Opinion of the Committee of the Regions on:

- the 'Green Paper: Towards fair and efficient pricing in transport - Policy options for internalizing the external cost of transport in the European Union`, and - the 'Proposal for a Council Directive on the charging of heavy goods vehicles for the use of certain infrastructures` (97/C 116/08)

THE COMMITTEE OF THE REGIONS,

having regard to the green paper: Towards fair and efficient pricing in transport - Policy options for internalizing the external costs of transport in the European Union (COM(95) 691 final);

having regard to the Proposal for a Council Directive on the charging of heavy goods vehicles for the use of certain infrastructures [COM(96) 331 final - 96/0182 (SYN)] ();

pursuant to the Commission decision of 5 January 1996 to refer the above-mentioned green paper to the Committee of the Regions;

pursuant to the Commission decision of 26 July 1996 to refer the above-mentioned draft directive to the Economic and Social Committee;

pursuant to decisions of 12 June 1996 and 18 September 1996, in line with the fourth paragraph of Article 198c of the Treaty establishing the European Community, to issue an opinion and to assign the work involved to Commission 3 - Transport and Communication Networks;

having regard to the draft opinion adopted by Commission 3 on 11 December 1996 (CdR 364/96 rev.) (rapporteurs: Mr Lebrun and Mr Weingartner),

unanimously adopted the following opinion at its 16th plenary session on 15 and 16 January 1997 (meeting of 16 January).

1. Introduction

The European Union Green Paper - Towards fair and efficient pricing in transport - is a key element in the European Union's strategy to promote more efficient transport systems by creating a market where prices and direct regulatory measures are designed to help make transport systems fairer, more balanced and more rational, with the aim of ensuring sustainable transport development.

The proposal to address the issue through pricing, as part of a package of coordinated common transport policy measures, is a pioneering new development in the search for a solution to such a complex problem as internalizing external costs.

The practical application of this concept is, down to the last detail, a challenge which the Commission can only meet in the long term.

The green paper seeks to address this problem realistically and on a step-by-step basis by, for example, grading the measures to be taken into short- medium- and long-term objectives; existing resources are to be used more effectively, so that, gradually, ever more refined fiscal instruments and tools can be developed in the future. Action of this kind is, in fact, essential if the principle of territoriality is to be maintained for resolving certain local problems with traffic bottlenecks, safety or environmental degradation by gearing charges to the length and time of the trip and the chosen mode of transport.

2. The most important aspects and guidelines

The Committee endorses the following broad outlines set out in the green paper:

2.1. Across the European Union, overall external costs for 1991 were estimated at ECU 250 billion, 90 % of which were generated by road transport. The general problem facing the authorities is the advance financing required to re-establish a balance in traffic flows and to secure a switch from road transport to other modes where the theoretical socio-economic benefits are expected to largely outweigh the costs involved.

2.2. The failure to charge for external costs and particular types of infrastructure explains why the transport market is not functioning effectively and why valuable resources - which must be recognized as being in short supply - are being used inefficiently and thus wasted.

2.3. The basic idea behind pricing is that all social costs and the costs of infrastructure, which have been somewhat neglected up to now, should be included so that society as a whole is no longer burdened with the entire amount which by rights should be subject to the polluter-pays principle and covered by the user.

2.4. Economic instruments and regulatory measures are two key factors in a comprehensive strategy for avoiding transport congestion; however, other measures are also needed in areas such as regional planning, telematics-based traffic management systems and efficient public transport.

2.5. The avowed aim of the green paper is to enhance market instruments and complement them by regulation as required; attention must, however, be paid to ensuring that they are used where they can manage transport demand as effectively as possible. Demand for road transport can be curbed only after multi-modal infrastructures and modes of transport have been made available.

2.6. It is not enough simply to increase vehicle excise duty; the tax system has to be restructured in such a way that the entire system and the fiscal burden combine to make transport systems more efficient and environmentally friendly, while safeguarding the Union's economic development.

In addition, the White Paper on growth, competitiveness and employment notes the need to establish an equalization mechanism, for example, by pumping revenue back into the economy, lowering other taxes and charges, or by reducing social security payments for low-paid workers.

2.7. Before economic instruments can work efficiently, there must be a gradual approximation of the Union's tax policy arrangements. Closer harmonization of vehicle excise, fuel excise rates, road use charges and the like will help the transport market to function smoothly.

Transport charges, particularly for road traffic, must take account of the principle of territoriality and the charges must vary depending on the time, place and mode of transport, so that they are levied where the costs actually arise. The various different tax systems in the individual Member States create distortions in competition between the European Union's passenger transport companies.

2.8. Amending the taxation system, fuel excise rates and charges is a suitable way of recouping environmental costs quickly. The charges must be calculated according to length of trip and axle weight, taking particular account, however, of transport conditions in sparsely populated countries and regions. These measures, which are already being transposed technically in some Member States are a good approach to a speedy solution.

3. A critical appraisal of the green paper

3.1. The scientific basis of the green paper and the available research findings do not at the moment provide persuasive evidence that the overall approach to solving transport problems via market prices and by internalizing external costs will definitely relieve congestion in the European Union transport system.

The draft Council Directive on the charging of heavy goods vehicles for the use of certain infrastructures would point to the existence of pre-conceived ideas as to what the impact of the measures would be. The proposal claims that the impact on demand in road and intermodal transport will be limited. As for savings in infrastructure and reductions in pollutant emissions, it would seem that almost any advantage gained is due to changes in the make-up of the vehicle fleet, with little indication of any substantial switch to other transport modes.

3.2. The document under discussion deals above all with transport by road. This approach is to be criticized insofar as the European Union generally lauds multi-modal transport as the solution to all transport ills, for both goods and passengers.

The cited data are incomplete and unconvincing. They make it impossible to discern the merits of each individual form of transport and the crucial advantages of rail and waterway transport over transport by road. For example, waterways are not exclusively transport routes; they are also used for other purposes, such as surface water drainage, sewerage systems, groundwater collection, low-water management, flood discharge and the generation of hydroelectricity. Taking account of the various functions of waterways can only raise the viability of investments without, however, guaranteeing the socio-economic superiority of waterway transport over other transport modes.

The green paper clearly looks at the issue of transport market management solely from the aspect of competition. It would be well to consider the complementarity between different modes of transport; this would better demonstrate the interoperability, not only of measures, but also of transport modes. Measures taken exclusively from the angle of competition and based on pricing have an impact first and foremost on the budget and only then on transport users' behaviour.

3.3. The problem must therefore be looked at in more detail before debate is possible. All the external costs to be borne by all modes of transport should be listed and collated, clearly setting out the merits of each transport mode; assessment of its chances of success should not focus solely on competitiveness. Any debate would then be more likely to focus on the fact that the findings bring with them problems in continuing and implementing the Commission's concepts in practice.

3.4. The present wording of the green paper couches the criteria for selecting the instruments (efficiency, cost-effectiveness, transparency, fairness etc.) in terms which are too general to be effective in practice.

These criteria expose serious issues of methodology which must be looked at and clarified. This is no easy task, and will delay the findings somewhat.

3.5. Any measure designed to raise road transport prices via taxes will certainly be ineffective unless users switch to alternatives to road transport. Moreover, since road transport levels are greater than those of other transport modes, the need for alternative modes and structures would be considerable. For this reason, the regional and local authorities need clear signals about the Commission's real intentions.

4. The role of regional and local authorities

4.1. The regions and municipal authorities have particular responsibility for regional planning and, in some cases, also for infrastructure. The problems outlined fall largely within their remit. Leaving aside urban areas, it is difficult to find regional and local solutions to traffic congestion without at the same time taking account of overall government policy, reflecting Community policy. In many cases, the flow of traffic is increasingly hampered by restrictive regional policy measures.

The aim should be first and foremost to undertake land-use and transport planning at regional and local level. A realistic solution can only be found in a joint policy designed from the outset to manage demand, adjusting the transport supply, and thus infrastructure accordingly. These areas fall, partially, within the remit of the regions and municipal authorities.

Thus, all the various levels of decision-making must be given a say in the strategy formulated by the Commission; moreover, this strategy must be adjusted to suit the different decision-making tiers in the regions and municipal authorities of the individual Member States.

4.2. The principle of subsidiarity must be applied in particular to the implementation of measures at every level of decision-making. However, the strategy's guidelines and overall objectives must be determined at Community level, including the involvement of other tiers of government, with the aim of reaching a consensus. Federal, regional and local tiers of decision-making must retain a certain degree of scope for action, particularly as regards the levying of taxes and charges in the transport sector.

4.3. In implementing the principle of territoriality, regional or local differentiations must be made in relation to the time of day a journey is taken; this would allow solutions to be found for specific problems relating to infrastructure, congestion and environmental factors. These special cases must be covered in Community arrangements, with adequate control mechanisms; in addition steps must be taken to prevent distortions in competition between the various transport modes and to create a clear direct link between the cause of the problem and the impact of the measures.

4.4. Revenue allocation must take account of the expenditure incurred by the regions and municipal authorities. Revenue must make it possible to finance not only the use, but also the expansion of new, multi-modal infrastructures.

4.5. As part of the machinery of fiscal policy, regional and local charges are, together with taxes and fuel excise duty, one way of meeting the costs incurred by the regions and municipal authorities. Obviously taxes must be aligned at Community level to head off distortions in competition. A degree of scope for action must be left open to other decision-making tiers, in line with the subsidiarity principle.

4.6. Charging systems must be structured as simply as possible and transaction costs kept to a minimum. Norms for the design and interoperability of these systems must be set at Community level. The actual development and management of the systems, however, must be left to the regions and local levels, who must be involved in this process from the outset.

4.7. Pricing principles must be determined on a consensual basis at every level and be based on the findings of research carried out into all modes of transport (i.e. not road transport first, the others later).

4.8. The practical application of the principle of territoriality means that the regions and municipal authorities have to be reimbursed in full for the transport costs they bear. This problem must be linked to the use of revenue and dealt with transparently.

4.9. A detailed analysis must be made of the role of each of the tiers of decision-making and their scope for action, if the principle of subsidiarity, which up to now has been paid mere lip service, is to be implemented in practice.

5. Conclusions

Without wishing to detract from the Commission's good intentions, it must be said that at the moment the green paper focuses primarily on the problem of road transport and bases its assumptions on unconvincing scientific premises and theoretical suppositions which have yet to be backed up by the facts. The line of argument is underpinned by studies which do not take adequate account of the economic costs of modes of transport, or pinpoint their respective merits. Nor does it answer the question of the extent to which, leaving aside political input, the proposed solutions can be realised in practice.

To be more specific, even a high-performance transport system embracing rail and inland waterways is no guarantee that the price differentials between the various different modes of transport will be enough to secure the required change in user behaviour. Such behaviour is determined by a whole range of, inter alia, physiological, historical and sociological factors which mean that demand for transport modes cannot be controlled via prices, and cannot be influenced adequately to change transport users' behaviour.

One solution to this problem is to continue traditional subsidy and financial aid measures for transport by rail and inland waterway. In this event, however, it would become impossible to use competitive prices as the main argument for the natural transfer of road transport to alternative modes, just as it would be equally impossible to use the balance between the revenue and the marginal costs of transport modes as a point of reference for the economic efficiency of transport systems.

Taxation and regulation are two instruments which, while capable of influencing transport mode choice, cannot bring about any substantial change in behaviour as long as no real alternatives are available. Alternative transport modes and a mixture of measures are needed since choice is influenced by various different factors. Price is one factor, but will only become a critical element if alternatives are also available.

Thus, the green paper must take its case a good deal further and back it with convincing figures which show that the concepts which have been in vogue for a number of years are in fact built on a solid foundation. At first sight, these concepts may appear tempting, but, in the end, turn out to be impractical. The infrastructure of rail and waterway transport are highly subsidized, while the infrastructure costs of road transport are, external costs apart, broadly covered by fiscal revenue. The high costs of infrastructure mean that the incorporation of external costs scarcely affects the privileged position enjoyed by road transport with its tax-based links between costs and revenue; rather, it merely serves to boost the productivity of competing transport modes.

For these reasons the Committee of the Regions offers the following opinion:

(1) The Committee welcomes the Green Paper - Towards fair and efficient pricing in transport - and the fact that the topics it covers have sparked off a debate on pricing procedures, while at the same time initiating a fundamental discussion among Community institutions, citizens and transport operators. The proposed methods of calculating the internal and external costs of transport are a first step requiring detailed discussion. The proposal nonetheless enhances the base for making political decisions on how high taxes and charges should be.

(2) The Committee of the Regions feels that the green paper's conclusions must form the basis for a restructuring of Community law in this area, with Europe's regions and municipal authorities taking their rightful place in the process. It is important to ensure the on-going development of the transport policy tools available to these regions and municipal authorities.

(3) The Committee calls for the external costs of transport to be internalized as transparently and as simply as possible; the methods used must be clearly understandable to companies and, broadly speaking, to ordinary people too. If no consensus emerges in the near future on how to proceed and no conclusive findings are reached soon, the Committee believes that the problem must be approached empirically and gradually; taxes, excise duties and road use charges should be levied and differentiated on the basis of environmental damage, traffic levels, time of day, length of trip and axle weight.

(4) The Committee shares the Commission's view that one aim of internalizing external costs is to calculate costs according to the principle of territoriality. Special arrangements or comprehensive measures must be made for particularly sensitive regions, conurbations and congested transport routes. In these cases, pricing structures must also be specially adapted, with the additional option of regulatory measures and limitations.

(5) The Committee calls for fair, efficient and socially acceptable prices which are also tolerable for industry. Transport users must also be encouraged to reduce external impacts. The argument for taking account of all impacts of pricing, as proposed in the draft Council Directive on the charging of heavy goods vehicles for the use of certain infrastructures, is a positive sign.

(6) The Committee endorses the clear statements made in the green paper, but points out the need to examine the external costs and infrastructures not already considered and, under this aspect, to look not only at road transport, but also other transport modes, infrastructures and transportation facilities.

Thus, in determining how to proceed and in developing proposals for other transport modes, it must not be forgotten how difficult it will be to bring the prices of these modes closer to the actual costs incurred, since they require massive spending on infrastructure.

(7) The Committee believes that cross-financing of various different transport modes, as is already the norm in urban areas, should also be permitted in other areas too, since this could provide an acceptable degree of mobility for people, while helping protect the environment.

(8) The Committee urges that ways be sought of using resources derived from a harmonized fuel price increase to create priority transport facilities in the Member State in which the revenue is generated.

(9) The Committee notes that economic growth in the regions of the European Union must continue to be guaranteed and, if need be, that compensatory measures should be taken where the tax burden is at saturation point.

Here too, the evaluation of the proposed measures must not lose sight of their overall financial impact. Moreover, it would be well to consider the proposed regulatory measures from the aspect of quality of life (both of the individual and of society) since the high tax burden makes people distrustful and dismissive of any finance policy measure (often tax-related) from the very outset.

(10) The Committee points out that technological development is essential for detailed and precise price differentiation, which must at least be a long-term goal.

Brussels, 16 January 1997.

The Chairman of the Committee of the Regions

Pasqual MARAGALL i MIRA

() OJ No C 59, 26. 2. 1997, p. 9.

APPENDIX to the opinion on the 'Proposal for a Council Directive on the charging of heavy goods vehicles for the use of certain infrastructures`

1. Point of departure

1.1. The provisional version of the Council Directive on the charging of heavy goods vehicles for the use of certain infrastructures (proposed new directive on transport infrastructure costs) is based on:

- Council Directive 93/89/EEC on the application by Member States of taxes on certain vehicles used for the carriage of goods by road and tolls and user charges for the use of certain infrastructures (directive on transport infrastructure costs) (); and

- the green paper - Towards fair and efficient pricing in transport - Policy options for internalizing the external costs of transport in the European Union (COM(95) 691 final).

1.2. Article 12 of Directive 93/89/EEC, which deals with transport infrastructure costs and is in force at the moment, stipulates that, by 31 December 1997 at the latest, the Commission is enjoined to draw up a report on the directive's implementation and, if need be, to submit proposals for introducing road pricing arrangements based on the principle of territoriality.

1.3. Directive 93/89/EEC was annulled by the European Court of Justice in July 1995 on the grounds of procedural irregularities. It was decided however that the directive would remain in force until the Council had adopted new legislation, hence the need for a new directive on transport infrastructure costs.

2. Comments and observations on the directive

2.1. The premises underlying the provisional version of the new directive on transport infrastructure costs reflect today's thinking on modern transport policy within the European Union.

The municipal authorities and regions back a new directive on road transport infrastructure costs, but stress that tax provisions alone will not be enough to change users' choice of transport mode unless viable alternatives are provided and that, by themselves, prices will not secure a satisfactory switch to other modes of transport.

2.2. The regions and local authorities therefore believe that this new directive on road transport infrastructure costs is but a first step in solving the problems clearly highlighted in the green paper - Towards fair and efficient pricing in transport. It is stressed, however, that the comments made in the opinion on the green paper still hold good, particularly on road pricing in line with the polluter-pays principle and the incorporation of other modes of transport, taking account in particular of all conditions prevailing at the time.

2.3. The Committee of the Regions recognizes that the provisional version of this new directive is based on the principles and objectives of the green paper - Towards fair and efficient pricing in transport. The rates for taxes and charges contained in the draft directive - or rather in annexes 1 to 3 - (which are generally given in terms of minimum and maximum values) however clearly show that this is only a first step. This is confirmed by the sometimes substantial differences between this provisional version and the Commission's first working document of March of this year.

The municipal authorities and regions, however, believe that the imbalance between the prices paid by transport companies and the actual costs involved must be bridged as quickly as possible so that charges can be made where the costs concerned arise.

2.4. The sliding scale of charges to take account of damage to the environment caused by different types of vehicle and the 10 % difference between non-EURO class vehicles and EURO I and EURO II vehicles are acceptable. However, the classification of existing minimum tax levels for vehicles which fall outside any EURO classification, and the reduction of 10 or 20 % for vehicles in the categories EURO I or EURO II means a reduction in vehicle tax against today's figures.

Since such measures are also at odds with the principles and objectives set out in the Green Paper - Towards fair and efficient pricing in transport - the municipal authorities and the regions demand that the minimum levels should be set for vehicles which meet the standards of the best available technology (EURO II category is mandatory for all new vehicles licensed from 1 October 1996 onwards) and that a 10 % supplement be levied on EURO I vehicles, rising to 20 % for non-classified vehicles.

2.5. As for tolls and user charges, the provisional version of the directive refers for the first time to external costs and the inclusion of sensitive routes. This meets the demands made in the COR Opinion on the Common Transport Policy Action Programme 1995-2000 (). At the same time, however, the proposed directive sets inter alia maximum levels for sensitive areas.

The municipal local authorities and the regions propose a gradual move from today's maximum levels to charges for the actual costs incurred.

2.6. With regard to road tolls, the provisional version, on the one hand, provides only for charges to be calculated in proportion to the length of time the infrastructure is used and not in relation to on-road performance (i.e. on the basis of the actual distance travelled); on the other hand, the levels of these user charges, calculated on monthly, weekly or daily basis are set as a percentage of the annual rate and are lower than in the past.

The Committee of the Regions therefore rejects the new user charges paid on a monthly, weekly and daily basis, since these are lower than those prescribed under the infrastructure costs directive in force up to now. Moreover, the part-payment arrangement is cheaper than the annual charge. This arrangement would also represent an increase in red tape.

2.7. Annexes I and II to the provisional version of the directive assign vehicles into damage classes. As we have pointed out above, this approach is basically correct and to be welcomed. Annex II, however, which classifies vehicles according to the degree of damage they cause to the road surface, shows that, as technology stands at the moment, most vehicles would be placed in sub-categories II and I. The maximum amount of annual user charges in line with damage class are, at least in part, lower than present road use charges of ECU 1 250 per annum. This would again have the effect of making goods carriage by road cheaper in the future.

As we have noted, a reduction in the cost of goods carriage by road would be a blatant contradiction both of the statements made on modern transport policy within the European Union and the Green Paper - Towards fair and efficient pricing in transport; the Committee of the Regions therefore believes that the new user charges must, in part, be rejected. This means that problematic vehicles of 38 tonnes and more must not be assigned to damage class I.

() OJ No L 279, 12. 11. 1993, p. 32; OJ No L 71, 15. 3. 1994, p. 26.

() OJ No C 337, 11. 11. 1996, p. 13.