EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 8.7.2008 
SEC(2008) 2209 
  
COMMISSION STAFF WORKING DOCUMENT 
 
accompanying the 
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
Strategy for an internalis ation of external costs 
  
and the 
 
Proposal for a 
 
DIRECTIVE OF THE EUROPEAN PA RLIAMENT AND OF THE COUNCIL 
 
amending Directive 1999/62/EC on the charging  of heavy goods vehicles for the use of 
certain infrastructures  
  
Summary of the Impact assessment on th e internalisation of external costs  
{COM(2008) 435 final} 
{COM(2008) 436 final} 
{SEC(2008) 2208} 
EN 3   EN COMMISSION STAFF WORKING DOCUMENT 
Impact assessment on the internalisation of external costs 
When amending Directive 1999/62/EC on chargi ng heavy goods vehicles (HGV) for the use 
of infrastructure in May 2006, the European Pa rliament and the Counc il stipulated that: “ No 
later than 10 June 2008, the Commission shall present, after examining all options including 
environment, noise, congestion and health-related  costs, a generally applicable, transparent 
and comprehensible model for the assessment of all external costs to serve as the basis for 
future calculations of infrastructure charges ”. The amending dire ctive adds that: “ This model 
shall be accompanied by an impact analysis of th e internalisation of external costs for all 
modes of transport and a strategy for a stepwise  implementation of the model for all modes of 
transport. The report and the model shall be ac companied, if appropriate, by proposals to the 
European Parliament and the Council for further revision of this Directive ”. 
The present impact assessment focuses on the inte rnalisation of external costs of noise, air 
pollution, climate change, congestion and acci dents from heavy goods vehicles and other 
transport means through market based instruments such as charges, taxes or tradable permits. 
It analyses the options for intern alising external costs in HGV tolls in order to revise Directive 
1999/62/EC and the options for internalising extern al costs in other modes of transport such 
as railways, aviation, maritime and inland waterways. 
1. PROBLEM DEFINITION  
Transport activities produces nuisa nces which have a cost for others. Most of the time, these 
costs are external, meaning that they are not borne by those who generate them, but by other 
transport users (congestion, accidents) and society (environmental costs). 
Given its environmental externalities, transport is already exposed to a number of regulatory 
measures. In addition, transport activities, including vehicle purch ase, ownership and use, are 
subject to numerous taxes and charges, whic h may overall compensate, and in some cases 
maybe even over-compensate, for some of their social  costs. It is therefore is necessary to take 
into account the existing situati on to avoid double char ging for the same external cost. The 
question, however, is to ascertain  to what extent existing measur es allow external  costs to be 
internalised, in other words whether the price si gnals given by these exis ting charges, taxes or 
subsidies incite the developmen t of new technologies, new ways of transportation or a change 
in consumer behaviour.  
Although there is some evidence th at some degree of internalis ation of external costs is 
already in place, transport users do not bear all th ese costs or they pay in ways not related to 
external costs. In most cases, government measures are fragmented and do not tackle 
explicitly these market failures. The problem is  that the structure of existing levies does not 
give a price signal efficient enough to  influence the mobility behaviour. 
Leaving the situation unchanged would mean th at transport would co ntinue to generate 
nuisances that would not be borne by transport us ers. However, this is not to say that nothing 
would be done as there are other instruments e ither in existence (e.g.  vehicle taxes, Euro 
classes) or being discussed at the EU institutio ns (e.g. ETS for aviation, CO2 and cars rules) 
EN 4   EN to fight external costs. Without  internalisation, tran sport price would con tinue to give a wrong 
signal to users who would not have enough incen tives to use cleaner vehicles and avoid 
congested routes at peak times. 
2. OBJECTIVES  
The general objective for the EU is to “ensure  that our transport systems meet society 
economic, social and environmental needs whil st minimising their undesirable impacts on the 
economy, society and the environment". 
However, this impact assessment is only concerned with a specific objective of the 
Commission which, following the precise request of  the legislator, is to  propose a strategy to 
internalise external costs generated by transport.  By internalising external costs, transport 
prices are expected to give th e right signal to transport users, to improve the efficiency of 
infrastructure use and contribut e to reducing negative extern alities such as congestion, 
accidents and environmental emissions. This objective should not hamper the competitiveness of the economy and should avoid any undue burden on transport.  
The following operational  objectives are to: 
– propose a stepwise strategy to promote the intern alisation of external costs for all modes of 
transport, creating incentives for users to make  efficient use of transport infrastructure.  
– as a first step, and taking into account the fact  that a proposal for introducing an ETS in air 
transport has already been formulated enable and encourage Member State to implement in 
a consistent way on motorways and other road s efficient road usage charges leading to 
more sustainable mobility. This would lead to the revision of Directive 1999/62/EC.  
3. P
OLICY OPTIONS  
A set of policy options has been analysed, also with the help of modelling tools.  
The reference scenario  (no new actions) does not consider  any new proposal to ensure the 
internalisation of external costs, but takes into account the forthcoming measures aimed at 
reducing environmental nuisances. Th ese relate mostly to climate change external costs; they 
are not part of a comprehensive strategy for internalisation and do not  cover all modes of 
transport.  
The second scenario  analyses the impact of charging for external costs in road freight 
transport. This policy option w ould lead to a revision of Dire ctive 1999/62/EC. Three variants 
have been analysed:  
– charging for air pollution and noise costs,  
– charging for air pollution, noise and CO 2,  
– charging for air pollutio n, noise and congestion.  
A third scenario  would ensure that external costs can be  charged for, not only in road freight 
transport as in Policy Option 2, but also in al l other modes of transpor t, i.e. rail, aviation, 
EN 5   EN maritime and inland waterways in order to ensure  equal treatment in all modes of transport. 
Two variants have been analysed: 
– charging for air pollution and noise costs in  all modes of transport, charging for CO 2 in 
maritime, inland waterways and railways,  
– charging for air pollution, noise and CO 2 in all modes of transport. 
4. ANALYSIS OF IMPACT  
In all policy options, internalisation of external costs does not hamper mobility in Europe 
although charging modifies the ch oice of transport users and infl uences modal split. However, 
it appears that charging for congestion in road transport leads to more positive effects as it 
contributes to saving time while  decreasing fuel consumption and environmental nuisances.  
The economic impact of internalising external costs is negative in the short term as the 
increase in transport costs outw eighs the other effects. However,  the share of transport costs 
varies in industrial sectors and would probably lead to an increased efficiency in the transport 
of goods. On the whole, there are grounds for be lieving that the reduction of external costs – 
congestion, environmental costs, and the reductio n of fatalities will improve Europe's overall 
competitiveness as these costs are currently bo rne by European society at large. Moreover, 
charging for congestion induces tim e savings which will be translated into productivity gains 
for business.  
The implementation of a charging scheme leads to an overall reduction in environmental 
external costs of about 1 billion euros per year. The strong reduction of CO 2 emissions in the 
case of congestion charging is mostly due to th e reduction of fuel consumption. According to 
some studies, vehicle fuel consumption incr eases by approximately 10- 30% under heavy 
congestion.  
The distributional impacts of internalisati on are quite modest a nd do not contribute to 
increasing inequalities. This could stem from the fact that lower income people tend to use more public transport and do not feel impacted  by charging of private cars. One aspect the 
models cannot capture is the positive effects of the reduction of external costs on health. The 
reduction of air pollution will have a positive impact on health, especially in densely populated areas and in alpine a nd other populated mountain valleys. 
Taking the revenues from tolls in different polic y options, operational costs would vary from 
12% to 25% of revenues in the EU25. These estimates do not consider existing schemes. In some countries such as Germany, Austria or the Czech Republic, an electronic system is 
already in place and operational costs range betw een 15% and 20% of revenues. Accordingly, 
the estimates provided above might be lower in some Member States.  
The use of the revenues from charging for externalities should ta ke into account the 
advantages for the Community of international tra ffic. In the case of road  freight transport, the 
share of international traffic in total road fr eight traffic in the EU- 27 is 27%. However, in 
seven Member States, it is higher than 50% with a peak of 84% in Estonia and 77% in 
Luxembourg. Given the increase in international ro ad freight traffic, it s share of EU27 traffic 
is expected to reach 33% with a peak of 90%  in Estonia. In the absence of earmarking, 
Member States would tend to maximise their na tional welfare without ta king full account of 
the benefits of sustainable mobility at Community level.  
EN 6   EN The absence of transparency and accountability c ould result in some cases in overcharging of 
international transport, which in turn ma y impact negatively on mobility, freedom of 
movement and the internal mark et. Overcharging may also have  negative impacts at local 
level. First experiences with tolled motorways in Hungary in the 1990s; for instance failed 
because charges were set at a leve l beyond the users' capacity to pay.  
The most important provisions in the current  Directive to ensure accountability of 
infrastructure costs are the recourse to a common method for calculating costs and the 
adoption of common charging princi ples. Member States can deci de to recover only some of 
the costs calculated according to this comm on methodology. As to external cost charges, a 
similar approach could be envisaged. 
5. COMPARING THE OPTIONS  
The quantitative and qualitative an alysis appears to show that the option including congestion 
charges offers the best results. First, the reduction of time spent induces positive effects in the economy as transport goods flow more easily. Second, congestion charging induces strong 
reduction of external costs. Fr eer flows impact on fuel consum ption, which in turn induces 
less CO
2 emissions. For these reasons, welfare effects are higher in this scenario. 
When charging all modes of transport, mobilit y is largely maintained while environmental 
emissions and fatalities decr ease. Congestion is not analys ed, therefore all the positive 
impacts due to congestion charging are not prov ided in this case. From an acceptability point 
of view, the public consultation has shown strong support for char ging all modes of transport. 
However, the international dimension of mariti me and air transport needs to be considered 
when implementing an internalisation strate gy. In addition, in policy option 3, the impact on 
employment relies heavily on the use of revenues.  
Preferred options: Strategy to internalise external costs in all modes 
For reasons of fairness, all modes of transp ort should be concerned by internalisation. 
However, given the international framework of  maritime, aviation and inland waterways, the 
strategy will be developed in a longer term perspective.  
The comparison of scenarios gives some indica tion of the preferred policy option. Option 3B 
covers other modes and would involve internalising air po llution, noise and CO 2 in the other 
modes. Extending internalisation to other modes of transport im proves overall sustainability.  
On this basis, a work programme would be  elaborated, taking into consideration the 
desirability of charging for extern al costs (air pollution, noise, CO 2) in other modes of 
transport.  
In the railways directive, the im pact assessment mentions that charging for external costs was 
already envisaged in the ex isting EU legislation (Direct ive 2001/14/EC). Once the 
Eurovignette has been revised to allow inte rnalisation, railways would have further 
opportunities to internalise external costs.  
In air transport, inclusion in the ETS is an important step to fight CO 2 emissions. Ongoing 
work on the reduction of Nox emissions would give the opportunity to analyse a pricing 
mechanism in this context.  
EN 7   EN In maritime transport, the growth of CO 2 and air pollutants emissions shows the need to take 
actions in this field. Given the international framework for maritime, a solution such as the ETS could be one of the outcomes of the analysis.  
Finally, consideration will also be given to inla nd waterways, taking into account the fact that 
many of them have their specific regulatory  environment, e.g. the Manheim Convention.  
Preferred options: Revision of Directive 1999/62/EC in June 2008 
As mentioned above, road freigh t transport contribute s to a large share of external costs. 
Internalising these costs, which requires Direc tive 1999/62/EC to be amended is therefore an 
essential component of the broa der strategy to internalise exte rnal costs in all modes of 
transport.  
Tackling road freight transport external costs is not the first step in this broader strategy since 
a proposal has already been made  for inclusion of aviation in ETS The revision of Directive 
1999/62/EC is also necessa ry to unblock the legi slative bottleneck that  prevents tackling 
externalities in rail transport.  
Acting in road transport while other policy in itiatives in other modes are being developed 
would not negatively affect the trend in externali ties, since it would be consistent with higher 
relative charging of th e mode with larger  externalities.  
In the framework of this analysis, the polic y options corresponding to  charging air pollution, 
noise and congestion in freight road transport se em to offer the best combination in terms of 
mobility and sustainability. A differentiated charging scheme based on the costs of air 
pollution and noise allows local environmenta l externalities to be taken into account. 
Integrating a congestion charge into such sc hemes produces time savings which lead to a 
positive impact on the economy at large. Conges tion charging is more efficient if passenger 
and freight transport are concerned as both comp ete for the same infrastructure. This element 
is supported by the result of the public consultation which was in favour of an option "charging for freight and passenger cars”. In a ddition, the reduction of travel time also 
contributes to reducing CO
2 emissions. Interestingly, charging for freight and passenger cars 
leads to a reduction of environm ental costs similar to policy options that include a specific 
CO 2 mark-up.  
The analysis assumed that all Member Stat es are charging. However, the benefits and 
drawbacks of a mandatory vers us and optional/empowering appr oach have been considered 
together with the link with subsidiarity is sues. A number of considerations suggest 
considering first an empowering approach: 
– There may still be uncertainties related to the costs, benefits and enforcement of the 
required tolling systems on the networks of some Member States with lower traffic and thus with low levels of externalities.  
– A binding approach based on a mandatory char ge would constitute a radical change 
compared with the current Directive and coul d hardly be envisaged without a transitional 
period.  
– Member States have traditionally followed differing approaches regarding infrastructure 
charging and consequently have different levels of experience with the tolling technology 
involved. Interoperability i ssues are not yet solved. 
EN 8   EN – A flexible and gradual phasi ng in approach would allow the new charging schemes and 
tolling technology to be trialled  in Member States where th e geographical conditions are 
the most appropriate. 
– The actual implementation and operational ex perience gathered in the early adopter 
Member States would allow a thorough stocktak ing to be carried out at a later stage. A 
joint assessment of the pros and cons of making external co st charging mandatory for all 
Member States and the required degree of EU  co-ordination can then be reviewed.  
Such a policy option, based on an enabling appr oach, would entail the revision of Directive 
1999/62/EC as a first step in the internalisati on strategy. The main amendments would be: to 
authorise the calculation of road charges on th e basis of the external costs, namely air 
pollution, noise and congestion and to differen tiate the charges accordingly. Such charging 
schemes would be subject to a number of conditions to improve  their efficiency and their 
chance of success such as the use of electronic free flow tolling technol ogies to facilitate 
implementation by reducing costs, and loca l inconveniences and allowing subsequent 
extension to all roads. For subsidiarity reasons, the Directive will not cover passenger cars. However, charging to reduce congestion is more e ffective if other road users outside the scope 
of this Directive are also covered by a similar scheme. Th is positive impact should be 
acknowledged.