CONFÉRENCE EUROPÉENNE DES MINISTRES DES TRANSPORTS
EUROPEAN CONFERENCE OF MINISTERS OF TRANSPORTRESOLUTION No. 98/1 ON THE POLICY APPROACH TO INTERNALISINGTHE EXTERNAL COSTS OF TRANSPORT[CEMT/CM(98)5/FINAL]
Ministers of Transport of the ECMT, meeting in Copenhagen on 26-27 May 1998

REITERATING− that adequate and efficient transport systems are of fundamental importance to theeconomies of all ECMT Member Countries and play an important role in the lives of theircitizens;− that there exist safety, health and environmental problems for which the transport sector
bears a responsibility;− that difficulties are increasingly apparent in meeting demand for mobility and funding
infrastructure developments.
RECALLING− that the Council of Ministers at Annecy in 1994 established an ad hoc Task Force on theSocial Costs of Transport to clarify the issues in the debate on external costs, advise on
methods of evaluation and develop appropriate policy options;− that the 1996 ECMT Hearing of International Non-Governmental Organisations showed
general support for the approach to managing the social costs of transport adopted by theTask Force;− that the Berlin Council of Ministers of 1997 accepted the approach to internalising theexternal costs of transport set out in the report of the Task Force and called for thedrafting of a resolution on policy toward the external costs of transport;− that Ministers reiterated their support for further consideration of the application of theprinciple of internalising the external costs of transport in their 1997 Helsinki Declaration
and at the 1997 UN/ECE Conference on Transport and Environment in Vienna;− that the European Commission will make proposals on the development of instruments
for reducing the social costs of transport on the basis of the 1996 report Towards Fair andEfficient Pricing in Transport;

CONSIDERING− that significant welfare gains could be realised through reducing the external costs oftransport efficiently and that internalisation aims to achieve this by factoring externalcosts into markets;− that through more efficient management of resources and government expenditure,internalisation presents opportunities to reduce budget deficits, increase public spending
and/or reduce taxes on labour and capital;− that internalisation is a key element of policies aimed at fostering sustainable
development;

AWARE− that internalisation can be achieved without a net increase in taxation in the economy as awhole;− that by improving economic efficiency internalisation
position of enterprise;

can improve the competitive− that issues of equity (including the international dimension) need to be considered indeveloping internalisation policies. Equity issues can and should be addressed by avariety of flanking measures. In this way, internalisation can be made compatible with
policies for regional cohesion;− that the tax systems of many countries may already internalise some external costs, either
as a result of overt policy or as a by-product of raising revenue through taxes specific totransport;− that there are uncertainties in the estimation of external costs and in cost allocation, butthese costs are certainly not zero and the lower bound estimates used as the basis for theaccompanying report are unlikely to over-value external costs;− that for some transport services with high external costs, internalisation is likely to lead toprice increases but that internalisation should be based primarily upon structuring prices
more efficiently, rather than increasing prices overall;− that for those modes currently associated with high external costs, internalisation will, atthe same time as improving efficiency, reduce growth in the volume of transport and any
associated socio-economic benefits. However, a well designed policy package need havelittle impact on GDP and will result in an increase in net welfare when the value of safety
and environmental benefits is taken into account.
NOTING− that the potential for economic instruments to address the social costs of transport has
been under-exploited;

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− that tax increases that provide no incentive to reduce external costs do not contribute tointernalisation;− that regulations should be dynamic (tightened over time) in order to provide incentives
for technological improvement, and that fiscal components of internalisation policy musttake into account the expected benefits of such technological improvements;− that economic indications of individual preference are the ideal basis for the valuation ofexternal costs. However, where satisfactory valuations on this basis do not exist, agreed
political targets (e.g. ambient air quality or exhaust emissions standards) are the mostsuitable basis for a practical internalisation strategy.

AGREE TO THE FOLLOWING PRINCIPLES− that in the interests of improving economic efficiency, reducing the social costs oftransport and increasing economic welfare, internalisation is an important transport policyobjective;− that full internalisation should be viewed as a long term objective, taking account of thewide gap that exists between the present structure of costs and prices in transport markets
and the ideal in many countries (and particularly in some transition economies);− that internalisation policies should be implemented through economic instruments and/orregulations, designed to provide effective incentives for reducing externalities while notresulting in a net increase in taxation in the economy as a whole;− that Governments must co-operate to develop effective instruments for internalisation that
do not discriminate between citizens or companies of different countries;− that internalisation policies should not discriminate between different modes of transport
or between transport and other sectors of the economy;− that where public financial support for the provision of public goods is necessary, it
should be provided, but only through transparent payments under contract;− that internalisation policy should be implemented in a gradual step-wise manner in order
to avoid economic shocks;− that these gradual changes should be co-ordinated between modes to avoid shifts inmodal split that would prove uneconomic in the long term.

RECOMMEND− that Governments pursue opportunities to provide incentives for internalisation in thedevelopment of transport policy both in the context of EU legislation and in theframework of national legislation in all ECMT Member countries;

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− that Governments develop economic instruments for the internalisation of transport
externalities and that Ministers of Transport co-operate with Ministers of Finance in
exploring the possibilities;− that Governments align the structure of taxation more closely with costs, for example bymoving towards more differentiated tax systems in transport and making greater use ofvariable charges1;− that Governments progressively tighten fuel, emissions and safety standards costeffectively to stimulate technical improvements towards lower social costs of transport;− that Governments ensure that existing regulations are respected, notably in regard tosocial legislation;− that where existing legislation related to the external costs of transport proves difficult toenforce, notably in the areas of road safety and environmental protection, regulations arereviewed with a view to rendering enforcement more practicable and effective;− that special attention be given to reducing acute externalities, such as in urban areas, inthe shorter term;− that Governments ensure coherence in the valuation of costs and benefits, both privateand external, used in project appraisals and environmental impact assessments and indeveloping both investment and internalisation policies;− that Governments ensure that the electronic charging systems for using roads underdevelopment in a number of Member countries are compatible to a degree that minimises
the costs of using such systems, avoids the need for individual vehicles to be equippedwith several different systems and avoids the creation of delays at national frontiers;− that Governments undertake appropriate public education measures to prepare theground for the introduction of internalisation policies;− that first steps towards a gradual and progressive internalisation of the external costs oftransport be taken in individual Member countries as soon as possible.
INSTRUCT THE COMMITTEE OF DEPUTIES− to monitor the development of internalisation policies in ECMT Member Countries;− and to report on progress towards the application of this Resolution within three years.

1.

Italy entered a reservation in view of its concern that fiscal policy is not the remit of Transport
Ministers.

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ECMT Resolution 98/1