2004 - Progress in charge structure and internalisation policies
- 28 Oct 2003 - Progress in charge structure and internalisation policies
- 01 Jun 2001 - Implementation of internalisation instruments
- 01 Jun 2001 - Implementation of internalisation instruments
Transport (Primary topic)
Typology: Policy-effectiveness indicator (Type D)
- TERM 026
Key policy question: Is transport charge restructuring moving fast enough towards better internalisation of external costs?
There has been some progress in restructuring transport charges towards better internalisation of external costs though this has been slow. Urban (congestion) charging schemes and distance related charging are expanding, and several countries have modified or introduced vehicle charges. Environmentally-weighted passenger vehicle related taxes are also growing in popularity (excluding petrol/diesel tax). Further, the Eurovignette directive - which aims to ensure road usage better reflects its true social impact by proposing a "user pays" and a "polluter pays" principle for heavy lorries in Europe - was sent to parliament on 15th October 2010.
The differentiation of user charges has in the past been structured around air pollution in the road freight sector, noise in the aviation sector and CO2 emissions for passenger cars. However, there is a growing trend for CO2 based differentiation of user charge across all modes, such as aviation becoming included in the EU Emissions Trading Scheme, and CO2 regulations (already in place for cars) are being planned for vans and are likely also for HGVs in the future.
Tax breaks for low-sulphur fuel are slowly disappearing as its use becomes more common and mandatory standards are imposed (for example <10ppm sulphur petrol and diesel road fuel has been mandatory since 2009) under the amended Fuel Quality Directive (98/70/EC). At the same time reduced excise on biofuel, LPG, CDG and ethanol is being more widely applied in Europe. Many countries have already adopted regulations for reduced car sales duties and road tax for electric vehicles, hybrids and hydrogen vehicles.
This indicator records the introduction and extension of regulations for non-fuel related vehicle taxes and charges (road, rail, air and waterborne transport) as well as for reduced excise on certain vehicles and fuels. The effect of transport on the environment is important and should be reflected in relevant taxes and charges. This indicator gives a qualitative overview of the effectiveness of such taxes and charges in terms of their ability to internalise environmental costs from transport activity. Although there are many examples of good internalisation initiatives, it must be noted that in general they fall short of the level of the externality. The factsheet on infrastructure prices and taxes (TERM 22 ‘Transport taxes and charges’) outlines the development of user-dependent transport charge levels.
The levels of transport infrastructure taxes and charges follow the ‘Polluter Pays’ principle and are dependent on local and temporal circumstances; as a result it is hard to reflect externalities in charge levels. In practice, existing taxes and charges aim to achieve this by differentiating charges based on environmental characteristics such as:
- level of air pollution in the road freight sector,
- tax reductions for fuel efficient and hybrid passenger cars, and
- noise in the aviation sector.
Very few measures have been implemented to internalise costs of congestion on the road (some aviation and rail charges, and some urban parking fees are exceptions), rail and road noise, or climate change and air pollution costs of aviation. In urban areas, the internalisation of external costs is still far from complete. Some rail, aviation and motorway charges are differentiated according to the time of day and/or week, which can be considered to address congestion. It is, however, difficult to monitor consistently the aim of specific charges. Rail transport also faces the scarcity on dispatched services. Urban parking charges that vary with time of day and/or proximity to central business districts also address congestion. They have not been included in table 1 as they only cover specific local areas.
Several European countries are modifying their vehicle charges, which demonstrate that the national taxation policies are aligning, though not necessarily with the aim to encourage more sustainable behaviour.
At present, seventeen EU Member States weight passenger car taxes by CO2 performance. France’s bonus-malus scheme (“Bonus malus voiture”) is an example of a passenger car taxation policy which has proven successful since its implementation in 2008. The scheme aims to accelerate the market penetration of lower-emission vehicles by providing financial incentives for people buying lower emission cars (bonus) whilst at the same time penalising the purchase of vehicles with greater CO2 emissions (malus).
In addition. fifteen governments provide tax incentives for electrically-chargeable vehicles. Incentives for electrically-chargeable vehicles are now provided in all western European countries with the exception of Italy and Luxembourg. Examples of policies include tax reductions and exemptions, as well as bonus payments for the purchasers of electric vehicles.
EURO standards are increasingly becoming very high profile amongst the newer member states due to the high priority attached to air pollution. The EURO standards aim to reduce transport’s contribution to air pollution and encourage use of newer, more efficient engines.
Austria successfully introduced a kilometre charge on its motorways in 2004, varying from EUR 0.13 to EUR 0.27 depending on the number of axles of a vehicle, but without any environmental differentiation. The German kilometre charging for HDV on motorways was launched in 2005, linking charges per vehicle-kilometre to the number of axles as well as the Euro emission class. The Czech government introduced electronically calculated tolls on main roads from 2006, charging vehicles over 12 tonnes (plans to extend the scheme for LDV charging exist). Slovakia also has similar intentions. Toll rings have existed in Norway since 1987, within which charges vary depending on the day of the week (e.g. in Trondheim, Stavanger and Oslo). Stockholm has also introduced a time sensitive congestion charging scheme, which came into operation in August 2007.
In many other European countries public private partnerships (PPPs) have been an important means to fund infrastructure. In France, Spain, Portugal, Italy and Greece on large parts of the motorway network distance related toll charges apply. On the A1 motorway near Paris an additional congestion tariff is levied. During peak hours (Sundays between 16:30 and 20:30), traffic volume decreased by between 4 to 10 percent.
In February 2003 London introduced a congestion-charging scheme to improve the accessibility of the city centre, air quality and liveability. Vehicles fuelled by alternative sources of energy are exempted from any charge. Since its introduction, congestion within the zone in London has decreased by 30 % and emissions of NOx and PM10 from road traffic by approximately 12 %. Research suggests that the charge has had a broadly neutral impact on overall business performance in the charging zone. In February 2007 the charging area was extended to the west of the UK’s capital – although this may be returned to a free zone in December 2010. There are now plans to introduce congestion charging or a low emission zone in Manchester. In Italy, Rome and Genoa both have city charging schemes.
In Poland an environmental fee system has been in use since 1990 which applies to companies in all industries as well as the transport sector. A fee is charged related to emissions of HC, CO2, NOx, Pb (lead), SO2 and particulates. In practice, the fee is estimated on the basis of fuel consumption and a pre/post Euro 2 classification with low charges.
The ‘Eurovignette’ Directive (Directive 2006/38/EC) was adopted in May 2006 with the aim of improving the structure of road freight distance based charges and also to shift freight from roads onto other less-polluting modes of transport such as rail and waterways. Under the Directive, the Eurovignette allows EU Member States to levy charges on heavy goods transportation vehicles of more than 3.5 tonnes. The Eurovignette also gives Member States extra flexibility on how to levy tolls or charges. In particular, these can now be raised on the entire road network, not just motorways. Furthermore, the most recent proposals for the revision of the Eurovignette include allowing Member States to charge heavy lorries to cover the costs of environmental impacts (air pollution and noise pollution from traffic emissions) through road tolls paid by lorries, which will also raise money for reinvestment into sustainable transport research.
With respect to air transport, the majority of countries have noise surcharges and schemes in place to curb night time noise linked to airports. The UK, Sweden, Switzerland and Germany have all recently introduced emission surcharges at airports. Sweden introduced an environmental tax on airline tickets which came into affect in July 2006. The Netherlands introduced a surcharge on airline tickets as of 1 July 2008 differentiated on the basis of the distance of the flight to reflect environmental effects. France, the UK, Norway, Cyprus, Luxembourg and several over countries outside the EEA-32 have proposed to raise funds for development aid by introducing a tax on airline tickets. The French air ticket tax to reduce emissions of greenhouse gases and other pollutants entered into force on 1 July 2006.
Shipping taxation linked to environmental performance is very limited. Only two countries (Sweden and Finland) differentiate ship emissions.
There is a Green Award for seaborne ships being administered by the Green Award Foundation, which has been established in 1994 on the initiative of the Rotterdam Municipal Port Management and the Dutch Ministry of Transport (independent since January 2000). A Green Award specifies that a ship meets high, but manageable technical and managerial requirements. An increasing number of ports and nautical providers recognize the value of Green Award, such as in Lithuania, Netherlands, Portugal, Spain, Belgium, the UK and more (http://www.greenaward.org).
Questionnaire results for TERM026 indicator "Internalization measures for transport environmental costs"
provided by European Environment Agency (EEA)
More information about this indicator
See this indicator specification for more details.
Contacts and ownership
EEA Contact InfoCinzia Pastorello
EEA Management Plan2010 2.9.2 (note: EEA internal system)
This document is part of the SOER 2015 product.