Internalisation of external costs and greening transport

Speech Published 11 Dec 2008 Last modified 13 Apr 2011
CLECAT Freight Forwarders’ Conference, 50th Anniversary. Presentation by Prof. Jacqueline McGlade, Executive Director, European Environment Agency, in Brussels, 3rd December 2008

... we still do not see any real signs of decoupling between transport and economic growth.

Prof. Jacqueline McGlade, Executive Director, European Environment Agency

As society, we currently invest a significant part of nature's 'ecosystem capital' in transport policy, and the debate on how take account of this investment is not new.

As far back as 1995 the European Commission first laid out an attempt to integrate transport charging.

Essentially the internalisation of external costs, and greening transport, is not about punishing transport with environmental measures, but rather, a matter of recovering the 'ecosystem' costs and ensuring we use transport in the optimal, and most sustainable way.

The latest stage in this process is 'Greening Transport', unveiled by the Commission this year to provide a series of initiatives and a stepwise approach for the internalisation of external costs.

Since the Dobris assessment in 1991, transport has been a major factor in EEA reports. Earlier this year we launched our latest transport report for 2007 – with 2 key conclusions;

  • freight transport demand is largely driven by economic considerations in the private sector; 
  • the environmental trends are unsustainable.

As I am sure many of you here realise, freight transport volumes - in tons per km for air, road and maritime - have grown faster than GDP.

Importantly our report highlights that signs of decoupling between transport and economic growth is extremely limited – and any decoupling that is taking place, is only represented in passenger transport!

Neither do we see any shift of our freight to rail, inland waterways or short sea shipping.

This has led to transport growth patterns which reflect that transporting freight is cheaper than producing the goods locally, but has failed to include environmental costs in the charges paid.

The environmental effects from transport are well documented. And when we consider that the 2006 Commission White Paper, forecasts a 50% growth of freight transport between 2000 and 2020, greening transport becomes a necessity!

However, transport as the root of many of the problems we face, also represents the solution, and has a primary role in any debate on 'cause and effect'.


The organisation I direct - the European Environment Agency - has a key role in ensuring the EU and its citizens can make the changes our environment needs.

We are required to support sustainable development and help achieve significant and measurable improvement in Europe's environment, through the provision of timely, targeted, relevant and reliable information.

As part of that process I would like to highlight some of the trends in the transport sector.

Transport trends

At the outset we must recognise that some progress is being made. Overall, however, transport is still far from being sustainable.

Exposure to noise, air pollution, land fragmentation, impacts on our nature and species, and rising emissions of greenhouse gas are the most well-known externalities born by society.

The EEA is in the process of reviewing data submitted by Member States on noise – provisional analysis suggests that a large proportion of EU citizens are still exposed to harmful levels of traffic noise. 

Air pollution and greenhouse gas trends are also a cause for concern.

Air Pollution

Whether we are involved in freight logistics or environment monitoring, good air quality is essential for us all.

Due to the progressive tightening of air emissions limits applicable to road vehicles through the EURO standards, road transport emissions have decreased and emissions of many air pollutants have fallen.

However, since 1997, measured concentrations of particulate matter and ozone in the air have not shown any significant improvement, despite the decrease registered in emissions.

This is especially relevant to most of Europe's population which live in cities – where air quality limits for particles are far too often exceeded.

Our monitoring work illustrates that the prospect of compliance with limit values, especially for cities is not good, e.g.

  • The PM10 air quality limit, which should have been met by 2005, was still exceeded at 60% of the measuring stations in 2006.

Road transport in 2006 was the single main source of nitrogen oxides, carbon monoxide and non-methane volatile organic compounds, and the second-most important source of fine particulate emissions in the EU-27.

But it isn't all road transport.

The Commission CAFE programme has shown that maritime transport emissions would exceed all land sources emissions by 2020.

In addition, the Commission are committed to address NOx emissions from aviation in 2009.

What I have sought to illustrate is that, although improvements have been made, there is a long way to go in ensuring the required air quality standards in Europe.

Trends, sadly which are similar to those we are observing with greenhouse gases.

Climate change

In the EU - driven by the growth in transport volume, including aviation and marine - emissions have increased by 35.8% between 1990 and 2006.

Just to illustrate the significance of this increase, the non transport sectors have decreased emissions by 13.4% over the same period.

Despite progress on fuel and CO2 efficiency, road emissions from light and heavy vehicles are still growing. Road transport has contributed to over half the growth in emissions, followed by aviation and maritime transport.

If the current trends continue, total transport emissions could grow by 47% between 1990 and 2020 – almost all coming from road and international transport (aviation and marine), 60% and 39% respectively.

These trends are not sustainable and will undoubtedly threaten the EU objective to reduce overall emissions by 20%, by 2020, which will be discussed by heads of state next week.

In addition, all of us, as Europeans, have a target of limiting a global temperature increase to 2 °C by 2050. To attain this target we need to reduce all emissions by 60% to 80% compared to 1990.

These aren’t impossible, but the current trends in transport emissions, point very clearly to an urgent need to change the way you do business, and how the environment cost is factored in.

Co-benefits – environment and transport

The Commission in launching its 'Greening transport' initiative this year said:

"Transport will clearly have to contribute to the ambitious goals that the European Council set itself in 2007" – the 20/20/20 package.

Is this possible?

CLECAT describes a freight forwarder as 'the real master of the supply and value chain…..crafting logistic solutions that satisfy both production and consumption,….(which) do not privilege any means of transport or transport infrastructure'.

This suggests that your flexibility and ability to adapt, provides the perfect platform on which to make the changes your business, and our environment needs.

The mid-term review of the 2006 transport White Paper identifies a range of interlinked policy issues to be addressed in order to increase the efficiency and sustainability of freight transport:

  • reducing congestion, which would reduce costs, time of transport and fuel consumption;
  • reducing greenhouse gas emissions from freight transport, which would also reduce air pollutant emissions and noise;
  • reducing dependency on imported fossil fuels, which would improve energy security.

I am aware that CLECAT is concerned at congestion levels and infrastructure policies that inadvertently affect their business models.

I am also acutely aware that, although our starting points may be different, actions to address these issues will have co-benefits – for your business and the EU’s environment.

However, this should not deflect our view from simpler measures that can already have an impact – even if one model cannot fit all.

Urban logistics

The French national research programme on transport – PREDIT - showed that large reductions in emissions, noise and road space consumption can be achieved by changing logistics and consumption patterns.

In particular, round delivery vs. parallel delivery. PREDIT illustrate that one 12 tonne diesel lorry, undertaking the same deliveries as 12 light vehicles from the same point to point could reduce emissions of NOx, PM, CO2 and fuel, by 3 to 4 times!

With the International Energy Agency predicted oil at over $200 per barrel by 2030, I am sure you are all considering how to rationalise fuel consumption – which is a key element for 'just in time delivery'.

Just in time delivery

Just-in-time delivery has developed as a result of changes in cost of production and transport.

As storage costs have been bigger than transport costs, it has been better for companies to request small quantities more often, than to get fewer, larger deliveries.

Although internalising the external costs will clearly shift this optimum towards more storage on site, and fewer trips with fuller vehicles, in terms of transport volumes there is little change.

As the case for urban deliveries (above) it is possible to carry out these transports in a way that reduces the environmental impacts.

We are also in favour of charges that are tied to environmental performance. This way the “economy of scale” achieved by using fewer and bigger vehicles is turned into both environmental savings for society and economic savings for companies.

Green cargo

There are many companies which are acting proactively - companies which will set the industry trends in the near future as consumers and businesses change  habits.

The companies that prepare themselves best for these challenges are certainly more likely to be the economic, and environmental winners.

Let me just use one example – Sweden's Green Cargo.

The company reports on their emissions, and each year announce initiatives to reduce them. Their emissions are not zero, but they try hard to be the best in the field – and still be in business.

Just last week Maersk – the container shipper, announced that they were aiming to be best in their industry field.

Final remarks

The EU Council has concluded that 'putting transport on a sustainable path remains a challenge, in particular in light of the growth that is expected in the coming years'.

From the EEA's perspective, clear, measurable, realistic and time related targets for reducing the greenhouse gas emissions, air emissions and noise of transport still need to be set.

In this regard it is heartening to note that several of CLECAT's position papers, do not question the impact of transport on the environment.

The major cause for concern is that we still do not see any real signs of decoupling between transport and economic growth.

Significant changes are needed to sustainably reverse the trends, shift to low carbon transportation system and put transport on a sustainable path.

By doing so, we will obtain ancillary and co-benefits related to the reduction of noise, air pollution, greenhouse gases and costs.

Although transport must urgently be addressed through a comprehensive strategy, targeting the many sectors of the economy where the transport demand originates, including the production and consumption sides, is also essential.

A good illustration is Switzerland – who already have a charging structure to internalise the environmental costs. It illustrates policies will work, provided they reflect the right price signals and are widely implemented - addressing both demand and supply.

I agree that we must consider all transport, planning, infrastructure, consumerism etc to have the whole picture on how policies should be prioritised.

But we also need to recognise that measures to tackle the internalisation of external costs have been on the table, in one shape or another, for 13 years.

'Greening transport' is an essential response, and no longer an option. We have made progress, but small steps forward are no longer sufficient for the long lasting change our environment and citizens need.





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