WRITTEN QUESTION E-2579/01

by Jules Maaten (ELDR) to the Commission

(24 September 2001)

Subject: Environmentally harmful subsidies, with particular reference to road transport and energy

1. Environmentally harmful subsidies are those granted with a particular objective, often unrelated to the environment, but which may have unintended negative side-effects on the natural and social environment. A study by Van Beers and De Moor (Public Subsidies and Policy Failures. How Subsidies Distort the Natural Environment, Equity and Trade, and how to reform them, Edward Elgar Publishers, Cheltenham, UK, 2001) shows that environmentally harmful subsidies are a widespread phenomenon in the road transport sector. These include in particular fuel prices which are too low, public expenditure on the construction and repair of new roads and bridges, failure to levy parking charges, and a lump sum payment for travel to work by car. Does the Commission have a sufficient overview of these hidden environmentally harmful subsidies?

2. Is the Commission prepared to carry out detailed studies on hidden environmentally harmful subsidies in the transport sector?

3. Does the Commission agree with De Moor and Van Beers (Het internationale klimaatcompromis [The international climate compromise], Economisch-Statistische Berichten, 29/06/2001, p. 552-554, and André de Moor, Towards a Grand Deal on subsidies and climate change, Natural Resources Forum 25 (2001), 167-176) that, in the negotiations on Kyoto with the USA, a compromise can be found with the USA on one of its objections (non-participation by developing countries)? This could be done by proposing that all environmentally harmful energy subsidies be abolished in the OECD countries provided the OECD countries use (part of) the funds thus released for financial aid and technology transfer to help the developing countries do the same, with the developing countries offering in return to cooperate in international agreements on emissions reduction and accept national objectives for the emission of greenhouse gases.

4. Is the Commission prepared to launch an investigation within the EU in order to obtain a good overview of hidden energy subsidies?

Answer given by Mrs Wallström on behalf of the Commission

(23 November 2001)

1. The Commission is well aware of the existence of subsidies harmful to the environment including in the transport sector.

The Commission therefore plans to propose a framework directive to establish principles of infrastructure charging and pricing structure for all modes of transport in 2002. In many cases, it is the structure rather than the overall level of prices and charges that creates incentive structures harmful to the environment.

2. The research project UNITE (Unification of accounts and marginal costs for Transport Efficiency) funded under the 5th Framework Programme for Research and Technological Development will develop pilot transport accounts for the fifteen Member States plus Switzerland, Hungary and Estonia. These accounts will comprise of all modes of transport and of all costs (both fixed and variable) of the transport system and the revenues collected in the form of taxes, charges and subsidies to cover the costs. The cost elements covered are infrastructure, accidents, emissions, noise and congestion. By comparing the costs with revenues, an indicator for hidden subsidies can be derived. All the results of UNITE will be publicly available by summer 2002 while the pilot accounts for Germany and Switzerland will be completed by the end of 2001.

3. Whether the proposed Grand Deal would be acceptable or not for the United States and the developing countries is difficult to say for the Commission. However, the basic premise of all environmentally harmful energy subsidies being removed within the Organisation for Economic Cooperation and Development (OECD) countries seems somewhat hypothetical, taking into account the social and regional considerations other than environmental protection lying behind the existence of such subsidies. As far as the Community is concerned, it is to be noted that the amount of energy subsidies, in particular in the hard coal sector, is showing a clear downward trend, that is expected to continue in the coming years.

The issue of developing countries accepting quantitative emission limitations similar to the ones by OECD countries, will have to be negotiated under the UN Framework Convention on climate change for the period after 2012.

4. One of the actions contained in Commissions proposal for a 6th Environment Action Programme(1) is that of undertaking an inventory and review of energy subsidies in the Member States with consideration to the compatibility with climate change objectives.

(1) COM(2001) 31 final.