Commission staff working document accompanying the communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Strategy for an internalisation of external costs and the proposal for a directive of the European Parliament and of the Council amending Directive 1999/62/EC on the charging of heavy goods vehicles for the use of certain infrastructures - Impact assessment on the internalisation of external costs {COM(2008) 435 final} {COM(2008) 436 final} {SEC(2008) 2209}
Date: 2008-07-08
Institutions: European Commission
Subjects: charges for use of infrastructure, common price policy, common transport policy, fixing of prices, impact study, transport price

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.7.2008 
SEC(2008) 2208 

COMMISSION STAFF WORKING DOCUMENT 

accompanying the 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Strategy for an internalisation of external costs 

and the 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Directive 1999/62/EC on the charging of heavy goods vehicles for the use of 
certain infrastructures  

Impact assessment on the internalisation of external costs 

{COM(2008) 435 final} 
{COM(2008) 436 final} 
{SEC(2008) 2209} 

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COMMISSION STAFF WORKING DOCUMENT 
Impact assessment on the internalisation of external costs  
accompanying  
the proposal for a directive amending Directive 1999/62/EC on the charge 
of heavy goods vehicles for the use of certain infrastructures  
and a Communication on the internalisation of external costs  

{COM(2008) 435 final} 
{COM(2008) 436 final} 
{SEC(2008) 2209} 

Lead DG: TREN 

Other involved services: ECFIN, EMPL, ENTR, ENV, SG, JRC, TAXUD 

Agenda planning or WP reference: TREN/2008/023, TREN/2008/73  

Executive summary 

When amending Directive 1999/62/EC on charging heavy goods vehicles (HGV) for the 
use of infrastructure in May 2006, the European Parliament and the Council stated1 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 Directive adds that: “This model shall be accompanied by an impact analysis 
of  the  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  accompanied,  if  appropriate,  by  proposals  to  the  European  Parliament 
and the Council for further revision of this Directive”. 

The present impact assessment focuses on the internalisation of external costs of noise, 
air  pollution,  climate  change,  congestion  and  accidents  from  heavy  goods  vehicles  and 
other  transport  means  through  pricing  instruments  such  as  charges,  taxes  or  tradable 
permits. It analyses the options for internalising external costs in HGV tolls in order to 
revise  Directive  1999/62/EC  and  the  options  for  internalising  external  costs  in  other 
modes of transport such as railways, aviation, maritime and inland waterways. 

The problem definition highlights the following elements: 

-  the  diversity  of  tax  and  charge  systems  across  Member  States  and  across  modes  of 
transport which generally fails to give the right price signals to users.  

-  implementing  an  internalisation  strategy  in  road  transport  may  lead  to  issues  such  as 
traffic  detour,  lack  of  public  and  impact  on  the  internal  market  that  might  mitigate  the 
effectiveness of instruments. Therefore, traffic diversion, public acceptability, the use of 

1 

Article 11 of Directive 1999/62/Ec as amended by Directive 2006/38/EC. 

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new technologies and enforcement aspects should be considered in the analysis of impact 
and the comparison of options. 

-  if  nothing  is  done,  Member  States  have  limited  scope  for  internalisation  since  the 
current Directive on infrastructure charging in road transport does not allow to do so for 
heavy  goods  vehicles  (HGV)  and  the  current  Directive  on  infrastructure  charging  in 
railways  allows  mark-ups  for  external  costs  under  certain  conditions.  The  revision  of 
Directive on infrastructure charging in road transport should be a first step in the strategy 
of internalisation of external costs.  

A  set  of  policy  options  has  been  analysed,  also  with  the  help  of  modelling  tools.  An 
option  analyses  the  impact  of  charging  external  costs  in  road  freight  transport.  This 
policy option would lead to a revision of Directive 1999/62/EC. Three variants have been 
analysed: charging for air pollution and noise costs, charging for air pollution, noise and 
CO2, charging for air pollution, noise and congestion. Another policy option envisages 
charging air pollution, noise and CO2 in all modes of transport.  

The results of the analysis of impact show that mobility is practically maintained as the 
reduction  of  traffic  in  road  freight  transport  is  almost  completely  compensated  by  an 
increase in other modes. The impact on GDP and efficiency varies across policy options 
and  can  be  negative.  However,  the  results  of  the  models  cannot  capture  some  benefits 
such as the improvements in health and human well-being derived from the reduction of 
environmental emissions and the improvement of safety. The reduction of external costs 
would benefit to citizens and contribute to improving welfare.  

The  comparison  of  selected  quantitative  and  qualitative  criteria  allows  identifying 
preferred options. Policy option 2C – charging for air pollution, noise and congestion in 
road freight transport – allows maintaining sustainable mobility while limiting negative 
economic and social impact. Policy option 3B – charging for air pollution, noise, CO2 in 
all  modes  –  gives  also  evidence  of  the  best  combination  of  these  effects.  Sensitivity 
analysis  and  implementation  issues  also  suggest  practical  steps  to  initiate  a  stepwise 
strategy of internalisation.  

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1. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

1.1. 

Preliminary Remarks on the scope of the Impact Assessment 

1.1.1.  The request of the EU legislator 

When amending Directive 1999/62/EC on charging heavy goods vehicles (HGV) for the 
use of infrastructure in May 2006, the European Parliament and the Council stated2 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 Directive adds that: “This model shall be accompanied by an impact analysis 
of  the  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  accompanied,  if  appropriate,  by  proposals  to  the  European  Parliament 
and the Council for further revision of this Directive”. 

The current impact assessment focuses on the internalisation of external costs from heavy 
goods  vehicles  and  other  transport  means  through  pricing  instruments  such  as  charges, 
taxes  or 
the  Commissions  work  programme 
(TREN/2008/073 and TREN/2008/023) and of the Green Transport Package. 

tradable  permits.  It 

is  part  of 

The objective of the internalisation of external costs is to provide a clear and correct price 
signal  to  the  transport  users  so  as  to  influence  their  behaviour.  It  should  lead  to  an 
improvement in transport efficiency as transport users will base their decisions upon the 
price mechanism in accordance with the principle that the user and polluter pays for the 
costs they generate. Furthermore, setting the pricing which includes social costs should 
provide incentives that are consistent with greater sustainability of transport activities. 

1.1.2. 

Scope of the impact assessment 

The request from the EU legislator requires looking at the internalisation of external costs 
in  the  charges  levied  on  heavy  goods  vehicles,  but  also  mentions  the  need  to  analyse 
these  issues  in  other  modes.  The  scope  of  this  impact  assessment  is  limited  to  pricing 
based internalisation measures. Internalisation of external costs should lead to a reduction 
of external costs. However, in presence of rigid demand resulting from, or combined with 
different other market failures (producing lack of alternatives, low incentive to buy clean 
vehicles…), other tools such as regulation, infrastructure policy or research support can 
be used in complementary and mutually reinforcing ways (see box 2).  

1.1.2.1.  Internalisation of external costs in all modes of transport 

For  reasons  of  fairness  and  efficiency,  the  request  of  the  European  legislator  explicitly 
referred to the need to carry out an analysis not only for road transport but also in other 
modes of transport.  

2 

Article 11 of Directive 1999/62/Ec as amended by Directive 2006/38/EC. 

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Internalisation is already foreseen in some cases. The EU legislation addresses charging 
issues  in  railways  in  Directive  2001/14/EC.  According  to  this  Directive,  infrastructure 
managers are obliged to charge all trains for access to infrastructure to recover the costs 
of  operating  the  train  service.  They  have  the  possibility  to  charge  for  external  costs 
(article 7). According to the Directive, "charging of environmental costs which results in 
an increase in the overall revenue accruing to the infrastructure manager shall however 
be allowed only if such charging is applied at a comparable level to competing modes of 
transport" (article 7). 

The  situation  is  different  in  other  modes  of  transport.  Internalisation  of  external  costs 
within the TENs is not allowed in the current Eurovignette if it leads to extra-revenues 
(see below 1.1.2.2). However, Member States are free to apply tolls or user charges on 
roads other than those on the trans-European network, including for the internalisation of 
external  costs.  Member  States  are  also  equally  free  to  apply  charging  schemes  to 
passenger cars. The Commission considers that, for reasons of subsidiarity, the decision 
whether  to  internalise  or  not  is  best  left  in  these  cases  to  the  Member  States.  Still,  the 
existing  Eurovignette  and  railways  legislation  opens  new  avenues  for  reflection  and 
possible action in other modes of transport.  

In air transport, the Commission has recently proposed to include air transport in ETS, 
which  contributes  to  internalising  the  cost  of  greenhouse  gas  emissions.  In  waterborne 
transport,  the  EU  legislation  does  not  propose  at  the  moment  any  measures  on 
internalisation.  Navigation  in  the  river  Rhine  which  covers  the  main  part  of  inland 
waterway  transport  is  subject  to  the  revised  Mannheim  convention  which  exempts 
navigation from pricing issues. As regards maritime, the Community has identified many 
challenges to strengthen the competitiveness of European ports, but has left pricing issues 
to national initiatives.  

This  impact  assessment  will  analyse  the  impact  of  internalisation  of  external  costs  not 
only for HGV, but also in other modes of transport such as railways, aviation, maritime, 
inland waterways and cars. 

1.1.2.2.  Charging for external costs in Directive 1999/62/EC 

In  some  cases,  HGV  compete  with  railways.  Therefore,  allowing  internalisation  in  the 
framework  of  the  existing  directive  on  infrastructure  charging  would  give  further 
opportunities to internalise external costs in the railways sector and other modes.  

Directive  1999/62/EC allows but does not  oblige Member States to charge road freight 
vehicles over 3.5 tons on the roads belonging to the trans-European network. Tolls can 
not  exceed  the  recovery  of  infrastructure  costs.  The  infrastructure  costs  are  defined  as 
being  the  costs  of  constructing,  operating  and  maintaining  the  infrastructure  network 
concerned and may include a profit margin based on market conditions. Tolls can vary no 
more than 50% at constant revenue. 

The amending Directive 2006/38/EC allows a toll mark-up of up to 25% in mountainous 
areas  on  an  exceptional  basis  if  earmarked  to  finance  the  construction  of  priority 
European projects in the same corridor. It also allows a higher variation of tolls of up to 
100%, without fixing a minimum, according to the EURO class of vehicles, the time of 
day, type of day or season to tackle congestion. However, the variation is allowed only if 
it does not generate additional tolling revenues. Moreover, the Directive does not address 

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the variations of tolls between roads crossing areas exposed to different level of external 
costs (in-built areas and rural areas).  

The current Directive therefore does not allow levying charges specifically designed to 
reflect external costs, nor does it provide a framework for fully varying existing tolls, i.e. 
beyond  100%.  Hence  the  request  of  the  legislator  to  propose  a  methodology  to  assess 
external costs and to analyse whether it may serve as the basis for calculating an external 
cost element in tolls levied on HGVs.  

This impact assessment will analyse the options to internalise external costs in HGV tolls 
in order to revise Directive 1999/62/EC. The revision of Directive 1999/62/EC is a step 
to  allow  internalisation  in  a  mode  which  competes  with  railways  in  some  networks  by 
giving incentives to internalise.  

1.1.2.3.  Internalisation of external costs in urban transport 

Although many external costs of road transport are related to the use of vehicles in cities, 
the current exercise does not deal with this issue. The high diversity of mobility patterns 
between  different  cities,  both  for  freight  and  passenger  transport,  makes  analysis  at  an 
EU  level  much  more  difficult  than  that  of  long  distance  transport,  which  is  also  at  the 
heart  of  the  Common  Transport  Policy.  In  addition,  other  instruments  such  as  parking 
policies,  public  transport  or  promotion  of  walking  and  cycling  are  specific  to  urban 
policies  and  would  need  a  full  separate  analysis.  Analysis  in  urban  transport  will  be 
provided when it comes to congestion. However, the impact assessment will not provide 
a pricing strategy in cities as it is considered that in this field policy decisions are better 
taken  at  a  level  that  is  closer  to  the  citizens  and  their  particular  circumstances.  The 
forthcoming  Action  Plan  on  urban  mobility  will  cover  both  passenger  and  freight 
transport.  It  will  address  internalisation  in  urban  areas  while  respecting  the  subsidiarity 
principle. Improving the quality of policy making in this field through the harmonisation 
of  rules  and  standards  and  the  interoperability  of  technologies  could  contribute  to 
creating a common framework in this field. In addition, the exchange of experiences and 
knowledge can play a role. . 

1.1.2.4.  The treatment of infrastructure costs 

In  most  cases,  the  EU  legislation  allows  Member  States  to  recover  infrastructure 
maintenance,  operation  and  construction  costs  through  charges  for  the  use  of 
infrastructure, provided that a number of general principles like non discrimination and 
transparency  are  respected.  This  possibility  is  used  to  some  extent  by  Member  States. 
Tolls are levied on only 3% of the total trunk and motorways network.  

The request of the EU legislator does not question the flexibility left to Member States on 
infrastructure pricing and concerns only external costs.  

However, in order to assess the impact of charging external costs, existing charges levied 
to recover infrastructure costs in road transport will be taken into account in the analysis 
of  impact  of  policy  options  (see  part  4  and  5  below).  In  the  modelling  exercise,  the 
approach leaves all existing charges for infrastructure as they are and puts internalisation 
charges on top of them.  

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Box 1: Infrastructure Costs 

Variable infrastructure costs 

Infrastructure use costs correspond to the variable part of infrastructure costs. Although it 
is  often  difficult  to  distinguish  the  variable  cost  from  the  fixed  costs,  it  is  generally 
considered  that  variable  infrastructure  costs  cover  maintenance  and  operating  costs 
(expenditures  for  road  maintenance,  expenditure  for  dredging  a  canal  or  a  harbour). 
These costs vary with traffic volumes, vehicles weight per axle and weather conditions.  

However, only a part of these variable costs can be considered as external cost insofar as 
they  are  imposed  by  some  users  on  other  users.  Damage  costs  by  vehicles  could  be 
considered as external costs.  

Infrastructure construction costs  

Traditionally,  construction  costs  have  been  borne  by  public  authorities  or  by  operators 
linked  to  public  authorities.  In  most  cases,  it  is  still  true  nowadays  although  some 
infrastructures  are  increasingly  provided  by  the  private  sector  (subject  to  public-private 
partnership contracts) in some Member States and some modes (motorways, airports…).  

The impact assessment assumes that the recovery of construction cost is independent of 
the  internalisation  of  external  costs.  This  “separation”  assumption  is  quite  realistic  for 
most external costs (air pollution, noise, accidents) as cost recovery payments are weakly 
related to the costs drivers of these externalities (e.g. vehicle characteristics, population 
density, etc). However, as to congestion, charging for it provides under certain conditions 
(i.e.  absence  of  economies  or  diseconomies  of  scale,  absence  of  indivisibilities)  an 
optimal expansion pathway for the infrastructure. Conversely, cost recovery pricing may 
integrate in the price a congestion differentiated signal reflecting the need to provide for 
additional capacities. If infrastructure is correctly dimensioned and planned through cost-
benefit  appraisal,  cost  recovery  pricing  (e.g.  based  on  two-part  tariffs)  may  not  be 
conceptually too different from long term marginal cost pricing of congestion in which 
new vehicles are asked to pay not only for the actual congestion they produce in the short 
run  but  also  for  the  long  term  expansion  of  the  infrastructure  they  bring  nearer.  Both 
systems may mesh and complement each other over the life of a project.  

In  conclusion,  the  assumption  of  separation  between  efficient  infrastructure  use  and 
efficient  infrastructure  provision,  including  cost  recovery  is  needed  to  allow  the 
theoretical  analysis  of  internalisation  to  proceed.  When  it  comes  to  implementing 
instruments, it should be acknowledged that there are many linkages between both as for 
example,  the  differentiation  of  cost  recovery  charges  according  to  EURO  class  in 
Directive 2006/38/EC.  

1.2. 

External Expertise 

This  impact  assessment  relies  on  different  works  carried  out  over  the  past  years  –  EU 
research projects and the IMPACT study.  

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1.2.1.  Research project under the Research Framework Programme 

For  many  years,  the  Commission  has  financed  research  programmes  in  the  field  of 
transport pricing3. 

GRACE4 – Generalisation of Research on Accounts and Cost Estimation – is a research 
project  funded  by  the  EC  sixth  Framework  programme.  This  project  aims  to  support 
policy makers to develop sustainable transport systems by facilitating the implementation 
of  pricing  and  taxation  schemes  that  reflect  the  costs  of  infrastructure  use.  Among  the 
areas  of  research,  it  proposes  methods  of  evaluation  of  external  costs.  GRACE  project 
has been reviewed in the Handbook on the assessment of external costs.  

An ongoing research project named REFIT5 is aiming at providing a set of sustainability 
indicators  for  assessing  the  effect  of  various  policies.  This  project  is  developing  a 
“modelling tool-based” methodology that produces data on a set of identified indicators 
and  that  enables  ex-ante  evaluation  of  the  Transport  Policy  measures  considering  the 
economic,  environmental  and  social  dimensions  of  sustainability.  Some  of  these 
indicators are being used in the current analysis. In order to be consistent with the whole 
exercise,  REFIT  has  applied  its  methodology  to  some  policy  options  of  the  current 
impact assessment and used the scenarios defined in the IMPACT study. 

Finally, DIFFERENT6 is reviewing the state of play of differentiated charges in Member 
States  and  analyses  user  reaction  from  real-world  cases.  DIFFERENT  has  been  used 
when assessing the existing charging situation in Member States.  

1.2.2.  External Study 

The  Commission  has  launched  a  study  –  IMPACT  –  aiming  at  reviewing  the  existing 
methods to estimate external costs in Europe7 which has been published in January 2008. 
On top of the handbook, two other studies have been made available: one on the study of 
infrastructure costs and charging in road transport, another one on the analysis of impact 
of  pricing  scenarios  (using  transport  models  run  by  the  Commission  and  ASTRA 
model8). 

1.2.3. 

Inter-service group 

An  Inter-service  group  has  been  created  and  comprised  transport  units  of  DG  TREN 
(maritime  and  inland  waterways,  railways,  road,  air  transport,  and  logistics),  ENV, 
ENTR,  EMPL,  ECFIN,  TAXUD,  SG,  and  JRC.  The  interservice  group  met  5  times 
between October 2007 and March 2008. The modelling of transport was carried out by 

3 

4 
5 
6 
7 

8 

Efficient pricing in transport - overview of European Commissions transport research programme. 
Catharina Sikow-Magny. Chapter 15. Acceptability of transport Pricing Strategies. 2003, ed by J. 
Schade and B. Schlag, Elsevier. 
http://www.grace-eu.org/project.htm 
http://refit.bouw.tno.nl/index.htm 
http://www.different-project.eu/ 
Internalisation Measures and Policies for all external Costs of Transport (IMPACT). Handbook 
on estimation of external costs in the transport sector. CE Delft. 2007.  
“Report  on 
für 
Wirtschaftspolitik  und  Wirtschaftsforschung,  Universität  Karlsruhe,  Germany)  is  modelling 
ASTRA.  

internalisation  Strategies”.  Ongoing  work.  CE  Delft. 

Institut 

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JRC  (TRANSTOOLS)  and  ENV  (TREMOVE,  service  contract  with  the  University  of 
Thessaloniki) as an input to the IMPACT study.  

1.3. 

Consultation of stakeholders 

1.3.1.  Consultation on the Handbook 

On 15 March 2007, the Commission held a workshop with stakeholders to test the main 
assumptions  and  orientations  undertaken  in  the  IMPACT  study9.  The  aim  of  the 
workshop was twofold. The first objective was to make use of the broad expertise of the 
invitees  on  the  issues  presented  with  a  view  to  incorporating  their  comments  into  the 
project deliverables of the IMPACT study. The second objective was to gain support for 
the results of the project, which was deemed crucial for any further step towards policy 
development  on  the  internalisation  of  external  costs.  The  issues  discussed  included  the 
following: which external costs need to be considered; should a pragmatic marginal cost 
oriented  approach  with  averaged  figures  for  typical  traffic  situations  form  the  basis  for 
the  estimation  of  concrete  values;  are  there  well  established  methods  to  estimate  and 
value these external costs; are there limits to the use of universal methods and to the level 
of accuracy available in practice. 

On  22  November  2007,  the  Commission  organised  a  technical  meeting  with  experts 
nominated  in  different  Member  States.  The  objective  of  the  meeting  was  to  have  a 
diverse panel of scientific and technical experts nominated by the Member States to peer-
review the final draft handbook and give their comments on how the document could be 
improved before it is published.  

There  was  a  general  agreement  on  the  external  cost  categories  selected,  on  their 
definitions, on the suitability of the methodology used and the completeness of the data 
presented.  It  was  generally  acknowledged  that  the  handbook  provides  a  comprehensive 
review  of  the  existing  state-of-the  art  research  on  the  subject  and  as  such  creates 
important added value. There were several specific suggestions made for improvements 
and it was also pointed out  by several participants that the “How to use the handbook” 
section  would  benefit  from  further  elaboration as  the  situation  of  potential  users  of  the 
handbook will depend a great deal on the availability of input and output data for their 
particular countries. The authors have incorporated the comments into the final version of 
the Handbook. 

1.3.2.  Consultation on the impact assessment 

A  broad  Internet  consultation  has  been  launched  end  October  2007  and  stopped  on  31 
December 2007. The objective of the consultation was to get a feedback on the general 
principle of internalisation and on the various policy options developed in a consultation 
paper10.  

The Commission received 469 replies and 17 position papers. Annex 1 gives details on 
the results of the consultation. The majority of respondents agreed with the principle of 

9 
10 

Summary and minutes can be found at: http://www.ce.nl/redirect/Workshop_IECT_index.htm 
“Preparation  of  an  Impact  Assessment  on  the  Internalisation  of  External  Costs”.  Consultation 
Document. Available at http://ec.europa.eu/transport/white_paper/consultations/index_en.htm. 

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internalising  external  costs  generated  by  transport.  In  general,  participants  expect 
internalisation  to  improve  efficiency,  fairness  in  society  and  a  reduction  of  nuisances. 
However,  some  concerns  were  expressed  on  a  possible  increase  in  costs  which  would 
affect overall competitiveness of EU economies. In addition, stakeholders were asked to 
provide feedback on the choice of economic instruments to tackle external costs.  

On 31 January 2008, a high level conference was organised in order to present the main 
findings of these consultations11.  

This feedback has enriched the analysis and has been taken into account when defining 
policy options on the internalisation of external costs.  

1.4. 

Consultation of the Impact Assessment Board 

1.4.1.  Preliminary comments 

An  early  cooperation  has  been  organised  with  the  Impact  Assessment  Board  (IAB)  in 
order to get quality support. The IAB had the opportunity to comment on the draft outline 
of the current impact assessment and on the draft handbook. The two sets of comments 
were received on 20 September and 30 October 2007.  

The main comments have been on the need to take into account infrastructure costs, to 
define a level of internalisation for each mode of transport; and to analyse the effects of 
internalisation on social inclusion. 

Many of the comments of the IAB have been taken into account, in particular the level of 
internalisation  and  the  social  aspects.  As  regards  infrastructure  costs,  the  inclusion  of 
these  costs  is  part  of  the  analysis.  But,  the  impact  assessment  does  not  deal  with  cost 
recovery principle and its implementation (see box 1).  

1.4.2.  Opinion of the Impact Assessment Board 

The  impact  assessment  was  discussed  with  the  Impact  Assessment  Board  on  2  April 
2008. The IAB published its opinion on 7 April 2008.  

The opinion of the Board listed the following recommendations for improvements: 

- strengthening the economic reasoning underlying the internalisation of externalities.  

-  stressing  the  limitations  of  the  quantitative  models  and  complementing  with  a 
reinforced qualitative analysis.  

- improving the identification and description of policy options 

- strengthening the analysis of earmarking 

- improving the comparison of options.  

11 

See the position papers and the presentations at 
http://ec.europa.eu/transport/costs/conference/index_en.htm.  

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Following  these  recommendations,  the  impact  assessment  has  been  revised  along  these 
lines.  

- The economic reasoning has been reinforced across the document and a box (box 2) on 
theoretical  aspects  has  been  added.  This  box  develops  further  the  theoretical  principles 
exposed  in  the  consultation  paper  on  the  internalisation  of  external  costs.  More 
specifically, it explains how external costs represent a market failure that would require 
and justify public authority's intervention.  

- The limitations of the models have been highlighted in box 6 (section 5). In particular, 
models  should  be  seen  as  providing  indications  on  likely  effects  rather  than 
quantifications of impacts, as they are not able to capture all the effects. Moreover, the 
aggregation  at  EU  level  limits  the  analysis  of  local  effects  and  underestimates  the 
positive aspects. A qualitative analysis complements the quantitative analysis in section 
5. Results from transport economic literature and research projects are provided and help 
analyse the overall impact of internalisation.  

-  The  process  of  selection  of  policy  options  is  explained  step  by  step.  In  addition,  the 
reasons why policy option 4 has been discarded are explained.  

- The analysis of earmarking has been expanded in section 5 and section 6. Pro and cons 
arguments are provided and policy choices are explained and justified.  

-  Finally,  the  comparison  of  options  has  been  reinforced  and  supplemented  by  a 
qualitative assessment.  

In order to help the reader, a glossary of technical terms has been added in annex 15.  

On 30 April 2008, the IAB published its second opinion and recommended to (1) further 
streamline  and  clarify  section  4  on  policy  options,  (2)  to  provide  some  quantitative 
results when comparing policy option 3A and 3B and (3) to explain why using electronic 
tolling should be the implementation mechanism. 

Following these recommendations, the following amendments have been made: 

- Section 4 has been restructured in order to clarify the presentation of the  selection  of 
policy options. A table (table 4.1) summarising each policy options has been added; 

- A table (table 6.2) on the comparison of policy option 3A and 3B has been included in 
section 6. It provides some quantitative results from the modelling exercise.  

- The issue of electronic tolling had already been mentioned in section 2.3.4. It has been 
further developed in section 2.3.4 and section 6 in order to justify why this mechanism is 
preferred.  

2. 

PROBLEM DEFINITION: WHY INTERNALISATION OF EXTERNAL COSTS? 

While  transport  choices  are  influenced  by  transport  prices,  the  gap  between  prices  and 
underlying costs may lead to an inefficient situation (see box 2). In a number of cases, 
part of the costs generated by transport users is not fully borne by them but is paid for by 

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other transport users or by society. As a consequence, the "user pays" and "polluter pays" 
principle fails to be applied in transport activities.  

This section will try to assess to which extent external costs are not internalised.  

Box 2: Internalisation of external costs: Theory and Practice 

Who pays what? Private costs and External costs 

For  efficiency  as  well  as  for  fairness  purposes,  the  costs  and  nuisances  related  to 
transport  activities  should  be  borne  by  those  who  produce  them.  Regarding  transport 
activities, it appears that quite often some of these costs are not borne by transport users 
and more importantly that there is no direct relation between the costs paid by users and 
the cost they impose on the society.  

The costs of transport can be split into private/internal costs (those directly borne by the 
person engaged in transport activity) and external costs (i.e. those that are imposed on 
others  but  not  supported  by  the  user).  The  sum  of  private  and  external costs represents 
social costs. The boundary between internal and external costs is defined by the costs the 
person takes into account when deciding to use a transport service. This means that when 
engaging in a transport activity, a person will incur private costs  linked  to the use  of  a 
mode  of  transport  (vehicle  purchase,  tolls  or  fuel  use),  but  will  not  be  aware  of  effects 
imposed on others such as pollution or congestion. His/her decision will not be based on 
the social costs of his/her activity.  

In  other  words,  the  costs  imposed  on  others–  environmental  damages,  accidents, 
congestion - generated by transport activities are external costs, more generally referred 
to as externalities. Most of them have increased over the past years despite technological 
progress.  

The table below draws the line between both categories of costs. 

Table Box 2: Classification of the costs of Transport 

Cost of categories 

Social costs 

Internal/Private  costs:  borne  by 
transport user 

External  costs:  borne  by  other 
transport users or society 

Transport 
expenditure  

operating 

Fuel and vehicle costs 

Costs  paid  by  other  users  or  by 
society 

infrastructure 

Costs partly uncovered  

Infrastructure use costs 

Accidents costs 

Tickets/fares 

Costs  covered  by 
charge 

Costs covered by tickets/fares 

Costs  covered  by  insurance,  own 
accident costs 

Noise costs 

Own disbenefits 

Uncovered  accident  costs  (e.g.  pain 
and  suffering  imposed  on  others), 
administrative and police costs 

Costs  borne  by  people  exposed  to 
noise 
(noise  disturbance,  health 
effects) 

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Air pollution costs 

Own  disbenefits  (depending  on 
individual situation) 

Costs borne by people exposed to air 
pollution (health effects) 

Climate change costs 

Own  disbenefits  (including  future 
generation, i.e. children) 

Costs borne by society and by future 
generations 

Congestion costs 

Own time costs 

Delays/time costs imposed on others 

Source: Consultation Paper on Internalisation of External Costs (October 2007). Table adapted from Table 
2.1. of the Green Paper "Towards fair and efficient pricing in transport. COM(95) 691 final. 

Internalisation as a way to convey the right economic signal 

If prices do not appropriately reflect social costs, they fail to convey the right economic 
signals,  thus  leading  to  situations  where  transport  activities  generate  excessive  costs  as 
compared  to  an  efficient  situation.  Consequently,  each  mode  will  not  be  used  in  an 
optimal way and the final equilibrium will not lead to maximum benefits to society. For 
example, health care due to damage from air pollution or noise will be paid by others, i.e. 
tax payers in this case. The transport activity being relatively under-priced in respect of 
its cost, too much of it will take place or more often too much transport activity with the 
wrong characteristics (technical, modal, timing). 

Internalisation  is  a  way  to  ensure  that  each  transport  user  pays  the  social  costs 
associated  to  his  individual  trip.  It  can  be  implemented  through  taxation  and  user 
charges. Trade permits can also play a role by allowing prices to reflect damages. By this 
way, transport users will have an incentive to reduce the nuisances/costs they generate.  

Internalisation  eliminates  the  market  failure  due  to  externalities  and  defines  a  new 
equilibrium  in  which  individual  behaviour  is  consistent  with  maximisation  of  social 
welfare. However, internalisation will only be effective insofar as transport choices are 
sensitive to price signals. In the presence of other market failures that make demand less 
responsive  to  internalisation  charges  (lack  of  alternatives,  low  incentive  to  buy  clean 
vehicles,  bounded  rationality  (myopic  behaviour)…), 
internalisation  should  be 
complemented  by  other  policies  such  as  infrastructure  policy,  research  policy, 
competition policy…… If these other market failures are removed, the internalisation of 
externalities  would  probably  determine  an  equilibrium  at  which  the  level  of  external 
costs  would  be  significantly  lower  and  possibly  better  adjusted  to  politically  expressed 
social preferences. 

Which external costs? 

Transport activities generate costs related to the need to build and maintain infrastructure 
and to the use of these infrastructures. The provision of infrastructure generates external 
costs on land use, nature (fragmentation of ecosystems) and on landscapes. The current 
impact assessment does not deal with these costs and focuses on costs related to the use 
of  infrastructure.  Among  external  costs  of  using  infrastructure,  economic  and  transport 
literature agrees to identify congestion, accidents, air pollution, noise and climate change 
as the main ones.  

Estimating external costs: providing a common framework 

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The  characteristic  of  externalities  is  that  they  are  not  borne  by  the  user.  One  of  the 
reasons may stem from the fact that it is often difficult to identify precisely the physical 
impact  as  such.  Assessment  is  also  made  difficult  as  there  is  often  no  market  and  no 
monetisation.  For  example,  air  pollution  and  noise  affect  health;  time  loss  imposes 
adjustments  and  waste.  But  these  costs  are  indirect  and  there  is  not  market  as  such  to 
monetise them. As a result, internalising these costs requires making estimates of them.  

In January 2008, a Handbook on estimation of external costs in transport sector has been 
published. It reviews the recent methodologies of estimating external costs and identifies 
best practices. On this basis, the Commission intends to publish in June 2008 a common 
framework  to  assess  external  costs.  It  will  provide  a  common  methodology  to  estimate 
external  costs  of  air  pollution,  noise  and  congestion.  The  Communication  will  also 
recommend default values in case such values would not be available in Member states. 
Finally,  recommendations  on  the  application  of  charging  will  be  made  on  the  basis  of 
differentiation.  

Principle of charging: social marginal cost pricing versus equity approach 

The need to confront each individual transport decision-maker with the correct costs he 
imposes on others pleads for the use of a marginal social cost approach. The choices of 
individuals  are  made  by  equating  marginal  benefit  to  marginal  cost.  By  ensuring  that 
marginal cost to the user is equal to marginal cost to society, the overall equilibrium will 
reflect  the  condition  for  efficiency  that  marginal  abatement  costs  are  set  equal  to  the 
marginal damage. Such an approach means that prices in transport should be equal to the 
short-run additional cost created by an additional user of the infrastructure. In theory, this 
approach  should  include  price-relevant  cost  of  use  (infrastructure  wear  and  tear, 
congestion,  scarcity  costs)  and  marginal  external  costs  (environmental  costs,  external 
accidents costs). Marginal social cost pricing would then lead to allocative efficiency for 
the use of existing infrastructure, both statically and dynamically through the provision of 
the right level of incentives. Furthermore, as the user would pay for the additional cost he 
imposes on society, this would contribute to fairness across transport users and non users. 
However, this system would not guarantee that the infrastructure can be financed as the 
revenues it would produce can fall short of the needs or can exceed them.  

Another approach based on full cost pricing is often perceived as a more appropriate, as 
it ensures that the user will pay for the whole cost of the infrastructure, which sometimes 
may  be  considered  necessary  by  public  authorities.  This  approach  –  also  called  equity 
approach  –  takes  all  costs  into  account,  including  infrastructure  investment  costs,  and 
considers that prices should be equal to average costs in order to allow cost recovery*. It 
can be noted  that average cost charging may prevent the  access to the infrastructure of 
users whose marginal benefit would be larger than the marginal cost they actually cause, 
thus producing a sub-optimal allocation. Moreover it also assumes that the beneficiaries 
of  the  infrastructure  are  only  the  actual  users  of  it,  and  not  the  people  and  firms  who 
value the option of using it, which gives to the infrastructure a public good character.  

Both  approaches  are  presented  in  this  impact  assessment.  However,  when  possible,  the 
social marginal cost pricing should be favoured as it gives incentives to adopt less costly 
behaviour  and  gives  transport  users  the  freedom  to  respond  in  ways  which  are  most 
efficient in their particular circumstances. In order to be effective, such a principle would 

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require  that  transport  users  do  not  receive  direct  compensation  that  would  reduce  the 
incentives to change the behaviour and thus eliminate the effectiveness of internalisation.  

Assessing the current level of internalisation 

In  real  life,  it  might  be  difficult  to  assess  the  true  level  of  internalisation.  Modes  of 
transport are already faced with charges, taxes and/or subsidies which are not linked to 
external  costs,  but  contribute  to  influencing  behaviours.  The  analysis  of  internalisation 
has to take these elements into account.  

Depending on the approach – equity and efficiency, there are two ways of assessing the 
level  of  internalisation.  The  first  one  –  equity  –  will  tend  to  assess  all  costs  and 
charges/taxes/subsidies  while  the  second  one  –  efficiency  –  will  only  take  into  account 
variable costs linked to the use of an additional vehicle.  

Both  approaches  are  proposed 
complementary assessment of the situation (see section 2.2). 

this 

impact  assessment  as 

in 

they  provide  a 

* Average costs are not the only way to reach full cost recovery. Second best schemes such as dual tariffs 
or Ramsey-Boiteux pricing could be preferred.  

2.1. 

The need to maintain the sustainability of transport activities 

2.1.1.  Transport growth 

Transport services play a central role in modern society and economy. They account for 
4.3% of EU25 value added and employ about 8.2 million persons in the EU25.  

Over  the  past  decades,  transport  has  increased  in  line  with  economic  growth.  Freight 
transport thus grew by 2.8% per year over the period 1995-2005 while real GDP growth 
was by 2.3% per year over the same period; at the same time passenger transport grew by 
1.9% per year. Freight transport demand has increased more strongly for modes offering 
greater flexibility, in particular road transport (see chart 0a and table 0a and 0b of annex 
2). 

2.1.2.  Evolution of nuisances generated by transport 

Although the benefits of transport services are widely acknowledged, transport activities 
generate nuisances/costs not only to other transport users, but also to society in general, 
including local population and future generations. More specifically, transport activities 
have  an  impact  on  time  –  private  and  professional  (congestion),  on  life  (accidents),  on 
health (pollution, noise) and on climate change (greenhouse gas emissions) among other 
things12. Over the past years, measures to reduce these nuisances – regulatory measures, 
awareness information campaign, research projects and financial support (TENs, Marco 
Polo) have been undertaken at EU and national level. Several economic instruments such 
as infrastructure charging, vehicle taxation, congestion charging, and fuel taxation have 
also been implemented with various degrees of intensity and coverage. As a result, some 

12 

Such as land use, energy supply security and infrastructure maintenance. This impact assessment 
deals  with  the  following  external  costs:  air  pollution,  noise,  climate  change,  congestion  and 
accidents. See section 4 on the selection process of policy options. 

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of  these  nuisances  have  displayed  a  significant  decrease  even  though  they  still  remain 
important. 

Congestion in Europe 

The density of traffic in Europe has increased over the past years, reflecting the creation 
of an internal market in the EU and consequently increased mobility of individuals, and 
growing dynamism of the exchange of goods. The growth of traffic has been sustained 
while the pace of expansion of infrastructure network was lower, which exerts pressure 
on its capacity use (see graph 1, annex 2).  

The  increase  of  density  of  traffic  may  lead to  bottlenecks  in  corridors  crossing  densely 
populated areas or sensitive areas such as the Alps and the Pyrenees. But, congestion is 
mainly an urban problem (which is not reflected in the graph 1 in annex 2)13.  

Accidents in Europe 

Road fatalities have displayed a net reduction (- 21.4% between 2000 and 2004 in EU25. 
See  graph  2  in  annex  2).  However,  in  2005,  there  were  still  41 274  persons  killed  in 
EU25, among which 53.4% involved cars and taxis and 19.6% involved motorcycles and 
moped.  In  2006,  there  were  42953  persons  killed.  In  comparison,  fatalities  in  other 
modes are much lower (65 in railways in 2006 and 1 casualty in the activities of EU27 air 
operators in 2006). 

Air pollution generated by transport 

Air  pollution  emissions  from  road  transport  have  considerably  decreased  over  the  past 
years  due  to  technology  progress  and  regulation.  However,  air  pollution  from  road 
transport still remains a challenge in dense and high traffic areas.  

By contrast, in other modes of transport (except railways), the decrease has been much 
slower  and  emissions  have  even  increased  again  for  carbon  monoxide  (CO),  sulphur 
dioxide (SO2) and non-methane volatile organic compounds (NMVOC). Graph 3 (a, b, c, 
d, e, and f) in annex 2 provides evidence of these contrasted evolutions. 

In  international  maritime  transport,  the  increase  in  NOx,  SO2  and  NMVOC  has  been 
high (respectively +37.6%, +44.2% and +41.0% between 1990 and 2005). Moreover, the 
Thematic  Strategy  on  air  pollution14  shows  that  emissions  of  SO2  and  NOx  from  the 
maritime sector should surpass total emissions from land-based sources by 2020. 

In air transport, the increase in NOx has been particularly important between 1990 and 
2005  with  an  increase  of  48.8%  for  domestic  aviation  and  +85.5%  for  international 
aviation.  

13 

14 

See COMPETE (2006), Annex 2, "Studies, harmonised approach and panorama of congestion in 
Europe  and  US".  It  gives  estimates  of  congestion  in  cities  using  the  travel  time  index  (ratio 
between the actual average and the free flow travel speed). The travel time index in large cities of 
Europe compares journey times due to congestion between them: 1.34 for Paris Ile de France, 1.40 
for Greater Copenhagen area, 1.84 for Greater London, 1.32 on average for other English cities  
SEC (2005) 1133, p 30. Annex to the Communication on Thematic Strategy on Air Pollution and 
the Directive on “Ambient Air Quality and Cleaner Air for Europe”. 

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Greenhouse gas emissions generated by transport 

Transport  is  a  large  contributor  to  greenhouse  gases  emissions,  namely  CO2  (27.2%  of 
the latter come from transport; of which 72.8% are from road transport). CO2 emissions 
of  transport  have  increased  by  32%  from  1990  to  2005  while  CO2  emissions  in  other 
sectors of the economy (industry, households) have decreased or stabilised. However, the 
evolution is not homogeneous across modes of transport. Rail has reduced emissions of 
CO2 over the past decade (1990-2005) due to a large extent to a reduction of the share of 
diesel  trains.  CO2  emissions  growth  from  air  transport  and  maritime  (international 
bunkers)  has  been  higher  than  CO2  emission  growth  from  road  transport  (+49.1%, 
+51.6% against +27.5%).  

Noise generated by transport 

In 1999, the European Environment Agency estimated that 32% of total EU population 
was exposed to road noise level above 55 Ldn dB at the front of their house whereas 10% 
was exposed to rail noise level above 55 Ldn dB and another 10% was highly annoyed 
by aviation noise15. In 2008, the Commission reports that the number of people affected 
by  aircraft  noise,  particularly  at  night,  has  increased  since  2002  due  to  the  general 
increase  in  the  number  of  movements,  and  predicts  that  this  number  will  continue  to 
grow although the situation may differ between airports16. More generally, the mid term 
review  of  the  Commissions  White  Paper  on  Transport emphasises that attention should 
be paid to noise pollution from road transport and other modes of transport.  

2.1.3.  These nuisances have a cost for other transport users and society 

All these nuisances have a cost for others in terms of time loss (congestion), life threats 
(accidents),  health  (accidents,  air  pollution  and  noise)  and  climate  change.  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)17.  

There  have  been  many  attempts  to  quantify  external  costs  generated  by  transport  and, 
depending  on  the  methodology  and  the  scope  of  analysis,  the  amount  of  total  external 
costs  varies.  All  these  methods  have  been  reviewed  by  a  Handbook  on  external  costs 
published  in  January  2008.  This  handbook  reviews  the  different  methodologies  and 
identifies the best practices for each category of external cost. Several conclusions can be 
drawn from it. 

First, there have been large efforts in the research field to propose and use methodologies 
of  assessment  of  external  costs.  A  wide  set  of  methods  are  available  to  monetise  these 
externalities.  Although  the  estimation  of  external  costs  has  to  consider  several 

15 

16 
17 

“Traffic noise: exposure and annoyance”. 1999. European Environment Agency. According to the 
Directive 2002/49/EC on the assessment and management of environmental noise, Member States 
should report to the Commission more recent data on exposure to transport noise. These data were 
not yet available when drafting this document.  
Forthcoming COM(2008)66 final.  
Accidents costs are already partially internalised by vehicle drivers. External accidents costs are 
those costs which are not covered by risk oriented insurance premiums. The level of external costs 
non internalised depends on the level of accidents, but also on the insurance system.  

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uncertainties,  there  is  a  wide  consensus  on  the  methodological  issues  and  on  the 
bandwidths18.  

Second, congestion, accidents, air pollution and noise external costs vary across location. 
In  all  modes  of  transport,  marginal  external  costs  are  higher  in  areas  with  higher 
population density, typically urban areas. Furthermore, the time of the day during which 
transport  takes  place  leads  to  strong  variations  of  external  costs  (differences  between 
night and day and peak and off-peak periods). The costs of a lorry or a freight train may 
vary according to time and location (see graphs and tables from the Handbook in annex 
3).  By  contrast,  greenhouse  gas  emissions  do  not  depend  on  location  and  time  and  are 
instead related to fuel consumption and the carbon content of fuel. 

Third, the Handbook reviews studies that have assessed the magnitude of externalities. It 
is widely agreed that road transport accounts for more than 90% of total external costs19 
imposed by transport on society. Roughly 25% is generated by trucks. Such a situation is 
also  explained  by  the  high  modal  share  of  road  transport.  Road  transport  is  by  far  the 
biggest mode of transport accounting for more than 70% of inland freight transport and 
more than 80% of total passenger transport in Europe. Despite its high modal share, the 
growth  of  road  transport  still  continues,  both  in  absolute  and  relative  terms.  However, 
these figures do not capture the recent evolutions of emissions in non road transport. As 
mentioned  in  section  2.1.2,  emissions  of  non  road  transport  have  largely  increased, 
especially in maritime and in air transport and will continue to do so. It could be assumed 
that the share of external costs of non road transport modes could be higher than the past 
estimates.  

2.2. 

Are external costs already internalised? 

Under some conditions, markets fail to ensure that all costs – private and external – are 
fully  reflected  in  price  formation.  External  costs  are  a  manifestation  of  market  failures 
related to the efficient allocation of resources when prices paid by economic actors fail to 
reflect the entire social costs and benefits of economic activities (see box 2).  

Given  its  environmental  externalities,  transport  is  already  exposed  to  a  number  of 
regulatory  measures.  In  addition,  transport  activities,  including  vehicle  purchase, 
ownership  and  use,  are  subject  to  numerous  taxes  and  charges,  which  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  situation  to  avoid 
double charging for the same external cost. The question, however, is to ascertain to what 
extent existing measures allow external costs to be internalised, in other words whether 
the  price  signals  given  by  these  existing  charges,  taxes  or  subsidies  incite  the 
development of new technologies, new ways of transportation or a change in consumer 
behaviour.  

18 

19 

See “Handbook on estimation of external costs in the transport sector” published in January 2008 
at http://ec.europa.eu/transport/costs/handbook/index_en.htm 
96%  in  the  UNITE  study  (excluding  maritime).  95%  in  the  IMPACT  study  (based  on 
TREMOVE)  excluding  maritime.  However,  it  is  important  to  note  that  these  figures  exclude 
maritime  as  the  emissions  of  air  pollution  and  CO2  of  maritime  have  increased  over  the  past 
years.  

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2.2.1.  Existing taxes/charges and subsidies in transport: General Overview 

Existing  taxes/  charges  and  subsidies  give  an  indication  of  what  is  being  borne  by 
transport.  The  primary  objective  of  these  economic  instruments  was  either  to  finance 
infrastructure  or  to  provide  revenues  to  the  general  budget.  Few  of  them  aimed  at 
reducing negative externalities generated by transport. The same can be said on subsidies 
which  are  not  related  to  an  objective  of  avoiding  external  costs  or  obtaining  external 
benefits (e.g. for public service obligation or else). However, taxes/charges and subsidies 
(targeted or not) cannot be ignored as they influence the behaviour of transport users and 
may have an impact on external costs.  

Environmental taxes and charges 

Compared  to  1980,  environmental  taxes  have  increased  in  nominal  terms  (more  than 
quadrupled). The share of environmental taxes in GDP has also increased a lot. The main 
increase  took  place  between  1990  and  1994  and  was  driven  by  the  increase  in  energy 
taxes. Since the beginning of this decade, the share of environmental taxes in GDP has 
been  stable.  In  2005,  environmental  taxes  represented  approximately  2.6%  of  EU25 
GDP, of which 1.9% were energy taxes (most of which are taxes levied on motor fuels) 
and 0.6% were transport (or vehicle) taxes (see graph 1 in annex 4)20. 

On the total revenues of environmental taxes, more than 90% are supported by transport 
in  most  EU  countries  (see  graph  2  in  annex  4)21.  Most  of  these  revenues  come  from 
petrol  and  diesel  taxes  and  to  a  lesser  extent  vehicle  tax  (ownership  and  use  of  motor 
vehicles). Road transport bears the majority of these taxes as some modes of transport are 
exempted from fuel taxation (see below). 

User charges are also applied in transport mainly to recover infrastructure costs, but it is 
more  difficult  to  have  a  quantitative  estimate  of  these  charges  (see  below  for  the 
description in each mode of transport). 

Subsidies 

Subsidies  can  have  different  objectives:  economic  (fostering  regional  development  or 
creating  jobs);  social  (grant  access  to  different  types  of  services)  and  environmental 
(reducing  pollution  or  noise  for  example)22.  Another  objective  is  the  compensation  for 
high fixed costs of infrastructure if borne by the public budget, but the amount is much 
more difficult to assess. Overall EU state aids to transport have decreased over the past 
decade. The allocation of aids between modes of transport has changed: state aids to air 
transport  have  decreased  while  state  aids  to  maritime  have  increased.  State  aids  to 
railways are higher than in other modes of transport. Overall, according to the State Aid 

20 

21 

22 

2007 Edition of Tax Structures (Eurostat/TAXUD).   
http://ec.europa.eu/taxation_customs/taxation/gen_info/economic_analysis/tax_structures/index_e
n.htm 
This applies to 20 MS. For Lithuania and Malta, 18 and 30% of environmental revenues are paid 
from transport. These figures are even lower for Bulgaria and Romania. 
These aspects are not taken into account in DG COMP scoreboard. The EEA Technical report (n° 
3/2007) provides estimates on infrastructure subsidies based on the UNITE report. According to 
these figures, in EU15, road transport would receive the majority of infrastructure subsidies (110 
bn euros in 2005 out of a total of 156 bn euros). Rail would receive 37 bn euros.  

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Scoreboard  published  by  the  European  Commission,  the  share  of  state  aid  to  transport 
accounts for less than 0.4% of EU25 GDP (excluding railways, see graph 3 of annex 4). 

Tax exemptions for some transport modes can be considered as subsidies. Although they 
cannot be ignored because they contribute to distorting market signals, it is more difficult 
to  assess  the  revenues  loss  from  tax  exemptions  (e.g.  international  air  and  maritime 
transport). According to the EEA, fuel tax exemptions and VAT exemptions affecting the 
transportation sector could reach from 0.35 to 0.58% of GDP in 200523.  

2.2.2.  Existing charges and taxes by mode of transport: stylised facts 

Each  mode  of  transport  has  its  own  characteristics  and  needs,  which  leads  to  different 
external costs (see above). For the same reasons, the level of taxes, charges and subsidies 
vary  across  modes  of  transport,  but  may  also  vary  across  Member  States,  although 
common minimum levels of taxation apply to motor fuels across the EU (given the EU 
energy tax harmonisation). There might be a beginning of EU harmonisation in the field 
of vehicle taxation and charging, but it does not apply to all modes of transport.  

2.2.2.1.  Road Transport 

Existing charges and taxes 

Several  instruments  coexist  in  the  EU,  mainly  fuel  taxes,  vehicle  taxes  and  road  usage 
charges (see annex 5 for a description of charges and taxation in road transport).  

Fuel  taxation  is  related  to  the  EU  directive  on  energy  taxation  which  sets  mandatory 
minimum  values.  As  a  result,  fuel  taxes  are  applied  in  all  Member  States.  Excise  fuels 
and  vehicles  taxes  represent  most  of  transport  taxes  (95%).  Fuel  tax  (72%  of  total 
revenues  paid  by  transport)  and  other  taxes  (such  as  circulation  tax…)  may  partially 
serve to recover infrastructure costs or other general purpose.  

Directive  1999/62/EC,  article  2,  sets  EU  minimum  tax  levels  for  vehicle  (circulation 
taxes) to contribute to fiscal harmonisation and reduce distortions of competition in the 
road market. But in practice the range of annual rates across Member States is well above 
the  EU  minima  and  quite  wide  from  €  515  to almost €  3000 (see graph 1 of annex 5). 
Vehicle taxes are in the order of few cents per vehicle kilometre and proportionally much 
smaller  than  tolls  (usually  above  >15ct/vkms).  They  vary  according  to  the  weight  per 
axle to reflect the damage to the infrastructure. By contrast, they do not vary according to 
the EURO class, nor do they reflect the real use of vehicle (travelled distance, time and 
location of use).  

The system of road usage charges differs considerably across European countries. Tolls 
are levied on some 56 000 km of motorways and trunk roads (3% of the total network) 
through either toll barriers or electronic pricing. Few countries require a time based fee 
(vignette).  Hitherto,  variations  of  user  charges  according  to  EURO  vehicle  class  to 

23 

Fuel tax exemptions have been estimated between 11 and 36 billions euros in 2005 (8-16 in air 
transport and 3-19 in waterborne transport). VAT exemptions amount to 29 billions euros in 2005, 
of which 18 billions come from air transport. EEA Technical Report, n°3/2007. “Size, Structure 
and Distribution of transport subsidies in Europe”.  

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provide incentives for using cleaner vehicles or according to time to relieve congestion 
have hardly been applied. 

Box 3: HGVs user charge in the EU 

Some  countries  have  no  nationwide  road  usage  charging  systems  at  all  (e.g.  Finland, 
Estonia and Latvia) while other countries have no nationwide road charging systems and 
only toll on a few infrastructure sections (Ireland and UK). The map in annex 6 presents 
the diversity of charging systems in the EU. 

Others  (e.g.  France,  Italy,  Spain,  Portugal,  and  Greece)  have  a  long  tradition  of  having 
parts of their motorway network operated by concession motorways. Although the tolls 
are distance based, they are usually not expressed in a price per kilometre but in the form 
of  a  matrix  listing  motorway  entry  and  exit  points.  These  schemes  cover  all  types  of 
vehicles not only HGVs. Slovenia has a similar system in that most motorway roads are 
toll roads with tolls collected at toll stations. 

Several  countries  have  recently  introduced  integrated  network-wide  electronic  road 
charging systems for HGVs. The first EU member states to introduce such systems were 
Austria  and  Germany  on  1  January  2004  and  1  January  2005  respectively.  The  Czech 
Republic introduced its own system on 1 January 2007. Similar systems are envisaged in 
the Netherlands, France, Slovenia, Hungary and Slovakia. The charging systems are all 
distance based but differ in a number of characteristics from the technology used to the 
network covered. 

Lastly,  there  are  countries  with  time  based  fees  (vignettes).  Belgium,  Denmark, 
Luxembourg,  Netherlands  and  Sweden  have  been  operating  the  so-called  Eurovignette 
system since 1 January 1995. Germany had also participated until it stepped out to launch 
its own distance based electronic system. The principle of the Eurovignette system is that 
the certificates issued are mutually recognised in all participating countries. The system 
covers the motorway network and certain other roads and applies to HGVs only. 

In addition to the Eurovignette countries many new Member states (Bulgaria, Hungary, 
Lithuania,  Poland,  Romania  and  Slovakia)  have  their  own  time  based  vignette  systems 
covering both passenger cars and HGVs. 

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Internalisation tools available under the current Eurovignette Directive 

While  the  existing  Directive  1999/62/EC  stipulates  that  tolls  shall  be  based  on  the 
principle of the recovery of infrastructure costs only, it does theoretically allow Member 
States  to  vary  the  toll  rates  for  purposes  such  as  combating  environmental  damage  or 
tackling  congestion.  However,  toll  variation  is  subject  to  a  number  of  conditions,  the 
most significant being that it must not be designed to generate additional tolling revenue 
and any unintended increase in revenue has to be counterbalanced through changes to the 
structure of the variation. 

In practice, only a few Member States have implemented charging systems that actually 
differentiate the tolls for the recovery of infrastructure charges. Germany and the Czech 
Republic have electronic tolling systems that apply differentiated charges of HGVs based 
on  the  environmental  performance  of  the  vehicle  (as  indicated  by  the  EURO 
classification  of  the  engine)  while  in  France  there  are  examples  of  time  based 
differentiation  on  the  A1  motorway  between  Paris  and  Lille  and  on  the  A14  motorway 
between Orgeval and Paris. The experience from these schemes is positive. Germany has 
witnessed  adjustments  in  the  fleet  composition  with  a  visible  trend  towards  cleaner 
vehicles and accelerated renewal of the fleet. In contrast, this effect has not been seen in 
neighbouring  Austria  where  the  tolling  system  on  the  motorways  does  not  differentiate 
by emissions class. The time based differentiation on the French motorway sections has 
reduced the traffic flow during rush hour by up to 10%. Despite the encouraging results 
from these  existing schemes there are  a  number  of reasons  why  the  current  options for 
differentiation are not more widely used in the Member States: 

- Toll operators face practical difficulties to adjust the differentiated charges to changes 
in  traffic  demand  in  a  way  which  respects  the  condition  that  the  total  tolling  revenue 
remains constant on a biennial basis; 

- There is a clear lack of interest for Member States to introduce differentiated charges 
and increase the complexity and operating costs of the tolling system if no extra revenue 
is  allowed  to  be  generated.  The  effective  removal  of  the  constant  revenue  requirement 
would  give  the  possibility  of  financial  incentive  to  the  beneficiaries  of  the  tolling 
revenues to introduce the differentiated charges.  

- There are genuine difficulties in controlling and enforcing a differentiated scheme (e.g. 
accurate identification of the EURO class of vehicle). This can be especially problematic 
in case of non resident hauliers. Often the only realistic enforcement method would be to 
carry out costly roadside checks. 

The  other  internalisation  tool  available  under  the  current  Directive  is  the  mark-up  in 
mountainous areas. However, it is allowed only in exceptional cases and in mountainous 
corridors  where  priority  projects  of  the  trans-European  network  are  located.  In  practice 
this limits the application of this instrument to the two corridors crossing the Alps. 

2.2.2.2.  Rail Transport 

Directive 2001/14 obliges to charge for infrastructure variable costs and allows charging 
for  environment  or  congestion  (article  7  of  the  directive).  In  10  Member  states, 
infrastructure managers charge according to marginal costs pricing (AT, CZ, DK, FI, FR, 

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NL, PT, SE, UK). Except NL and PT, they allow having mark-ups in order to recover full 
costs.  In  other  Member  States  (BE,  EE,  DE,  HU,  IT,  LT,  PO,  RO,  SL),  infrastructure 
managers have adopted  the principle  of recover full costs minus state subsidies and set 
their charges according to this principle. Charges for congestion and scarcity, accidents 
and environment are undertaken in a minority of countries (see annex 5 table 2).  

2.2.2.3.  Air Transport 

The EU Directive on energy taxation establishes the fuel tax exemption of international 
air transport for legal reasons (see annex 5 table 3). At the same time, the Directive, in its 
article  14(2)  allows  for  taxation  of  aviation  fuel  on  domestic  flights  and  under  certain 
conditions  for  intra-Community  transport.  In  2006,  the  Commission  has  proposed  to 
include aviation in the fight against climate change. As a  result, air  transport  would be 
subject to the Emission Trading Scheme from 2011.  

Many  airports  are  already  applying  differentiated  charges  for  some  external  costs.  The 
situation is not homogeneous, not only across countries, but also across airports. 

2.2.2.4.  Maritime Transport 

The  EU  Directive  on  energy  taxation  establishes  the  fuel  tax  exemption  of  maritime 
transport  (see  annex  5  table  4).  The  same  optional  fuel  taxation  envisaged  for  aviation 
also applies to navigation within Community waters. 

There  is  a  great  variety  in  port  charging  practices.  Port  charges  can  vary  by  type  of 
infrastructure, by charge description and by port institutional arrangements. At the same 
time, ports tend to be subsidised in order to make the region more attractive and to induce 
value-added logistic and industrial activities. 

2.2.2.5.  Inland waterways transport 

A  large  share  of  EU  inland  waterway  transport  is  concentrated  on  relatively  few 
watercourses.  70% of all  inland  waterway transport is carried on the river Rhine, Elbe, 
Oder,  and  Danube.  On  the  river  Rhine,  charges  are  prohibited  (under  the  Mannheim 
Convention). 20% are subject to sophisticated charges in LU, FR, DE (under the Mosel 
Convention), FI, UK and NL (see annex 5 table 5). 

2.2.3.  Level of internalisation by mode of transport 

Having the full picture of external costs and existing levies and subsidies, the following 
step would be to analyse the level of internalisation in each mode of transport. 

Assessing  the  level  of  internalisation  requires  comparing  costs  and  payments  in  each 
mode  of  transport.  When  payments  are  not  sufficient  to  cover  costs,  the  mode  of 
transport does not support all the costs it generates. Given the incomplete availability of 
data,  this  exercise  is  however  quite  difficult,  in  particular  for  other  modes  than  road 
transport. There are two ways of assessing gap between costs and payments (see also box 
2 for theoretical arguments).  

The first approach – account or equity approach – takes into account the total social costs 
and total resources and analyses the gap between both. This approach helps assess cost 

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recovery ratio and to which extent additional levies are needed; it neglects however the 
reasons  for  political  choices  that  are  made  with  respect  to  funding  of  infrastructure  or 
subsidisation  of  passenger  transport  and  may  lead  to  extended  disputes  on  the  level  of 
implicit subsidies in one particular mode. Furthermore, the comparison of total costs and 
resources  does  not  help  assess  whether  transport  users  have  the  right  incentives.  This 
approach  is  however  presented  here  as  it  is  a  practical  way  to  report  on  the  level  of 
internalisation.  

The  second  approach  –  based  on  efficiency  consideration  –  would  be  to  compare 
marginal social cost and price and the failure of price to cover this cost. Obviously, this 
approach  would  be  the  best  way  to  assess  whether  transport  users  have  the  right 
incentives  as  it  reflects  the  principle  of  social  marginal  cost  pricing.  However,  such  an 
approach is difficult to calculate as the variation of marginal costs with time and location 
is not easy to capture24. This is particularly true for noise and congestion costs where the 
relationship between these costs and traffic is not linear and average and marginal costs 
can  be  very  divergent.  Moreover,  the  comparison  of  marginal  costs  and  marginal 
revenues is typically done by aggregating average variable costs, which will hide specific 
situations.  

Both  approaches  have  their  own  advantages  and  limitations.  For  this  reasons,  both  are 
presented as they give useful indications on the level of internalisation and can be used in 
a complementary way. 

The equity approach has been adopted by REFIT and the following indicators try to give 
evidence  of  the  level  of  internalisation  as  far  as  data  are  available  (see  annex  7  for 
methodological  explanations).  The  IMPACT  study  attempts  to  apply  the  efficiency 
approach by comparing marginal costs and marginal resources (see annex 8).  

2.2.3.1.  Equity or account approach 

The  equity  (account)  approach  proposed  by  REFIT  leads  to  an  indicator  –  level  of 
internalisation  (Lol)  designed  to  specify  to  which  degree  market  distortions  have  been 
compensated by subsidies, taxes and charges.  

The equity or account approach is based on cost recovery principle. As a consequence, 
the calculation of the index requires average costs in order to take into account all costs 
occurred  in  the  mode  of  transport.  All  relevant  components  –  including  infrastructure 
charges – are included in the calculation of the indicator.  

From  this  approach,  it  can  be  concluded  that  transport  does  not  bear  all  the  costs  it 
generates because of subsidies and despite the existence of taxes/charges. However, the 
equity  (account)  approach  does  not  allow  drawing  conclusions  on  the  efficiency  of  the 
whole system. In other words, it is hard to know whether transport users have the right 
incentive and whether the tax/charge structure is related to cost drivers.  

24 

See Nash C et al (2002), The environmental impact of transport subsidies, Paper presented at the 
OECD workshop on environmentally harmful subsidies, 7-8 November 2002, Paris. 

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Road transport 

A  disaggregated  perspective  highlights  the  disparities  of  the  situation  between  types  of 
vehicles  and  country,  in  particular  due  to  strong  disparities  in  registration  or  annual 
circulation taxes. HGVs are responsible for the largest part of the wear and tear of roads. 
However, infrastructure wear and tears are not properly reflected in circulation tax.. More 
specifically,  passenger  cars  users  are  already largely paying  for the costs  of  using their 
vehicle  (including  fixed  infrastructure  costs)  which  is  not  the  case  of  other  types  of 
vehicles, notably trucks or motorcycles.  

Graph 2.1: Level of internalisation in road transport (equity approach) 

Level of Internalisation - Road Transport (passenger) - 2005

o
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f
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1,80

1,60

1,40

1,20

1,00

0,80

0,60

0,40

0,20

0,00

Car

Motorcycles

Moped

AT

BE

CZ

DE DK EL

ES

FI

FR HU

IE

IT

LU NL

PL

PT

SE

SI

UK EU25 EU15 EU12

Source: REFIT 

Graph 2.2: Level of internalisation in road freight transport (equity approach) 

Level of Internalisation - Road Transport (freight) - 2005

2,50

2,00

1,50

1,00

0,50

0,00

n
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HDT  1

HDT  2

HDT  3

HDT  4

LDT

AT

BE

CZ

DE

DK

EL

ES

FI

FR

HU

IE

IT

LU

NL

PL

PT

SE

SI

UK EU25 EU15 EU12

Source: REFIT 
HDT1: heavy duty truck 3.5-7.5t; HDT2: heavy duty truck 7.5-16t, HDT3: heavy duty truck 16-32t, HDT4: heavy duty truck > 32t
LDT: Light duty truck

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Other modes of transport 

The  level  of  internalisation  in  freight  railways  is  higher  than  in  passenger  railways 
(probably due to subsidies in the field of public service obligation). In aviation and inland 
navigation, the availability of data is less exhaustive and therefore, these indexes should 
be considered as rough indications of the level of internalisation. 

Graph 2.3: Level of internalisation in rail transport (equity approach) 

Level of Internalisation - Rail Transport - 2005

1,20

1,00

0,80

0,60

0,40

0,20

0,00

n
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Freight T rain

Passenger T rain

AT

BE

CZ

DE

DK

EL

ES

FI

FR HU

IE

IT

LU

NL

PL

PT

SE

SI

UK EU25 EU15 EU12

Source: REFIT 

Graph 2.4: Level of internalisation in inland ship transport (equity approach) 

Level of Internalisation -Inland ship - 2005

1,05

1,00

0,95

0,90

0,85

0,80

0,75

n
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CZ

DE

DK

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FI

FR

HU

IE

IT

LU

NL

PL

PT

SE

SI

UK EU25 EU15 EU12

Source: REFIT 

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Graph 2.5: Level of internalisation in air transport (equity approach) 

Level of Internalisation -Air transport - 2005

1,00

0,95

0,90

0,85

0,80

0,75

n
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CZ

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FI

FR

HU

IE

IT

LU

NL

PL

PT

SE

SI

UK EU25 EU15 EU12

Source: REFIT 

2.2.3.2.  Efficiency approach 

The  efficiency  approach  aims  at  establishing  how  variable  user  charges  compare  with 
variable  external  costs.  Under  this  approach,  only  the  variable  component  of  costs  is 
provided.  The  advantage  of  the  efficiency  approach  is  to  assess  whether  the  tax/charge 
structure provides the right incentive as it should be directly related to the cost drivers.  

From an efficiency perspective, the results of the IMPACT study show that the level of 
internalisation is not achieved, i.e. marginal resources do not cover marginal costs. The 
analysis only covers road transport. Graph 1 in annex 8 shows the gap between marginal 
external costs and marginal user charges for truck 32 tons. In all Member states, charges 
and tolls are insufficient to cover external costs. In other words, when an additional truck 
travels, it will pay a certain amount of charges/tolls linked to the distance of trip, but in 
comparison,  will  generate  additional  external  congestion,  noise,  air  pollution  and 
accident  costs  for  which  it  will  not  pay  entirely.  Charges  and  tolls  fail  to  provide  this 
message when decision is made to travel.  

In  practice,  calculations  according  to  the  efficiency  approach  lack  data  at  a  more 
disaggregated level and as a consequence fail to capture the local dimension of external 
costs. However, differentiated charges help take into account these variations across time 
and location. For example, table 2.1 displays the lower level of internalisation in in-built 
areas  and  in  countries  where  no  tolls  are  levied.  Comparing  Italy  and  Germany  at 
aggregate level shows that both corridors have roughly the same level of internalisation. 
However, in Germany, total external costs show strong variations between built-up and 
non built-up areas while tolls do not show any difference in charging. This leads people 
from built-up areas to pay comparatively less for the nuisance they generate. By contrast, 
the  Italian  case  shows  that  differentiation of  charging  between  both  areas  (built-up  and 
non built-up) induces a higher level of internalisation in built-up areas.  

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Table 2.1: Overview on costs per km (in Euro ct.) 

 HGV EURO III 

Toll  

IT  Genova-Chiasso 
Built-up 
Non-built-up 
DE  Basel-Venlo 
Built-up 
Non-built-up 

NL  Venlo-Rotterdam port 
UK  Felixstowe-Preston 

Average 

€ct/km 
16.0 
39.4 
12.5 
12.0 
12.0 
12.0 
1.2 
2.6 
6.8 

Total 
external 
costs 
€ct/km 
11.5 
25.3 
9.5 
12.7 
28.1 
12.3 
10.6 
8.5 
9.2 

Infrastructure 
costs 

Total 
costs 

Cost 
coverage  

€ct/km 
18.1 
18.1 
18.1 
7.4 
7.4 
7.4 
10.3 
17.1 
10.2 

€ct/km 
29.6 
43.4 
27.6 
20.1 
35.5 
19.7 
20.9 
25.6 
19.4 

 % 
54.7 
90.7 
45.2 
59.7 
33.8 
60.9 
5.7 
10.1 
35.0 

* Source: IMPACT Study. All costs are calculated for a EURO III HGV. Total external costs include air 
pollution,  noise  and  congestion  costs.  Infrastructure  costs  are  average  variable  infrastructure  costs  and 
exclude construction costs.  

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2.2.4.  What can be concluded from the existing situation? 

Heterogeneity of internalisation across Member States and modes of transport 

-  Existing  charges  and  taxes  are  far  from  homogeneous  across  Member  States  (except 
minimum  fuel  tax  where  there  is  a  European  framework).  This  situation  might  be 
justified  as  the  level  of  infrastructure  costs  and  external  costs  varies  across  regions, 
depending on the density of traffic and also on the density of population. However, this 
diversity does not reflect the various situations, but the extent to which countries tackle 
external costs. Such a variety may give rise to distortions of competition in road transport 
since  the  road  transport  market  is  open  to  competition  at  EU  level  and  half  of  the 
international road haulage market is operated by non registered hauliers.  

- Existing charges are not homogeneous within Member States. The variety of situation 
also exists within Member States. For example, a typical HGV from Hamburg to Bilbao 
pays  a  toll  of  around  15  ct/km  to  use  the  German  primary  roads  and  the  concession 
motorways in France and Spain and pays a daily vignette of 8 € (2-6 ct/km) to cross the 
Benelux.  However,  when  this  truck  crosses  the  Paris  area  it  generates  considerably 
higher external costs but pays no usage charge at all.  

- Existing instruments are not homogeneous across vehicles and modes of transport. User 
charge,  tax  exemptions  on  fuel  use,  emissions  trading  scheme  and  fuel  taxes  lead  to  a 
variety  of  situation  between  modes  of  transport  which  might  compete  on  certain 
segments  or  routes.  In  the  road  sector,  the  situation  differs  between  categories  of 
vehicles.  Graphs  2.1  and  2.2  show  that,  from  an  account/equity  approach,  the  level  of 
internalisation is higher in private cars than in trucks.  

The market signal given by existing charges and taxes could be improved 

-  Existing  charges  are  user  pays  instruments  which  primarily  aim  at  recovering 
infrastructure  costs.  Except  minor  variations  according  to  vehicle  types  under  revenue 
neutrality constraints as far as HGVs are concerned or environmental charges in Swedish 
harbour,  current  user  charges  rarely  address  external  costs.  Few  Member  States  apply 
differentiated  charges  to  take  external  costs  into  account,  also  because  the  Community 
legislation limits them in doing so. The efficiency approach shows that vehicles do not 
have the right incentive when travelling. Charges fail to reflect the additional social costs 
generated by one trip.  

- Existing levies do not relate to the key cost drivers of external costs which make them 
quite  inefficient  because  they  are  unable  to capture  the  variations  of  time  and  location. 
However,  they  are  already  borne  by  transport  users  and  may  induce  some  changes  in 
behaviour.  Existing  levies  or  subsidies  should  be  considered  when  implementing 
internalisation of external costs in order to avoid double charging. 

- By contrast, fuel taxes are directly related to fuel consumption, which is the cost driver 
of CO2 emissions. This makes this instrument the most appropriate to internalise the cost 
of CO2 emissions. Independently of other objectives that fuel taxes pursue, the minimum 
level of excise duties correspond to a shadow price of 159 euros per ton of CO2 for petrol 
(see box 4). 

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Box 4: CO2 emissions and fuel tax 

CO2 emission is related to fuel consumption. Therefore, increasing the price of fuel may 
induce  a  change  of  behaviour  from  consumers  when  they  purchase  a  vehicle  and  to  a 
smaller extent a change in the way they use it. 

For  many  years,  fuel  taxes  have  increased  in  Europe,  making  them  the  first  private 
expenditures  of  transport  users  (mainly  road  transport  as  some  other  modes  are 
exempted). Taking into account the minimum excise duties as foreseen in the Directive 
2003/96/EC  on  energy  taxation  and  the  CO2  content  of  fuel,  the  shadow  price  of  CO2 
could be estimated to 159 euros per ton for petrol and 115 euros per ton for diesel. 

Despite this level of taxation, CO2 emissions are the only nuisances that have not been 
reduced  over  the  past  years  in  particular  in  air  and  road  transport.  This  is  however  not 
surprising since traffic in these modes has risen more than CO2 and is very much linked 
to the economic growth and to the (limited) development and availability of alternative 
modes  of  transport  which  are  less  CO2  intensive  and  provide  the  same  utility  for 
transport user. The effectiveness of fuel taxes – and of internalisation measures in general 
– in curbing the growth of road emissions is doubtful to the extent that they have a low 
capacity to influence the demand of transport in the short run. This is not to say that this 
instrument has not been effective at all. Compared to the US where fuel taxation is much 
lower, European cars display higher performance in fuel efficiency (ICCP, 2007). Some 
recent  studies  highlight  the  increase  in  car  dependency  and  therefore  the  very  low 
elasticity of demand. Short run price elasticities (within 1 year) had been assessed to be 
around -0.25 (Goodwyn (2002)) but recent evidences found that these elasticities could 
drop  to  about  -0.04  between  2000  and  2006.  These  studies  refer  to  the  US  market. 
However,  they  could  also  confirm  the  low  short  term  impact  of  fuel  taxes  on  CO2 
emissions.  In  a  longer  term,  fuel  consumption  is  more  sensitive  to  prices.  Long  run 
elasticities (5 years) are estimated to be around -0.6 (Goodwyn, (2002). 

Therefore, the use of  other  instruments such as regulation, standard settings or trade of 
emission permits cannot be ignored. 

In  conclusion,  although  there  is  some  evidence  that  some  degree  of  internalisation  of 
external costs is already in place, transport users do not bear all these 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.  

2.3.  Why and how to implement the internalisation of external costs in the road 

freight transport sector? 

The sections below will discuss about charging HGV and explore in more details few of 
the  concrete  implementation  issues  raised  by  charging  external  costs  for  trucks.  These 
issues  may  impact  the  ways  of  these  questions  should  be  tackled  in  the  review  of  the 
Directive. 

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2.3.1.  Why charging HGV? 

As  mentioned  above,  road  transport  accounts  for  more  than  90%  of  external  costs25. 
Given the forecast for a continued steady growth of road freight transport (estimated at 
more than 50% between 2000 and 2020) these negative impacts are likely to increase. 

The specific features of road freight transport make them more sensitive to prices. It has 
to  be  pointed  out  that  taking  into  consideration  all  the  existing  taxes  and  charges  the 
current  average  degree  of  internalisation  is  substantially  lower  for  trucks  than  for  cars 
(see 2.2.3.1). Compared to private motorists, commercial road haulage operators respond 
more  efficiently  to  price  signals  due  to  their  capacity  to  plan  the  route  in  advance  and 
make  rational  decisions  about  how  to  optimise their  operating  costs. In  this  respect  the 
incidence of occasional and unplanned use seems lower for HGV. In addition, more than 
one quarter of trucks regularly crosses internal borders in the EU which raises the issue 
of internal market (see below). In contrast, as studied in the GRACE project, drivers of 
passenger are less likely to adapt in the short term their behaviour to complex changes in 
prices  as  they  do  not  perceive  their  vehicle  operating  costs  accurately  and  usually 
underestimate trip distances to start with. 

The initial conditions for internalisation seem to be in place for HGVs. Tolling systems 
are more widely implemented for heavy goods vehicles than for passenger cars and as a 
result  the  tolling  technology  used  to  charge  trucks  is  more  mature.  Pursuant  to  the 
Directive  1999/62/EC  a  number  of  Member  States  have  already  introduced  electronic 
tolling  systems  to  recover  from  heavy  goods  vehicles  the  infrastructure  costs  related  to 
the  use  of  certain  infrastructures.  Data  protection  and  privacy  issues  which  may  be  a 
potential obstacle to implement road pricing for cars are also considered less severe for 
truck  as  demonstrated  by  the  wide  spread  use  of  on-board  computers  and  fleet 
management  applications  in  the  road  haulage  sector.  As  an  example,  Germany  has 
already  gained  practical  experience  on  the  use  of  electronic  devices  to  implement 
internalisation schemes.  

Of  course  there  would  be  additional  benefits  if  other  vehicles  including  passenger  cars 
would also be charged, but the additional complexities and public acceptance issues may 
justify  a  stepwise  approach  starting  with  heavy  goods  vehicles.  National  strategies  to 
develop road pricing based  in  a first  step on electronic  tolling  systems  for  trucks  make 
therefore  sense  from  both  an  economic  point  of  view,  technology  point  of  view  and 
probably from a public acceptability point of view.  

When defining a  strategy at  EU  level, subsidiarity considerations need to be taken into 
account.  National  and  local  authorities  are  better  placed  to  decide  on  ways  of 
implementing  road  pricing  for  cars  provided  that  general  Treaty  principles  like  non 
discrimination on the basis of the nationality are respected. Conversely for road freight 
transport,  which  includes  an  important  and  growing  international  transport  segment 
playing an important role in the internal market, the questions appear to be mainly which 
actions can be relevant both to encourage an efficient pricing and to maintain a smooth 
functioning  of  the  internal  market.  The  review  of  the  Directive  1999/62/EC  should 
therefore seek to tackle these questions.  

25 

See footnote 19 

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2.3.2.  The  base  and  differentiation  of  variations  of  charges:  limits  posed  by 

information and transaction cost 

The  difficulty  of  the  identification  of  external  costs  in  all  times  and  places  imposes  a 
trade-off  between  the  level  of  differentiation  and  the  cost  and  feasibility  of  its 
implementation. In theory, an internalisation charge should be levied on the aspect(s) of 
transport  decisions  that  drive  the  externality  being  addressed,  and  hence  vary  with  the 
size  of  the  eternality.  In  practice,  however,  externalities  and  their  drivers  cannot  be 
perfectly  determined  or  monitored,  and  charges  cannot  be  set  accurately  and  without 
transaction costs on the driver of the externality. These information and cost issues have 
informed  the  shape  of  existing  internalisation  charge  schemes  which  only  approximate 
(more or less precisely) the theoretically prescribed charges and charge levels.  

A first important type of differentiation is per vehicle type. Current truck usage charges 
vary  in  general  according  to  the  weight  per  axle  to  better  approximate  infrastructure 
damages. The Directive adopted in 1999 introduced the possibility to vary tolls according 
to  the  environmental  performance  up  to  50%,  the  amending  Directive  adopted  in  2006 
widened  this  possibility  by  allowing  a  higher  variation  of  up  to  100%.  This  possibility 
has  been  used  in  Germany  and  Czech  Republic  which  introduced  differentiated  rates 
according to a simple Euro classification for using their network wide toll system. This 
possibility  has  however  not  been  used  in  the  Member  States  with  tolls  on  individual 
sections  or  small  network  (usually  concession  tolls).  Toll  operators  wishing  to 
differentiate  the  rates  according  to  vehicle  types  have  to  design  a  classification  which 
reflects the various costs, infrastructure, air pollution and noise costs mainly and at the 
same  time  a  classification  which  is  enforceable,  i-e  which  allows  an  automatic  or  easy 
vehicle identification by toll managers and by road enforcers. To be effective in sending 
price  signals  understood  by  the  EU  freight  transport  operators  and  indirectly  the 
manufacturing  industry,  such  classification  should  be  kept  simple  and  preferably 
harmonised at EU level.  

Another type of differentiation is according to the type of roads and the areas which are 
crossed as external costs in in-built areas are significantly higher than in other areas due 
notably to the higher population exposed to traffic air pollution and noise. Most external 
costs  estimates  suggest  a  rather  simple  differentiation  between  agglomeration,  urban 
roads,  and  other  roads.  The  toll  rates  should  therefore  be  set  according  to  such 
classifications. As to congestion, the issue is more complex as it requires a differentiation 
according  to  time  and  theoretically  a  rather  disaggregated  approach  to  calculate  the 
charge  segment  per  segment.  A  simple  time  variation  distinguishing  peak,  off-peak 
should be a minimum common requirement to justify a congestion charge.  

Overall it should be remembered that variation of tolls are already allowed by the current 
Directive  but  at  the  condition  that  revenues  remain  constant  to  reflect  only  the 
infrastructure  costs.  Section  2.2.2.1  has  already  described  the  main  reasons  why 
variations are in general not applied. Such variation is relatively complex to manage for 
tolling  operators  and  particularly  when  regular  adjustments  of  the  charge  structure  are 
required  to  keep  the  revenues  constant.  The  additional  revenues  raised  by  charging 
external costs could give the possibility to reimburse toll or infrastructure operators for 
the  additional  costs  incurred  due  to  the  increased  complexity  created  by  variation  of 
rates.  In  addition,  by  promoting  the  use  of  interoperable  electronic  tolling  systems,  the 
control and enforcement issue would also be effectively addressed.  

EN 

32 

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2.3.3. 

Setting  the  geographical  scope:  diversion  of  traffic  and  charging  all  roads  or 
only motorways? 

Tolling motorways may divert traffic to parallel roads with lower or no charge at all. This 
has  a  particularly  negative  impact  when  lorries  use  secondary  roads  which  are  usually 
less  safe  than  tolled  motorways  and  which  may  cross  areas  more  sensitive  to  pollution 
and  noise  (e.g.  small  towns).  Such  traffic  diversion  is  well  known  on  roads  parallel  to 
concession  motorways  (e.g.  between  Zaragoza  and  Barcelona),  on  roads  in  Alsace 
bordering  the  German  tolled  network  or  on  secondary  roads  in  Austria.  There,  when 
implementing  charging,  there  is  a  need  to  see  whether  the  diversion  effect  does  not 
mitigate the effect of the measure.  

Additionally, unless charges are introduced simultaneously throughout the EU, there may 
be  undesirable  cross-border  effects  due  to  traffic  diversion  from  one  Member  State  to 
another  as  road  users  try  to  avoid  the  use  of  tolled  infrastructure.  Although  the  causal 
relation is hardly measurable, Austria uses to claim that the introduction of a high Swiss 
kilometre charge has generated traffic detours on its territory. At EU level the phasing-in 
of  a  truck  kilometre  charge  would  require  coordination  mechanisms  between  Member 
States to prevent traffic diversion with undesirable cross-border effects or to mitigate its 
effect.  

2.3.4.  Technology and interoperability: implementation costs 

Levying user charge requires controlling the access to the network in order to avoid free 
riders. Unlike other modes of transport, it may entail relatively high implementation costs 
and local environmental nuisances (e.g. queues at manual toll barriers at each entry/exit, 
visual  intrusion  of  tollbooths).  Advanced  electronic  toll  systems  can  reduce  these  costs 
while avoiding obstacles to the free flow of traffic. The system implemented in Germany 
for  heavy  goods  vehicles  costs  20-22%  of  the  revenue  levied  with  it  (excluding 
enforcement)  while  in  Austria,  the  costs/revenues  ratio  is  around  10-12%26.  The 
Netherlands have a target of 5% costs/revenues ratio for its future distance charging. The 
Swiss  system  has  a  lower  ration  of  6-8%.  As  it  applies  to  the  full  network,  it  requires 
fewer facilities to control entry/exit points. The variety of electronic systems is also not 
fully  interoperable  in  spite  of  Directive  2004/52/EC  and  users  are  currently  obliged  to 
subscribe to different systems and with different operators for an international transport. 
Implementing  an  EU  wide  external  cost  charging  system  would  require  ensuring  a  full 
interoperability to both reduce high transaction costs and gain higher acceptance by the 
road haulage industry. It should be noted that an important part of the toll operation costs 
are  caused  by  the  need  to  provide  for  adequate  facilities  for  occasional  users,  whose 
vehicles may not be equipped with the required On Board Unit.  

2.3.5.  User orientation: acceptability and intelligibility of the system 

The  implementation  of  a  pricing  scheme  needs  to  take  account  of  the  needs  of  the 
targeted transport users in order to warrant its effectiveness and fairness. Several research 

26 

Austria [Asfinag] has a DSRC-based toll for vehicle > 3,5 tonnes and toll stations or stickers for 
lighter vehicles.  According  to  Autria,,  costs/revenue ratios  range between  10-12  %.  Switzerland 
uses  tacho/GPS/DSRC  technologies  and  claims  6-8%  costs/revenue  ratio.  All  these  figures 
include capital costs.  

EN 

33 

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projects have analysed these aspects and have derived conclusions on the conditions to be 
successful. More particularly, it appears that a pricing strategy should be complementary 
to  other  measures  such  as  extending  the  possibility  of  choice  of  consumers  by  offering 
alternatives  of  transport  and  using  the  revenues  in  a  transparent  way27.  As  a  result, 
earmarking of revenues to transport may increase the public acceptability.  

A fair and effective charge scheme should include the following elements:  

- Link prices and external cost. The user should be able to understand the link between 
the charge and the (driver of the) externality. For instance, a congestion charge on road 
users  at  off-peak  periods  where  there  is  no  congestion  will  not  be  understood  and 
accepted.  

-  Transparency.  The  derivation  of  the  charges  must  be  sufficiently  transparent  so  that 
the  user  can  be  confident  no  over-charging  takes  place.  A  similar  transparency 
requirement seems to apply to the size of the revenues and where they are used for. The 
user must also be able to see the charge's unit rate(s) and the amount actually paid as this 
would  allow  making  better  informed  choices.  This  again  points  to  the  need  for  an 
adequate communication. 

-  Intelligibility.  The  scheme  must  not  become  overly  complex.  A  much  differentiated 
scheme is likely to approximate the marginal external costs more accurately but also risks 
to  become  unintelligible  for  many  users  and  so  hinder  their  effective  response  to  the 
given  price  signal.  Next  to  the  implementation  and  operational  costs,  this  suggests  that 
the  best  internalisation  scheme  needs  to  have  a  simpler  structure  than  suggested  by 
theory. It also points to the need to assist the users to learn and adapt when internalisation 
schemes are being implemented.  

-  Transport  alternatives.  Both  user  acceptance  and  changes  in  transport  decisions 
would be enhanced when there are transport alternatives, such as different routes to the 
destination or other transport modes. For examples, commuters may want to respond to 
congestion  charges  by  going  to  work  by  metro  instead  of  by  car  or  taking  a  less 
congested route respectively.  

It  has  also  been  argued  that  the  revenues  of  the  internalisation  charges  would  help  to 
making the transport alternatives available (the so-called "earmarking" of the revenues). 
This issue will be further discussed in section 5.7. Some earmarking of the revenues to 
the transport sector may be required to obtain political acceptability.  

2.3.6.  Preserving the EU internal market: non discrimination and transparency 

International road freight traffic plays an important role in the internal market. This role 
will  become  even  more  significant  as  the  forecast  growth  rate  of  international  road 
freight transport is twice as high as that of domestic road freight transport. Between 2000 
and 2020 international road freight traffic volume is forecast to double.  

27 

See C. Sikow-Magny, quoted in footnote 3. . Three Research Programmes deals with acceptability 
issues: AFFORD, PRILA and PATS.  

EN 

34 

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The main thrust of the current Directive 1999/62/EC is in fact to ensure that the charges 
set  by  Member  States  to  recover  the  infrastructure  costs  are  non-discriminatory 
proportional  and  therefore  transparent.  The  same  principle  should  apply  when  giving 
Member  States  the  possibility  to  cover  external  costs.  More  specifically,  mandatory 
checks and controls at Community internal border should also be avoided.  

External  cost  charging  should  not  discriminate  between  local  and  international  transit 
traffic  as  the  damage  caused  by  the  individual  vehicle  in  a  particular  location  does  not 
depend  on  its  destination.  The  same  applies  to  the  issue  of  regular  versus  occasional 
users. Users should pay for the damage caused by each individual trip and there should 
not  be  any  “frequent  polluter  discounts”.  Similarly  the  occasional  users  should  not  be 
subject to higher charges although toll operators considering the higher implementation 
costs created by this category of users (see 2.3.4) may be tempted to charge them more. 
Non discrimination principles may also lead to measures to discourage national or local 
charging policies which are limited and targeted exclusively at  roads with  international 
traffic.  

External  cost  charging  should  also  be  proportional.  There  is  however  a  risk  that 
infrastructure monopolies set charges at a level higher than what is justified. The charge 
setting should therefore be done by organisations independent of those which collect and 
use the toll revenues. The conflict between local and general interest gives rise to the risk 
that  some  local  or  national  authorities  set  excessive  charges  in  those  sections  of 
infrastructure  that  bear  heavy  transit  traffic  with  a  view  to  extracting  rents  from  users. 
Moreover  the  variability  of  external  costs  according  to  time  and  place  gives  rise  to  a 
rather  complex  pattern  of  information  needs  to  calculate  these  costs.  The  lack  of  a 
common  method  to  set  the  external  cost  charge  may  lead  to  a  situation  of  asymmetric 
information  between  Member  States  and  between  infrastructure  operators  and  users,  in 
which possible abuses would be difficult to detect.  

2.4.  What happens if nothing is done? 

Leaving the situation unchanged would mean that transport would continue to generate 
nuisances  that  would  not  be  borne  by  transport  users.  However,  this  is  not  to  say  that 
nothing  would  be  done  as  there  are  other  instruments  either  in  existence  (e.g.  vehicle 
taxes, Euro classes) or being discussed at the EU institutions (e.g. ETS for aviation, CO2 
and  cars  rules)  to  fight  external  costs.  Without  internalisation,  transport  price  would 
continue to give a wrong signal to users who would not have enough incentives to use 
cleaner vehicles and avoid congested routes at peak times. 

2.4.1. 

Incentives to internalise external costs 

As described above, the EU legislation does not allow charging for external costs in road 
freight transport and allows it in railways subject to certain conditions. Accordingly, the 
heterogeneity  of  charging  across  Member  States  and  across  modes  of  transport  will  be 
maintained and the use of price signals will be barely exploited. 

2.4.2.  External costs will continue to increase 

The Community has already proposed measures to reduce environmental emissions or to 
vary  charging  in  sensitive  zones.  These  actions  are  expected  to  reduce  nuisances 
generated  by  transport.  Some  of  these  measures  are  approved  but  not  yet  implemented 

EN 

35 

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while  others  are  still  under  scrutiny  (Commission  proposals  aiming  at  fighting  CO2 
emissions  from  transport).  These  measures  will  be  assumed  to  be  approved  and  not 
subject  to  appraisal  here.  Taking  into  account  existing  and  envisaged  measures28,  most 
external costs will continue to increase.  

Interestingly, air pollution trends show a sharp decrease, at least till 2020. The decreasing 
trend is even stronger when taking into account the impact of EURO VI (see graph 2.6). 
These trends do not include evolution in maritime transport and may thus underestimate 
the evolution of air pollution in all modes of transport.  

By  contrast,  climate  change  costs  display  a  high  increase  after  2020.  However,  the 
inclusion of air transport in ETS (reference scenario IMPACT, graph 2.6) has obviously a 
positive impact on the evolution of CO2 compared to scenario which does not include it 
(Baseline  of  TREMOVE,  graph  2.6).  Here  again,  these  projections  do  not  include 
maritime transport.  

Graph 2.6: Projections of climate change and air pollution costs  

Projections of BC* and IMPACT1* Climate Change and Air Pollution

M€

90,00

80,00

70,00

60,00

50,00

40,00

30,00

20,00

10,00

0,00

BC- Climate Change
IM PACT1-Climate change
BC/IM PACT1-Air pollution
BC/IM PACT1 + Euro VI-Air pollution

2000

2005

2010

2015

2020

2025

2030

* BC: Reference scenario of TREMOVE. IMPACT1: Reference scenario of IMPACT
** Maritime not included. Well to tank emissions excluded

Source: TREMOVE baseline and IMPACT baseline 

The increase in transport traffic will lead to an increase of noise and accident costs. 

28 

The reference scenario of this impact assessment will include these measures (see part 4 for the 
full  description  of  the  policy  option  “no  new  action”).  However,  the  proposal  to  reduce  air 
pollution for EURO VI has not been included in the reference scenario as the impacts were not yet 
analysed when defining the current reference scenario (see part 4). Graph 2.6 shows the positive 
impact on air pollution when including this proposal. Another possibility would have been to take 
a  “business  as  usual”  scenario  as  it  is  the  case  in  the  pre-existing  TREMOVE  baseline  derived 
from  the  2005  ASSESS  study.  Compared  to  the  reference  scenario  of  the  current  impact 
assessment,  the  TREMOVE  scenario  displays  less  positive  trends  regarding  environmental 
external  costs,  in  particular  climate  change  costs  which  is  the  externality  addressed  by  the 
measures in the pipeline. 

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36 

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Graph 2.7: Projections of accident and noise costs 

Evolution Marginal external costs Noise and Accidents 
Road transport (€2000)

M€

120.000

100.000

80.000

60.000

40.000

20.000

0

M€
25.000

20.000

15.000

10.000

5.000

0

Accidents

Noise

2000

2005

2010

2020

Source: IM PACT

Source: IMPACT 

Projections also show that congestion will not improve. Graph 2.8 shows projections of 
congestion in morning peak in 2020. It provides the ratio between average speed and free 
speed.  The  lower  the  ratio  becomes,  the  higher  the  congestion  is.  The  map  below 
identifies bottlenecks in some parts – UK, BE, NL29.  

Graph 2.8: Evolution of interurban congestion in Europe 

Source: TRANSTOOLS 

29 

TRANSTOOLS projections. Another way of presenting congestion has been to compare the share 
of driving below free speed with the total driving time. Following this approach, it appears that 
28.6% of EU27 network will be congested in 2020.  

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2.4.3.  The level of internalisation will not improve 

The  level  of  internalisation  will  not  improve  if  no  new  actions  are  taken.  Annex  7 
provides the evolution of the level of internalisation (equity approach) in road transport 
and  other  modes  and  it  clearly  appears  that  the  situation  will  not  improve.  As  a  result, 
external costs will increase following the foreseen increase in transport volumes.  

2.4.4.  Who is affected 

Transport users and society at large will be affected as the level of internalisation will not 
be improved and external costs will continue to increase. Densely populated areas with 
dense  interurban  networks  and  sensitive  zones  will  be  mostly  affected.  Low-income 
classes  are  likely  to  suffer  the  most  since  they  tend  to  inhabit  the  areas  where 
externalities (congestion, air pollution, noise) are more severe.  

2.5. 

EU right to act 

The  internalisation  of  external  costs  contributes  to  achieving  the  objectives  of  the 
Common Transport Policy set out in article 71 of the Treaty.  

The internalisation of external costs is a way to apply the “polluter-pays” principle as it 
has been requested by the European Parliament. The “polluter-pays principle” is treaty-
based: article 174 of the Treaty states that, “environmental damage should as a priority be 
rectified at source” and that “the polluter should pay”. The Directive on charging HGV 
and  the  Railways  directive  also  provide  the  possibility  for  Member  States  to  apply  the 
“user pay” principle in recovering the cost of infrastructure.  

Box 4: Polluter Pays Principle and Cheapest Cost Avoider Principle 

During  the  public  consultation,  some  stakeholders  mentioned  that  any  policy  on 
internalisation of external costs should be based on the "cheapest cost avoider principle" 
rather  than  on  the  polluter  pays  principle.  Such  an  approach  consists  in  taking  into 
account possible action from pollutees as well as from polluters when defining a strategy 
to internalise external costs.  

The cheapest cost avoider principle has been inspired by the economist R. Coase, who, in 
his  article  of  1960,  highlighted  the  reciprocal  nature  of  the  externality  problem.  A 
possible interpretation is that there can be circumstances in which the cost to society of 
abating  externalities  can  only  be  minimised  if  responsibility  for  action  is  placed  on  the 
party  which  could  prevent  the  nuisance  at  the  lowest  cost.  Crucial  to  this  result  is  the 
presence of sufficiently high transaction costs.  

The EU Treaty establishes the "polluter pays principle" for environmental externalities, 
which amounts to entitling the citizens with the right to a proper environment (clean air, 
silence,  etc)  and  which  is  closer  to  the  Pigouvian  principle  according  to  which  the 
polluter  that  generates  the  nuisance  should  bear  the  costs  of  the  effects  he  imposes  on 
others.  This  principle  has  been  acknowledged  as  the  principle  of  action  of  EU 
sustainability  policy.  While  the  polluter  pays  principle  always  puts  the  burden  of 
adjustment  on  the  polluter  side,  it  is  not  opposed  to  a  negotiated  settlement  that  could 
reduce the overall cost to society. However, it must be said that transport externalities are 
generally so diffuse that the transaction costs to reach an agreement would be very high 

EN 

38 

   EN 

due the number of possible participants (transport users and the affected population). On 
the other hand, technical solutions would generally be cheaper if applied to the polluter 
side than to the exposed population which is very large in case of air pollution, accidents 
and  noise  and  even  more  so  in  the  case  of  climate  change.  Accordingly,  in  the  case  of 
transport externalities, it is to be expected that the Polluter Pays Principle and Cheapest 
Cost  Avoider  Principle  would  lead  to  the  same  result.  In  the  case  of  congestion  the 
distinction is not relevant since the same category of actors that generate the externality, 
suffer  from  its  consequences.  It  should  also  be  stressed  that  the  Pigouvian  tax  leaves 
incentives  to  the  pollutees  to  take  private  actions  to  avoid  the  externalities,  but  at  an 
efficient level.  

The  Community  has  to  ensure  the  proper  functioning  of  the  internal  market  and  the 
absence  of  distortions  of  competition  between  transport  undertakings  in  the  Member 
States. The current situation as regards taxation and charging in transport reflects a wide 
variety  between  Member  States  approach  and  between  different  modes  of  transport. 
Charging for external costs may also make more difficult the control of possible abuses 
by setting charges at a disproportionate level or in an arbitrary manner, which would be 
incompatible with the general treaty principles, notably its Articles 23 to 31 and with the 
Common  Transport  Policy  (article  79  on  non  discrimination  on  national  grounds). 
Harmonisation should continue as it has started with a number of directives on taxation 
taxation),  Directive 
and 
2006/38/EC (road), Directive 2001/14/EC (rail)30).  

infrastructure  charging  (Directive  2003/96/EC  (energy 

As mentioned above, the EU legislation does not allow, in most cases, to charge heavy 
duty vehicles for external costs while it allows infrastructure managers to charge railways 
undertakings  for  external  costs  under  limited  conditions  (no  extra  revenues  for 
infrastructure managers unless there is similar charging in competing modes). Obviously, 
as long as the EU legislation does not explicitly authorize charging road freight transport 
for external costs, Member States can not initiate the reforms of charges structure which 
would be required to internalise external costs in land transport.  

3. 

OBJECTIVES 

3.1. 

General and specific objectives 

The  general  objective  for  the  EU  is  to  “to  ensure  that  our  transport  systems  meet 
society’s economic, social and environmental needs whilst minimising their undesirable 
impacts on the economy, society and the environment31“. 

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 the right signal to transport users, to improve 

30 

31 

COM(2007)52  Proposal  for  a  Council  Directive  amending  Directive  2003/96/EC  as  regards  the 
adjustment of special tax arrangements for gas oil used as motor fuel for commercial purposes and 
the coordination of taxation of unleaded petrol and gas oil used as motor fuel. 
Council  European  Union.  June  2006.  Renewed  EU  Sustainable  Development  Strategy. 
http://ec.europa.eu/sustainable/docs/renewed_eu_sds_en.pdf. 

EN 

39 

   EN 

                                                 
the efficiency of infrastructure use and contribute to reducing negative externalities 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.  

This objective would ensure consistency with other transport policies, but also with other 
Community  policies.  For  many  years,  the  Commission  has  been  advocating  the 
internalisation  of  external  transport  costs  through  fair  and  efficient  pricing.  The  Green 
Paper  published  in  1995  opened  the  debate  while  the  White  Paper  in  1998  outlined  an 
initial strategy for transport infrastructure charging. The White Paper of 2001 on the EU 
general  transport  policy  and  its  mid-term  review  in  2006  confirmed  the  need  to 
implement fair and efficient pricing.  

The internalisation of external costs is also consistent with the EU agenda by contributing 
to  improving  efficiency  (Lisbon  Agenda)  and  sustainability  (Sustainable  Development 
Strategy). More specifically, the Integrated Guidelines 16 of the Growth and Jobs agenda 
recommends  to  "consider  the  case  for  appropriate  infrastructure  -  pricing  systems  to 
ensure  the  efficient  use  of  infrastructures  and  the  development  of  a  sustainable  modal 
balance,  emphasizing  technology  shift  and  innovation  and  taking  due  account  of 
environmental costs and the impact on growth"32.  

3.2. 

Operational objectives 

As already mentioned, EU legislation does not authorise Member States to levy directly 
from  heavy  goods  vehicles  external  costs  while  it  allows  infrastructure  managers  to 
charge  railways  undertakings  for  external  costs  under  limited  conditions.  Nor  does  it 
provide  incentives  to  Member  State  to  vary  the  charges  according  to  location  and  time 
and  deal  with  charges  on  roads  other  than  the  trans-European  network.  Accordingly, 
there is a need to revise EU legislation to unlock the possibilities left to Member States 
for  internalising  external  costs  and  to  ensure  consistency  in  the  way  external  costs  are 
treated.  

The following operational objectives are therefore to: 

–  propose  a  stepwise  strategy  to  promote  the  internalisation  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  roads  efficient  road  usage 
charges  leading  to  a  more  sustainable  mobility.  This  would  lead  to  the  revision  of 
Directive 1999/62/EC.  

4. 

POLICY OPTIONS  

Policy  options  will  envisage  the  use  of  different  market  based  instruments  for  each 
external cost and different spans or combinations of external costs.  

32 

COM(2007)804. Proposal for a Community Lisbon Programme 2008-2010. 

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40 

   EN 

                                                 
4.1. 

Preliminary remarks: selection of policy options 

4.1.1.  Taking into account the various dimensions of internalisation 

When  defining  a  strategy  to  internalise  external  costs,  several  dimensions  have  to  be 
considered.  

-  Which  external  costs?:  As  explained  in  box  2,  transport  activities  generate  different 
types of externalities linked to the provision and the use of infrastructure. There are some 
generally  recognised externalities  caused  by  the  use  of  infrastructure  –  CO2  emissions, 
air pollution and noise. Congestion and accidents are also externalities, but the "victims" 
are other transport users ("club" effects). Other external costs are sometimes referred to, 
such as space occupancy, landscape, security of supply or biodiversity. 

- Which modes of transport? The Commission had a clear mandate to tackle all modes of 
transport  –  road,  rail,  air,  waterborne.  But  the  various  externalities  have  different 
relevance  across  modes  and  it  may  not  be  opportune  to  tackle  all  externalities  in  all 
modes.  

-  Which  economic  instruments?  As  discussed  in  box  2,  internalisation  can  be 
implemented  with  taxation,  user  charges  or  trading  systems.  The  most  appropriate 
instrument needs to be selected depending on the externality and the mode of transport.  

- EU level of intervention Given the local nature of external costs, policy action can be 
better tackled at local or national level. However, mobility of goods and persons across 
Europe  is  a  key  principle  and  the  Community  level  may  be  the  appropriate  level  for 
policy action when defining common charging principles in Member States. 

On this basis, the public consultation33 sought comments on the possible use of different 
economic  instruments  for  each  external  cost,  i.e.  congestion,  accidents,  noise,  air 
pollution  and  climate  change  and  for  each  mode  of  transport,  i.e.  road,  rail,  aviation, 
maritime  and  inland  waterway.  42  individual  options  were  submitted  to  public 
consultation (see table 1 annex 9).  

4.1.2.  Determination of policy options 

Selecting dimensions 

The  determination  of  policy  options  with  respect  to  the  various  dimensions  of  the 
problem  has  been  done  on  the  basis  of  the  prescriptions  of  the  economic  literature 
(summarised in the Handbook) and the opinion of stakeholders. Selected combinations of 
policy  options  have  then  been  tested  through  economic  modelling  in  order  to  provide 
additional indications on their possible joint implementation. 

33 

See consultation paper (footnote 19 and 20) at 
http://ec.europa.eu/transport/costs/consultations/index_en.htm.  

EN 

41 

   EN 

                                                 
 
External  costs:  the  current  impact  assessment  focuses  on  external  costs  which  are 
related  to  the  use  of  infrastructure.  According  to  research  and  studies34,  congestion,  air 
pollution,  noise  and  accidents  account  for  a  large  share  of  external  costs  (excluding 
infrastructure costs). The share of climate change costs is lower, but relies heavily on the 
assumptions  made  on  its  calculations35.  These  findings  have  been  corroborated  by 
preliminary  results  using  the  TREMOVE  model.  The  total  marginal  external  cost  of 
climate change, air pollution, noise and accidents for all modes in the EU-19 in 2010 are 
estimated  at  158  billion  Euros.  (excluding  congestion  cost  and  the  cost  of  maritime 
shipping and intercontinental aviation)36. Accidents account for more than half of these 
costs; air pollution account for one fifth and climate change and noise respectively for 14 
and 11%.  

The present analysis covers congestion, accidents, air pollution, noise and climate change 
costs.  While  different  studies  may  change  the  relative  weight  of  these  externalities 
between each other, they are generally accepted as the most important transport external 
costs.  Other  external  costs  such  as  land  fragmentation  and  visual  intrusion  are  more 
related  to  the  provision  of  infrastructure  than  to  its  use  and  are  as  such  controlled  at 
project appraisal level. However, although accidents are part of the current analysis, the 
internalisation  of  these  external  costs  has  not  been  considered  in  the  policy  options  for 
the reasons described below.  

Transport mode: All the larger motorised transport modes are being examined but not 
all the five external costs are relevant for all of them. Accidents have not been considered 
in  non  road  transport  as  these  costs  are  very  low  in  aviation,  rail  and  almost  zero  in 
maritime  and  inland  waterways.  Air  pollution  and  climate  change  costs  have  been 
analysed for all modes. Congestion is perceived by stakeholders as an important nuisance 
only in road transport. Moreover, congestion charging is already foreseen in the current 
railways legislation 2001/14/EC. In air transport, the European Commission has adopted 
a Communication on the application of the slot allocation Regulation37 which clarifies a 
number of issues in order to ensure a better implementation of the existing rules and to 
improve  the  efficient  use  of  scarce  capacity  at  congested  Community  airports.  In 
maritime, ports don't operate at full capacity38 and when congestion is a problem, it is to 
some  extent  dealt  through  planning  and  port  charges.  Accordingly,  in  the  present 
document, congestion is analysed only for road transport. 

34 

35 

36 

37 
38 

UNITE – Unification of accounts and marginal costs for Transport Efficiency. November 2003. 
Project funded by 5th Framework – Transport RTD. INFRAS. External costs of transport. October 
2004. 
The share of climate change costs vary between 4% to 28% depending on the assumptions on the 
shadow price of CO2. Climate change costs have been estimated with a high reduction targets (-
50% between 1990 and 2030). UNITE's shadow value is €20 euros per tonne CO2. The INFRAS 
study use a range of shadow value from €20 to €135 euros per tonne CO2. 
The  TREMOVE  results  of  scenario  1  also  provide  data  on  the  summarized  marginal  external 
costs, based  on  the  estimates  made  in  the handbook.  These  sums  can  not  be  interpreted  as  total 
external  costs,  because  of  the  difference  between  marginal  and  average  external  costs  (in 
particular for noise, accidents and congestion costs).  
COM(2008)X.  
COMPETE  (2006).  Analysis  of  the  Contribution  of  transport  policies  to  the  competitiveness  of 
the EU economy and comparison with the United States.  

EN 

42 

   EN 

                                                 
Economic instruments: The choice of economic instruments is dictated by the nature of 
the  externality.  Air  pollution  and  noise  costs  are  heavily  related  to  the  type  and 
characteristics of the vehicle use and the location and time of the day. Congestion is also 
dependent  on  the  location  and  time  of  the  day.  Accordingly,  these  externalities  require 
differentiated  charges  in  order  to  provide  incentives  to  change  behaviour  (more  silent 
vehicles, less polluting vehicles, change of driving style, postpone or cancel travel). By 
contrast,  CO2  emissions  are  related  to  fuel  consumption  and  a  simpler  economic 
instrument, such as fuel taxes can provide the right signal to users (see box 4 in section 
2). When fuel tax is not possible, emission permits can be another way to internalise.  

EU  level  of  internalisation:  In  general,  stakeholders  favour  an  action  at  EU  level,  but 
many respondents also stressed the need to take into account the local character of some 
nuisances (for example congestion or accidents). As a result, the EU should play a role of 
enabler  by  providing  a  common  framework  while  tackling  global  nuisances  such  as 
climate  change.  For  these  reasons,  the  role  of  the  EU  should  be  different  and  its 
implication  should  vary  from  providing  a  common  framework  to  establishing  more 
binding rules. 

Internalisation of external accident costs  

It is widely acknowledged that accidents account for an important share of total external 
costs. In principle, accident costs causing real financial flows are covered by insurances. 
However,  a  large  part  of  the  costs  associated  with  accidents  are  non  financial  and  are 
often not yet covered by insurances.  

A  differentiate  kilometre  charge  system  could  be  implemented,  but  would  hardly  meet 
costs  drivers.  Accident  costs  drivers  are  very  complex  and  rely  on  parameters  like 
location,  time  and  vehicle  type,  but  they  are  also  related  to  driver  characteristics  and 
accidents  history.  These  factors  may  materialize  in  different  kinds  of  behaviour  as  to 
speed, alcohol driving, use of seat belts and other risk factors relatively independent from 
the  distance  travelled  and  which  are  otherwise  subject  to  regulation  and  police 
enforcement. To take into consideration all of these aspects is complex and may be hard 
to implement because of privacy reasons. As a result, internalisation of accident costs is 
not  easy.  An  alternative  would  be  to  charge  the  insurance  company  a  lump  sum  at  the 
level of the estimated external costs for each accident as they have detailed information 
on  cost  drivers  and  differences  in  the  risk  rates  between  drivers.  Insurance  companies 
would be able to pass on these costs to drivers and to differentiate these costs according 
to the characteristics of drivers. 

The  results  of  the  public  consultation  display  a  strong  support  to  an  internalisation  of 
external  accidents  costs  through  liability  insurances  (see  annex  1).  However,  such  a 
system  would  be  complex  to  elaborate  as  insurance  companies  would  be  faced  with 
increased uncertainties. Moreover, it would be even more difficult to design at EU level 
given the diversity of insurance systems in Europe.  

For  these  reasons  –  complexity  and  subsidiarity  –  external  accident  costs  have  been 
discarded from the analysis. 

EN 

43 

   EN 

Use of economic modelling to identify policy options 

Because  of  the  strong  interaction  between  transport  modes  and  between  various 
externalities, it is desirable to test the joint implementation of policy choices with respect 
to the various aspects of internalisation. Since the number of the possible combinations 
of  policy  actions  is  very  large,  a  few  scenarios  that  bundle  together  selected  uses  of 
policy instruments have been developed and tested with modelling tools.  

Because  of  modelling  resource  constraints  only  6  combinations  were  tested.  These  are 
the ones that were considered more realistic and operational. An additional scenario had 
been tested, but has been excluded at an early stage (see below section 4.1.3). 

4.1.3.  Exclusion of policy option "Integrated approach of internalisation according to 

the principle of social marginal costs pricing" 

A possible approach would be to charge for all external costs in all modes of transport 
applying  social  marginal  cost  pricing.  This  approach  would  allow  the  internalisation  of 
all  external  costs,  i.e.  congestion,  accidents  and  environmental  costs  in  all  modes  of 
transport,  freight  and  passengers,  including  private  cars.  In  addition,  the  approach 
represented  in  this  scenario  would  be  based  on  applying  the  concept  of  marginal  costs 
pricing as strictly as possible. As a consequence, marginal infrastructure costs would be 
charged  on  all  roads,  replacing  all  existing  charges,  including  infrastructure  charges  on 
the sections currently tolled.  

Finally,  this  scenario  would  not  only  consider  that  existing  fuel  tax  already  internalise 
CO2  in  road  freight  transport,  but  also  take  into  account  –  within  the  limits  of  tax 
legislation – the excess with respect to an estimated CO2 price. Accordingly,  road  fuel 
taxes  would  be  lowered  to  minimum.  ETS  in  air  transport  would  be  considered  as 
internalising CO2 emissions. Fuel tax/ETS would be applied in other mode of transport, 
i.e. maritime, IWW, railways. 

Although attractive, this scenario has been dropped for the following reasons: 

- Political feasibility: 

Charging  marginal  infrastructure  costs  can  not  be  sufficient  to  allow  cost  recovery  of 
infrastructure construction costs. This would go against the existing EU legislation in the 
road freight transport (Directive 1999/62/CE) and would require an extensive revision of 
this Directive which would go far beyond the request of the EU legislator.  

In addition, the inclusion of a decrease in fuel taxes to minimum in road transport would 
be difficult to implement as Member States are free to use fiscal charges provided they 
respect the minima set by the EU legislation. 

- Lack of sustainability of transport 

Moreover,  preliminary  modelling  results  show  that  the  decrease  in  fuel  tax  in  road 
transport  contribute  to  increasing  traffic,  which  generates  an  increase  in  external  costs 
(air  pollution  and  CO2)  and  fatalities.  Mobility  is  improved  at  the  expense  of 
sustainability which goes against the objective set by the EU.  

EN 

44 

   EN 

For  these  reasons,  this  strict  marginal  cost  scenario  has  been  discarded  as  the  results 
reflect a trade off between higher mobility, and less sustainability.  

In  conclusion,  the  policy  options  suggested  below  take  into  account  the  practical 
implementation of internalisation and its political and practical feasibility. They propose 
alternative strategies of internalisation by combining differently: 

–  the scope of modes of transport taking into account their freight or passenger transport 

activities,  

–  a  variable  span  of  external  costs  (environmental  costs  excluding  climate  change,  all 

environmental costs, congestion),  

–  the use of different economic instruments (charges, taxes or emission trading),  

–  and the extent to which policy instruments should bind Member States or just enable 

them to internalise external cost. 

4.2. 

Scenario 1: No new actions 

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.  These  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  reference  scenario  includes,  notably,  the  following  proposed  measures  by  the 
Commission: 

–  The  proposal  for  a  binding  fuel  efficiency  target  for  new  passenger  cars  (130  CO2 
g/km  target  +  10%  biofuel  target),  which  largely  replaces  the  pre-existing  voluntary 
agreement. 

–  The proposal39 to include aviation in the EU emission trading schemes (ETS), which 
would  allow  airlines  to  purchase  allowances  for  all  emissions  of  aircraft  above  the 
historic emission levels of 2004-2006. 

–  The  proposal  on  the  harmonisation  of  commercial  diesel40,  which  aims  at  reducing 
distortions  of  competition  and  environmental  damage  in  the  transport  haulage  by 
reducing fuel tank tourism. 

–  The passengers' car taxation. According to this proposal41 by 2008, at least 25% of the 
total  revenue  from  annual  circulation  taxes  and  registration  taxes  shall  come  from  a 
carbon-dioxide based element in the tax structure. This share should be 50% by 2012. 
By 2016, it is proposed that all registration taxes should be abolished. 

39 
40 
41 

COM(2006) 818 
COM(2007)52 
COM(2005)261 

EN 

45 

   EN 

                                                 
As mentioned in part 2, this reference scenario assumes that all these measures will be 
implemented.  Compared  to  the  baseline  scenario  of  TREMOVE,  it  incorporates 
additional measures and shows a more favourable evolution of CO2 costs. It is therefore 
more  optimistic  as  it  considers  that  various  measures  proposed  by  the  Commission  to 
fight  CO2  from  transport  are  already  in  place;  these  measures  are  not  subject  to 
assessment  in  this  document.  As  the  reference  scenario  assumes  a  certain  reduction  of 
CO2  emissions,  the  calculations  of  impact  could  be  larger  if  such  measures  were  not 
implemented.  

By contrast, it should be noted that the reference scenario does not include the proposal 
for further reducing emission limits for HGV (Euro VI)42. Such a proposal help reduce 
air pollution emission. Therefore, impacts of charging air pollution in the current analysis 
could  be  lower  if  such  a  proposal  was  implemented  following  the  rythm  of  market 
penetration of the new trucks from 2013 on.  

4.3. 

Scenarios 2: Efficient charging of heavy goods vehicles  

The  analysis  in  the  second  part  of  this  impact  assessment  shows  that  road  transport 
accounts for the very large majority of external costs. Within road transport, the level of 
internalisation is lower for heavy goods vehicles than for cars.  

Road  transport  is  regulated  at  EU  level  in  the  field  of  heavy  goods  vehicles  by  a 
legislation whose initial main aim was to avoid distortions within the internal market by 
disproportional and discriminatory charges.  

This set of scenarios analyses charging only heavy  goods vehicles in the framework of 
the  EU  legislation.  It  would  ensure  that  external  costs  can  be  charged  in  road  freight 
transport and focus on a modification of Directive 1999/62/EC. As mentioned before, the 
Directive  provides  a  framework  on  infrastructure  charging.  With  respect  to  the  current 
situation,  Member  States  would  be  allowed  to  charge  for  external  costs  on  top  of  their 
current charges.  

The framework for the possible charging of external costs would be extended beyond the 
Trans-European networks (TENs) in order to avoid inconsistent pricing which may lead 
to traffic diversion and impediments to the internal market. This entails a change of scope 
of the current Directive, which only applies to TEN roads. 

Three main variants are envisaged: 

2.A.  Charging  for  air  pollution  and  noise  while  considering  CO2  internalised  through 
existing fuel taxes  

A road user charge for air pollution and noise would be levied for all Member States. It 
would add to the current infrastructure tolls where they exist. The charge would be set at 
recognised median values of air pollution and noise costs generated by lorries and would 

42 

Impact  Assessment  of  the  Proposal  for  a  Regulation  on  the  approximation  of  the  laws  of  the 
Member  States  with  respect  to  emissions  from  on-road  heavy  duty  vehicles  and  on  access  to 
vehicle repair information. SEC(2007)1718. 

EN 

46 

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vary  according  to  the  EURO  class  of  vehicle,  and  the  location  (urban/interurban). 
Existing fuel taxes are considered to cover climate change.  

Annex 10 describes the different assumptions made. A sensitive analysis has been carried 
out with:  

–  charging higher values of external costs 

–  optional charging, meaning that, in the modelling, only some Member  States charge 

for external costs 

The analysis of these policy options is detailed in annex 10 and 12. The analysis below 
deals  with  PO2  assuming  all  Member  States  charge  on  the  basis  of  median  values  of 
external costs. This allows comparison with other policy options in a consistent way.  

2.B Charging for air pollution, noise and CO2 

A similar system as in 2.A (median values of external costs, all Member States) would be 
applied. In addition a CO2 charge would be added on top of the air pollution and noise 
charge. Member States may choose to add this CO2 charge in their fuel tax or in the tolls. 
Those  above  the  EU  average  fuel  tax  level  could  be  inclined  to  opt  for  an  increase  of 
tolls.  

Annex 10 describes the assumptions made on the level of fuel tax.  

2. C. Charging for air pollution, noise and congestion  

Here  again,  a  similar  system  as  in  2.A  (median  values  of  external  costs,  all  Member 
States) would be applied. On top of the environmental costs, a congestion mark-up would 
be  applied  on  some  sections/links  (basically,  when  marginal  infrastructure  costs  are 
higher  than  average  infrastructure  costs,  reflecting  the  pressure  on  the  use  of 
infrastructure).  Due  to  model  limitations,  the  implementation  of  congestion  charges  is 
simulated in an extremely rudimentary way as they would not vary according to peak and 
off-peak. 

Here  again,  a  variant  on  the  scope  of  congestion  charge  will  be  tested  (inclusion  of 
passenger cars) and is described in annex 10.  

4.4. 

Scenarios 3: Efficient charging in all modes of transport 

This set of scenarios  would ensure that external  costs can be charged, not  only in road 
freight  transport  like  in  scenarios  2,  but  also  for  all  other  modes  of  transport,  i.e.  rail, 
aviation, maritime and inland waterways in order to ensure equal treatment in all modes 
of transport.  

Scenarios  3  would  not  only  consider  externalities  for  HGV  on  all  roads  requiring 
modification  of  Directive  1999/62/EC  as  in  scenarios  2,  but  also  imply  legislative 
changes in other modes of transport.  

EN 

47 

   EN 

Two main variants are envisaged 

3.A. Charging for air pollution and noise in all modes and charging for CO2 in maritime, 
IWW and railways (diesel) 

In this option, charging for air pollution and noise is made possible in all modes. Climate 
costs are considered to be internalised by existing fuel excise duties in road transport and 
by  the  proposal  to  include  air  transport  in  the  ETS.  Maritime,  IWW  and  diesel  trains 
would be subject to a fuel tax. 

3.B Charging for air pollution, noise and CO2 in maritime, IWW, railways (diesel) and 
road freight transport 

In  this  case,  a  similar  system  would  be  applied.  In  addition,  a  CO2  charge  would  be 
added on top of air pollution and noise charge in road freight transport. 

Table 4.1: Summary table on scenarios 

Modes 

Policy option 

Road freight 
transport 

Road Passenger 
cars 

All modes of transport

- 

- 

Policy option 2A   -  Charging  for  air 
pollution  and  noise 
top  of  current 
on 
infrastructure cost.  

Policy option 2B 

Policy option 2C 

-  Charging  on  all 
roads 

-  Charging 
Member States*. 

in  all 

-  Charging  for  air 
pollution  and  noise 
on 
top  of  current 
infrastructure cost.  

- CO2 mark-up. 

-  Charging  on  all 
roads 

-  Charging 
Member States 

in  all 

-  Charging  for  air 
pollution  and  noise 
on 
top  of  current 
infrastructure cost 

-  Charging  on  all 
roads 

-  Charging 

in  all 

Sensitivity 
analysis: 
congestion 
charging 
bottlenecks 
(PO2Call) 

in 

EN 

48 

   EN 

 
 
 
 
 
Policy option 3A 

Policy option 3B 

Member States 

- 
charging 
bottlenecks.  

Congestion 
in 

-  Charging  for  air 
pollution  and  noise 
on 
top  of  current 
infrastructure cost.  

-  Charging  on  all 
roads 

-  Charging 
Member States. 

in  all 

-  Charging  for  air 
pollution  and  noise 
on 
top  of  current 
infrastructure cost.  

- CO2 mark-up. 

-  Charging  on  all 
roads 

-  Charging 
Member States 

in  all 

-  Air  pollution  and 
noise  charging  in  short 
sea 
inland 
waterways, railways, air 
transport. . 

shipping, 

CO2  charge  (fuel  tax) 
in  maritime, 
IWW, 
railways (diesel).  

assumed 

-  ETS 
to 
already  internalise  CO2 
transport  and 
in  air 
railways (electric). 

-  Charging 
Member States 

in 

all 

-  Air  pollution  and 
noise  charging  in  short 
sea 
inland 
waterways, railways, air 
transport. . 

shipping, 

- CO2 charge (fuel tax) 
IWW, 
in  maritime, 
railways (diesel).  

assumed 

-  ETS 
to 
already  internalise  CO2 
in  air 
transport  and 
railways (electric). 

Charging in all Member 
States 

* A sensitivity analysis has been made on this policy option, considering some only some Member States 
charge for air pollution and noise costs (see annex 10). 

5. 

ANALYSIS OF IMPACT 

The  analysis  of  impact  is  supported  by  quantitative  and  qualitative  analysis.  Three 
models – TRANSTOOLS, TREMOVE43 and ASTRA – have been used in order to assess 
the  impact  on  transport  demand  and  on  the  rest  of  the  economy  (see  annex  11  for  the 
description of the models and their use in the analysis of impact). The reference scenario 

43 

TREMOVE  has  been  used  in  the  context  of  the  IMPACT  study  and  some  comparisons  can  be 
made with the TREMOVE results. 

EN 

49 

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is described in annex 12 as all policy options are compared against it. Annex 13 describes 
the various modelling exercises that have been made for each set of policy options and 
gives additional details on the results of modelling.  

Different  impacts  have  been  assessed:  the  impact  on  transport,  the  impact  on  the 
economy,  the  impact  on  environment  and  the  impact  on  society.  In  addition, 
implementation costs of charging in road transport have been estimated. Administrative 
costs have also been assessed. Finally, the use of revenues has an influence on the overall 
impact and alternative use of those revenues is discussed in the last section.  

All  the  results  provided  by  the  models  give  useful  indications  of  the  impact.  However, 
the  models  can  neither  capture  all  the  situations  (time  or  location  differentiation  of 
charges and taxes) nor the impact of local passenger traffic (see box 6). Accordingly, the 
improvement of the level of internalisation is likely to be higher than it is estimated and 
the reduction of external costs could also be greater. In addition, the economic effects do 
not  capture  the  economic  positive  impact  of  the  reduction  of  fatalities  or  the 
improvement  of  health  (due  to  a  reduction  of  air  pollution).  As  a  result,  the  modelling 
results  have  to  be  combined  with  qualitative  analysis  and  complemented  by  other 
empirical studies.  

Box 6: Limitations of modelling internalisation of external costs 

The complexities of the transport sector require the use of models for a comprehensive 
analysis to be carried out. Models of course simplify the real world and thus have their 
limitations. The negative effect these limitations can have on the quality of the analysis 
can  be  alleviated  by  complementary  qualitative  analysis  but  it  is  important  to  be  clear 
about what economic models can contribute to an analysis (and what they cannot).  

The  transport  sector  comprises  two  very  different  markets:  passengers  and  freight.  In 
addition, many modes of transport often compete for the same infrastructure e.g. trucks 
and cars. Moreover, urban traffic conditions are very different from interurban ones. Cost 
is determined not only in money terms but also by time spent travelling. Interactions are 
complex  e.g.  an  increase  in  aviation  kerosene  prices  (or  taxes)  can  have  a  negative 
impact on rail freight competitiveness through increased high speed train demand. 

External costs further complicate the analysis as they depend on changing situations and 
on the characteristics of the infrastructure. Human activity patterns produce rush hours. 
Wind direction or strength determines pollution impacts. Moreover, there are interactions 
between  different  types  of  external  costs:  a  worsening  of  congestion  could  improve 
safety. The interactions among the different markets, populations and infrastructures are 
so complicated that models – which are simplifications of the reality – can provide very 
useful insights. 

The  current  Impact  Assessment  covers  the  whole  European  transport  sector  with  all  its 
diversity. The key element in pricing for external costs is that internalisation charges are 
targeted  at  the  actions  that  produce  them,  thus  they  have  to  be  highly  differentiated 
according  to  time  and  place.  But  to  facilitate  things  (and  also  for  lack  of  information), 
models  tend  to  be  highly  aggregated.  The  possibility  of  differentiating  charges  is  quite 
limited and models cannot capture all the derived benefits. It must be said that in real life 
the  more  differentiated  pricing  is,  the  more  difficult  and  expensive  it  becomes  to 

EN 

50 

   EN 

implement  it.  The  downside  of  aggregation  is  that  the  impacts  are  also  aggregated  and 
lose most of their visibility. In these conditions, models should be considered as useful 
tools  that  may  confirm  the  predictions  of  theory  and  often  show  the  direction  of 
interactions.  

The economic model used in this impact assessment is a standard, well-known and tested 
model. It does not capture positive benefits such as health improvement, the reduction of 
CO2 emissions, the decrease in fatalities, the improvement of the quality life of citizens 
and the incentive to innovate and change the fleet mix to cleaner vehicles. Most of these 
effects will improve GDP in the long run, an aspect not included in the modelling results. 
Economic theory would suggest that internalisation improves social welfare since when 
"polluters" are confronted with correct prices reflecting true costs, society ends up with a 
level of pollution it considers optimal (see also box 2). . The application of a Pigouvian 
tax leads to an improvement of efficiency provided each goods/service is sold at its social 
price (including external cost) and that revenues are promptly and properly used.  

In  the  current  impact  assessment,  the  model  estimates  that  the  negative  impact  of  an 
increase in transport prices outweighs other positive effects of internalisation. Taking a 
longer  term  horizon  could  have  helped  identify  the  adaptation  of  the  economy:  private 
investments do not happen in the ASTRA model as a time delay is implemented in the 
model.  A  simulation  until  2030  would  lead  to  much  stronger  impacts  on  private 
investments. This would lead to a boost in GDP. Hence, the model results are likely to 
understate the long term net benefits and they should be taken as an indication only, since 
they do not capture the entire complex mechanism and interactions of internalisation. 

Finally,  as  explained  in  annex  11,  because  of  the  comparative  static  nature  of 
TRANSTOOLS,  starting  and  end  values  for  transport  volumes  and  travel  times  have 
been  fed  into  the  economic  model  ASTRA.  The  inputs  from  Trans-Tools  have  been 
linear interpolated to derive the input for the whole simulation period from 2000 to 2020. 
This technical limitation does not allow analysis on how quickly the economy adapts and 
the initial costs are recouped in social benefits.  

5.1. 

Impact on transport  

Charging  for  external  costs  has  an  impact  on  transport  costs  which  in  turn  influences 
transport  volumes  (trips,  tons  lifted  and  passenger  and  ton  kilometres).  This  impact  is 
expected  to  be  different  across  modes  which  would  modify  the  share  of  modes  of 
transport  and  lead  to  modal  shift.  The  magnitude  of  these  impacts  varies  across  policy 
options. Finally, the impact on congestion will be assessed as it influences the time spent 
in transport.  

5.1.1. 

Impact on transport costs 

Increase in transport user charges 

The  principle  of  internalisation  is  that  transport  users  bear  the  costs  they  generate  – 
private and external. In order to make transport users pay for these external costs, all the 
policy  options  have  envisaged  a  user  charge  based  on  the  estimation  of  those  external 
costs.  

EN 

51 

   EN 

The level of pricing measures aimed at internalisation of an externality should ideally be 
based on the corresponding marginal external costs. The estimation of marginal costs for 
the  various  cost  categories  has  been  elaborated  from  the  Handbook  on  external  cost 
estimates44. These results have been taken as starting point. The value transfer procedures 
presented in the Handbook have been applied to retrieve values for all Member States.  

Table  5.0  describes  the  increase  in  charging  in  all  modes  of  transport.  The  increase 
depends  on  the  scope  of  external  costs  covered  -  air  pollution,  noise,  CO2  and 
congestion.  

The  internalisation  of  external  costs  will  lead  to  the  following  increase  in  charges 
according  to  the  different  scenarios.  As  an  example,  under  scenario  2A,  a  truck  would 
have  to  pay  0,037  euros  corresponding  to  a  marginal  external  cost  of  air  pollution  and 
noise for each kilometre it would travel.  

44 

Climate  change  costs  and  air  pollution  costs  per  tonne  of  emission,  accidents  and  noise  costs 
estimates per vehicle-kilometre (differentiated to urban/interurban, vehicle size, Euro standard) or 
LTO, congestion costs per vehicle-kilometre, as function of the capacity use of the road (used for 
TRANSTOOLS runs only). For the translation of the changes in taxes and charges per tonne of 
emission  to  changes  per  vehicle-kilometre,  LTO  or  litre  of  fuel,  data  from  the  TREMOVE 
reference scenario output has been used (fuel consumption, vehicle-kilometre and emissions). The 
result  of  this  translation  was  a  set  of  input  data  for  EU-19.  The  Joint  Research  Centre  has 
extrapolated the input data for the other 6 EU Member States, in order to run the TRANSTOOLS 
model for EU-25. 

EN 

52 

   EN 

                                                 
Air 
(passenge
r) 
€/LTO**
* 
Not 
relevant 

Table 5.0: Summary of simulation results – Increase in charges in 2020 

Road 
freight 
transport 
€/vkm 

Rail 
freight  

€/vkm 

Inland 
waterways 

Short-sea 
shipping*
* 
€/port call  €/vkm 

Passeng
er rail 

€/vkm 

1.20 

0,064 

0,076 

0,037 

0,037 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

Not 
relevant 

PO 2A 
Charging Air 
pollution and Noise 
PO 2B 
Charging Air 
pollution, noise and 
CO2 
PO 2C 
Charging air 
pollution, noise and 
congestion 
PO 3A 
Charging air 
pollution and noise. 
CO2 in non road.  
PO 3B 
Charging air 
pollution, noise and 
CO2 in all modes 
* Charges are expressed in €2000. It is assumed that all roads would be charged and that all Member States 
would  charge  for  external  costs.  Annex  12  shows  the  impact  when  only  some  Member  States  charge 
external costs in road freight transport.  
** 2012 is an average. The range is between 755 to 4080 euros per port call. For maritime transport, the 
application  of  charges  per  port  call  was  the  only  charging  option  that  could  be  modelled  with  the 
TRANSTOOLS model. In addition, the lack of reliable data on international maritime transport led to the 
limitation of the scope of the internalisation to that of local impacts only, in a radius of 60 miles from the 
port. The resulting additional charges used in the simulations therefore represent only a fraction of the real 
external costs of maritime transport. 
Source: TRANSTOOLS 

2012** 

2012** 

0,064 

0.58 

0.58 

1.20 

2.88 

2.88 

306 

306 

Increase in transport costs 

An increase in transport costs is to be expected due to the fact that some natural resources 
(air,  silence)  were  used  and  some  nuisances  caused  (health,  lower  air  quality,  noise, 
increased time) and they were not paid for. Although the magnitude of the costs of the 
internalisation for transport depends on the importance of the nuisance, it will be reduced 
by the response of transport users.  

The response of transport users will involve a re-organisation of travel whilst continuing 
to use the same mode, better logistic organisation (reduction of empty running, increase 
in  load  factors)  or  the  choice  of  alternative  corridors45.  As  the  EU  FP5  CAPRI  project 
explained:  "Modelling  studies  for  urban  and  inter-urban  road  pricing  indicate  that 

45 

See "Third Annual Thematic Research Summary- Pricing, Taxation and Financing Tools" Paolo 
Delle Site pages 13 and 15. EXTRaWEB Project DG Energy and Transport  

EN 

53 

   EN 

 
 
 
                                                 
proposed price changes can induce small but significant changes in behaviour (e.g. a 5% 
to  10%  demand  reduction)  which  can  make  a  major  contribution  to  the  reduction  of 
congestion and other externalities. In some studies a small reduction in demand has been 
shown  to  result  in  the  marginal  external  cost  of  congestion  falling  to  20%  of  the  pre-
charge  level46.  Thus  the  increase  in  transport  costs  is  to  some  extent  self-correcting 
through  the  behavioural  changes  it  induces  which  in  turn  allow  a  reduction  in  user 
charges.  

Therefore,  the  consequence  of  internalisation  on  transport  costs  is  not  straightforward. 
First, the increase in charges impacts directly on transport costs. But, a reduction of time 
costs due to freer flow traffic can compensate for the user itself the increase in charges. 
As  a  result,  one  needs  to  consider  both  effects  in  order  to  assess  the  magnitude  of 
impacts. 

The  modelling  results  show  that  the  increase  in  charges  leads  to  an  increase  in 
generalised costs which is generally lower than the first one. This is likely to be due to a 
reduction  of  time  costs  which  slightly  compensate  the  increase  in  charges  (see  graph 
5.147).  Charging  would  induce  an  increase  in  operational  costs  between  3  and  7%. 
However, the reduction of time costs (between -0.04 and -0.14%) compensates a bit the 
increase in generalised costs. The level of aggregation of the model hides to some extent 
the real effect, although it points at the right direction.  

Graph 5.1: Increase in road charges and generalised costs in road freight transport 

Average increase in road charges and generalised costs

Average increase in
road charges
Average change in
generalised costs

PO 3B

PO 3A

PO 2C

PO 2B

PO 2A

0,000

0,010

0,020

0,030

0,040

0,050

0,060

0,070

0,080

€/veh*km - Changes relative to reference scenario

Source: IMPACT/TRANSTOOLS 

46 

47 

Concerted  action  on  transport  pricing  research  integration  CAPRI  C.  Nash,  T.Sansom,  B. 
Matthews and alt. Page 17. Transport RTD programme 4th FP 
Note that the evolution of generalised costs is not so straightforward in other modes as the model 
cannot capture the impact of capacity constraints. As a result, it is more relevant to display these 
results only for road.  

EN 

54 

   EN 

 
                                                 
5.1.2. 

Impact on traffic and performances 

The increase in transport cost will therefore give a clear signal to transport users. Those 
who  value  their  trip  below  this  cost  will  choose  not  to  travel  at  that  moment  in  time 
and/or to use alternatives means. By contrast, those who value their trip above this cost 
will  continue  to  travel.  As  a  result,  a  change  in  traffic  flows  should  be  expected.  Most 
important is to see whether mobility is reduced, maintained or increased. In addition, the 
mobility  pattern  is  expected  to  be  different,  whether  road  freight  transport  is  charged 
alone or if other modes are charged.  

Mobility of goods 

The reference scenario assumes that, from 2000 and 2020, transport growth will be +66% 
in freight transport (all modes), including +91% for international road freight transport, 
and +35% in passenger (all modes). The evolution of the share of road transport would 
be negative: -4% in freight transport, -3% in passenger transport (see annex 11).  

The  implementation  of  charges/taxes  would  lead  to  a  decrease  in  tons  lifted.  The 
decrease  in  volumes  in  all  modes  is  mostly  explained  by  the  decrease  in  road  freight 
transport.  

Graph 5.3 shows that the stronger impact on road freight transport per ton-kilometre are 
caused  in  scenario  2C  (charging  air  pollution,  noise  and  congestion).  Changes  are 
positive  for  other  modes  of  transport,  but  the  increase  of  ton  lifted  in  other  modes  of 
transport is not sufficient to fully compensate the decrease of ton lifted in road transport.  

EN 

55 

   EN 

Is there detour of traffic?  

Detour of traffic can be one of the adverse effects of pricing as vehicles can be incited to 
take  alternative  roads  to  avoid  charging.  When  comparing  with  a  scenario  where  only 
motorways are tolled48, tonne-km reduce less than tonnes lifted (-0.44% versus -1.10%) 
which indicates that some detour from tolled motorways to non tolled secondary roads is 
taking place which results in the average trip length going up. 

Real  life  example  from  Germany  also  indicated  that  there  was  this  detour  effect 
especially  in  the  first  month  after  the  introduction  of  the  toll  (but  then  it  gradually 
reduced).  It  has  to  be  noted  that  the  quality  of  the  available  secondary  road  network  is 
crucial  as  it  makes  a  big  difference  to  the  willingness  to  take  the  detour  what  is  the 
subsequent  time  incurred  on  the  secondary  road.  Also  one  would  expect  professional 
drivers to make a pragmatic economic decision balancing the cost of the toll and the time 
loss and extra running costs (fuel) to decide which road to take.  

Here, all the policy options assume that all roads are charged in order to avoid any detour 
of traffic in road transport. The divergent evolution of ton-km and ton lifted shows that 
the  average  length  of  trips  could  increase  or  decrease,  which  might  indicate  that 
alternatives for road transport require a longer travelling distance. Depending on the type 
of  goods,  other  modes  may  not  be  perfect  substitute  for  road  which  can  offer  more 
flexibility and responsiveness to industrial needs. 

Graph 5.2: Changes in freight volumes in tons lifted per transport mode in 2020 
with respect to the reference scenario 

1

o

i
r
a
n
e
c
s

o
t

e
v
i
t
a
l
e
r

d
e
t
f
i
l

s
e
n
n
o
t
n

i

e
g
n
a
h
C

12,00%

10,00%

8,00%

6,00%

4,00%

2,00%

0,00%

-2,00%

-4,00%

PO 2A-central estimates

PO 2B- existing fuel tax

PO 2C

PO 3A

Po 3B

Maritime

Rail

Road

IWW

All modes

Freight modes

Source: IMPACT-TRANTOOLS 

48 

Scenario  5B  of  the  IMPACT  study  analyses  charging  on  motorways.  See  annex  11  for  the 
description of the scenario of the IMPACT study (Deliverable 3).  

EN 

56 

   EN 

 
 
 
 
 
 
 
 
                                                 
Graph 5.3: Changes in freight volumes in ton-kilometres per transport mode in 
2020 with respect to the reference scenario 

15,00%

10,00%

1

o

i
r
a
n
e
c
s

o
t

e
v

i
t
a

l

e
r

m
k
t

n

i

e
g
n
a
h
C

5,00%

0,00%

-5,00%

Maritime

Rail

Road

IWW

All modes

PO 2A-central estimates

PO 2B- existing fuel tax

PO 2C

PO 3A

Po 3B

-10,00%

Freight modes

Source: IMPACT/TRANSTOOLS Modelling 

Modest impact in passenger transport 

In  general,  passenger  transport  would  not  be  affected  as  freight  transport  is  charged. 
Scenarios 3 includes partial charging for passenger transport (air, maritime and railways). 
Modelling results confirm this. 

Graph 5.4: Changes in passenger trips per transport mode in 2020 with respect to 
the reference scenario 

1

o
i
r
a
n
e
c
s

o
t

e
v
i
t
a
l
e
r

s
p
i
r
t

f
o
r
e
b
m
u
n

n

i

e
g
n
a
h
C

3,00%

2,50%

2,00%

1,50%

1,00%

0,50%

0,00%

-0,50%

-1,00%

PO 2A-central estimates

PO 2B- existing fuel tax

PO 2C

PO 3A

PO 3B

Aviation

Rail

Road

All modes

Passenger modes

Source: IMPACT/TRANSTOOLS Modelling 

EN 

57 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 5.5: Changes in passenger volumes (measured in passenger-kilometres) per 
transport mode in 2020 with respect to the reference scenario 

1

o
i
r
a
n
e
c
s

o
t

e
v

i
t
a

l

e
r

m
k
p

n

i

e
g
n
a
h
C

3,00%

2,50%

2,00%

1,50%

1,00%

0,50%

0,00%

-0,50%

PO 2A-central estimates

PO 2B- existing fuel tax

PO 2C 

PO 3A

PO3b

Aviation

Rail

Road

All modes

Passenger modes

Source: IMPACT/TRANSTOOLS Modelling 

5.1.3. 

Impact on modal shift 

The various evolution of traffic in all modes of transport has consequences on modal split 
as the share of non road transport increases, especially in freight transport. Which of the 
non-road modes profits most from the modal shift, depends on the policy option. This has 
mainly to do with rather detailed network effects and cannot easily be explained by the 
price  changes  as  such.  The  impact  on  modal  shift  is  likely  to  be  related  to  many  other 
factors  than  transport  cost  like  reliability  and  quality  of  alternative  to  road  freight 
transport. Moreover, it probably depends on the market segments as certain transport like 
long distance transport, or transport of raw  materials, are more likely to be sensitive to 
changes in cost structure 

The impact on modal shift in freight transport is higher in scenarios 2 (charging only in 
road  freight  transport)  than  in  other  policy  options  where  the  other  modes  are  charged. 
This  is  expected  as  the  increase  in  road  charging  may  give  incentive  to  use  alternative 
modes  of  transport,  and  even  more  so  if  they  are  not  charged.  Maritime  and  railways 
shares increase. Charging for congestion and other external costs (air pollution and noise) 
has  a  strong  impact  and  leads  to  an  increase  in  other  modes  of  transport,  especially  in 
railways (see annex 12 for additional results on PO2 and 3).  

EN 

58 

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Table 5.1: Modal split in freight transport 

EU25 – 2020 – bn t-km 
Reference Scenario. Modal split 

Short-Sea  Rail 
36,8% 

13,5% 

Road 

IWW 

44,6% 

5,1% 

Evolution of modal shares relative to reference scenario (in percentage points) 

PO2A.  
PO2B 
PO 2C 
PO2C (all) 
PO 3A 
PO 3B 

2.0 
2.1 
1.7 
1.8 
2.0 
2.1 

1.1 
1.3 
1.2 
1.7 
1.1 
1.3 

-3.2 
-3.6 
-3.0 
-4.0 
-3.2 
-3.6 

0.1 
0.2 
0.1 
0.6 
0.1 
0.2 

Source: IMPACT-TRANTOOLS 

Table 5.2: Modal split in passenger transport 

Rail 
8,0% 

Air 
11,6% 

Road 
EU25- 2020-pass-km 
Reference scenario. Modal split 
80,4% 
Evolution of modal shares relative to reference scenario (in percentage points) 
-0.1 
-0.1 
-0.1 
-0.6 
-0.1 
-0.1 

PO2A. 
PO2B 
PO 2C 
PO2C (all) 
PO 3A 
PO 3B 

0.1 
0.1 
0.1 
0.4 
0.1 
0.1 

0.0 
0.0 
0.0 
0.2 
0.0 
0.0 

Source: IMPACT-TRANTOOLS 

5.1.4.  Congestion 

Forecasts of congestion for most European countries assume a rise in congestion levels 
(see  section  2).  To  the  direct  costs  of  suffering  congestion  one  should  add  the  costs  of 
avoiding it by adding a precautionary margin to the trip start as well as the costs derived 
from the loss of reliability in front of clients. The "COMPETE" study on competitiveness 
and congestion points out that the size of reliability costs is about 10 to 20% of the value 
of  time  costs49,  but  it  can  be  much  more.  Charging  for  congestion  is  expected  to  have 
strong impact on traffic flows.  

Congestion is mainly located in cities, in roads of densely populated areas and in some 
corridors on a seasonable basis. Since a few years, there have been many experiences of 
congestion  charging  in  cities  in  Europe.  In  February  2003,  London  has  imposed  a 
congestion  charging.  Three  years  later,  traffic  was  21%  lower  than  before  charging  in 
2002  and  congestion  was  8%  lower  compared  to  200250.  Similar  situation  was 
experienced  in  Stockholm  where  traffic  decreased  by  23%  six  months  after  the 
application of a congestion charge in 200651.  

49 

50 

51 

Compete  Final  report  (2006).  Analysis  of  the  Contribution  of  transport  policies  to  the 
competitiveness of the EU economy and comparison with the United States 
BESTUFS  II.  Deliverable  2.3.  October  2007.  6th  framework  programme  for  research  and 
technological development. 
Idem. 

EN 

59 

   EN 

                                                 
In France, variation of motorways tolls on A1 Lille Paris according to peak and off-peak 
periods suggests a possible reduction of rush hours of 10% (about 2000 cars less during 
rush hours for 4 hours each week-end)52. 

In  the  Netherlands  the  government  is  preparing  the  introduction  of  a  nation-wide 
kilometre charge for all road vehicles. Since 2005, various studies have been carried out 
assessing the various impacts, social costs and social benefits of various variants for this 
system.  These  studies  have  been  based  on  extensive  model  runs  with  the  national 
transport model LMS (LandelijkModel Systeem). The most important variants include a 
charge per kilometre which is differentiated to vehicle type, location and time of the day 
in order to give incentives for reducing congestion. The modelling shows that the overall 
congestion  levels  can  be  more  than  halved53.  The  net  social  benefits  of  the  scheme  are 
estimated  at  1.0  to  1.6  billion  Euros  a  year.  The  main  benefits  are  from  congestion 
reduction and are valued at 1.6 billion Euros per year (in variants with 35% congestion 
reduction) up to 2.3 billion Euros per year (in variants with 55% congestion reduction)54. 

All these case studies show the effectiveness of a congestion charge in reducing traffic. 
Moreover, congestion also leads to the reduction of other nuisances such as air pollution 
or CO2. According to some studies55, vehicle fuel consumption increases approximately 
between 10 and 30% under heavily congestion. Reducing congestion impacts positively 
on time saving and fuel consumption. 

Results are more limited in the current modelling exercise due to the aggregation at EU 
level.  On  average,  the  percentage  of  congested  network  in  Europe  would  decrease. 
However, an analysis at local level is likely to proved stronger impacts in dense and/or 
urban areas.  

Unexpectedly, the results of the modelling exercise show a higher decrease in congestion 
in  scenario  2C.  In  addition,  charging  for  passenger  and  freight  road  vehicles  leads  to  a 
higher  reduction  of  congestion.  Due  to  important  model  limitations  (no  time 
differentiation,  partial  modelling  of  local  traffic  important  on  congested  links),  these 
results do not fully show the theoretical benefits expected from congestion charging. One 
could  assume  that  the  impacts  of  congestion  charging  are  much  stronger  than  the 
modelling results suggest.  

52 

53 

54 

55 

Note  on  Tolling  Variations  and  Measures  for  optimizing  use  of  road  network  in  France.  2008. 
Ministry of transport. France.  
Ecorys  &  MuConsult,  2007.  Effecten  vormgeving  kilometer-prijs  bij  variabilisatie  van  BPM, 
MRB en Eurovignet. Rotterdam : Ecorys & MuConsult, 2007 
CPB (2005). Ex ante economic assessment of various road pricing schemes. Paul Besseling, Wim 
Groot and Rik Lebouille. Summary executive.  
Quoted in Transportation cost and benefit analysis – Congestion costs. Victoria Transport Policy 
Institute. It refers to studies that have analysed the link between congestion and fuel consumption. 
In  particular,  Greenwood  I.D.  and  Bennett  C.R.,  "The  effects  of  traffic  congestion  on  fuel 
consumption",  Road  and  Transport  Research,  Vol  5,  n°2,  June  1996;  Johansson  O.,  "Optimal 
roald pricing: simultaneous treatment of time losses, increased fuel consumption and emissions". 
Transportation research, Vol 2, n° 2, June 1997.  

EN 

60 

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Table 5.3: Congestion indicator (whole road network) - 2020 

Scenario 

2A-central 

Reference 
PO 
estimates 
PO  2B-  existing  fuel 
tax 
PO 2C 
PO 2C (all- 
PO 3A 
PO3b 

Degree of 
congestion network 
28,62% 

Difference 

28,35% 

28,39% 
27,38% 
26,56% 
28,43% 
28,40% 

-0,27% 

-0,23% 
-1,25% 
-2.06% 
-0,19% 
-0,22% 

Note: differences are computed with respect to Impact1 
Source: TRANSTOOLS 

5.2. 

Economic impact of transport dynamics 

The previous section has analysed the increase in charges in all modes and the impact on 
generalised  costs  and  on  traffic.  All  these  evolutions  have  an  economic  impact  as 
transport  plays  a  central  role  in  the  exchanges  of  goods  and  services  as  well  as  in  the 
efficiency of the economy.  

The  primary  objective  of  internalisation  is  to  improve  overall  economic  efficiency,  i.e. 
the use of resources, and the extent to which costs and resources coincide should be re-
assessed.  Improved  efficiency  and  fairness  in  society  was  also  one  of  the  major 
expectations expressed in the public consultation.  

In addition, the macro-economic effect should be considered as transport costs increase 
due  to  the  imposed  transfer  of  funds  to  the  public  sector  resulting  from  the 
internalisation.  The  results  of  the  public  consultation  showed  some  concerns  about 
possible  loss  of  competitiveness.  It  is  thus  important  to  look  at  the  effects  on  the 
economy  at  large.  The  way  in  which  the  economy  will  be  affected  depends  from  the 
magnitude of that increase after the adaptation methods and from the way and the timing 
in  which  the  recycling  of  funds  takes  place.  Furthermore,  a  sectoral  analysis  of  the 
impact  on  industry  should  be  scrutinised  as  transport  is  part  of  the  cost  structure  of 
industrial sectors. Charging freight transport might have negative effects on industry and 
services.  

5.2.1. 

Impact on efficiency 

Internalisation will give stronger and more beneficial impact if charges are related to cost 
drivers. The first best option would be to allow high differentiation of charges to reflect 
the  variation  of  external  costs.  There  are  some  practical  limits  to  such  implementation 
due  to  technology  feasibility.  Charges  could  not  vary  over  time,  place,  route  chose, 
driving  style…  However,  assuming  differentiation  of  charging  according  to  location 
(urban, non urban), to vehicle characteristics and time (peak, off-peak, day, night) would 
help make a direct link between charges and costs and would probably improve optimum 
welfare.  Transport  users  would  have  the  incentive  to  make  efficient  use  of  transport 
infrastructure,  and  then  to  base  their  decision  on  the  right  prices.  Only  the  transport 

EN 

61 

   EN 

  
activities  which  were  more  valuable  than  their  external  costs  would  remain  after  the 
internalisation. Scarce road space would be allocated to the most valuable uses.  

One  of  the  shortcomings  of  the  current  modelling  exercise  is  the  inability  to  assess  the 
improvement  of  efficiency,  due  to  the  limited  differentiation  allowed  by  the  model, 
which is a key element in a social marginal cost pricing system. As a result, the impact of 
efficiency is difficult to measure, and one can rely on other experiences in this field.  
ECMT research estimates56, on the basis of 2000 data for the three biggest economies in 
Europe (Germany, France and the UK), that by reforming prices for inland transport and 
even without expanding infrastructure, net gains for society of 30 billion Euros per year 
could be achieved through improved efficiency. The changes in prices modelled would 
yield 100 billion Euros of additional revenues that could be used to cut taxes or invest in 
infrastructure  inside  the  transport  sector  or  elsewhere  in  the  economy.  The  study  also 
analysed potential welfare gains in Finland where population density and the number of 
cities are lower and roads are less congested. The annual welfare increase would be 300 
millions  euros.  The  largest  part  of  the  economic  gains  would  come  from  reducing 
congestion  to  optimal  levels  on  the  roads  (with  the  rest  related  to  improved 
environmental  performance  and  better  use  of  rail  and  public  transport).  These  findings 
show  the  positive  role  of  congestion  by  reducing  fuel  consumption  and  time  spent  in 
transport.  

5.2.2.  Macroeconomic impact 

Economic  impacts  of  transport  pricing  depend  on  the  type  of  charging  and  the 
interactions between the different sectors of the economy. For example, one can expect 
that congestion charges would not affect exports while all other charges imposed on long 
distance transport may cause significant reduction of exports if behaviour is not adapted. 
As  a  result,  congestion  charging  tends  to  impact  GDP  less  negatively  than  other 
charges57.  

In  a  medium  term,  internalisation  can  improve  productivity  as  transport  users  may  be 
incited to use vehicles more efficiently. This has been one of the positive results of the 
Swiss  experience.  Since  Switzerland  has  implemented  a  charging  scheme  for  HGV, 
productivity has increased and has compensated the short term increase in prices58.  

In  the  current  analysis,  the  modelling  exercise  using  ASTRA  model  shows  the 
macroeconomic impact of transport evolutions. The time horizon is 2020 and the model 

56 

57 

58 

Reforming Transport Taxes and charges, ECMT, May 2003. The gain in welfare recorded is a net gain after 
substracting  the  reduction  in  consumer  surplus  of  motorists  from  the  various  elements  of  the  welfare  gain 
such as the increase in revenues, the reduction of travel times or the reduction in pollution and accidents, and 
so on. The research undertaken modelled the optimum with the replacement of all existing taxes by a new 
externality tax (similar to a differentiated km charge). The research suggests significant higher charges for 
cars, trucks and vans in urban areas and on some inter-urban routes. Price increase in peak periods can be 
around  100%  for  small  petrol  cars  in  cities  such  as  Munich,  Ile  de  France  (compared  with  the  prices 
prevailing in 2000). These increase suggests why the modelling exercise has larger effects.  
W. Schade, C. Doll. Macroeconomic analysis of transport pricing regimes for the EU. Advanced 
OR and AI methods in transportation.  
The  charging  scheme  has  been  implemented  with  an  increase  of  weight  limitations  on  heavy 
traffic  from  28  tons  to  35  tons  and  then  to  40  tons  in  2005.  Bundesamt  für  Raumentwicklung 
ARE.  Schweizerische  Eidgenossenschaft.  Volkswirtschaftliche  Auswirkungen  der  LSVA  mit 
höherer Gewichtslimite", 2007. 

EN 

62 

   EN 

                                                 
may not be able to capture the long term adjustment of the economy. In addition, ASTRA 
does not compute market equilibria and does not deliver welfare impacts.  

The  reference  scenario  assumes  a  favourable  competitive  situation  of  EU27  economies 
(see  annex  10).  Exports  and  investments  are  dynamic  while  industrial  sectors  display 
good  performances.  GDP,  Gross  value  added,  consumption  and  TFP  (total  factor 
productivity) grow by an average annual growth rate of about 2%. Against this reference 
scenario, the evolutions of macroeconomic variables have been assessed.  

The impact of the policy options analysed is negative on the macro-economic dynamics 
as  these  policy  options  envisage  a  net  increase  in  charges  and  taxes.  It  should  also  be 
noted  that  the  graph  below  measures  the  changes  relative  to  the  reference  scenario. 
Therefore, all the options assume an increase of the macro-economic variables, but at a 
lower pace than foreseen in the reference scenario. 

The increase in transport costs leads to a negative evolution of exports and consumption 
(households have to face increased costs of transport). Investments and gross value added 
also  display  negative  trends  although  investments  exhibit  a  temporarily  growth  after 
introduction  of  road  charges,  which  could  be  explained  by  an  improvement  of  national 
budget  leading  to  a  decrease  of  interest  rates  which  support  investment  activities.  The 
evolution of total factor productivity (TFP) is negative apart in scenario 2C. Option 2C 
charges for congestion and environmental costs, which leads to a reduction of congestion 
(see table 5.3) and an improvement in freight time. Here again, the evolution of TFP is 
probably limited by the limitations of the model which cannot capture all positive effects. 
Congestion  charging  allows  goods  to  flow  faster,  which  should  be  reflected  in  the 
evolution of TFP.  

The evolution of employment is affected by the negative trends of the economy even if in 
the short term, there is a temporarily growth in some policy options. 

EN 

63 

   EN 

Graph 5.6: Impact on Gross value added for EU-27 (in € 2000) 

Impacts on gross value added without refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

0,1%

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT/ASTRA 

Graph 5.7: Impact on exports for EU-27 (in € 2000) 

Impacts on exports without refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

0,1%

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

-0,5%

-0,6%

-0,7%

-0,8%

-0,9%

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT/ASTRA 

PO2A central

PO2Bhigh

PO 2C

PO2C (all)

PO 3A

PO 3B

PO2A central

PO2Bhigh

PO 2C

PO2C (all)

PO 3A

PO 3B

EN 

64 

   EN 

 
 
 
 
 
 
 
 
 
 
Graph 5.8: Impact on consumption for EU-27 (in € 2000) 

Impacts on consumption without refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

0,3%

0,2%

0,1%

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

-0,5%

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT/ASTRA 

PO2A central

PO2Bhigh

PO 2C

PO2C (all)

PO 3A

PO 3B

EN 

65 

   EN 

 
 
 
 
 
Graph 5.9: Evolution of total factor productivity for EU27 (in € 2000) 

Impacts on total factor productivity without refunding for EU27 

0,2%

0,0%

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

-0,2%

-0,4%

-0,6%

-0,8%

-1,0%

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT/ASTRA 

Graph 5.10: Impact on GDP for EU-27 (in € 2000) 

Impacts on GDP without refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

0,1%

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

-0,5%

-0,6%

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT/ASTRA 

PO2A central

PO2Bhigh

PO 2C

PO2C (all)

PO 3A

PO 3B

PO2A central

PO2Bhigh

PO 2C

PO2C (all)

PO 3A

PO 3B

EN 

66 

   EN 

 
 
 
 
 
 
 
 
 
 
Graph 5.11: Impact on employment for EU27 

Impacts on employment without refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

0,1%

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

-0,5%

-0,6%

-0,7%

PO2A central

PO2Bhigh

PO 2C

PO2C (all)

PO 3A

PO 3B

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT/ASTRA 

5.2.3.  Macroeconomic impact if taxes are lowered 

The use of revenues (i.e. the tax/charge recycling pattern) has an influence on the impact 
of charging. Section 5.7 will discuss about the different uses of revenues.  

In the modelling exercise, all the scenarios have been modelled with the assumption that 
revenue  goes  to  the  general  budget  and  is  not  refunded  to  some  specific  objectives. 
Another  assumption  has  been  made  on  the  use  of  revenues  to  decrease  other  taxes 
(lowering direct taxes). Revenues from road charges can be fed back into the system via 
refunding the revenues for direct tax reductions. In this case, the expenditures are given 
back to all private households balancing their total disposable income.  

In  this  case,  investment  and  consumption  would  display  positive  changes  compared  to 
the  situation  where  the  refunding  does  not  take  place.  Refunding  revenues  induces 
positive  growth  of  employment,  investment  and  consumption  which  softens  the  impact 
on  GDP  (see  annex  12  for  other  macroeconomic  evolutions).  In  policy  option  3B, 
refunding  revenues  has  a  positive  impact  on  employment.  The  impact  remains 
nevertheless slightly negative with respect to baseline. This is because transport activity 
as  a  whole  is  reduced  and  modelling  does  not  take  into  account  the  positive  impact  on 
GDP of reduced externalities.  

EN 

67 

   EN 

 
 
 
 
 
Graph 5.12: Impact on GDP for EU27 with refunding (in € 2000) 

Impacts on GDP with refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

0,1%

0,0%

-0,1%

-0,2%

-0,3%

PO2A central

PO2Bhigh

PO 2C

PO2C (all)

PO 3A

PO 3B

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Source: IMPACT/ASTRA 

5.2.4. 

Impact on Industry and Services 

Transport is part of the cost structure of industry and may range from 1% to 9% of final 
product value59.  

In general, transport costs are an instrument for adaptation as firms have to adjust quickly 
to changing competitive situations. The incidence of transport costs on industrial sectors 
depends  on  raw  material  prices  (transport  costs  matter  as  these  products  are  often 
imported through sea transport), the overall value added, the overall production costs and 
the distribution network. Recent trends such as the fragmentation of the value chain that 
goes beyond the simple relocation of production to low cost countries show that transport 
has become a lower component of the overall cost of producing and distributing60. One 
expectation  expressed  during  the  public  consultation  was  that  internalisation  would 
increase the incentives to produce locally in Europe leading to a reduction of relocation 
to  third  countries.  At  this  stage,  the  impacts  are  too  small  to  trigger  such  effects, 
especially in sectors where transport costs are not the major part of the cost structure.  

Based on an analysis of selected sectors – processed food, automotive, coffee and textile- 
the  conclusion  is  that  transport  is  not  so  critical  for  the  competitiveness  of  the  EU  as 
transport  modifications  are  rather  a  consequence  of  strategic  choices.  The  overall 
incidence of transport costs on the final prices of goods on average ranges between 5 and 
10%  for  the  processed  food,  is  under  4%  for  the  automotive  and  1-3%  in  the  textile 
sectors61.  

59 

60 
61 

9.5%  for  tomato  versus  3.9%  for  auto.  Energy  use  and  Cost  in  freight  Transport  Chain.  TRT 
Trasporti e Territorio. December 2005.  
Idem 
Idem 

EN 

68 

   EN 

 
 
 
 
 
                                                 
Accordingly,  the  way  services  and  goods  might  be  affected  by  transport  pricing  is  not 
straightforward as an increase in transport prices may not be transferred to clients. 

In  the  modelling  results,  the  introduction  of  transport  charging  would  have  a  negative 
impact on consumption, gross value added (GVA) and employment in industrial sectors. 
The impact varies across sectors.  

Annex  12  describes  extensively  the  impact  on  consumption,  gross  value  added  and 
employment of industrial sectors. 

5.3. 

Environmental impact of transport dynamics 

Internalisation is a way to influence behaviour and is expected to decrease externalities. 
It should be noted that the model results cannot capture some major impacts that are to be 
expected  with  regard  to  emissions,  in  particular  shift  to  cleaner  vehicles  within  each 
mode. Based on the evidence from the Swiss and German charging schemes, charges that 
are  effectively  differentiated  on  the  emission  class  of  the  vehicle  will  accelerate  fleet 
renewal  and  will  therefore  deliver  a  significantly  improved  environmental  performance 
of the vehicle fleet resulting in a substantial reduction of air pollution costs.62 

As  a  result,  the  overall  impacts  on  emissions  that  are  to  be  expected  from  the  various 
internalisation policy options are much larger than shown in the graphs below. 

5.3.1.  Air pollution and CO2 

The evolution of external costs under the reference scenario has been described in part 2 
“what  happens  if  nothing  is  done”.  The  trends  display  an  increase  of  external  costs, 
which is not linear over the years (in particular for air pollution and CO2).  

CO2  emissions  would  increase.  However,  the  reference  scenario  displays  a  more 
favourable  evolution  of  CO2  costs  (see  part  2).  This  shows  the  positive  impact  of 
pipeline measures if they are to be adopted (in particular the inclusion of air transport in 
ETS). Air pollution projections exhibit a decrease.  

Internalisation of external costs is expected to decrease those external costs as transport 
users will have incentive to maximise their utility at the lowest costs (including external 
costs).  According  to  pricing  experience,  a  decrease  in  air  pollution  and  CO2  happens 
when  charging  for  these  external  costs.  The  research  undertaken  by  ECMT  shows  that 
optimal charging would lead to a reduction of air pollution and CO2 by 54% in United 
Kingdom,  50%  in  France  and  42%  in  Finland  (see  footnote  56  for  the  scope  of  the 
research)..  

In  the  modelling  exercise,  the  implementation  of  a  charging  scheme  leads  to  a  more 
modest reduction of air pollution costs due to the model limitations previously described. 
The  reduction  of  environmental  external  costs  is  estimated  at  about  1  billion  euros  per 

62 

Presentations on the German case by W. Rothengatter and the Swiss case by C. Küng at Transport 
and Environment Conference on road pricing on 9 April 2008. 
http://www.transportenvironment.org/News/2008/2/9_april_2008_eurovignette_conference_road_
charging/.  

EN 

69 

   EN 

                                                 
 
year.  Obviously,  charging  all  modes  reduces  more  external  costs  rather  than  charging 
only road transport. ). 

Graph 5.14: Impact on PM emissions in 2020  

Evolution of PM10 external costs

15,00%

10,00%

)
s
o
r
u
e

5,00%

0,00%

-5,00%

-10,00%

n
b
(

o
i
r
a
n
e
c
s

e
c
n
e
r
e
f
e
r

o
t

e
v
i
t
a
l
e
r

s
n
o
i
s
s
i

m
e

0
1
M
P

f
o
s
e
g
n
a
h
C

Gasoline
passengers
(road)

Diesel
passengers
(road)

Road freight

Rail
passenger

Rail freight

IWW

T OT AL 

PO 2A-central estimates

PO 2B- existing fuel tax

PO 2C

PO 3A

PO3b

Source: IMPACT/TRANSTOOLS Modelling 

Graph 5.15: Impact on Nox emissions in 2020  

Evolution of NOx external costs

15,00%

10,00%

)
s
o
r
u
e

5,00%

0,00%

-5,00%

-10,00%

n
b
(

o
i
r
a
n
e
c
s
e
c
n
e
r
e
f
e
r

o
t

e
v
i
t
a
l
e
r

s
n
o
i
s
s
i

m
e

x
o
N
n
i

s
e
g
n
a
h
C

Gasoline
passengers
(road)

Diesel
passengers
(road)

Road
freight

Rail
passenger

Rail freight

IWW

TOTAL 

PO 2A-central estimates

PO 2B- existing fuel tax

PO 2C

PO 3A

PO3b

Source: IMPACT/TRANSTOOLS Modelling 

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Graph 5.16: Impact on CO2 emissions in 2020  

Evolution of CO2 external costs

15,00%

10,00%

)
s
o
r
u
e

5,00%

0,00%

-5,00%

-10,00%

n
b
(
o
i
r
a
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c
s
e
c
n
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e
f
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o
t
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v
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a
l
e
r

s
n
o
i
s
s
i

m
e
n
i

s
e
g
n
a
h
C

Gasoline
passengers
(road)

Diesel
passengers
(road)

Road
freight

Rail
passenger

Rail freight

IWW

TOTAL 

PO 2A-central estimates

PO 2B- existing fuel tax

PO 2C

PO 3A

PO3b

Source: IMPACT/TRANSTOOLS Modelling 

5.3.2.  Noise 

Charging  for  noise  costs  should  lead  to  a  reduction  of  exposure  to  noise,  especially  in 
areas with heavy traffic. The impact on noise of the alternative policy options is difficult 
to assess at an aggregate EU level. REFIT provides indicators on the level of exposure of 
people to road noise. The level of population exposed to noise varies across Europe from 
3%  to  9%,  the  average  at  EU25  level  being  6%.  The  figure  is  quite  low  compared  to 
other  estimates  made  by  the  European  Environmental  Agency,  but  here  it  is  used  to 
assess  the  variation  due  to  the  impact  of  charging.  The  results  show  that  no  changes 
across scenarios seem to appear when charging for external costs63. However, one could 
expect an improvement of the situation at local level when some people are particularly 
exposed to noise.  

5.4. 

Social impact of transport dynamics 

When charging for external costs, mobility is expected to be preserved while improving 
safety in transport. How the cost increases distribute among people and across regions is 
also important to analyse.  

The analysis of social impact will have several dimensions. First, the impact on mobility 
should  be  assessed  as  keeping  mobility  is  a  key  dimension  of  the  EU  transport  policy. 
Second,  the  impact  on  income  should  be  scrutinised  as  it  gives  an  indication  of  the 
increase/decrease in wealth of the national economies. Third, the impact on equity needs 
to  be  analysed.  The  results  of  the  consultation  had  shown  that  respondents  were 
expecting increased equity in society. And finally, the impact on safety will be assessed.  

63 

Note  that  this  indicator  has  some  limits  due  to  model  limitations.  Vehicle-kilometres  on  the 
motorways  and  main  roads  are  extracted  from  TRANSTOOLS,  while  the  vehicle  kilometres  on 
urban roads are calculated by TREMOVE. Both baselines are therefore not correlated, which may 
influence the reliability of the indicator. See REFIT January 2008.  

EN 

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5.4.1.  Mobility of persons 

Overall mobility would be slightly reduced (see graph on number of trips), but those who 
keep  travelling  have  longer  trips  (see  graph  5.5).  The  changes  in  passenger  kilometres 
would induce relative changes in favour of railways. As a result, the impact on mobility 
would be modest and charging would not hamper mobility of the society as a whole.  

5.4.2.  Health effect 

One aspect the models cannot capture is the positive effect of the reduction of external 
costs  on  health.  The  reduction  of  air  pollution  will  have  a  positive  impact  on  health, 
especially in dense populated areas and in alpine and other populated mountain valleys. 
Transport is one of the main sources of air pollution, notably for NOx (the main source), 
VOC  and  PM2.5  but  also  for  SO2  in  the  case  of  shipping.  There  are,  however,  many 
other domestic (heating) and industrial sources which are also responsible of the health 
damages  produced  by  air  pollution64.  Nevertheless  transport  measures  are  an  important 
element of the EU thematic strategy on air pollution. While the main measures concern 
improved standards they have been so far backed by fiscal incentives, their effectiveness 
would  be  much  improved  by  internalisation  charges  which  are  also  mentioned  in  the 
thematic  strategy.  Increasing  dieselisation  and  growing  traffic  and  congestion  will  all 
raise emissions. On the other hand social vulnerability will also increase due to growing 
urbanisation  and  to  the  ageing  of  the  population.  Therefore  transport  measures  in  this 
field  are  urgent  notably  the  kick  adoption  of  cleaner  standards  supported  by  the 
application differentiated charges.  

5.4.3. 

Impact on income per employees 

The  reference  scenario  assumes  that  disposable  income  for  EU27  will  increase  in  real 
terms until 2020 by an average annual growth rate of about 2%. 

Graph  5.17  shows  the  evolution  of  income  per  employee  in  the  two  recycling  cases 
(refunding and not). Obviously, the impact of different options on both is very modest. 
The  income  per  employee  would  increase  temporarily  (likely  due  to  a  decrease  in 
employment).  Interestingly,  the  impact  increases  strongly  if  revenues  are  refunded  to 
lower direct taxes.  

64 

The  effects  on  life  expectancy  of  exposure  to  particulates  were  estimated  at  over  300  000 
premature  deaths  equivalent  in  year  2000  and  those  associated  with  ozone  at  some  21  000 
premature deaths (SEC(2005)1133 Impact Assessment of the Thematic Strategy on Air Pollution. 

EN 

72 

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Graph  5.17:  Impacts  on  income  per  employee  in  the  EU-27  until  2020 
(without refunding) (in € 2000) 

Impacts on income per employee without refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

0,25%

0,20%

0,15%

0,10%

0,05%

0,00%

-0,05%

-0,10%

PO2A central

PO2Bhigh

PO 2C

PO2C (all)

PO 3A

PO 3B

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT-ASTRA 

Graph 5.18: Impacts on income in the EU-27 until 2020 (with refunding) (in 
€ 2000) 

Impacts on income per employee with refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

1,2%

1,0%

0,8%

0,6%

0,4%

0,2%

0,0%

-0,2%

PO2A central

PO2Bhigh

PO 2C

PO2C (all)

PO 3A

PO 3B

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT-ASTRA 

5.4.4.  Distributional impacts 

The  distributional  impact  of  the  policy  options  can  be  assessed  in  at  least  two 
fundamentally different ways: on the one hand the REFIT calculates indicators like the 
Gini-coefficient  or  the  affordability  index  which  inform  about  changes  in  the  overall 
income distribution. On the other side is a mainly descriptive analysis of the impacts the 
internalisation might have on the most vulnerable groups. 

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The  Gini-coefficient  is  an  indicator  which  comprises  the  whole  income  distribution. 
Because of this macro-economic perspective, it is not surprising, that results do not differ 
much  between  the  different  options  furthermore  the  REFIT  results  for  the  baseline 
scenario still show some deviation from the figures provided by Eurostat. In so far this 
indicator has not been used in the current analysis. 

The  affordability  index  is  defined  as  the  fare  expenditure  made  by  household  as  a 
percentage of its income. It indicates that the share of income to be spent on mobility will 
slightly increase when scenario 5a of the IMPACT study will be realised65. Overall these 
changes will be minor. Still it does not cover the question how different income groups 
might be affected.  

Graph 5.21: Affordability index 

Affordability index*

25,00%

20,00%

15,00%

10,00%

5,00%

0,00%

Scenario 5a

Reference Scenario

AT BE CZ DE DK EL ES FI FR HU IE IT LU NL PL PT SE SI

UK

EU15

EU12

EU27

Source: REFIT Indicators

* pass-km*weighted average cost per mode/ per capita income

From a social point of view the question whether there are groups which might be cut off 
from  mobility  and  by  that  socially  excluded  is  very  important.  In  that  respect  most 
significant will be the impact of the internalisation on private cars. The proposed policy 
options do not charge passenger cars, except in the variant of PO2C where passenger and 
freight can be charged for congestion.  

Beyond  that,  the  existing  charging  of  passenger  car  is  not  primarily  oriented  towards 
internalisation  of  external  effects,  but  more  towards  raising  revenues.  In  so  far  moving 
towards an internalisation strategy might coincide with a) shifts of the payments and b) 
with  increases.  The  exact  extent  will  differ  among  the  Member  States  and  between 
different types of vehicles and mobility patterns. Overall simulations show that prices in 
urban areas will increase more significantly than in rural areas as congestion and noise 
are more problematic in agglomerations. This also means that on average price increases 
are more likely to occur where public transport is better developed. 

65 

The  REFIT  indicators  are  based  on  scenario  5a  of  the  IMPACT  study  described  in  annex  10. 
Compared  to  Policy  Option  3A,  scenario  5A  includes  accident  costs  and  applies  marginal 
infrastructure  costs.  The  increase  in  the  affordability  index  would  be  lower  under  policy  option 
3A. 

EN 

74 

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On  average  lower  income  people  tend  to  use  more  public  transport  although  in  some 
countries the proportion of low income people owning a car is almost half of households. 
When  they  use  public  transport,  they  will  not  feel  impacted  by  charging  private  cars. 
According to a study carried out by Gallup in 2007, the predominant profile of the owner 
of private car is a man, 25-39, living in a rural area and having a high level of education. 
Studies tend to show that low-income people are less numerous to own their car. It might 
be  added  that  respondents  of  the  public  consultation  have  suggested  that  low-income 
people are typically more exposed to externalities, as they tend to live in areas where real 
estate  prices  are  lower  often  due  to  externalities.  Accordingly,  they  might  benefit 
proportionally more from the reduction of externalities – an effect that is not captured in 
modelling.  

Although in most cases social inclusion will as far as foreseeable not be compromised, 
there  might  be  specific  situations  where  a  full  internalisation  of  external  costs  leads  – 
without  compensating  efforts  –  to  a  socially  undesirable  situation  (e.g.  unduly  limiting 
the mobility of physically handicapped, preventing low-income earners to work). In such 
exceptional cases which are – given the regional type of changes – better assessed on the 
Member States or regional level compensatory measures are to be put in place.  

Finally  the  social  impact  of  the  internalisation  will  vary  very  much  with  the  way  the 
revenues are used.  

5.4.5.  Fatalities 

The change in mobility patterns is expected to lead to a decrease in fatalities as most of 
accidents  occur  in  road  transport  mode.  Unsurprisingly,  fatalities  would  decrease  as 
compared to the reference scenario.  

Graph 5.22: Fatalities 

Evolution of fatalities in road 

PO 2A-central
estimates

PO 2A- only
MS with tolls

PO 2A- high
estimates

PO 2B- existing
fuel tax

PO 2B- lower
fuel tax

PO 2C

PO2C (all)

PO 3A

PO3b

Passengers

Freight

T otal

o
i
r
a
n
e
c
s

e
c
n
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e
f
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r

o
t

e
v
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a
l
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s
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n
a
h
c

1,00%

0,00%

-1,00%

-2,00%

-3,00%

-4,00%

-5,00%

-6,00%

-7,00%

-8,00%

-9,00%

Source: TRANTOOLS 

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5.4.6.  Welfare and regional impact 

Internalisation  should  improve  welfare  as  the  reduction  of  external  costs  is  expected  to 
compensate the increase in transport costs (see section on efficiency above).  

In the current modelling exercise, the positive impact of the decrease in externalities is 
higher than the loss of welfare due to the increase in transport costs. Table 4 in annex 13 
reports  the  distributional  effect  of  charging  across  regions  and  shows  that  congestion 
charging  leads  to  higher  net  welfare.  Welfare  gains  range  between  800  millions  and  2 
billions euros.  

However, the distribution of welfare is not equal across Europe and some regions might 
lose from it.  

Obviously,  the  impact  on  regions  will  be  different  across  Europe  according  to  their 
geographical situation. Some regions are losing, but overall the negative impact is quite 
moderate  across  Europe.  The  results  provided  by  TRANSTOOLS  provide  evidence  of 
the evolution of welfare across regions in Europe. The welfare gains/losses depend on the 
increase in the generalised costs of transport and the change in external cost (see annex 
12 for methodology).  

The  GRACE  study  on  socio  economic  effects  pricing  uses  the  CG  Europe  model  to 
analyse the welfare effect in regions. Three scenarios are analysed: (1) fuel tax for cars 
and flat km  tax for trucks covering air  pollution, congestion, accidents, noise and wear 
and tear, (2) fuel tax to internalise climate change and flat km tax for other external costs, 
(3) combination of fuel tax and km tax with differentiation by country, time, zone, road 
type and vehicle. The overall effect on regions is negative for all scenarios as transport 
prices are raised, which affects products supply (reduced product diversity) and welfare. 
The percentage of real income reduction is maximum -0.11% in EU27, but would need to 
be corrected for gains in congestion, environment and accident costs of more than 2%66. 
The gains/losses vary across regions. The most negative effects accrue to the peripheral 
regions (northern Sweden and Finland), Greece, southern Spain, Baltic states).  

5.5. 

Sensitivity analysis 

The  analysis  above  has  described  the  impact  of  the  three  broad  policy  options  – 
represented in scenarios 2, 3 and 4. In order to deepen it, the variants of scenario 2 have 
been tested against other assumptions (described in annex 12). These different tests aim 
at checking:  

–  the EU approach to charging (binding or optional for Member States) 

–  the impact of having high values of external costs 

–  the impact of the level of fuel tax 

–  the impact of including passenger cars in congestion charging as congestion is caused 

by both cars and freight vehicles.  

66 

The socio economic impacts of transport pricing reforms. GRACE, Deliverable 9, January 2008. 

EN 

76 

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These variants are described in annex 10.  

Variant PO2A has differentiated between optional and binding charging for air pollution 
and  noise.  Therefore,  optional  charging  has  only  been  modelled  for  some  countries 
having  already  tolls.  In  addition,  another  variant  tests  the  same  charging  taking  high 
value of external costs.  

Variant PO 2B has assumed two levels of fuel tax to reflect CO2 mark-up.  

Variant  PO2C  has  tested  two  ways  of  charging  for  congestion.  The  first  one  would 
charge  congestion  only  for  freight  transport.  The  second  one  would  extend  congestion 
charging to passenger cars.  

Assuming that only Member States with existing tolls charge for external costs reduces 
the  decrease  in  road  freight  traffic.  The  two  variants  of  PO2C  display  the  strongest 
impact  in  terms  of  modal  shift  and  reduction  of  road  freight  traffic.  Obviously, 
congestion charging for passenger cars has a negative impact on their mobility. 

Interestingly, the reduction of environmental costs is stronger in PO2B with existing fuel 
tax (-2.14% of CO2 costs, -1,29% of PM10 costs) and PO2C all (-2.84% of reduction of 
CO2  costs,  -1,27%  of  PM10  costs).  This  means  that  charging  for  congestion  in  freight 
and  passenger  leads  to  the  same  range  of  reduction  of  environmental  external  costs  as 
charging  for  CO2  (see  annex  13  for  graphs).  This  finding  is  not  surprising  and  is 
consistent with empirical literature. The strong reduction of CO2 emissions in PO2C(all) 
is mostly due to the reduction of fuel consumption (see section 5.1.4 on congestion).  

Graph 5.22: Analysis of impact on freight transport (ton km) 

Impact of charging road freight transport (PO 2 variants)

15,00%

10,00%

5,00%

0,00%

-5,00%

-10,00%

o
i
r
a
n
e
c
s

e
c
n
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r
e
f
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v
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a
l
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r
m
k
t
n
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s
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Maritime

Rail

Road

IWW

All modes

PO 2A-central estimates

PO 2A- only MS with tolls

PO 2A- high estimates

PO 2B- existing fuel tax

PO 2B- lower fuel tax

PO 2C

PO2C (all)

Source: IMPACT/TRANSTOOLS 

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Graph 5.23: Analysis of impact on passenger transport (passenger-km) 

Impact of charging road freight transport  on passenger transport (PO 2 variants)

4,00%

3,00%

2,00%

1,00%

0,00%

-1,00%

-2,00%

o
i
r
a
n
e
c
s

e
c
n
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r
e
f
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o
t

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v
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a
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s
p

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t

f
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r
e
b
m
u
n
n

i

s
e
g
n
a
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Aviation

Rail

Road

All modes

PO 2A-central estimates

PO 2A- only MS with tolls

PO 2A- high estimates

PO 2B- existing fuel tax

PO 2B- lower fuel tax

PO 2C

PO2C (all)

Source: IMPACT/TRANSTOOLS 

All the variants induce a reduction of congestion except scenario 2B with a lowering of 
fuel  tax.  The  reduction  of  congestion  with  optional  charging  is  almost  zero  (-0.04%) 
compared to the other variants (see annex 12 table 2).  

5.6. 

Implementation Costs 

Implementing a charging system would lead to implementation costs. Obviously, most of 
the costs would arise in road transport.  

5.6.1. 

Implementing charging in road transport based on a GPS based technology 

Road freight transport 

In scenario 2, no kilometre charging is introduced for passenger cars, but only for HGV 
(on  all  roads).  Such  a  wide  geographic  scope  for  HGV  km-charging  would  be  more 
efficient  if  carried  out  through  a  GPS  based  technology,  and  for  that  reason  the 
implementation costs of such a system will be estimated with the help of the cost figures 
found for the HGV charging in Germany. Based on these figures the investment costs of 
HGV km-charging on all roads in the EU-29 would be equal to 5 billion euros, and the 
operational costs would be 4 billion euros. The GPS based technology installed in lorries 
can also be used for other road freight regulatory (e.g. tachograph) or commercial (fleet 
management) applications.  

Extending the system to passenger cars 

To estimate the implementation costs for passenger cars of applying congestion charging 
in  Europe  the  costs  per  user  found  by  Ministry  of  Transport  of  Germany  (2005)  are 
multiplied  by  the  total  number  of  passenger  cars  in  Europe.  In  this  way  the 
implementation  costs  are  probably  overestimated,  because  not  all  European  passenger 
cars  are  confronted  with  bottleneck  charges.  Therefore,  if  it  is  assumed  that  50%  all 
European  passenger  cars  are  confronted  with  congestion  charges,  the  implementation 

EN 

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costs  of  the  congestion  charging  for  passenger  cars  would  be  around  8  billion  euros 
(investments) and 5 billion euros (operational costs). 

Table 5.4: implementation costs in road transport 

Mode 

Road 

Internalisation measure 

Investment costs 
(billion €) 

Operating costs 
(billion €) 

Kilometre charges for HGVs, 
bottleneck charges for all vehicles 

5 

8 

4 

5 

Source: IMPACT 

Overview of costs as % of revenues from tolls according to policy options 

Taking  the  revenues  from  tolls  from  different  policy  options,  operational  costs  would 
vary from 12 to 25% of revenues in EU25.  

Table 5.5: Operational costs as percentage of revenues from tolls – Road transport 

2020 
Reference 
Scenario 
PO 2A 
PO2A only MS 
PO 2B 
PO 2C 
PO 2C (all) 
PO 3A 
PO 3B 

Revenues from road 
tolls in bn € 

Operational  costs  as  %  of 
revenues from tolls 

3,6   

15,7
14,1
24,4
27,4
35,6
15,7
24,4

31,81% 
20.53% 
20,51% 
18,24% 
25,30% 
31,85% 
20,49% 

Source: TRANSTOOLS and IMPACT study. 

Obviously, the estimates of implementation costs are high and do not consider existing 
schemes  (especially  for  PO2A  with  only  Member  States).  In  some  countries  such  as 
Germany,  Austria  or  Czech  Republic,  an  electronic  system  is  already  in  place  and 
operational  costs  range  between  15  and  20%  of  revenues.  Accordingly,  the  estimates 
provided above might be lower in some Member States.  

At the same time there are uncertainties on the cost-effectiveness of the charging systems 
in Member States with low traffic densities. Given the technological complexity and the 
level of implementation costs involved, it would be reasonable to start the rollout of any 
new charging technology with pilot projects that allow experience a gradual build-up of 
experience in both system implementation and operation 

5.6.2. 

Implementing charging in other modes of transport 

In comparison, implementation costs in other modes would be lower as they would not 
require additional investment.  

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Table 5.6: implementation costs per transport mode 

Mode 

Rail 

Mark-up on existing infrastructure 
charges, increased fuel duty, ETS 

Internalisation measure 

Investment costs  

Operating costs  

Low 

Low 

Low 

pm 

Low 

Low 

Low 

Pm 

Aviation 

LTO charges 

Inland shipping 

Kilometre charge 

Maritime shipping 

Harbour charges, ETS 

Source: IMPACT  

5.7. 

Impact of the use of revenues: earmarking to transport 

Charging  transport  users  for  the  negative  consequences  on  others  in  society  of  their 
transport decisions leads to revenues. The issue of the recycling of these revenues must 
be considered in the appraisal of internalisation strategies: firstly, the overall net welfare 
effects  of  internalisation  and  their  distribution  over  various  groups  in  society  depend 
considerably on the destination of the revenues; secondly, as already discussed in section 
2.3.4,  the  revenues  can  be  used  to  enhance  simultaneously  the  user  acceptability  and 
effectiveness  of  the  internalisation  scheme,  namely  through  helping  making  available 
suitable  transport  alternatives.  Moreover,  the  decisions  on  how  to  spend  the  revenues 
may affect the political acceptability of internalisation. 

5.7.1.  How to use revenues from internalisation? 

The revenues of internalisation can get the following destinations: 

- Government debt reduction.  

Member States are often recommended to reduce their government debt so as to arrive at 
more sustainable public finances67. Paying off government debt relieves pressure on the 
annual  government  budget  arising  from  the  interest  payments  on  outstanding  debt,  and 
hence allows for reduction of the deficit in all future years or for more productive use of 
government  spending.  In  the  short  term  government  debt  reduction  has  a  deflationary 
impact on the economy as the revenues are taken out of effective demand (more precisely 
said, the former holders of the government bonds are generally less likely to spend than 
the charged transport users or the government would).  

However three countervailing effects should outweigh this negative demand effect on the 
medium  and  long  term.  Firstly,  public  finances  become  more  sustainable  allowing  for 
more  productive  government  spending.  Secondly,  the  reduction  of  government  debt 
exerts a downward pressure on the interest rate on national capital markets (depending on 
the share of government debt service and roll-over on these markets). Thirdly, the private 
sector  faces  less  the  prospect  of  future  tax  increases  needed  to  finance  and  pay  off  the 
government  debt.  The  second  and  third  effect  together  will  lead  to  more  private 
investments and durable consumption.  

67 

See for instance the Broad Economic Policy Guidelines which are drafted by the Commission and 
subsequently approved by Council. 

EN 

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The  net  outcome  has  been  estimated  through  model  calculations  (see  section  5.2  for 
results and box 6 for model limitations).  

- Reduction of taxation, specifically wage taxation 

The revenues of the internalisation charges can be used as an alternative way to finance 
government spending as compared to the taxes already in place. This option would leave 
government  deficit  (or  surplus)  and  government  spending  (both  total  amount  and 
destinations) unaltered. It allows for lower taxes elsewhere. 

The  most  logical  way  to  recycle  the  internalisation  revenues  is  through  a  wage  tax 
reduction, both on equity and efficiency grounds. The equity argument is that the wage 
tax is a broad tax (i.e. paid by many in society as opposed to other income taxes, wealth, 
profit  or  capital  (gains)  taxation).  It  could  thus  be  seen  as  giving  the  revenues  back  to 
society  in  general68.  However,  it  excludes  the  possibilities  to  further  reduce  the 
externalities and to help transport service providers and transport users more concretely 
to adapt to the internalisation charges. 

- General increase of government spending  

The additional revenues for the government can be used as well to increase government 
spending. This option assumes this will happen without any "earmarking", i.e. set-asides 
or  reservation  for  specific  purposes.  Hence  the  new  spending  items  would  be  selected 
through the standard budget selection procedure. The advantage is that this enhances the 
likelihood that out of all the candidate items those will be selected that offer the prospects 
to  further  enhance  social  welfare.  However,  it  should  be  pointed  out  that  this  option 
amounts to an overall general tax increase which has disadvantages from both equity and 
efficiency perspective.  

- Financing of existing transport infrastructure 

The revenues from the internalisation charge can be used to recoup the costs of existing 
transport infrastructure. This would help to shift some of these costs from the tax payers 
to the actual users of the infrastructure. However, this option has serious disadvantages as 
there is no clear relation between the environmental cost revenues and the infrastructure 
costs and it finances those pieces of transport infrastructure that enable the occurrence of 
the  externalities;  moreover  it  makes  the  introduction  of  more  efficient  infrastructure 
financing  in  the  future  less  necessary.  These  three  disadvantages  do  not  apply  for 
congestion charges which represent a payment for scarce infrastructure capacity. Under 
the  current  Eurovignette  regime  this  option  is  the  only  available  as  the  tolls  on 
motorways  are  allowed  to  be  differentiated  according  to  environmental  damage  and 
congestion  as  long  as  the  infrastructure  cost  recovery  condition  is  respected.  However, 
because there is no reason why the internalisation revenues should be lower or equal to 
the  infrastructure  costs,  it  is  doubtful  whether  the  allowed  variation  within  the  toll 
schemes allows for adequate internalisation charges.  

68 

However, the literature on Pigovian taxes points out that compensating the "victims" lessens their 
incentives to avoid the externalities and hence undermines the rationale for internalisation. Only a 
lump  sum  transfer  unrelated  to  the  actual  damage  would  avoid  doing  so,  but  such  a  transfer  is 
unattractive from the equity perspective, 

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- Compensating charged transport users  

Sluicing the money back to the charged transport users (individually or as group) would 
have  as  advantage  that  the  burden  to  this  group  would  not  go  up.  The  polluter  pays 
principle  would  take  into  account  the  existing  taxation  burden.  A  restructuring  of  the 
taxation could be made in order to give the right incentive.  

- Compensating externality victims 

Direct compensation could be envisaged in case a selected group of individuals affected 
could  be  identified.  However,  in  many  cases,  the  nature  of  the  externality  renders  it 
difficult to identify exactly the individual affected.  

- Spending on mitigating measures 

This type of "earmarking" aims to use the revenues to reduce the transport externalities 
through  collective  actions.  It  has  the  advantage  of  enhancing  both  user  and  political 
acceptability  as  it  helps  both  the  transport  users  and  the  "victims"  of  transport 
externalities. It will thus generally been seen as being equitable as well. 

Mitigating measures do not affect the proper incentives for transport users as long as they 
keep  on  being  properly  charged  for  the  actual  marginal  external  costs.  This  implies 
among  other  things  that  if  the  mitigating  measures  reduce  an  externality  the 
internalisation charge should be adapted so as to reflect the new marginal external costs.  

- Financing transport alternatives and promoting interoperability 

This type of "earmarking" aims to use the revenues to promote transport alternatives to 
the charged transport users. This may vary from providing different routes for the same 
transport  mode,  other  transport  modes,  promoting  interoperability  (i.e.  the  use  of  more 
than one transport mode for the travel), and innovative efforts to reduce the externalities 
of the transport in question (for instance to enhance the fuel economy of engines). It may 
also  include  efforts  to  help  transport  users  to  learn  how  to  "cope"  with  differentiated 
charges. 

The  potential  significant  advantage  of  this  option  is  that  it  boosts  the  efficiency  of  the 
transport  system  (in  case  of  congestion)  and  helps  to  reduce  the  magnitude  of  the 
externalities.  

In conclusion, except for option related to the direct compensation of charged transport 
users, all options have their rationale, strong points and risks. Depending on the specific 
circumstances and the local social and political preferences, they may be on their own or 
combined  the  best  way  forward.  Hence,  the  final  choice  on  how  to  spend  the  revenues 
should be left is to the governments receiving the revenues of internalisation.  

5.7.2.  Rationale for earmarking: 

Political acceptability 

For analytical purposes it is assumed in this appraisal that the governments involved will 
use  these  revenues  in  ways  which  is  socially  optimal.  This  is  likely  to  include 

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"earmarking" parts of there revenues to mitigating measures and to (innovative) transport 
alternatives69, because - as the discussion above has demonstrated - these options tackle 
the root of the problem of the externalities and so complement the incentives to transport 
users  provided  by  the  internalisation  charge;  because  they  are  equitable  towards  the 
"victims" and because they boost user and political acceptability. 

Some  of  the  main  arguments  for  earmarking  internalisation  revenues  to  transport 
investments  come  from  the  international  aspects  of  transport  and  the  fact  that  different 
political  jurisdictions  are  involved  which  should  not  necessarily  trust  each  other. 
Efficient charges will tend to benefit more countries at the centre where traffic including 
transit one is heavier than at the periphery. If the proceeds from internalisation are used 
to reduce labour taxes in the central or transit countries, their employment and GDP will 
grow  while  their  environmental  conditions  will  improve.  However,  this  kind  of  double 
dividend effect would only be reaped by the countries where transport took mostly place. 

As  a  result  of  internalisation  the  accessibility  costs  of  peripheral  countries  would 
increase, even if they would benefit from congestion reductions in the transit countries, 
which could damage the Union's cohesion objective. These Member States could require 
some kind of compensation as their welfare would be likely to suffer from the change in 
respect of the current situation where external costs of use were not taxed. Although this 
would be a logical way to defend their national interest, from an overall EU perspective it 
can be asked what could be their rationale for asking such compensation. 

It is important to realize that "earmarking" is just a possible instrument for an objective 
which is providing compensation to the party that is damaged by the change in the law. 
This  compensation  could  be  interpreted  as  a  part  of  a  cohesion  objective,  as  cohesion 
could suffer the effects of the new internalisation rules. But it can also be legitimate from 
an efficiency point of view, as argued below. 

International traffic, adequate infrastructure and Community interest 

The  use  of  the  revenues  from  charging  externalities  should  take  into  account  the 
advantages for the community of international traffic. In the case  of road transport, the 
share  of  EU27  international  in  total  road  freight  traffic  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 road traffic, the EU27 share is expected 
to reach 33% with a peak of 90% in Estonia.  

In  the  absence  of  earmarking,  Member  States  would  tend  to  maximise  their  national 
welfare without taking full account of the benefits of sustainable mobility at Community 
level.  

From the polluter pays point of view, it would be clear that when the peripheral country 
trucks use the central country infrastructure they will have to pay for the external costs 
they produce, once efficient pricing for the use of the infrastructure is applied. 

69 

This  is  line  with  the  policy  recommendations  from  the  researcher  of  the  GRACE  project  (Nash 
and Matthews, ITS, University Leeds): "smart use of the revenues is as important as the design of 
the pricing reform." 

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However, peripheral Member States could be entitled to request from an efficiency point 
of view that the central countries apply a policy of infrastructure provision which lives up 
to  the  efficiency  and  environmental  objectives  sought  through  the  new  pricing  for 
infrastructure use policy. 

In fact the infrastructure policy of the central state carries also a "polluter" responsibility 
because  the  user-polluter  can  only  choose  among  the  existing  infrastructure  options 
provided by the Member State where transport takes place. A truck driver may be obliged 
to  use  the  streets  of  a  town  because  there  are  no  by-passes;  a  transport  firm  may  be 
obliged to use road transport because rail services offer poor quality. This would amount 
to  acknowledging  that  transport  is  a  joint  product  between  the  infrastructure  and  the 
vehicle.  Although  in  the  short  term  it  is  the  vehicle  which  triggers  the  externality  and 
should  pay  for  it,  in  the  longer  term  the  responsibility  for  the  provision  of  the  right 
infrastructure corresponds to the state. 

Thus,  peripheral  states  could  feel  entitled  to  request  as  compensation  for  increase  user 
costs, that the infrastructure situation is improved, so that external cost payments are not 
larger  that  what  reasonable  practice  in  infrastructure  provision  would  require.  The 
extreme case is the one in which the central country is deliberately keeping bottlenecks 
as a way to collect revenues.  

Therefore, peripheral Member States could ask for some kind of assurance that the effort 
their transport firms pay as users will be matched by the effort of central Member States 
as  reasonable  infrastructure  providers.  A  way  to  ensure  a  perfect  match  is  through 
earmarking, but other kind of more political assurances could be provided, which could 
be monitored by the EU.  

Maximising welfare 

Doubts  have  been  expressed70  that  budgetary  allocation  procedures  would  always  be 
responsive  to  welfare  maximising  objectives  as  decisions  could  be  biased  in  favour  of 
particular political interests. This fear of abuses would be more relevant in a system with 
various levels of government (European, national, regional). In this situation earmarking 
could  be  superior  to  normal  budgetary  decision-making  precisely  because  it  would 
reduce the margin for political choice and guarantee the provision of a specific good or 
service – unless funds from other sources are reduced in an offsetting way. Apart from 
this, in case infrastructure has to be financed, it is a superior alternative to do it through 
earmarking  of  funds  from  marginal  cost  congestion charging than through levying new 
taxes, as the disutility from transport charges will be lower for transport users than that of 
taxes  for  the  general  taxpayer.  Earmarking  may  require  the  creation  of  a  fund  to  allow 
choices of best investment opportunities, to adopt a network approach instead of a link by 
link one, and also to minimise administrative and financial costs.  

70 

"The economics of Earmarked taxes" James Buchanan Journal of Political Economy 1963, vol 71. 
The  REVENUE  project  on  the  use  of  revenues  from  transport  pricing  (5th  Framework 
Programme) provides a further discussion of these and other arguments on earmarking, as well as 
an overview of the different cases of earmarking in Europe. See deliverable 6 (pages 37 and 61) 
in: http://www.revenue-eu.org/deliverables.htm. 

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5.8. 

The need to provide an EU framework 

Given  the  role  of  transport  in  the  internal  market  and  the  importance  of  international 
transport for the trade between Member States, an EU framework is needed to ensure the 
respect of basic principles like non-discrimination between users and proportionality of 
the  charges.  The  possible  traffic  detours  from  one  Member  State  to  another  in  case  of 
uncoordinated  tolling  also  plead  for  coordination  mechanisms  between  Member  States. 
Various measures can be envisaged ranging from simple a posteriori controls leaving a 
great flexibility to Member States when setting and collecting the charges to more precise 
EU rules ensuring transparency and accountability.  

The absence of such rules could also result in some cases in overcharging international 
transport, which in turn may impact negatively the mobility within the internal market. 
Overcharging may also have negative impacts at local level. First experiences of tolled 
motorways in Hungary in the 90' have for instance failed because of charges set at a level 
beyond  the  capacity  to  pay  of  users.  The  modelling  results  in  Annex  12  gives  some 
indication of the impact of charging external costs on the basis of high estimates (variant 
of  Policy  option  2).  It  has  to  be  taken  into  account  that  Member  states  are  already 
allowed to charge tolls that make the full recovery of infrastructure costs possible, which 
can have a significant effect on the operating costs of transport users. 

Moreover  the  approach  taken  in  Directive  1999/62/EC  as  far  as  the  recovery  of 
infrastructure costs is concerned was to set such types of EU rules ensuring transparency 
and  accountability.  Modifying  the  Directive  to  enable  external  cost  charging  without 
similar rules would constitute a radical change which would go beyond the request of the 
EU co-legislator. 

5.9. 

Administrative costs 

Administrative  costs  have  been  assessed  in  road  freight  transport  as  a  revision  of  the 
Eurovignette  directive  is  proposed.  Administrative  costs  would  be  related  to  the 
implementation  of  the  revised  Directive  1999/62/EC  and  would  concern  national 
administration and the need to enforce this directive. It should not entail administrative 
costs to companies.  

Table  2  in  annex  14  gives  indications  of  administrative  costs  for  Germany  (data 
available). Assuming that 10 Member States will decide to apply an external cost charge, 
administrative costs related to enforcement and reporting would amount to 11 500 euros 
per year (on the basis of German labour costs). Costs related to the setting of an authority 
to  estimate  the  charges  would  lead  to  extra  costs  of  137000  euros  (on  the  basis  of 
German labour costs). 

6. 

COMPARISONS OF POLICY OPTIONS 

The analysis of impact described above has relied on quantitative results and qualitative 
analysis.  The  comparison  of  scenarios  should  allow  identifying  the  policy  option  of 
internalisation  which  could  better  contribute  to  achieving  the  general  objective  of 
sustainable transport. It should also lead to a selection of policy options implementing the 
operational objective, i.e. proposing a strategy of internalisation of external costs for all 
modes of transport and allowing the revision of Directive 1999/62/EC.  

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6.1. 

Comparing Policy options 

Which policy options ensure sustainable mobility? 

As mentioned above, internalisation helps providing a correct price signal to the transport 
users.  Improved  social  efficiency  is  expected  to  modify  behaviours  and  hopefully  to 
decrease  externalities.  This  impact  assessment  has  also  established  the  limits  to  assess 
correctly social efficiency and the extent to which the level of internalisation is efficient.  

The comparison of options looks at several criteria based on mobility, competitiveness, 
environment  and  social  cohesion.  First,  as  stressed  in  the  White  Paper  of  2001  and  its 
mid term review in 2006, mobility should be maintained in order to ensure the circulation 
of  goods  and  persons.  Second,  sustainability  is  crucial  when  promoting  mobility. 
Therefore, the decrease of environmental nuisances will be another important aspect of 
the comparison. Third, sustainable mobility should be consistent with the objectives set 
by  the  Lisbon  agenda  which  is  to  promote  the  competitiveness  of  EU  economies.  As  a 
result,  economic  impacts  of  internalisation  should  be  taken  into  account.  Fourth, 
internalisation  should  not  threaten  social  cohesion.  Finally,  implementation  costs  of  a 
charging  system  should  not  burden  too  much.  Otherwise,  they  would  water  down  the 
benefits of the exercise.  

These  elements  should  be  reflected  in  the  different  patterns  of  mobility  which  in  turn 
influences  the  decrease  in  external  costs.  Welfare  should  be  improved  as  long  as  the 
reduction  of  external  costs  compensates  the  increase  in  transport  costs.  This  positive 
circle should affect positively competitiveness in a longer term.  

From the comparison of options, some trends can be identified. 

In all policy options, internalisation of external costs does not hamper mobility in Europe 
although  charging  modifies  the  choice  of  transport  users  and  influences  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.  As  congestion  is  mainly  concentrated  in  road  transport,  the 
positive effects are largely captured when charging congestion in road transport only and 
not in other modes. The economic impact of internalisation of external costs is negative 
in the short term as the increase in transport costs overbalances the other effects. On the 
whole, one could think that the reduction of external costs – congestion, environmental 
costs, and the reduction of fatalities will improve the overall competitiveness of Europe 
as these costs are currently borne by the European society at large. Moreover, charging 
for congestion induces savings in time which will be translated in productivity gains for 
business.  

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Table  6.1:  Comparison  of  policy  options  based  on  selected  criteria:  Revising  the 
Eurovignette Directive 

Mobility 

Congestion 

Sustainability 

PO 2A  

PO2B  

Charging for Air 
pollution and noise 
in road freight 
transport  

Mobility is 
maintained in freight 
and passenger 
transport: + 0.33% 

The sensitivity 
analysis has shown 
that impacts are 
reduced if only some 
Member States charge 
(freight mobility 
increases by +0.09%). 
Low impact 

Charging for Air 
pollution, noise and 
CO2 in road freight 
transport 
Mobility 
is 
maintained  in  freight 
and 
passenger 
transport: +0.38% 

Low impact 

Reduction 
pollution 
and 
co2 
1.81%).  

air 
of 
(-1.17%) 
(-
costs 

In  this  scenario,  the 
reduction  of  CO2  is 
comparatively  higher 
as  a  CO2  charge  is 
applied  (-2.14%).  Air 
costs 
pollution 
decrease by -1.33%. 

Competitiveness 

In  the  short  run,  the 
impact  on  GDP 
is 
negative  (-0.2%)  as 
transport  costs  have 
increased.  

In  the  short  run,  the 
impact  on  GDP  (-
0.03%) 
slightly 
is 
negative  as  transport 
costs have increased.  

Employment 

Equity 

Almost  no  effect  (-
0.14%) 
No impact 

Negative  effects 
0.02%) 
No impact 

(-

PO2C 
Charging 
for  Air 
pollution,  noise  and 
congestion 
in  road 
freight transport 

has 

this 

Mobility 
the 
increase  as 
stronger 
modal  shift  is  higher 
in 
scenario. 
+0.77% in freight. 
Congestion  charging 
and 
for 
passenger 
freight 
a 
decrease  in  passenger 
traffic (-0.42%).  

induces 

for 

charge 
congestion. 
all 
users 
and 
strengthens 

Congestion 
reduces 
Charging 
transport 
(passenger 
freight) 
the positive impacts.  
Congestion 
charges 
have  positive  effects 
on the reduction of air 
pollution 
(-0.76%) 
and CO2 (-2.09% and 
-2.84%  if  passenger 
are 
and 
freight 
charged 
for 
congestion). 
the 
Interestingly, 
impacts  are  similar  to 
applying 
CO2 
charge.  
for 
Charging 
congestion 
increases 
time  savings  which 
may  have  positive 
impact  on  efficiency. 
The reduction of GDP 
is slightly (-0.04%) 
Negative  effects 
0.04%) 
This  policy  option 
would have impact on 
equity  as  passenger 
would  be  charged. 

a 

(-

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Fatalities 

Welfare 

Implementation 
costs 

Decrease  in  fatalities 
(-1.07%) 

Net  welfare 
gains 
(+0.8 bn euros, 2020) 
High.  

The  reduction  of  road 
a 
traffic 
decrease  in  fatalities 
(-0.8%). 

induces 

if 

Net  welfare 
gains 
(+0.8 bn euros, 2020) 
High. 
However, 
some 
Member States having 
already  toll  system  to 
such 
implement 
charging, 
implementation  costs 
would be lower.  

Public acceptability 

Environment  is  seen 
as 
importance 
nuisance.  

an 

Environment  is  seen 
as 
importance 
nuisance.  

an 

EU value added 

Current  restrictions  to 
internalisation have to 
be raised.  
market 
Internal 
freedoms 
require 
coordinated approach. 
period 
Technical feasibility  Learning 
some 
required 
countries 
and 
interoperability issues.

for 

Current  restrictions  to 
internalisation have to 
be raised.  
market 
Internal 
freedoms 
require 
coordinated approach. 
period 
Learning 
some 
required 
countries 
and 
interoperability issues.

for 

Regulatory 
feasibility 

Proposal 
revise 
Directive 1999/62/EC 

to 

Proposal 
revise 
Directive 1999/62/EC 

to 

* % corresponds to % of change in 2020 relative to reference scenario. 

However, the example 
of  London  shows  that 
improving alternatives 
may 
also 
have 
positive impacts.  
Congestion 
charges 
induce a higher modal 
shift.  As  a  result,  the 
reduction  of  fatalities 
would  be  higher  (-
1.06%).  
Net  welfare 
gains 
(+1.8 bn euros, 2020). 
revenues 
Lower  as 
from 
congestion 
would be higher. 
However, 
charging 
for  passenger  will 
increase costs.  

support 

results  of 

Congestion  is  seen  as 
importance 
an 
nuisance 
road 
in 
transport.  
the 
The 
show 
consultation 
to 
strong 
congestion 
charging 
for 
and 
passenger 
freight.  (44.8%  for 
all  respondents,  of 
which  64.2%  are 
citizens  and  35.7% 
are organisations) 
Current  restrictions  to 
internalisation have to 
be raised.  
market 
Internal 
freedoms 
require 
coordinated approach. 
period 
Learning 
some 
required 
countries 
and 
interoperability issues. 
Implementation  more 
difficult  if  passenger 
charging is foreseen. 
Proposal 
revise 
Directive 1999/62/EC 

for 

to 

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From  the  quantitative  and  qualitative  analysis,  the  option  including  congestion  charges 
seems to offer 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.  Freer  flows  impact  on  fuel  consumption, 
which in turn induces less CO2 emissions. For these reasons, welfare effects are higher in 
this scenario. 

As  regards  the  other  modes  of  transport,  policy  options  3A  and  3B  show  the  positive 
impact  of  including  all  modes  of  transport.  The  difference  between  3A  and  3B  comes 
from the application or not of a CO2 mark-up in road freight transport. As a result, the 
decrease in CO2 and air pollution is stronger when road freight transport is charged for 
CO2.  However,  the  comparisons  of  all  variants  of  PO2  (charging  in  road  freight 
transport) has shown that congestion charging had roughly the same magnitude of impact 
on environment and was contributing to improving overall efficiency.  

Policy option 3 shows that when charging all modes of transport, mobility is maintained 
while  environmental  emissions  and  fatalities  decrease.  Congestion  is  not  analysed, 
therefore all the positive impacts due to congestion charging are not provided in this case. 
From an acceptability point of view, the public consultation has shown strong support to 
charge for all modes of transport. However, the international dimension of maritime and 
air transport needs to be considered when implementing an internalisation strategy. 

Table 6.2: Comparison of policy options based on selected criteria: Strategy 
to internalise external costs in all modes of transport 

Sustainability 

PO3A 
Charging for air pollution, noise 
and CO2 in non road transport. 
Charging  for  air  pollution  and 
noise in road transport 
Reduction of air pollution costs (-
1.5%) and CO2 costs (-2.2%).  

PO3B 
Charging  for  air  pollution,  noise  and 
CO2 in all modes.  

Reduction of air pollution costs (-1.5%). 
The  reduction  of  CO2  (-2.3%) 
is 
comparatively higher as a CO2 charge is 
applied in road transport.  

Mobility 

Mobility is maintained in freight (+0.3%) and passenger (+0.1).  

Competitiveness 

In  the  short  run,  the  impact  on  GDP  (-0.2%)  is  negative  as  transport  costs 
have increased.  

Negative effects (-0.14%) 
No impact 
Reduction of fatalities (-1.2%) 
Net welfare gain (+0.8 bn euros in 2020 for 3A, 0.9 bn euros in 2020 for 3B) 
High. 

High as all modes of transport would be treated on the same ground. 

Employment 
Equity 
Fatalities 
Welfare 
Implementation 
costs 
Public 
acceptability 
EU value added  Need of a coordinated approach. 
Regulatory 
feasibility 

Need  to  take  into  account  the  international  regulatory  framework  for  air 
transport and maritime.  

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Preferred options: Strategy to internalise external costs in all modes 

For  reason  of  fairness,  all  modes  of  transport  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 indication of the preferred policy option. Option 
3 covers other modes and would involve internalising air pollution, noise and CO2 in the 
other  modes.  Enlarging  internalisation  to  other  modes  of  transport  improves  overall 
sustainability.  

On  this  basis,  a  work  programme  would  be  elaborated,  taking  into  consideration  the 
convenience of charging for external costs (air pollution, noise, CO2) in other modes of 
transport.  

In  railways  directive,  this  impact  assessment  has  already  mentioned  that  charging 
legislation  (Directive 
in 
external  costs  was  already  foreseen 
2001/14/EC).  

the  existing  EU 

In air transport, the inclusion in ETS is an important step to fight against CO2 emissions. 
Ongoing work on the reduction of Nox emissions would give the opportunity to analyse 
pricing mechanism in this context.  

In  maritime,  the  growth  of  CO2  and  air  pollutants  emissions  shows  the  need  to  have 
actions in this field. Given the international framework for maritime, a solution such as 
ETS could be one of the outcomes of the analysis.  

Finally, reflection will also be carried out in inland waterways, taking into account that 
many  of  them  have  their  specific  regulatory  environment,  e.g,  the  Mannheim 
Convention. 

Preferred options: Revision of Directive 1999/62/EC in June 2008 

As mentioned above, road freight transport contributes to a large share of external costs. 
Internalising  these  costs,  which  requires  a  modification  of  Directive  1999/62/EC  is 
therefore an essential component of the broader strategy to internalise external costs in all 
modes of transport.  

Tackling road freight transport external costs is not the first step of this broader strategy 
since a proposal has already been made for inclusion of aviation in ETS. The revision of 
Directive  1999/62/EC  provide  further  opportunities  to  internalise  external  costs  in  rail 
transport.  

Acting in road transport while other policy initiatives in other modes are being developed 
would  not  negatively  affect  the  trend  in  externalities,  since  it  would  be  consistent  with 
higher relative charging of the mode with larger externalities.  

In this framework of analysis, the policy options corresponding to 2C seem to offer the 
best combination in terms of mobility and sustainability. Differentiated charging scheme 
based  on  the  costs  of  air  pollution  and  noise  allows  taking  into  account  local 
environmental externalities. Integrating into such schemes a congestion charge produces 

EN 

90 

   EN 

time  savings  which  lead  to  a  positive  impact  on  the  economy  at  large.  Congestion 
charging  is  more  efficient  if  passenger  and  freight  transport  are  concerned  as  both 
compete for the same infrastructure. This element is supported by the result of the public 
consultation which gave support to an option "charging for freight and passenger cars”. 
In  addition,  the  reduction  of  travel  time  also  contributes  to  reducing  CO2  emissions. 
Interestingly,  charging  for  freight  and  passenger  cars  leads  to  a  reduction  of 
environmental costs similar to policy options that include a specific CO2 mark-up.  

The analysis has assumed that all Member States are charging. However, the benefits and 
drawbacks  of  a  mandatory  versus  and  optional/empowering  approach  have  been 
considered  together  with  the  link  to  subsidiarity  issues.  A  number  of  considerations 
suggest considering first an empowering approach: 

- There may still be uncertainties related to the costs, benefits and the enforcement of the 
required tolling systems on the networks of some Member States with lower traffic hence 
with low levels of externalities.  

-  A  binding  approach  based  on  a  mandatory  charge  would  constitute  a  radical  change 
compared with the current Directive and could 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 issues are not yet solved. 

- A flexible and gradual phasing in approach would allow the new charging schemes and 
tolling technology to be trialled in Member States where the geographical conditions are 
the most appropriate. 

-  The  actual  implementation  and  operational  experience  gathered  in  the  early  adopter 
Member States would allow at a later stage to carry out a thorough stocktaking. A joint 
assessment  of  the  pros  and  cons  of  making  external  cost  charging  mandatory  for  all 
Member States and the required degree of EU co-ordination can be reassessed then.  

Member  States  which  experience  an  increase  of  traffic  diverted  from  charging 
neighbouring countries would have an incentive to start charging for external costs. This 
incentive could also exist under the current Directive 1999/62/EC.  

Such  a  policy  option,  based  on  an  enabling  approach,  would  entail  the  revision  of 
Directive  1999/62/EC  as  a  first  step  of  the  strategy  of  internalisation.  The  main 
modifications would be: to authorize the calculation of road charges on the basis of the 
external costs, namely air pollution, noise and congestion and to differentiate the charges 
accordingly.  Such  charging  schemes  would  be  subject  to  a  number  of  conditions  to 
improve their efficiency and their chance of success like the use of electronic free flow 
tolling technologies to facilitate implementation by reducing costs, local inconveniences 
and allow a subsequent extension to all roads. For subsidiarity reasons, the Directive will 
not  cover  passenger  cars.  However,  charging  to  reduce  congestion  is  more  effective  if 
other  road  users  outside  the  scope  of  this  Directive  are  also  covered  by  a  scheme  of 
similar nature. This positive impact should be acknowledged.  

EN 

91 

   EN 

6.2. 

Common principle: earmarking of the revenues 

Earmarking revenues to transport 

Part 5 has shown that the use of revenues contributes to improving the economic impact 
in  the  short  term  as  it  compensates  for  the  draining  of  resources  that  has  taken  place 
through  charging.  Recycling  revenues 
investment  and 
in 
consumption in the short term, which induces smoother impact on employment and GDP. 
It may be through lowering direct taxes, earmarking to transport and/or to the reduction 
of  externalities.  In  all  cases,  public  expenditure  has  to  be  subject  to  appraisal  with  the 
same quality benchmarks. 

the  economy  boosts 

Transport economists agree on the importance of acceptability when implementing a new 
pricing scheme71. Earmarking to transport is one aspect that can contribute to improving 
the acceptability by transport users. Such preference was also expressed during the public 
consultation (see annex 1). 

Earmarking in the context of the revision of Directive 1999/62/EC 

In the case of road transport, the use of the revenues from charging externalities should 
take  into  account  the  advantages  for  the  community  of  international  traffic.  In  section 
5.7, it has been stressed that the share of international road traffic is expected to grow and 
could reach one third of the total road traffic. For this reasons, Member States could be 
tempted  to  ignore  the  benefits  of  this  traffic  and  invest  in  projects  that  would  not 
correspond to the Community interest.  

It should also be considered that in the particular case of congestion charging, it has to be 
recalled  that  payments  reflect  the  capacity  scarcity  and  indicate  the  need  and  provide 
resources for further expansion.  

The  argument  for  earmarking  of  charges  to  infrastructure  funding  as  an  alternative  to 
relying on traditional budgetary allocation is particularly relevant when considering road 
transport in the European Union. In this case road charges will be borne initially by the 
transport firm and at the end by the consumer, but in the case of transit flows, it is quite 
clear that both the transport firm and the final consumer are residents in other countries. 
Therefore,  there  is  no  particular  reason  why  they  (and  their  Member  States)  should  be 
confident at all that the budgetary processes in the transit country will provide them with 
any kind of satisfactory expenditure programme. While they may admit that their trucks 
should be obliged to pay, they will be asked to accept a loss with respect to the situation 
currently  established  by  the  Eurovignette  Directive  without  any  kind  of  guaranteed  use 
for the new charges they will have to pay  

As a result, earmarking of the revenues will be proposed in the context of the revision of 
Directive  1999/62/EC  and  in  the  broader  strategy  of  internalisation  in  all  modes  of 
transport. 

71 

See  I.  Mayeres,  Taxes  and  Transport  Externalities,  WPn°2002-11.  See  also  research  projects 
AFFORD, PRIMA described in . Sikow Magny (footnote n° 26). 

EN 

92 

   EN 

                                                 
6.3. 

Ensuring EU coordination 

The EU should oversee that the introduction of charging for  external costs is done in a 
coordinated  way  to  preserve  the  integrity  of  the  internal  market  and  the  freedom  of 
circulation for people and goods.  

As said before, the most important provisions in the current Directive on charging trucks 
aim  at  ensuring  the  proportionality  (avoid  overcharging)  and  non-discrimination,  hence 
transparency  and  accountability  of  the  charging  schemes  used  to  recover  infrastructure 
costs.  These  provisions  are  the  recourse  of  common  charging  principles,  including  a 
common method to calculate the costs. Member States can decide to recover only parts of 
the costs calculated according to this common methodology.  

As to external cost charges, a similar approach appears a reasonable way of ensuring the 
required  accountability  whilst  leaving  some  flexibility  to  Member  States..  The  new 
Directive  would  therefore  allow  external  cost  charging  provided  that  the  external  costs 
are  calculated  according  to  a  common  method.  Other  measures  like  the  designation  of 
independent authorities and reporting mechanisms would reinforce the transparency and 
the accountability. 

7. 

MONITORING 

7.1.  Monitoring of external costs 

In  line  with  the  general,  the  specific  and  the  operational  objectives  of  the  impact 
assessment it is proposed that the effectiveness of the implemented measures is evaluated 
through  the  monitoring  of  the  level  of  negative  externalities  generated  by  the  transport 
activities. It is suggested that as much as possible existing indicators are to be used for 
the monitoring. 

Congestion levels will be monitored only on the road or other infrastructure sections that 
are  subject  to  congestion  charging  measures  implemented  in  the  framework  of  this 
proposal. 

Accident levels will be monitored using the number of road fatalities. 

Air pollution generated by transport will be monitored within the framework of Council 
Directive 96/62/EC on ambient air quality assessment and management and Commission 
Decision  2004/461/EC  specifying  the  format  and  content  of  member  States  Annual 
Report  on  ambient  air  quality  in  their  territories.  This  directive  describes  the  basic 
principles as to how air quality should be assessed and managed. Monitoring will focus 
on NOx, PM10 and SO2 emissions. Furthermore the EEA and Eurostat have developed 
indicators to monitor the impact s of air pollution on human health and the environment. 

Greenhouse  gas  emissions  generated  by  transport  will  be  monitored  using  the  fuel 
consumption statistical figures. 

Measurement  of  noise  generated  by  transport  will  be  done  in  the  framework  of  the 
Directive  on  Environmental  Noise  (Directive  20002/49/Ec  of  25  June  2002)  which 
requires the competent authorities in Member states to draw up “strategic noise maps” for 

EN 

93 

   EN 

major  roads,  railways,  airports  and  agglomerations,  using  harmonised  noise  indicators. 
These maps can be used to assess the number of people annoyed and sleep disturbed. 

It is acknowledged that, as the internalisation of external costs of transport is likely to be 
used  in  combination  with  other  policy  instruments  such  as  regulation,  infrastructure 
policy  or  research  support,  it  will  not  always  be  possible  to  clearly  establish  to  what 
extent a particular impact is due to any specific policy measure. 

7.2. 

Reporting on the Directive 1999/62/EC 

Furthermore, to ensure that any tolls or user charges introduced pursuant to the proposed 
Directive  amending  Directive  1999/62/EC  on  the  charging  of  heavy  goods  vehicles  for 
the  use  of  certain  infrastructures  function  in  a  transparent  and  non-discriminatory 
manner, it is proposed that the Member States which levy an external cost charge shall 
draw  up  a  report  on  the  application  of  the  external  cost  charge  every  two  years.  This 
report will show the total revenue raised in the Member State through the external cost 
charge,  the  total  number  of  vehicle  kilometres  travelled  on  the  road  sections  subject  to 
the  charge  (with  both  indicators  calculated  for  the  vehicles  to  which  the  external  cost 
charge  applies)  and  the  specific  amounts  of  the  external  cost  charge  levied  for  each 
combination of class of vehicle, type of roads and period of time. 

7.3. 

Extending the analysis to other external costs 

A mid term review could be carried in order to update, if needed, estimates of external 
costs. In addition, the mid term review could also comprise other external costs such as 
space occupancy, biodiversity, landscape use, etc.  

EN 

94 

   EN 

Annex 1: Results of public consultation 

1 

BACKGROUND 

The Commission is currently developing a model for the assessment of external costs of 
transport.  This  was  requested  by  the  European  Parliament  when  it  approved  the 
Eurovignette Directive in May 2006 which states 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 Directive adds that: “This model shall 
be  accompanied  by  an  impact  analysis  of  the  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 accompanied, if appropriate, by 
proposals  to  the  European  Parliament  and  the  Council  for  further  revision  of  this 
Directive”. 

The  Commission  is  now  carrying  out  an  impact  assessment  which  will  support  the 
strategy on internalisation of external costs. To this end, a consultation paper (available at 
http://ec.europa.eu/transport/costs/consultations/index_en.htm)  has  been  prepared  and  an  on-
line questionnaire was submitted. 

The  consultation  started  on  29  October  2007  and  closed  on  31  December  2007.  The 
questionnaire received 469 replies and 16 position papers on the matter were submitted in 
the meantime.  

2 

GENERAL INFORMATION ON RESPONDENTS 

Out  of  the  469  respondents,  68%  were  individual  respondents  and  31%  were 
organisations. Among the individuals, many are young people. Most come from the EU. 
The majority of the respondents live in cities (metropolitan or towns). They use car and 
public transport for their daily mobility and use train, car and planes for longer journeys.  

As  regards  organisations,  most  of  them  are  professional  organisations.  All  modes  of 
transport are represented. 

3 

EXTERNAL COSTS OF TRANSPORT 

The  questionnaire72  asked  the  participants  to  rank  the  following  external  costs  – 
congestion, accidents, noise, air pollution, climate change – according to their magnitude. 
According  to  respondents,  environmental  costs  –  air  pollution,  climate  change,  noise  – 
are the most important nuisances in transport (in all modes).  

The picture slightly differs across modes of transport. In road transport, air pollution and 
congestion  appear  as  the  most  important  nuisance  for  the  majority  of  respondents.  In 
railways, noise is seen as the most serious one. In aviation, environmental costs – noise, 
air  pollution  and  climate  change  –  are  considered  as  the  most  important  while  air 
pollution and climate change have been ranked first in maritime and inland waterways. 

72 

See Annex 1 the full Questionnaire. 

EN 

95 

   EN 

                                                 
Graph 1a 

Graph 1b 

Road

Rail

1.1 - 1.5: Which external costs impose nuisances on other users and society?

Road Transport*

climate change

noise

accident

congestion

air pollution

0,0

1,0

2,0

3,0

4,0

5,0
average rate

* 409 respondents - Scale 0 (low  nuisance) to 5 (high nuisance) 

1.1 - 1.5: Which external costs impose nuisances on other users and society?
Rail Transport*

accident

congestion

climate change

air pollution

noise

0,0

1,0

2,0

3,0

4,0

5,0

* 228 respondents - Scale 0 (low  nuisance) to 5 (high nuisance) 

average rate

Graph 1c 

1.1 - 1.5: Which external costs impose nuisances on other users and society?

Air Transport*

accident

congestion

Air

climate change

air pollution

noise

0,0

1,0

2,0

3,0

4,0

5,0

average rate

* 370 respondents - Scale 0 (low  nuisance) to 5 (high nuisance) 

EN 

96 

   EN 

 
 
 
Graph 1d 

Graph 1e 

1.1 - 1.5: Which external costs impose nuisances on other users and society?

Maritim e Transport*

congestion

noise

Maritime

accident

climate change

air pollution

0,0

1,0

2,0

3,0

4,0

5,0

* 175 respondents - Scale 0 (low  nuisance) to 5 (high nuisance) 

average rate

1.1 - 1.5: Which external costs impose nuisances on other users and society?

Inland Waterw ays Transport*

Inland Waterw ays

accident

congestion

noise

climate change

air pollution

0,0

1,0

2,0

3,0

4,0

5,0

* 127 respondents - Scale 0 (low  nuisance) to 5 (high nuisance) 

average rate

4 

WHAT  ARE  THE  MAIN  EXPECTATIONS  OF  INTERNALISATION  OF  EXTERNAL 
COSTS? 

The primary objective of the internalisation of external costs is to ensure that the prices 
paid by transport users reflect the costs they generate, including external costs. More than 
80% of all respondents agree or agree strongly with the principle of internalising external 
costs generated by transport.  

EN 

97 

   EN 

 
 
Graph 2 

2.1. Do you agree that it is important to internalise the external costs generated by transport?

3%

6%

10%

28%

* 469 respondents

53%

Strongly agree

Agree

Disagree strongly

Disagree

No opinion

Participants were asked to express their views on the main expectations they have with 
regards to internalisation. More specifically, they were asked to describe advantages and 
disadvantages of internalisation for the economy, society and the environment. 

Advantages/Disadvantages for the economy 

According to respondents, increased efficiency is one of the most important expectations. 
The  internalisation  of  external  costs  is  seen  to  allow  the  elimination  of  market  failures 
and  the  improvement  of  the  allocation  of  resources.  It  would  decrease  distortions  of 
prices created by the fact that users do not always bear the full costs of their decisions. 
Efficiency is also considered to mean more efficient use of transport and then a decrease 
in logistics costs.  

Respondents  also  expect 
the 
internalisation  of  external  costs  could  lead  to  the  relocation  of  activities  from  third 
countries to EU, which would benefit to the whole economy.  

increase.  In  other  words, 

local  production  to 

Among the concerns expressed, appears the increase in costs of transport which could 
affect European competitiveness. It could also favour inflation and have negative effects 
on  the  aggregated  demand.  In  addition,  a  reduction  of  mobility  could  also  affect  the 
freedom of circulation of people and goods.  

Some of the respondents highlighted the need to make a thorough impact assessment on 
these effects. Moreover, they stressed the need to take into account existing charges and 
taxes.  

Advantages/Disadvantages for society 

In general, respondents think that the advantages for society would be important. Most of 
them expect a reduction of nuisances and an improvement of the quality of life, as well as 
positive  effects  on  public  health  and  road  safety.  The  internalisation  of  external  costs 
would lead to promote fairness in society to the extent that transport users would bear 
all the external costs they generate.  

EN 

98 

   EN 

 
Some  respondents  have  highlighted  that  low  income  social  categories  are  the  most 
affected  by  nuisances  (living  near  noisy  and  polluted  areas).  If  those  nuisances  are 
reduced, these categories would benefit the most from it.  

As  regards  social  effects,  on  one  hand,  respondents  think  that  the  development  of  new 
activities (due to increased attention to environment) could create new jobs. On the other, 
if is feared that the loss of competitiveness due to increased costs could lead to job losses. 

Investment  in  public  transport  is  considered  to  improve  equity  and  favour  low  revenue 
social categories.  

Advantages/Disadvantages for the environment 

Respondents expect environmental nuisances to decrease. It is hoped air pollution, noise, 
congestion and accidents could be reduced and that the use of cleaner modes of transport 
–  public  transport,  cycling  and  walking  –  would  also  contribute  to  reducing 
environmental nuisances.  

According to participants, the internalisation of external costs could lead to modal shift in 
favour  of  cleaner  modes  of  transport.  Therefore,  the  impact  on  environment  would  be 
positive and a reduction of externalities could be expected. 

Not  all  respondents,  however,  agree  that  internalizing  external  costs  would  have  a 
positive  impact  on  environment.  Some  of  them  consider  that  increased  transport  prices 
would  not  imply  a  significant  decrease  of  traffic  flows;  therefore,  the  impact  on 
environment would be negligible. 

How could the negative effects be reduced?  

Very often, respondents consider that pricing is a good instrument. However, for many of 
them  pricing  should  be  part  of  a  combination  of  other  policies.  Technology  policy  is 
identified  as  an  important  one  as  innovation  is  one  of  the  key  drivers  to  reduce 
externalities. Many think the policy mix should also  include “classic” instruments such 
as  traffic  management,  provisions  for  car-free  city  centres,  etc.  Standards  also  play  an 
important role. In addition, it has been emphasized that one should not underestimate the 
positive role of investing in infrastructure and in public transport.  

Public  transport,  especially  in  urban  areas,  is  considered  a  key  point  to  develop  clean 
transports and sustainability.  

4 

HOW TO INTERNALISE? POLICY OPTIONS TO INTERNALISE 

The  consultation  paper  describes  possible  ways  to  internalise  using  options  to  use 
economic instruments for each external costs – charge, tax and tradable permits. All these 
instruments  have  their  own  advantages  and  disadvantages  and  can  be  adapted  to  deal 
with specific external costs. 

Congestion costs 

Most  of  respondents  welcome  the  internalisation  of  congestion  costs.  They  stress  that 
congestion is mostly a local or regional problem and this needs to be taken into account. 

EN 

99 

   EN 

Respondents  also  highlighted  the  need  of  harmonisation  at  EU  level.  Complementary 
instruments  such  as  the  development  of  the  infrastructure  network  and  information 
technology  were  also  mentioned  in  the  comments.  As  regards  congestion  in  road, 
participants  seem  to  prefer  charging  for  all  users  –  passenger  and  freight  –  rather  than 
charging  only  freight.  In  scheduled  transport,  participants  recalled  that  congestion 
charging  is  already  implemented  in  some  airports  or  within  the  existing  railways 
directive.  

Some  of  the  respondents,  however,  did  not  agree  on  congestion  costs  being  an 
externality,  as  they  claim  these  costs  (time  loss)  are  already  internalized  amongst  road 
users themselves. 

Graph 3 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

3.1.2-3.1.6 Which actions would you favour to tackle congestion and scarcity cost?

No opinion

No new action

Tradable permit (for freight)

Congestion charges for passenger (including cars)

Congestion charges for freight

Congestion charges for freight + passenger (including cars)

Congestion / Scarcity charge

road

rail

air

maritime

iww

* 469 respondents for road, rail, air, maritime, inland w aterw ays (iw w )

Accident costs 

In  general,  respondents  favour  taking  into  account  accidents  when  internalising. 
Moreover, the majority would like this internalisation in all modes of transport, and not 
only in road transport.  

However,  some  participants  were  opposed  to  this  arguing  that  these  costs  are  already 
internalised  through  insurance  prices.  Some  stressed  that  instruments  such  as  controls, 
penalties and information campaigns would be more efficient to deal with accidents. 

EN 

100 

   EN 

Graph 4 

3.2.6. Which action w ould you favour for accidents in road transport?

10%

15%

41%

Liability insurance

Safety charge

No new  action

No opinion

23%

* 469 respondents

Noise costs 

Participants welcome the internalisation of external costs in the field of noise. Many of 
them stressed that noise restrictions or charges were already applied in some airports or 
by infrastructure managers in railways. Technology was also mentioned as a key element 
to  fight  against  noise.  Some  respondents  have  the  feeling  that  noise  costs  are  already 
internalized via lower land prices in the proximity of noisy transport infrastructures. 

Graph 5 

3.3 Which action w ould you favour to tackle NOISE costs?

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

No opinion

Ot her

Tax

Diff erent iat ed charge

road

rail

air

* 469 respondents

Air pollution costs 

Most  of  respondents  think  that  differentiated  charges  are  the  best  way  to  take  into 
account the characteristics of air pollution (which depend on time, location, etc…). Some 
of  them  raise  the  issue  of  technology  and  innovation  which  help  limit  air  pollution 
emissions.  Other  respondents  claim  more  stringent  legislative  standards  on  emissions 
from vehicles. 

EN 

101 

   EN 

 
 
 
Graph 6 

3.4 Which action would you favour to tackle AIR POLLUTION costs?

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

No opinion

Other

Tax

Differentiated charge

road

rail

air

maritime

iw w

* 469 respondents

Climate change costs 

As regards climate change, respondents would prefer the application of ETS in all modes 
of  transport  or  some  of  them  (railways,  maritime).  Other  participants  favour  the  use  of 
taxation  which  is  seen  as  the  best  way  to  influence  CO2  emissions.  Most  respondents 
highlight the global aspects of climate change costs and the need to have an action at EU 
level. 

Graph 7 

3.5 Which action w ould you favour to tackle CLIMATE CHANGE costs?

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

No opinion

Other

Emission trading scheme

Tax

r oad

rail

air

marit ime

iww

* 469 respondents

Other instruments? 

Many  of  the  participants  highlighted  the  advantages  of  electronic  charging.  Electronic 
charging is seen as the best way to encapsulate all the external costs and make the user 
pay in an effective way. At the same time, other instruments such as norms, standards, 

EN 

102 

   EN 

 
 
research  policy,  information  campaigns,  intelligent  transport  system  (ITS)  were 
mentioned. 

Chart 8 

3.6.1. Would you favour electronic charging in road transport?

4%

10%

14%

40%

Strongly agree

Agree

No opinion

Disagree strongly

Disagree

33%

* 414 respondents

In addition, some respondents highlighted the need to take into account the specific case 
of  regions  such  as  the  Alps.  Other  tools  such  as  transit  permits  could  be  effective  to 
tackle nuisances.  

5 

THE NEED FOR EUROPEAN ACTION 

In  general,  the  need  for  European  action  is  acknowledged  and  the  vast  majority  of 
participants expect the EU to act in this field. At the same time, participants mentioned 
that  most  of  these  costs  are  local  and  this  should  be  reflected  in  the  way  economic 
instruments are applied.  

Graph 9 

3.1.7, 3.2.7, 3.3.5, 3.4.7 and 3.5.7: Do you think the EU should do something in the field 
of internalistion costs in general?

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

congestion

accidents

noise

air pollution

climate change

* 469 respondents

No opinion

Disagree strongly

Disagree

Agree

Strongly agree

EN 

103 

   EN 

 
 
6 

SHOULD TRANSPORT REVENUES GO TO TRANSPORT? 

The  questionnaire  asked  to  which  purpose  the  revenues  of  internalisation  should  go. 
Most  respondents  think  that  revenues  should  go  to  transport,  more  specifically  to  the 
mode  that  is  taxed  or  charged.  Many  respondents  stressed  the  need  to  avoid  cross-
subsidisation between modes of transport; some of them, however, stressed the need for 
investing in intermodal transport. Revenues should be used to improve infrastructures if 
needed  and  above  all  to  invest  in  cleaner  technologies  and  develop  environmentally 
friendly transport. The development of public transport and the promotion of cycling and 
walking  are  also  considered  a  good  way  to  improve  the  sustainability  of  transport. 
Revenues could be used to this end.  

The  majority  of  participants  consider  that  revenues  should  be  used  to  reduce  negative 
externalities.  

Chart 10 

4.1. In your opinion, revenues from external costs should go to...

5%

22%

40%

Transport in general

The mode of transport that  has been
charged or taxed

The general public budget

No opinion

33%

* 427 respondents

Chart 11 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

4.2-4.3 How  should revenues of external costs be used? 

No opinion

Disagree strongly

Disagree

Agree

Strongly agree

Use revenues t o compensat e vict ims

Use revenues t o reduce ext ernal ef f ect s

* 469 respondents

EN 

104 

   EN 

 
 
 
7 

FINANCING INFRASTRUCTURES 

The majority of respondents think that infrastructure should be financed – mostly if not 
entirely – by the general budget. The comments allowed giving more details on the way 
infrastructures  could  be  financed.  Many  participants  highlighted  that  both  –  users  and 
general  budget  –  should  contribute  to  financing  the  building  of  infrastructures.  In 
addition,  most  of  them  suggested  promote  public-private  partnership  (PPP)  as  a  viable 
way of financing. 

Chart 12 

5.1. The construction of infrastructure should be paid by...

10%

35%

56%

the general public budget (i.e. paid
by the taxpayer)

the user

No opinion

* 421 respondents

8 

SUMMARY OF POSITION PAPERS 

In  response  to  the  Public  Consultation  on  the  Internalisation  of  external  costs  launched 
by DG TREN in December 2007, 17 position papers were sent to the Commission. 

Internalisation of external costs 

The majority of stakeholders agree on internalisation at differentiated prices, mentioning 
road and air transport as priorities and based on the following assumptions: it should aim 
at  modal  shift  towards  more  sustainable  modes  of  transport;  it  should  lead  to  a  fairer 
competition  among  transport  operators  and  modes;  it  should  be  a  chance  for  a  “double 
dividend”.  

In some cases a step by step approach dealing with individual externalities is preferred as 
well  as  a  double-tier  approach  taking  into  account  also  externalities  induced  by 
insufficiently  maintained  infrastructure;  in  others  a  full  recovery  of  externalities  is 
envisaged. In no case internalisation should evolve into additional taxation or introduce 
forced changes in the modal split. 

Differentiation  is  often  mentioned,  stating  the  need  of  taking  into  account:  existing 
charges  and/or  taxes  already  internalising  some  externalities;  variations  in  domestic 
policy  and  variations  of  external  costs  both  regionally  and  among  modes  and  flows 
(transit and local). 

EN 

105 

   EN 

 
 
It is also stressed that external costs and decisions on transport policy should be reflected 
in pricing mechanisms and in the appraisal processes used to support the policy decision-
making  process;  furthermore  charging  should  be  fair  and  understandable  to  achieve  a 
higher acceptance. 

Only two position papers disagree on the merits of internalisation, showing scepticism on 
the  possibility  of  internalising  external  costs  for  all  modes  of  transport,  of  having  a 
common model for assessing external costs and of reducing externalities through pricing. 
It is also stated that internalisation risks penalising home/work commuting lower income 
categories, reducing employment and leading to environmental degradation.  

Expectations 

Expected  advantages  include  an  increased  sustainability  in  transport  through  modal 
shifts;  fairer  competition  between  different  modes,  removing  current 
taxation 
inequalities; availability of revenues to invest on modes generating less externalities and 
to  reduce  existing  taxes;  rearrangement  of  production  and  retail  systems  in  favour  of 
proximity  locations  to  cut  down  transport  distances;  improvement  of  environment, 
quality  of  life,  road  safety,  employment,  public  transport;  technological  innovation 
leading to fleet renewal and promotion of less polluting vehicles. 

In  such  a  scenario,  a  uniform  system  integrating  and  charging  the  external  costs  of  all 
transport  modes  in  accordance  to  co-modality  and  as  part  of  general  mobility  policy  is 
envisaged by some respondents. 

On  the  other  hand,  it  is  widely  feared  that  charges  will  result  into  increased  costs  and 
prices - especially when no alternative modes are available - and into risks for European 
competitiveness.  

It is also underlined that internalisation involves pricing external costs but not reducing 
externalities.  However,  the  aim  of  the  exercise  should  also  be  considered  from  the 
environmental point of view, rather than the economic aspects alone. 

Policy options 

It is generally agreed that tackling externalities requires a combination of technological, 
regulatory  and  pricing  measures,  including  investments  in  environmentally  friendly 
modes  of  transport,  enhanced  network  capacity,  land  use  policies,  availability  of  co-
modality  and  promotion  of  public  transport,  trading  schemes  as  well  as  taxation, 
the 
incentives  and 
complementarity of the different modes, the specificity of each one and the global frame 
of mobility policies. 

subsidies.  Such  combination 

into  account 

should 

take 

Measures suggested to tackle each externality vary though.  

Congestion  is  mostly  seen  as  a  local  problem  -  especially  related  to  road  transport  - 
which  therefore  requires  local  solutions.  Anti-congestion  measures  mentioned  include 
pricing such as differentiated charging and non-pricing tools such as improvement of the 
infrastructure in terms of capacity and connections, smart Intelligent Transport Systems, 
parking  and  traffic  control  policies,  provision  of  public  transport  alternatives  to  allow 

EN 

106 

   EN 

modal  shifts,  as  well  as  the  rearrangement  of  logistics  in  terms  of  locations  and  short-
distance trips.  

Internalisation is not considered a proper instrument to reduce accident costs as they are 
already  internalised  by  insurances,  whose  liabilities  are  envisaged  to  be  expanded  in 
order to cover them totally. Road safety charges are also suggested, being composed by a 
fixed part (annual insurance) and a variable part according to distance (charge). 

On  noise  reduction,  positions  are  divided  between  those  who  suggest  to  tackle  this 
externality with differentiated charging and those who rather support regulatory measures 
such  as  land  use  or  new  technologies  for  engines  and  screens  (e.g.  use  of  low-noise 
rolling  material  in  urban  areas).  Mountainous  areas  are  particularly  aggravated  by  this 
externality; therefore noise charges are suggested by some to reflect this peculiarity. 

In order to tackle air pollution some are in favour of differentiated charging (according 
to  location,  day  or  week  time,  Euro  class),  whilst  others  rather  support  regulations  and 
fleet  renewals,  stressing  that  air  pollution  strongly  depends  on  local  meteorological 
conditions and emissions, as well as being to some extent a global issue. 

Climate change is considered a global and interdisciplinary issue to be connected with air 
emission  schemes  and  global  warming.  Taxation  and  permits  are  mostly  suggested,  in 
addition  to  technical  and  legislative  measures;  in  particular  the  following  tools  are 
envisaged  for  air  transport:  a  homogeneous  air  traffic  control  system  (Single  European 
Sky) and fleet renewal. 

As  far  as  integrated  charging  is  concerned,  the  use  of  electronic  tools  allowing 
differentiation as well as the uniformity of methods (or the interoperability of systems) is 
often proposed by respondents. 

Role of European revenues 

Although there is a general consensus on harmonisation at European level, positions vary 
from disagreement on the need for a generalised or statutory EU model for internalising 
external costs (due to national, regional and local differences) to wishing strict regulation 
for all transport modes in terms of level and composition of the charges at EU level. On 
the  one  hand  it  is  suggested  that  European  Union  should  limit  its  role  to  non-binding 
guidance  and  legal  proposals  in  accordance  with  the  principle  of  subsidiarity,  on  the 
other it is believed that it should intervene in the internalisation of external costs in order 
to create a level-playing field between the different modes and to foster modal shift.  

Revenues 

It  is  generally  agreed  that  revenues  from  charges  should  be  earmarked  to  the  transport 
mode that has generated them and used to decrease external costs through infrastructure 
construction or upgrading  as  well as through  technological innovation. Although cross-
subsiding  is  much  less  accepted,  it  is  also  mentioned  that  revenues  should  go  to  those 
modes of transport generating less externalities. 

Differentiation  in  revenues  is  also  suggested,  locally  distinguishing  revenues  generated 
by  transit  traffic  from  those  generated  by  exchange  or  local  traffic.  In  one  case,  it  was 
stressed  that  a  distinction  should  be  made  for  revenues  generated  by  urban  congestion 

EN 

107 

   EN 

charging  –  which  should  be  used  for  all  modes  of  transport  of  the  city  -  and  those 
generated  by  non  urban  congestion  charging,  which  on  the  contrary  should  be  used  to 
infrastructure adaptation in the mode of transport that has been charged. 

When the victims of the externalities cannot be clearly identified, revenues are suggested 
to go to public budget and be used to reduce burden on society. 

Other comments 

The aim of internalisation is stressed not to be the payment of charges but the reduction 
of  externalities,  therefore  paying  for  externalities  should  be  used  as  an  instrument  to 
achieve this goal. 

Other significant issues identified by respondents as needing debate concern the extent to 
which the external cost charging approach is applied in other important branches of the 
economy and the extent to which it may be possible to apply the “polluter pays” principle 
as distinct from the “user pays” principle. 

It is underlined by many that in rail the primary source of energy and its impact in terms 
of CO2 emissions should be considered; in this perspective it is remarked that European 
railway sector is working hard on the electrification of the remaining diesel lines in order 
to reduce air pollution. 

The  need  for  extending  port  capacity  and  improving  access  roads  and  intermodal 
connections has also been stressed in strong terms. 

EN 

108 

   EN 

ANNEX TO THE QUESTIONNAIRE 

GENERAL INFORMATION 

Your Profile 

Citizen 

Organisation  

(for Citizens) 

Gender 

Male 

Female 

Age 

<24 

25-34 

35-44 

45-54 

55-64 

>65 

Current occupation 

Employee  

Manual worker  

Self-employed  

Without a professional activity 

Other 

Would you say you live in a ... ? 

Metropolitan zone  

Other town/urban centre  

EN 

109 

   EN 

Rural zone  

Other 

What is the mode of transport you use most for your daily mobility? 

Car 

Public transport 

Powered two wheelers 

Bicycle 

Walking 

Other 

What is the mode of transport you use most when travelling over 500 kilometres? 

Car 

Train 

Plane 

Ship 

Coach 

Other 

(for Organisations) 

Organisation name  

Organisation type 

Associations/non-governmental organisations 

Chamber of Commerce 

Consultancy/Lobbying 

Educational establishment 

Employers organisation 

European institution or body 

EN 

110 

   EN 

Government, Ministry 

Industry, business 

International organisation 

Library 

Local government 

National government 

Not-for-profit association 

Parliament 

Press 

Private company 

Public sector body 

Publishing 

Regional government 

Scientific/research institute 

Trade union 

University 

Other 

Main field of activity 

Freight transport services 

Fuels 

Infrastructure 

Policy and legislation 

Public transport services 

Taxi services 

Transport equipment 

Users associations 

EN 

111 

   EN 

Other 

Which mode of transport do you represent? 

Air transport 

Inland waterways transport 

Maritime transport 

Rail transport 

Road transport 

Urban transport 

Other 

Region 

European Union (list of countries) 

Europe outside EU (list of countries) 

Other 

EXTERNAL COSTS 

External cost is a cost that is not included in the market price, e.g. a cost that is not incurred by those who 
generate it. This means that when engaging in a transport activity, a person will incur private costs linked 
to the use of a mode of transport (tolls or fuel use), but will not be taking into account nuisances imposed 
on others such as congestion, accidents, noise, pollution and emissions of CO2.  

1.1. In your opinion, do you think that road transport imposes nuisances on other 
transport users and society? 

Yes  

No 

No opinion 

IF YES 

Could you please rank the five following nuisances generated by road transport in 
order of magnitude (1=smallest nuisance, 5=greatest nuisance) 

Congestion, Accident, Noise, Air pollution, Climate Change. 

Comments (if any) on road external costs 

EN 

112 

   EN 

1.2.  In  your  opinion,  do  you  think  that  rail  transport  imposes  nuisances  on  other 
transport users and society? 

Yes  

No 

No opinion 

IF YES 

Could  you  please  rank  the  five  following  nuisances  generated  by  rail  transport  in 
order of magnitude (1=smallest nuisance, 5=greatest nuisance) 

Congestion, Accident, Noise, Air pollution, Climate Change. 

Comments (if any) on rail external costs 

1.3.  In  your  opinion,  do  you  think  that  air  transport  imposes  nuisances  on  other 
transport users and society? 

Yes  

No 

No opinion 

IF YES 

Could  you  please  rank  the  five  following  nuisances  generated  by  air  transport  in 
order of magnitude (1=smallest nuisance, 5=greatest nuisance) 

Congestion, Accident, Noise, Air pollution, Climate Change. 

Comments (if any) on air transport external costs 

1.4.  In  your  opinion,  do  you  think  that  maritime  transport  imposes  nuisances  on 
other transport users and society? 

Yes  

No 

No opinion 

EN 

113 

   EN 

IF YES 

Could you please rank the five following nuisances generated by maritime transport 
in order of magnitude (1=smallest nuisance, 5=greatest nuisance) 

Congestion, Accident, Noise, Air pollution, Climate Change. 

Comments (if any) on maritime external costs 

1.5.  In  your  opinion,  do  you  think  that  inland  waterways  transport  imposes 
nuisances on other transport users and society? 

Yes  

No 

No opinion 

IF YES 

Could  you  please  rank  the  five  following  nuisances  generated  by  inland  waterway 
transport in order of magnitude (1=smallest nuisance, 5=greatest nuisance) 

Congestion, Accident, Noise, Air pollution, Climate Change. 

Comments (if any) on inland waterway external costs 

1. 

Internalisation of costs 

Internalisation is a way to attribute external costs (such as pollution, congestion, noise, …) to users and to 
ensure that prices paid by transport users reflect social costs, i.e. private and external costs. 

The cost of transport can be split into private/internal costs (those directly borne by the person engaged in 
transport activity) and external costs (i.e. those that are imposed on others but not supported by the user). 
The sum of private and external costs represents social costs. 

2.1. Do you agree that it is important to internalise the external costs produced by 
transport? 

Strongly agree 

Agree 

Disagree 

Disagree strongly 

No opinion 

ADVANTAGES/DISADVANTAGES EXPECTATION 

Assuming  that  full  internalisation  if  possible  in  all  modes  of  transport,  some 
patterns of transport may become more expensive, the effects may not be the same 
on  all  modes  of  transport,  thus  making  some  forms  of  transport  more  or  less 
attractive than others. What are the main advantages/disadvantages you expect on 
the following: 

EN 

114 

   EN 

 
2.2. What are the main advantages/disadvantages you expect on the economy? 

2.3. What are the main advantages/disadvantages you expect on the social situation? 

2.4. What are the main advantages/disadvantages you expect on the environment? 

2.5.  In  your  opinion,  how  could  the  negative  effects  of  congestion,  accidents  and 
environmental nuisances be reduced? 

2. 

Policy Options 

Policy  options  will  envisage  the  use  of  different  market  based  instruments  for  each  external  cost  –  tax, 
charge and trading scheme. A tax is a required payment of money to governments that are used to provide 
public goods and services for the benefit of the community as a whole. Examples are fuel tax, circulation 
tax,  registration  tax.  A  charge  is  a  proportional  payment  required  in  exchange  for  a  clearly  defined 
service.  For  example,  a  toll  charge  will  give  access  to  the  use  of  a  specific  infrastructure  (bridge, 
motorway, etc…). A tradable permit scheme is a mechanism by which the authorities set a maximum level 
of  pollution  or  use  of  an  infrastructure  and  assign  to  individuals/operators  a  quantity  of  permits  that 
corresponds to this level. The individuals/operators can then trade permits, improving the efficiency in the 
distribution of efforts or in the use of the infrastructure.  

3.1. Congestion Costs 

3.1.1. In general, which instrument would you favour to tackle congestion costs? 

Charge 

Tax 

Tradable permit  Other 

3.1.2. In road transport which action you would favour to tackle congestion costs? 

No new action 

Congestion Charges 
for freight 

Congestion 
Charges for 
passenger 
(including cars) 

Congestion 
Charges for 
freight + 
passenger 
(including cars) 

Tradable 
permit 

No 
opinion 

3.1.3. In rail transport which action you would favour to tackle congestion costs? 

No new action 

Scarcity charge  No opinion 

3.1.4. In air transport which action you would favour to tackle congestion costs? 

No new action 

Scarcity charge  No opinion 

3.1.5.  In  maritime  transport  which  action  you  would  favour  to  tackle  congestion 
costs? 

EN 

115 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
No new action 

Congestion 
charge 

No opinion 

3.1.6.  In  inland  waterway  transport  which  action  you  would  favour  to  tackle 
congestion costs? 

No new action 

Congestion 
charge 

No opinion 

3.1.7.  Do  you  think  the  EU  should  do  something  in  the  field  of  internalisation  of 
congestion costs? 

Strongly agree 

Agree 

Disagree 

Disagree 
strongly 

No 
opinion 

Comments (if any) on congestion cost 

3.2. Accident Costs 

Accidents  are  mainly  a  road  problem  (in  2005,  there  were  105  killed  in  rail  accidents)  even  though  the 
number of road fatalities has considerably decreased since 1990. In general, insurance companies do not 
cover total costs of accidents but only partial ones. The remaining part is not borne by transport users. 

3.2.1.  Do  you  agree  that  accidents  costs  should  be  internalised  only  for  road 
transport? 

Strongly agree 

Agree 

Disagree  Disagree 
strongly 

No 
opinion 

3.2.2. Should accident costs also be internalised in rail transport? 

Strongly agree 

Agree 

Disagree  Disagree 
strongly 

No 
opinion 

3.2.3. Should accident costs also be internalised in aviation? 

Strongly agree 

Agree 

Disagree  Disagree 
strongly 

No 
opinion 

3.2.4. Should accident costs also be internalised in maritime transport? 

Strongly agree 

Agree 

Disagree  Disagree 
strongly 

No 
opinion 

3.2.5. Should accident costs also be internalised in inland waterway transport? 

Strongly agree 

Agree 

Disagree  Disagree 
strongly 

No 
opinion 

EN 

116 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.2.6. Which action you would favour for accidents in road transport? 

No new 
action 

Safety 
charge 

Liability 
insurance 

No 
opinion 

3.2.7.  Do  you  think  the  EU  should  do  something  in  the  field  of  internalisation  of 
accident costs in road transport? 

Strongly agree 

Agree 

Disagree  Disagree 
strongly 

No 
opinion 

Comments (if any) on accident cost 

3.3. Noise Costs 

3.3.1. In general, which instrument would you favour to tackle noise costs? 

Differentiated 
charge 

Tax 

Other 

No 
opinion 

3.3.2. Which action you would favour to tackle noise costs in road transport? 

No new 
action 

Differentiated 
charge 

Tax 

No 
opinion 

3.3.3. Which action you would favour to tackle noise costs in rail transport? 

No new 
action 

Differentiated 
charge 

Tax 

No 
opinion 

3.3.4. Which action you would favour to tackle noise costs in air transport? 

No new 
action 

Differentiated 
charge 

Tax 

No 
opinion 

3.3.5.  Do  you  think  the  EU  should  do  something  in  the  field  of  internalisation  of 
noise costs? 

Strongly 
agree 

Agree 

Disagree 

Disagree 
strongly 

No 
opinion 

EN 

117 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Comments (if any) on noise cost 

3.4. Air pollution costs 

3.4.1. In general, which instrument would you favour to tackle air pollution costs? 

Differentiated 
charge 

Tax 

Other 

No opinion 

3.4.2.  In  road  transport,  which  action  you  would  favour  to  tackle  air  pollution 
costs? 

No new 
action 

Differentiated 
charge 

Tax 

No opinion 

3.4.3. In rail transport, which action you would favour to tackle air pollution costs? 

No new 
action 

Differentiated 
charge 

Tax 

No opinion 

3.4.4. In air transport, which action you would favour to tackle air pollution costs? 

No new 
action 

Differentiated 
charge 

Tax 

No opinion 

3.4.5. In maritime transport, which action you would favour to tackle air pollution 
costs? 

No new 
action 

Differentiated 
charge 

Tax 

No opinion 

3.4.6.  In  inland  waterway  transport,  which  action  you  would  favour  to  tackle  air 
pollution costs? 

No new 
action 

Differentiated 
charge 

Tax 

No opinion 

3.4.7. Do you think the EU should do something in the field of internalisation of air 
pollution costs? 

Strongly 
agree 

Agree 

Disagree 

Disagree 
strongly 

No opinion 

EN 

118 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Comments (if any) on air pollution cost 

3.5. Climate Change Costs 

3.5.1.  In  general,  which  instrument  would  you  favour  to  tackle  climate  change 
costs? 

Tax 

Other 

No opinion 

Emission 
trading 
scheme 

3.5.2.  In  road  transport,  which  action  you  would  favour  to  tackle  climate  change 
costs? 

new 

No 
action 

Emission 
trading 
scheme 

Tax 

No opinion 

3.5.3.  In  rail  transport,  which  action  you  would  favour  to  tackle  climate  change 
costs? 

new 

No 
action 

Emission 
trading 
scheme 

Tax 

No opinion 

3.5.4.  In  air  transport,  which  action  you  would  favour  to  tackle  climate  change 
costs? 

new 

No 
action 

Emission 
trading 
scheme 

Tax 

No opinion 

3.5.5.  In  maritime  transport,  which  action  you  would  favour  to  tackle  climate 
change costs? 

new 

No 
action 

Emission 
trading 
scheme 

Tax 

No opinion 

3.5.6.  In  inland  waterway  transport,  which  action  you  would  favour  to  tackle 
climate change costs? 

new 

No 
action 

Emission 
trading 
scheme 

Tax 

No opinion 

3.5.7.  Do  you  think  the  EU  should  do  something  in  the  field  of  internalisation  of 
climate change costs? 

EN 

119 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Strongly 
agree 

Agree 

Disagree 

Disagree 
strongly 

No opinion 

Comments (if any) on climate change cost 

3.6. Integrated charging 

3.6.1. Would you favour electronic charging in road transport? 

Strongly 
agree 

Agree 

Disagree 

Disagree 
strongly 

No opinion 

3.6.2. Are there other policy options you would suggest? 

3.6.3. Are there other pricing instruments you would suggest for congestion, noise, 
accidents, air pollution or climate change? 

3.6.4.  Are  there  other  non-pricing  instruments  you  would  suggest  for  congestion, 
noise, accidents, air pollution or climate change? 

Comments (if any) on integrated charging 

1 

Use of revenues 

4.1. In your opinion, revenues from external costs should go to… 

The mode of transport that have been charged or taxed 

Transport in general 

The general public budget 

No opinion 

4.2.  In  your  opinion,  revenues  should  be  used  to  compensate  the  victims  of  the 
negative effects 

Strongly 
agree 

Agree 

Disagree 

Disagree 
strongly 

No opinion 

4.3. In your opinion, revenues should be used to reduce external costs 

Strongly 
agree 

Agree 

Disagree 

Disagree 
strongly 

No opinion 

Comments (if any) on the use of revenues 

EN 

120 

   EN 

 
 
 
 
 
 
 
2 

Infrastructure 

5.1. The construction of infrastructure should be paid by… 

The general public budget (i.e. paid by the taxpayer)  

The user 

No opinion 

Comments (if any) on infrastructure 

1 

General comments 

Are  there  other  comments  that  you  would  like  to  make  on  the  “internalisation  of 
external costs” topic not covered by the above questions? 

EN 

121 

   EN 

Annex 2: Evolution of nuisances in Transport 

Graph 0a: Evolution of transport and GDP growth 

Passengers, Goods, GDP 
 1995-2006  

0
0
1
=
5
9
9
1

140

135

130

125

120

115

110

105

100

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Passengers (1) (pkm)

Goods (2) (tkm)

GDP (at constant 1995 prices)

Source: DG TREN Pocketbook (2007) 

EN 

122 

   EN 

 
Table 0a: Performance per mode of transport (freight) 

EU-27 Performance by Mode
Freight Transport
1000 mio tonne-kilometres

Road

Rail

Inland 
Water- 
ways

Pipe- 
lines

Sea

Air

Total

1 289 

1 303 

1 352 

1 414 

1 470 

1 519 

1 556 

1 606 

1 625 

1 747 

1 800 

1 888 

 386 

 392 

 409 

 392 

 383 

 401 

 385 

 382 

 391 

 413 

 413 

 435 

 121 

 118 

 126 

 130 

 127 

 133 

 132 

 132 

 123 

 136 

 138 

 138 

 115 

 119 

 118 

 125 

 124 

 126 

 132 

 128 

 130 

 131 

 136 

 135 

1 150

1 162

1 205

1 243

1 288

1 348

1 400

1 417

1 445

1 488

1 530

1 545

2,0

2,1

2,3

2,4

2,5

2,7

2,7

2,6

2,6

2,8

2,9

3,0

3 062 

3 096 

3 213 

3 307 

3 394 

3 529 

3 607 

3 668 

3 717 

3 918 

4 020 

4 143 

46,5% 12,6% 14,5% 17,2% 34,3% 50,0%

35,3%

3,5%

1,1%

1,2%

1,5%

2,7%

3,8%

2,8%

4,9%

5,2%

0,0%

-0,7%

1,0%

3,4%

3,1%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

1995 -
2006

per 
year

2005 - 
2006

Source: DG TREN – Pocket book 

Table 0b: Performance per mode of transport (passenger) 

EU-27 Performance by Mode
Passenger Transport
1000 mio passenger-kilometres

Pass -
enger 
Cars

3 855

3 923

4 001

4 098

4 202

4 283

4 366

4 441

4 470

4 533

4 524

4 602

P2W

Bus & 
Coach

Rail -way

Tram & 
Metro

Air

Sea

Total

 123

 125

 127

 130

 134

 136

 139

 139

 144

 147

 150

 154

 501

 505

 504

 511

 511

 514

 516

 514

 515

 521

 523

 523

 348

 346

 348

 348

 356

 368

 369

 362

 358

 363

 374

 384

 65

 66

 67

 81

 80

 82

 83

 84

 79

 82

 82

 84

 335

 352

 385

 410

 424

 456

 453

 445

 462

 493

 526

 547

 44

 44

 44

 43

 43

 42

 42

 42

 42

 41

 40

 40

5 271

5 361

5 475

5 621

5 749

5 880

5 968

6 027

6 070

6 181

6 220

6 333

19,4% 24,6%

4,3% 10,4% 28,7%

63,3% -10,1%

20,1%

1,6%

2,0%

0,4%

0,9%

2,3%

4,6%

-1,0%

1,7%

1,7%

2,5%

-0,1%

2,7%

1,8%

4,0%

-0,3%

1,8%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006
1995 -
2006
per 
year
2005 - 
2006

EN 

123 

   EN 

 
 
Source: DG TREN – Pocket book 

Graph 1: Evolution of passenger and freight transport and of the length of 
infrastructures 

1995=100

Evolution of passenger and freight transport and of the length of infrastructures

14 0 ,0

12 0 ,0

10 0 ,0

8 0 ,0

6 0 ,0

4 0 ,0

19 9 4

Lenght of M otorways

Length of rails

Length of IWW

Road freight traffic

Road passenger traffic

Rail freight traffic

Passenger rail traffic

IWW freight traffic

19 9 5

19 9 6

19 9 7

19 9 8

19 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

Source: EU Energy and Transport in Figures. 2006

Graph 2: Road Safety Evolution in EU 

Road Safety Evolution in EU

s
e
i
t
i
l
a
t
a
F

70000

60000

50000

40000

30000

20000

10000

0

2500000

2000000

1500000

1000000

500000

0

d
e
r
u
j
n
I

,
s
t
n
e
d
i
c
c
A

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Source: CARE (EU road accidents database) or national publications. DG Transport and Energy

EN 

124 

   EN 

 
 
Graph 3a: Evolution of air pollutants (road) 

Road

)
0
0
1
=
0
9
9
1
(

s
n
o
i
s
s
i

m
E

t
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a
t
u
l
l
o
P
d
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x
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d
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140

120

100

80

60

40

20

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
NMVOC

NOx

CO2

SO2

CO

Source: TERM 2007

Graph 3b: Evolution of air pollutants (rail) 

Rail

)
0
0
1
=
0
9
9
1
(

s
n
o
i
s
s
i
m
E

t
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a
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u
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l
o
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x
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I

140

120

100

80

60

40

20

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

NOx

CO

NM VOC

SO2

CO2

Source: TERM 2007

EN 

125 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
Graph 3c: Evolution of air pollutants (Civil aviation - domestic) 

Civil Aviation (domestic)

)
0
0
1
=

0
9
9
1
(

s
n
o
i
s
s
i
m
E

t
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a
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u
l
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P

d
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x
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d
n
I

230

210

190

170

150

130

110

90

70

1990

1992

1994

1996

1998

2000

2002

2004

NOx

CO

NM VOC

SO2

CO2

Source: TERM 2007

Graph 3d: Evolution of air pollutants (Civil aviation - international) 

Civil Aviation (International)

)
0
0
1
=
0
9
9
1
(

s
n
o
i
s
s
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E

t
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P
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I

210

190

170

150

130

110

90

70

1990

1992

1994

1996

1998

2000

2002

2004

NOx

CO

NM VOC

SO2

CO2

Source: TERM 2007

EN 

126 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
Graph 3e: Evolution of air pollutants (Navigation- national) 

Navigation (national)

)
0
0
1
=

0
9
9
1
(

s
n
o
i
s
s
i
m
E

t
n
a
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u
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o
P

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150

140

130

120

110

100

90

80

70

1990

1992

1994

1996

1998

2000

2002

2004

NOx

CO

NM VOC

SO2

CO2

Source: TERM 2007

Graph 3f: Evolution of air pollutants (Navigation- international) 

Navigation (International)

)
0
0
1
=

0
9
9
1
(

s
n
o
i
s
s
i
m
E

t
n
a
t
u
l
l
o
P

d
e
x
e
d
n
I

160

150

140

130

120

110

100

90

80

70

1990

1992

1994

1996

1998

2000

2002

2004

NOx

CO

NM VOC

SO2

CO2

Source: TERM 2007

EN 

127 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
Annex 3: Unit External Costs per cost categories and per traffic situation 

- ROAD TRANSPORT 

Graph 1: Passenger cars: Unit Values per cost category in €ct/vkm (in €2000) based 
on unit values for all cost components from Table 47 of the Handbook. 

€ct/vkm

10.0

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

50.0

30.0

20.0

10.0

4.1

1.6

1.5

0.0

-
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0.8

0.1

0.2

0.0

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0.7

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Noise

Congestion

Accidents

Air pollution

Climate change 

Up- and downstream
processes

Nature &
landscape 

Soil &
water

Unit cost value

Min

Max

Notes: Unit cost value in bold. Source: Handbook (IMPACT) 

Graph  2:  Passenger  cars  (petrol):  Unit  Values  per  traffic  situation  in  €ct/vkm  (in 
€2000) based on unit values for all cost co mponents from Table 47 of the Handbook 

€ct/ vkm
70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

63.9

38.4

26.7

1.7

Peak

14.8

14.1

8.6

4.1

Off-Peak

Night

8.4

7.9

13.3

3.5

Peak

Off-Peak

Day

Urban

Unit cost value

Min

6.7

4.1

1.7

6.8

4.2

1.8

Day

Off-Peak

Interurban

Max

Off-Peak

Night

Notes:  Note:  for  pricing  purposes  not  all  cost  components  might  have  to  be  considered  (e.g.  costs  for  nature  and 
landscape). Source: Handbook (IMPACT) 

EN 

128 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Graph  3:  Heavy  goods  vehicles:  Unit  cost  per  cost  category  in  €ct/vkm  (in  €2000) 
based on unit values for all cost components from Table 47 of the Handbook. 

€ct/vkm

50.0

45.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

12.8

t

h
g
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,

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7.0

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125.0

75.0

70.0

35.0

1.1

2.0

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I

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Noise

Congestion

Accidents

Air pollution

Climate change 

Up- and downstream
processes

Nature &
landscape 

Soil &
water

Unit cost value

min

max

Notes: Unit cost values in bold. Source: Handbook (IMPACT) 

Graph  4:  Heavy  goods  vehicles:  Unit  values  per  traffic  situation  in  €ct/vkm  (in 
€2000) based on unit values for all cost co mponents from Table 47 of the Handbook. 

€ct/ vkm
200.0

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0.0

187.4

107.3

109.0

33.7

34.8

67.0

22.5

Peak

Off-Peak

Day

Urban

80.9

54.4

40.6

28.2

Off-Peak

Night

13.3

Peak

Unit cost value

min

39.0

39.9

19.4

13.3

20.3

13.6

Day

Off-Peak

Interurban

max

Off-Peak

Night

Notes:  Note:  for  pricing  purposes  not  all  cost  components  might  have  to  be  considered  (e.g.  costs  for  nature  and 
landscape). Source: Handbook (IMPACT) 

EN 

129 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- RAIL TRANSPORT 

Graph 5: Rail passenger transport: Unit values per cost category in €ct/train-km (in 
€2000) based on unit values for all cost co mponents from Table 48 of the Handbook. 

€/ train-km

350

300

250

200

150

100

50

0

144.8

90.7

78.0

23.7

20.6

34.4

20.0

8.0

0.0

0.0

0.0

11.4

0.0

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n
a
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Noise

Scarcity
costs

Accidents

Air Pollution

Climate change

Up- and downstream processes 

Nature &
landscape

Soil &
water

Unit cost value

Min

Max

Source: Handbook (IMPACT) 

Graph 6: Rail passenger transport: Unit values per traffic situation in €ct/train-km 
(in  €2000)  based  on  unit  values  for  all  co st  components  from  Table  48  of  the 
Handbook. 

€ct/ train-km

500

450

400

350

300

250

200

150

100

50

0

442

422

454

336

316

329

222

192

202

192

256

246

160

111

103

149

129

77

48

57

48

127

88

68

182

162

107

121

121

176

145

121

82

51

27

27

Peak

Off-Peak

Peak

Off-Peak Off-Peak Off-Peak

Peak

Off-Peak

Peak

Off-Peak Off-Peak Off-Peak

Electric

Diesel

Electric

Diesel

Electric

Diesel

Electric

Diesel

Day

Night

Day

Night

Urban

Unit cost value

Min

Interurban

Max

Notes:  Note:  for  pricing  purposes  not  all  cost  components  might  have  to  be  considered  (e.g.  costs  for  nature  and 
landscape). Source: Handbook (IMPACT) 

EN 

130 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Graph  7:  Rail  freight  transport:  Unit  values  per  cost  category  in  €ct/train-km  (in 
€2000) based on unit values for all cost co mponents from Table 48 of the Handbook. 

€/ train-km

800

700

600

500

400

300

200

100

0

366.8

305.8

171.1

41.9

40.1

67.7

20.0

8.0

0.0

0.0

0.0

0.0

28.9

28.9

44.4

34.8

44.4

34.8

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l

e
s
e
d

i

,
n
a
b
r
U

,
n
a
b
r
u
r
e
t
n
I

c
i
r
t
c
e
e

l

,
n
a
b
r
u
r
e
t
n
I

l

e
s
e
d

i

Noise

Scarcity
costs

Accidents

Air Pollution

Climate change

Up- and downstream processes 

Unit cost value

min

max

7.5

1.0

n
a
b
r
u
r
e
t
n
I

n
a
b
r
u
r
e
t
n

i

/
n
a
b
r
U

Nature &
landscape

Soil &
water

Source: Handbook (IMPACT) 

Graph 8: Rail freight transport: Unit values per traffic situation in €ct/train-km (in 
€2000) based on unit values for all cost co mponents from Table 48 of the Handbook. 

€ct/ train-km

1200

1000

1'027

1'007

1'077

913

893

920

800

600

400

200

0

502

457

482

457

611

586

295

224

202

245

225

115

73

95

73

446

374

426

374

454

421

192

172

121

101

52

52

199

129

99

Peak

Off-Peak

Peak

Off-Peak Off-Peak Off-Peak

Peak

Off-Peak

Peak

Off-Peak Off-Peak Off-Peak

Electric

Diesel

Electric

Diesel

Electric

Diesel

Electric

Diesel

Day

Night

Day

Night

Urban

Unit cost value

min

Interurban

max

Notes:  Note:  for  pricing  purposes  not  all  cost  components  might  have  to  be  considered  (e.g.  costs  for  nature  and 
landscape). Source: Handbook (IMPACT) 

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- AIR TRANSPORT 

Table 1: Air transport: Unit values per cost component in €/ flight in €2000 

Cost component 

Noise costs  
Scarcity costs  

Peak 
Off-Peak 

Accident costs 
Air Pollution 
Climate change 
Up- and downstream processes 
Additional 
external 
(nature & landscape) 
Total external costs 

Air passenger 
weighted EU-19 average values  
228 
n.a. 
n.a. 
118 
117 
530 
612 

costs 

n.a. 

993 

Not available. 

Value can also be expressed in €/LTO since noise costs only occur during take-off and landing of 

Distance class 1.000-1.500 km, Model results of TREMOVE model (valuation factors for Germany 

Explanations by cost category: 
Noise costs: 
an aircraft, Model results of TREMOVE model (EU-19 average values). 
Scarcity costs: 
Accident costs:  Model results of TREMOVE model (EU-19 average values). 
Air pollution: 
used). 
Climate change:  Distance  class  1.000-1.500  km,  costs  correspond  to  the  costs  of  a  whole  flight  (from  origin  to 
destination),  costs  are  without  climate  impacts  of  non-CO2  emissions,  Model  results  of  TREMOVE  model  (EU-19 
average values). 
Up- and downstream: 
Distance  class  1.000-1.500  km,  costs  correspond  to  the  costs  of  a  whole  flight  (from 
origin  to  destination),  Model  results  of  TREMOVE  model.,  valuation  of  air  pollutants  with  valuation  factors  for 
Germany. 
Nature&Landscape: 

Not available. 

- WATERWAYS TRANSPORT 

Table  2:  Inland  waterways:  unit  values  per  cost  component  in  €ct/ship-km  (only 
comprehensive data for air pollution and climate change costs available) in €2000 

Cost component 

Noise 
Scarcity 
Accidents 
Air pollution 
Climate change 
Up- and downstream processes 
Nature & landscape 
Soil & water pollution 
Total external costs 

Waterborne freight transport 
weighted EU-19 average values  
(–) 
(–) 
(–) 
89-1260 
8-114 
8-108 
(–) 
(–) 
105-1482 

Ranges  correspond  to  costs  of  different  ship  types  acc.  to  Error!  Reference  source  not  found. 

Explanations by cost category: 
Air pollution: 
(Model results of TREMOVE model (valuation factors for Germany). 
Climate change:  Ranges  correspond  to  costs  of  different  ship  types  acc.  to  Table  30,  using  the  central  value  for 
climate change costs from Table 26, Model results of TREMOVE model (EU-19 average values). 
Up- and downstream: 
of TREMOVE model, valuation of air pollutants with valuation factors for Germany. 
Total bandwidths are calculated by adding up bandwidths of all categories. 
Total 

Ranges correspond to costs of different ship types acc. to Table 40 (p. 95), Model results 

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Annex 4: Overview of taxes and subsidies in transport 

Graph 1: Evolution of environmental tax 

% of GDP
3,5

Evolution of environmental taxes (%  of GDP)
EU25

3

2,5

2

1,5

1

0,5

0

Taxes on Pollution/Resources

 Transport taxes

 Energy taxes

1999

2000

2001

2002

2003

2004

2005

Source: Eurostat/TAXUD

Graph 2: Total environmental revenues and total transport revenues 

US$

70000

Total environmental revenues and total transport revenues
 (average 2002-2004) 

T otal revenues

T otal transport

60000

50000

40000

30000

20000

10000

0

DE UK IT

Source: OECD

FR NL DK ES

SE AT BE

EL

PL

PT

FI

IE

CZ HU SK LU MT EE

LT RO BG

Graph 3: State aid to transport as a % of GDP 

S tate aid to transport as % of GDP *- EU25

% of GDP
0,45

0,4

0,35

0,3

0,25

0,2

0,15

0,1

0,05

0

2000

2001

2002

2003

2004

2005

      Land transport and transport via pipelines

      M aritime transport

      Inland water transport

      Air transport

Railways

* Source: DG COM P scoreboard. For railways, COM (2006)761.  Subsidies to railways includes all public subsidies that have been communicated to the 
Commission as well as subsidies that have been notified and authorised by the Commission under relevant State aid rules. However the figures exclude 
compensation for services of general economic interest.

EN 

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Annex 5: Overview of taxes and subsidies in each mode of transport 

Table 1: Summary table on existing charges and taxes in road transport 

Existing charges and taxes 

EU Framework 

Member States 

Road Transport 

Fuel tax 

Vehicle tax 

Infrastructure Charge 

No tolls, no vignette 

Traditional Tolled Motorway for 
passengers and HGV 

Time based vignette for passenger and 
HGV 

Distance-based electronic road charging 
system for HGV 

Time based fee charging (Eurovignette) 
for HGV 

Time base vignette for HGV 

Urban congestion: urban tolls 

Directive  2003/96/EC  on  energy 
taxation 

All Member States 

1.9% of EU25 GDP 

0.5 % of EU25 GDP 

Directive 1999/62/CE as amended by 
Directive 
the 
2006/38/CE 
charging of heavy goods vehicles for 
the use of certain infrastructures 

on 

CY, EE, FI, LV, MT 

EL, ES, IE, FR, IT, PT, SL 

HU, CZ, LT, SK 

AT, DE, CZ 

BE, DK, LU, NL, SE. 

BG, PL, RO 

IT  (Parma,  Firenze,  Ferrara,  Reggio 
Emilia, Cesena, Bologna) 

MT (La Valette) 

SE 

SL (Maribor) 

UK (London) 

Based on DIFFERENT, OECD Database, Eurostat data base. 

Graph 1: Vehicle taxes in Member States (for HGV) 

5'000

4'500

4'000

3'500

3'000

2'500

2'000

1'500

1'000

500

0

AT UK DE CZ SK NL HU BE PL RO ES FR IT DK

1998

1999

2000

2001

2002

2003

2004

Source: Road Transport Report n°1 

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€
 
Table 2: Summary table on existing charges and taxes in rail transport 

Rail Transport 

Existing charges and taxes 

EU Framework 

Member States 

Directive  2003/96/EC  on  energy 
taxation  

on 

Directive 
the 
2001/14/EC 
allocation  of  railway  infrastructure 
capacity  and  the  levying  of  charges 
for  the  use  of  railway  infrastructure 
and safety certification. 

Fuel tax 

Infrastructure Charge 

Maintenance 

Renewals 

Train planning and operations 

Congestion and Scarcity 

Accidents 

Environment 

AT,  CZ,  DK,  EE,  FI,  FR,  DE,  HU, 
LT, NL, PL, PT, RO, SL, SE, UK 

EE, FI, FR, DE, HU, LT, PL, SL, UK 

CZ,  EE,  FR,  DE,  HU,  IT,  LT,  NL, 
PL, PT, RO, SL 

AT, DK, FR, DE, IT, UK 

SE 

FI, SE 

Based on ECMT (2005), DIFFERENT. 

Table 3: Summary table on existing charges and taxes in air transport 

Air Transport 

Existing charges and taxes 

EU Framework 

Member States 

Fuel tax 

Directive  2003/96/EC  on  energy 
taxation.  Article  14,  1.c.:  exemption 
for “energy products supplied for use 
the  purpose  of  air 
as  fuel  for 
navigation  other 
in  private 
pleasure-flying”. 

than 

Directive  2003/96/EC  on  energy 
taxation  gives  the  possibility  to  tax 
fuel  used  on  domestic  and,  under 
certain conditions, intra-EC flights. 

NL  (Kerosene  tax  since  2005  for 
domestic flights) 

Route Charge 

Guidelines provided by Eurocontrol 

Infrastructure Charge and restrictions 

Landing charge according to maximum 
take-off weight 

Noise 

on 

the 
2002/30/EC 
Directive 
establishment of rules and procedures 
with  regard  to  the  introduction  of 
noise-related  operating  restrictions  at 
Community airports 

AT,  BE,  CY,  CZ,  DE,  DK,  FI,  FR, 
DE,  HU,  EL,  IE,  IT,  LV,  LT,  LU, 
MT, PT, NL, ES, SK, SL, UK 

BE,  CZ,  FR,  HU,  NL,  SE,  UK,  DE 
(Berlin, Munich, Stuttgart) 

(not based on social cost of noise, but 
on  cost 
recovery  of  alleviation 
measures). 

Night  noise  charge:  DK,  (Kastrup), 
FI, DE (Frankfurt, Munich, Berlin),  

Congestion and Scarcity 

Work  on  a  proposal  to  develop  a 
secondary market for slots at airports. 

Peak/off-peak  

AT (Vienna), FI, PT, ES, UK 

Night time surcharge 

BE  (Brussels),  CY,  FR,  IT,  LV, 
(Riga), LT (Vilnius), LU, MT, NL 

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Accidents 

Air pollution 

Emission Trading Scheme 

- 

CZ, HU, IT, ES, SK, SE 

Proposal  for  a  Directive  amending 
Directive  2003/87/EC  so  as 
to 
include  aviation  activities  in  the 
scheme for greenhouse gas emission 
allowance 
the 
Community. COM(2006) 818 final 

trading  within 

Based on DIFFERENT. OECD data base, IMPRINT-Net.  

Table 4: Summary table on existing charges and taxes in maritime transport 

Existing charges and taxes 

EU Framework 

Member States 

Maritime Transport 

Fuel tax 

Directive  2003/96/EC  on  energy 
taxation.  Article  14,  1.b.:  exemption 
for “energy products supplied for use 
as fuel for the purposes of navigation 
within  Community  waters  (including 
fishing),  other  than  private  pleasure 
craft,  and  electricity  produced  on 
board a craft “. 

Infrastructure Charge 

Ports dues: ship gross tonnage/cargo type 

Cargo dues 

Environment 

Based on DIFFERENT, IMPRINT-Net 

AT,  BE,  CY,  CZ,  DK,  EE,  FI,  FR, 
DE;  EL,  HU,  IE,  IT,  LV,  NL,  PL, 
PT, SK, SL, ES, SE, UK 

CY, FR, IT, LV, LU, MT, PT  

SE 

Table  5:  Summary  table  on  existing  charges  and  taxes  in  inland  waterways 
transport 

Inland Waterways Transport 

Existing charges and taxes 

EU Framework 

Member States 

Directive  2003/96/EC  on  energy 
taxation:  Art.  15(1)(f)  possibility  to 
exempt  fuel  used  for  the  purpose  of 
navigation on inland waterways (incl. 
fishing) other then in private pleasure 
craft,  and  electricity  produced  on 
board of a craft. 

Charge exemption 

Shipping rights 

Differentiated charge 

Port use 

Rhine, 
(Mannheim Convention). 

Danube, 

Elbe 

Oder 

70% of inland waterway transport.  

BE,  

FR, DE (Mosel convention) 

NL, HU 

Based on study of Ecorys .Charging and pricing in the area of inland waterways (2005)  

EN 

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Annex 6: Eurovignette in Europe 

EN 

137 

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Annex 7: Equity Approach of the level of internalisation (REFIT approach) 

1. METHOLODOGY 

REFIT  is  a  Research  project  aiming  at  providing  a  set  of  sustainability  indicators  for 
assessing  the  effect  of  various  policies.  This  project  is  developing  a  “modelling  tools-
based” methodology that produces data on a set of identified indicators and that enables 
ex-ante evaluation of the European Common Transport Policy considering the economic, 
environmental and social dimensions of sustainability.  

The  level  of  internalisation  (LoI)  is  the  degree,  to  which  external  costs  have  been 
internalised according to the polluter pays principle. The LoI is designed to assess how 
much policies contribute to the objective of fair pricing. According to theory, pricing and 
taxation is justified if markets are imperfect and distorted.  

For  the  REFIT  calculations  the  Equity  Approach  is  eligible.  It  takes  into  account  total 
and average costs. 

The aim of the Equity Approach (or Full Cost Approach) is to identify the total costs they 
cause  and  compare  these  costs  with  the  total  charges  paid  by  the  category  in  question. 
Thus, the Equity Approach defines the Level of Internalisation as follows: 

Figure 1: Basic cost elements of the LoI  

The basic cost elements of the LoI are  

Vehicle operation costs (VOC) reflect the costs derived from the generation of transport 
services. They comprise i.e. driver wages, fuel cost , insurance, etc 
Value of Time is a mode specific value of the time of the passenger (or goods) spent in 
the vehicle. 

These are added to both nominator and denominator 

PRIVATE COSTS 

The consumer has to pay taxes, fees and charges for the service, such as fuel levy, road 
user fees, airport charges, etc. Since the consumer profits as well from state subsidies to 
the transport sector, these have to be deducted.  

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138 

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SOCIAL COSTS 

Infrastructure Costs are costs related to implementation and maintenance of transport 
infrastructures. These costs are borne by the state and are a part of the social costs. 
The sum of taxes and subsidies is deducted from the denominator, as it is assumed that 
taxes are used to pay the social costs caused by the transport activity.  
External Costs are generated through the transport activities and comprise the costs for 
airborne emissions, global warming, noise and accidents. Only the cost components that 
are not internalised according to the polluter pays principle are external.  

2. INDICATORS 

Graph 1 

Level of internalisation of passenger cars - Evolution - EU25

1,20

1,00

0,80

0,60

0,40

0,20

0,00

n
o
i
t
a
s
i
l
a
n
r
e
t
n
i

f
o

l
e
v
e
L
x
e
d
n
I

Source: REFIT 

2005

2010

2020

Graph 2 

Level of internalisation -  Evolution - Road freight transport - EU25

0,90

0,80

0,70

0,60

0,50

0,40

0,30

0,20

0,10

0,00

n
o
i
t
a
s
i
l
a
n
r
e
t
n
i

f
o

l
e
v
e
L
x
e
d
n
I

2005

2010

2020

HDT  1

HDT  2

HDT  3

HDT  4

LDT

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Annex 8: Efficiency approach: Level of internalisation (IMPACT) 

Costs

Congestion

Fixed infracosts

Variable infrastructure Costs

Accidents

Noise

Air pollution

Charges

Charges/ toll

)

/

m
k
o
u
E

(
s
e
g
r
a
h
c
d
n
a
t
s
o
C

2

1,8

1,6

1,4

1,2

1

0,8

0,6

0,4

0,2

0

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
h
C

s
t
s
o
C

s
e
g
r
a
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C

s
t
s
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C

s
e
g
r
a
h
C

AT - BE - CZ - DE - DK - ES - FI - FR - GR - HU - IE - IT - LU - NL - PL - PT - SE - SI - UK - EU19

Source: IMPACT Study (Deliverable 3). The study also provides similar calculations for other vehicles.  

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Annex 9: Screening of policy options 

Table 1: Summary of policy options (without BAU option) 

Charge 

Tax 

Tradable permit 

Electronic charging 

Congestion 

Policy option 

Road 

Rail 

Air 

Maritime 

Policy  option  for 
freight,  passenger, 
freight + passenger 

Policy options 

Policy option 

Policy option 

Inland Navigation 

Policy option 

Accident 

option 

Policy 
freight, 
freight + passenger 

for 
passenger, 

Road 

Rail 

Air 

Maritime 

Inland Navigation 

Road 

Rail 

Air 

Maritime 

Inland Navigation 

Road 

Rail 

Air 

Policy option 

Policy option 

Policy option 

Noise 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Air pollution 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Maritime 

Policy option 

Policy option 

Inland Navigation 

Policy option 

Policy option 

Road 

Rail 

Air 

Maritime 

Inland Navigation 

Climate Change 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Policy option 

Source: Consultation Paper on the Internalisation of external costs. Published in October 2007. 

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Table 2: Confronting policy choices with Stakeholders views and the need of European action (subsidiary test) 

Stakeholders views on external 
costs 

Stakeholders views on 
policy options 

Stakeholders views on the 
need for European actions  

Subsidiarity test 

Policy  options  proposed  in 
the Impact Assessment 

Congestion in road 

Congestion is seen as an important 
nuisance/ 

The majority of people favour 
the  option  of  charging  for 
freight and passenger.  

Congestion in rail 

Congestion in aviation 

The  majority  of  people  consider 
congestion  is  not  an  important 
nuisance.  

The  majority  of  people  consider 
congestion  is  not  an  important 
nuisance. 

The  majority  favour  “no  new 
action” 

The majority favour “scarcity 
charge”.  

Congestion in maritime  The  majority  of  people  consider 
congestion  is  not  an  important 
nuisance. 

The  majority  favour  “no  new 
action” 

Congestion in IWW* 

The  majority  of  people  consider 
congestion  is  not  an  important 
nuisance. 

The  majority  favour  “no  new 
action” 

Accident in road 

Accident  is  not  seen  as  the  most 
important nuisance  

The  majority 
should 
accident 
internalised in road.  

thinks 

that 
be 

The  majority  favour  liability 
insurance 

the  EU 

The  majority  of  people  think 
that 
do 
something 
field  of 
congestion.  

should 

the 

in 

But  they  stress  that  congestion 
is  a  local  problem  and  the  EU 
should  pay  attention  to  this 
characteristic.  

Subsidiarity  should  be  respected  as 
long as the principle of free circulation 
in the EU is respected. 

directive 

2006/38/EC 
EU 
(Eurovignette)  provides  a  common 
approach 
road 
(modulation) 

interurban 

on 

More complex in urban areas.  

charge 

Congestion 
for 
passenger  cars:  EU  common 
framework.  

Congestion  charge  for  freight 
road  transport:  revision  of  EU 
directive. Policy option 2.  

Scarcity  charge  is  foreseen  in  EU 
directive 2001/14/EC. 

No option for rail. 

Communication 
charge. Common framework.  

on 

infrastructure 

No option for air  

No option for maritime 

No option for IWW 

the  EU 

The  majority  of  people  think 
do 
that 
something 
field  of 
accident. 

should 

the 

in 

In  the  field  of  insurance,  need  to 
respect the subsidiarity principle.  

No option. 

Accident in rail 

Accident  is  not  seen  as  the  most  The  majority 

thinks 

that 

No option..  

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Stakeholders views on external 
costs 
important nuisance  

Stakeholders views on 
policy options 
should 

accident 
internalised in rail.  

be 

Stakeholders views on the 
need for European actions  

Subsidiarity test 

Policy  options  proposed  in 
the Impact Assessment 

Accident in aviation 

Accident  is  not  seen  as  the  most 
important nuisance  

Accident in maritime 

climate 

Accident  comes  after  air  pollution 
and 
(but 
interpreted  as  accidents  implying 
water pollution) 

change. 

The  majority 
accident 
internalised in aviation.  

should 

thinks 

The  majority 
accident 
internalised in maritime.  

should 

thinks 

that 
be 

that 
be 

Accident in IWW* 

Accident  is  not  seen  as  the  most 
important nuisance  

The  majority 
accident 
should 
internalised in IWW.  

thinks 

that 
be 

Noise in road 

Noise  is  not  seen  as  an  important 
nuisance.  

The 
differentiated charge. 

majority 

favour 

The  majority  of  people  think 
that 
do 
something in the field of noise. 

the  EU 

should 

Noise in rail 

Noise  is  considered  as  the  most 
important nuisance 

The 
differentiated charge. 

majority 

favour 

Noise in aviation 

Noise ranks after air pollution and 
climate change.  

The 
differentiated charge. 

majority 

favour 

The EU is already harmonising 
data  collection  (noise  map). 
Initiatives 
railways  and 
aviation.  

in 

Noise in maritime 

Noise is not considered as the most 
important nuisance.  

Noise in IWW 

Noise  is  not  seen  as  an  important 
nuisance. 

The  EU  is  already  harmonising  data 
collection (noise map).  

Initiatives 
measures in retrofitting. 

in 

railways:  abatement 

Directive  2002  on  noise  in  airports: 
report published.  

No option.. 

No option. 

No option. 

Noise  is  charged  in  all  modes 
of  transport  in  policy  option  2 
and 3.  

Noise  is  charged  in  all  modes 
of  transport  in  policy  option  2 
and 3. 

Noise  is  charged  in  all  modes 
of  transport  in  policy  option  2 
and 3. 

Noise  is  charged  in  all  modes 
of  transport  in  policy  option  2 
and 3. 

Noise  is  charged  in  all  modes 
of  transport  in  policy  option  2 
and 3. 

Air pollution in road 

Air  pollution  is  seen  as  the  most  The 

majority 

favour  The  majority  of  people  think 

In 

the 

field  of 

regulation  and  Air  pollution  charge 

in  all 

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Stakeholders views on external 
costs 
important nuisance  

Stakeholders views on 
policy options 
differentiated charge. 

Air pollution in rail 

Air  pollution  ranks  second  after 
noise.  

Half 
favour  differentiated 
charge.  Half  favour  “no  new 
action”. . 

pollution 

Air 
aviation 

in 

Air  pollution  second  after  climate 
change.  

The 
differentiated charge. 

majority 

favour 

pollution 

Air 
maritime 

in 

Air pollution ranks first. 

The 
differentiated charge. 

majority 

favour 

Air pollution in IWW 

Air pollution ranks first. 

The 
differentiated charge. 

majority 

favour 

Climate change in road  Climate  Change  is  not  considered 

The majority favour taxation. 

as the most important nuisance  

Climate change in rail 

Climate Change is considered as a 
nuisance  after  congestion  and  air 
pollution.  

Half  favour  “no  new  action” 
and half of respondents ETS. 

Climate  change  in  air 
transport 

Climate  Change  is  considered  as 
the most important nuisance.  

ETS  and  tax  are  the  most 
favoured instruments. 

Climate 
maritime 

change 

in 

Climate 
IWW 

change 

in 

Climate change is considered as an 
ranks 
important  nuisance  and 
second after air pollution. 

Climate change is considered as an 
important  nuisance  and 
ranks 
second after air pollution. 

The majority favour ETS 

No  new  action  and  ETS  are 
favoured. 

Stakeholders views on the 
need for European actions  

Subsidiarity test 

standardisation,  EU  can  act  to  ensure 
fair competition.  

Climate  change  is  a  global  problem. 
EU is entitled to act.  

As  regards  fuel 
unanimity of Member States.  

taxation,  rule  of 

the  EU 

that 
do 
something  in  the  field  of  air 
pollution. 

should 

the  EU 

The  majority  of  people  think 
that 
do 
field  of 
in 
something 
climate change. 

should 

the 

Global approach. EU is entitled 
to act. There is also the need to 
into  account  existing 
take 
international 
in 
agreements 
maritime and IWW sectors.  

The  proposal 
air 
transport  into  ETS  should  also 
be taken into account. 

to  put 

Policy  options  proposed  in 
the Impact Assessment 
modes  of  transport  in  policy 
option 2 and 3. 

Air  pollution  charge 
in  all 
modes  of  transport  in  policy 
option 2 and 3. 

in  all 
Air  pollution  charge 
modes  of  transport  in  policy 
option 2 and 3. 

Air  pollution  charge 
in  all 
modes  of  transport  in  policy 
option 2 and 3. 

Air  pollution  charge 
in  all 
modes  of  transport  in  policy 
option 2 and 3. 

Climate  change  tax  or  ETS  is 
considered  in  policy  option  2 
and 3.  

Climate  change  tax  or  ETS  is 
considered  in  policy  option  2 
and 3. 

Climate  change  tax  or  ETS  is 
considered  in  policy  option  2 
and 3. 

Climate  change  tax  or  ETS  is 
considered  in  policy  option  2 
and 3. 

Climate  change  tax  or  ETS  is 
considered  in  policy  option  2 
and 3. 

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Annex 10: Description of policy options 2 and 3 

1. POLICY OPTION 2 

Policy  Options  2  concerns  the  revision  of  the  Eurovignette,  leaving  all  other  modes  of 
transport unchanged. Within each variant 2a, 2b, some further analysis has been made in order 
to test the impact of different assumptions on fuel tax, estimates of external costs.  

The starting point would be take into account the existing infrastructure costs (assumed to be 
implemented through existing tolls) as it is foreseen in the current directive.  

Policy option 2 envisages charging in all roads in order to avoid traffic diversion. The current 
directive  allows  Member  States  to  charge  on  motorways  (TENs).  The  IMPACT  study 
proposed  a  scenario  (5B)  charging  only  motorways  and  detour  of  traffic  appeared  to  be 
important. Therefore, charging in all roads will be analysed. 

2.A.  Charging  for  air  pollution  and  noise  costs  while  climate  change  tackled  through  fuel 
taxes  

Road  user  charge  for  air  pollution  and  noise  would  be  allowed.  Basically,  Member  States 
would add to the current permissible road tolls (infrastructure cost) an environmental mark-
up.  The  mark-up  would  reflect  the  air  pollution  and  noise  costs  generated  by  lorries  and 
would  vary  according  to  the  vehicle  characteristics,  the  location  and  to  the  time.  The 
differentiation  at  constant  revenue  according  to  time  (peak,  off-peak)  would  contribute  to 
reduce  congestion.  Existing  fuel  taxes  are  considered  to  cover  climate  change  (e.g.  by 
labelling a CO2 component).  

Policy option 2A will be analysed with different assumptions.  

-  The  first  one  would  be  to  take  the  central  value  of  external  costs  as  proposed  by  the 
Handbook. This option is part of the analysis proposed section 4 and 5.  

-  A  second  option  would  be  to  take  the  high  estimates  of  external  costs  as  proposed  by  the 
Handbook. This option allows analysing the impact of taking higher values of external costs. 
The  charges  would  also  vary  according  to  the  EURO  class  of  vehicle  and  the  location 
(urban/interurban). Existing fuel taxes are considered to cover climate change.  

- Finally, a third option will be tested assuming that only Member States having already tolls 
charge  external  costs.  This  option  would  envisage  optional  charging  by  Member  States. 
Therefore,  in  the  modelling  exercise,  Ireland,  Finland,  Sweden,  Denmark,  Estonia,  Latvia, 
Lithuania,  Luxembourg,  Malta,  Cyprus  and  United  Kingdom  have  been  excluded  from  the 
scope  of  the  analysis.  An  EU  coordination  including  a  cap  system  would  ensure  that  the 
charges  are  not  set  above  the  median  values  of  external  costs  of  air  pollution  and  noise 
generated  by  lorries.  The  charges  would  also  vary  according  to  the  EURO  class  of  vehicle, 
and  the  location  (urban/interurban).  Existing  fuel  taxes  are  considered  to  cover  climate 
change. 

2.B Charging for air pollution, noise and climate change 

A similar system would be applied, except that in addition a CO2 charge would be added on 
top of the air pollution and noise charge. Member States may choose to add this CO2 charge 

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in their fuel tax or in the tolls. Those above the EU average fuel tax level could be inclined to 
opt for an increase of tolls.  

Two possibilities could be explored: 

- Member States add a CO2 charge on top of the infrastructure charge whatever their current 
level of fuel duties (above or at Community minimum level). 

- Member States add to the tolls a CO2 mark-up with a lowering of fuel tax. 

2. C. Charging for air pollution, noise and congestion  

On  top  of  air  pollution  and  noise  costs,  a  congestion  mark-up  would  be  applied  on  some 
sections/links  (basically,  when  marginal  infrastructure  costs  are  higher  than  average 
infrastructure costs, reflecting the pressure on the use of infrastructure). 

As regards congestion charging, two possibilities would be explored: 

- Charging for congestion HGV  

-  Charging  for  congestion  HGV  and  private  cars.  The  rationale  behind  would  be  to  charge 
HGV only if passenger cars are also charged. 

Table 1: Description of modelling options for the Policy options 2 

Modes

Scope External costs 
Air pollution 
Noise 
CO2  

Air pollution 
Noise 
CO2  

Air pollution 
Noise 
Congestion 

Road freight transport 
Modelling of Policy Option 2 
Variant 2a 
External costs on top of existing infrastructure cost (as they are currently charged).  
Charges on air pollution, noise.  
CO2 already internalised through fuel taxes. 
2a High estimates 
In this sub-variant, high estimates of external costs are applied.  
2a Central estimates 
Here, central estimates of external costs are applied.  
2a Some Member States 
Only Member States with tolls (excluding IE, FI, SW, DK, EE, LV, LT, LU, MT, 
CY, UK) 

Variant 2b. 

Same as variant 2a Central estimates All Member States 
CO2 mark-up. 
2b High fuel tax 
2b Lower fuel tax 
Variant 2c.  
Same as variant 2a Central estimates All Member States. 
Congestion mark-up on some sections. 
2C freight 
Congestion charge would be limited to freight transport. 
2C all road 
Congestion charge would be extended to freight and passenger cars.  

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2. POLICY OPTION 3 

Policy option 3 includes all modes of transport. Charging for road freight transport is similar 
to charging in policy option 2. Variant 3A allows charging for air pollution and noise and add 
a fuel tax to non road transport.  

Table 2: Description of modelling options for the Policy options 2 

Modes
Economic Instruments

All modes of transport 
(PO3) 

Scope External costs 
Air pollution 
Noise 
CO2  

Air pollution 
Noise 
CO2  
Air pollution 
Noise 
Congestion 
All  external  costs,  i.e.  accidents,  congestion,  air 
pollution, climate change, noise. 

Variant 3a 
External  costs  on  top  of  existing  infrastructure  costs  cost 
(as they are currently charged).  
Air pollution and noise charging in all modes of transport. 
CO2 assumed to be internalised in road fuel taxes. 
CO2 charge (fuel tax) in maritime and IWW added.  
Air  pollution  and  noise  are  reflected  in  an  increase  of 
circulation  tax  in  cars  (converted  in  flat  km-charge  in 
Transtools).  
Variant 3b 
Same as variant 3a.  
Mark-up for CO2 in road transport (freight and passenger) 
No  variant.  Road  congestion  cannot  be  internalised 
through circulation tax. Congestion can not be modelled in 
other modes of transport.  

- 

4.  SCENARIO  OF  THE  IMPACT  STUDY  AND  THE  LINK  WITH  THE  POLICY 
OPTIONS OF THE IMPACT ASSESSMENT 

The  IMPACT  study  comprises  other  set  of  scenario  that  has  been  also  useful  to  build  the 
policy options.  

From the IMPACT study (deliverable 3), the reference scenario has been used to assess the 
impacts of other policy options.  

The  other  scenarios  provide  illustration  on  alternative  ways  of  internalisation.  Scenario  2 
assumes internalisation through fuel tax. This scenario has been discarded as fuel tax cannot 
capture the local dimension of some external costs.  

Scenario 3 assumes an increase of charges and has not been used.  

Scenario 4a assumes a lowering of fuel tax in road transport and has not been used. Scenario 
4b is the same as 4a, but keeps existing level of fuel tax. Scenario 4c is the same as 4a, but 
keeps existing level of fuel tax in freight transport.  

Finally, scenario 5a and 5b are close to policy option 3. The difference is that these scenarios 
apply marginal infrastructure costs and charge for all external costs. Scenario 5b is interesting 
because it only charges freight road transport on motorways. It results a detour traffic which 
has been assessed when deciding the scope of policy option 2. 

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Annex 11: Description of models 

TRANSTOOLS 

TRANSTOOLS  is  a  European  transport  network  model  covering  passenger  and  freight,  as 
well as intermodal transport. The following innovations are obtained from TRANSTOOLS: 

- 

New set up of a supply and demand model with respect to existing models. 

Intermodality for passenger/freight (as National and European transport policies seek 

- 
to promote intermodality through different measures). 

Inclusion of intercontinental flows (mainly for freight), as some models do not cover 

- 
this segment. 

Full coverage of Central and Eastern Europe (Accession Countries and the countries at 

- 
the borders of the enlarged European Union). 

- 

Integration of the new Member States at a level similar to those of EU-15. 

- 
Feedback  infrastructure  development  economy  (as  the  question  of  indirect  effects  in 
the economy and on network level is important, especially where investment has a substantial 
influence - notably for Accession Countries). 

- 

Logistics/freight chain explicitly included. 

Coupling method between local traffic and long-distance traffic in order to address the 

- 
effect of congestion on the later. 

A software approach is chosen which results in a software modelling tool on network 

- 
level. 

The TRANSTOOLS model, which reference data comes from the ETIS database, is made of 
different modules. These model components exchange information according to a sequential 
approach (i.e. the origin/destination matrix produced by the passenger model is transferred to 
the modal split model, etc.) although  feed  back effects  are taken into account (i.e. transport 
costs and times produced by the assignment model are fed back to the modal split model). In 
brief, the model works in the following way (using a modelling step of 1 year): 

- 
The  freight/logistics  model  (based  on  NEAC  and  SLAM  principles)  produces  the 
freight unimodal transport modal matrices for the 10 NST/R commodity groups on the basis 
of the NUTS2 zoning system. 

- 
The  passenger  model  (based  on  ASTRA  and  VACLAV  principles)  simulates  the 
generation and distribution of trips and produces origin/destination matrices by trip purpose 
and by mode at regional level (NUTS3 zoning system). 

- 
Main inputs for these two models are the transport network, the socio-economic data 
and  the  transport  Level  of  Service  (cost  and  times);  the  latter  is  produced  by  the 
TRANSTOOLS assignment model. 

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- 
The freight and passenger trip matrixes enter in the assignment stage. Freight matrixes 
have  to  be  brought  on  the  level  of  NUTS  III,  a  level  which  is  appropriate  to  describe 
congestion. 

From the assignment module the transport costs will enter (in logsum) into the SCGE 
- 
model, which is based on CG Europe principles. The change in transport costs/accessibility is 
a driving force for indicating the indirect effects (change in regional GDP), which are then fed 
in the freight and passenger model. 

TREMOVE 

TREMOVE  is  a  policy  assessment  model  to  study  the  effects  of  different  transport  and 
environment  policies  on  the  emissions  of  the  transport  sector.  The  model  estimates  the 
transport demand, the modal shifts, the vehicle stock renewal, the emissions of air pollutants 
and the welfare level. The model can be applied for environmental and economic analysis of 
different  policies  as  road  pricing,  public  transport  pricing,  emission  standards,  subsidies  for 
cleaner cars, etc.  

TREMOVE models both passenger and freight transport, and covers the period 1995-2020. 

TREMOVE  includes  in  fact  2  models:  a  land  transport  model,  and  a  maritime  model.  The 
maritime model has not been used for IMPACT since it is not able to model the impacts of 
pricing policies. The land transport model has been set up to model all transport within one 
country. The  TREMOVE modelling used  for IMPACT covers 19 countries: the  EU-15 plus 
Czechoslovakia, Hungary, Poland and Slovenia. 

The  TREMOVE  model  has  been  developed  by  Transport  &  Mobility  Leuven  and  the  K.U. 
Leuven, for the European Commission, DG Environment. 

The  first  version  of  the  model  dates  1997-1998.  At  that  time,  the  model  covered  nine 
countries and focussed on road transport. The K.U. Leuven and DRI developed the first model 
as an analytical underpinning for the European Auto-Oil II programme. 

TREMOVE  consist  of  twenty-one  parallel  country  models.  Each  country  model  consists  of 
three inter-linked core modules:  a  transport  demand  module, a vehicle  turnover module and 
an emission and fuel consumption module, to which a welfare cost module and a well-to-tank 
emissions module has been added. 

The  transport  demand  module  describes  transport  flows  and  the  user's  decision  making 
process  when  it  comes  to  making  their  modal  choice.  Starting  from  the  baseline  level  of 
demand  for  passenger  and  freight  transport  per  mode,  period,  region,  etc.,  the  module 
describes  how  the  implementation  of  a  policy  measure  will  affect  the  users  and  companies 
choice  between  these  240  different  transport  types.  The  key  assumption  here  is  that  the 
transport users will select the volume of transport and their preferred mode, period, region etc. 
based  on  the  generalized  price  for  each  mode:  cost,  tax  or  subsidy  and  time  cost  per  km 
travelled. The output of the demand module consists of passenger kilometres (pkm) and ton 
kilometres  (tkm)  that  are  demanded  per  transport  type  for  a  given  policy  environment.  The 
pkm and tkm are then converted into vehicle kilometres. 

The vehicle stock turnover module describes how changes in demand for transport or changes 
in  vehicle  price  structure  influence  the  share  of  age  and  type  of  vehicles  in  the  stock.  The 

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output of the vehicle stock module is twofold: both the total fleet and the number of km for 
each year according to vehicle type and age. 

The  fuel  consumption  and  emissions  module  is  used  to  calculate  fuel  consumption  and 
emissions,  based  on  the  structure  of  the  vehicle  stock,  the  number  of  kilometres  driven  by 
each vehicle type and the driving conditions.  

Outputs  from  the  vehicle  stock  and  fuel  consumptions  and  emissions  modules  are  fed  back 
into  the  demand  module.  As  fuel  consumption,  stock  structure  and  usage  influence  usage 
costs, they are important determinants of transport demand and modal split.  

In  addition  to  the  three  core  modules,  the  TREMOVE  model  includes  a  well-to-tank 
emissions and a welfare cost module.  

The well-to-tank emissions module enables to calculate emissions during production of fuels 
and electricity. 

The welfare cost module has been developed to compute the cost to society associated with 
emission reduction scenarios in European urban and non-urban areas. The welfare effect of a 
policy  change  is  calculated  as  the  discounted  sum  of  changes  in  utility  of  households, 
production  costs,  external  costs  of  congestion  and  pollution  and  benefits  of  tax  recycling. 
These  benefits  of  tax  recycling  represent  the  welfare  effect  of  avoiding  public  funds  to  be 
collected from other sectors, when the transport sector generates more revenues. 

ASTRA 

The ASTRA model is an integrated simulation  model which consists of eight modules. The 
modules are linked by a series of feedback loops and the model can be run over the appraisal 
period  required  for  a  cost  benefit  analysis  (CBA).  For  example,  trade  flows,  private 
consumption  decisions,  investments,  production  relationships  modelled  by  input-output 
tables, government revenues and technical progress are influenced by transport behaviour and 
transport policies. 

The 8 modules describe the structure and development of population, the macro-economy, the 
regional  economy,  foreign  trade,  transport,  vehicle  fleet  composition,  the  environment  and 
add a welfare module for aggregating results by means of welfare indicators. While the first 
idea  for  ASTRA  development  was  to  bring  together  transport,  the  economy  and  the 
environment  on  a  common  platform  of  analysis  the  recently  presented  advanced  version 
ASTRA-D includes covers now all 25 EU countries plus Bulgaria, Romania, Switzerland and 
Norway, and 25 economic sectors. 

(1)  The  population  module  (POP)  provides  the  population  development  for  all  modelled  29 
European  countries  with  one-year  age  cohorts.  Demographic  trends,  which  result  from  the 
population module, strongly affect the outcomes of the other modules. This is particularly true 
for  ageing  societies  with  shrinking  populations  but  also  holds  for  intra  EU  and  rural-urban 
migration, which is of prior importance with regard to social integration.  

The  model  depends  on  exogenous  country-specific  factors  like  fertility,  death  and  infant 
mortality  rates  as  well  as  migration  into  the  29  modelled  European  countries.  Based  on  the 
age  structure  given  by  the  one-year-age  cohorts  important  information  is  provided  for  other 
modules like the number of persons in working age or the number of persons in age classes 

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that  permit  to  acquire  a  driving  licence.  The  population  in  ASTRA  is  calibrated  to  fit  the 
EUROSTAT baseline population predictions until 2050 (Ponti et al., 2002).  

(2) The national economic framework in which the other modules are embedded is provided 
by the macro-economic module (MAC). The MAC cannot be categorised explicitly into only 
one  economic  category  of  models,  for  instance  a  neo-classic  model.  Instead  it  incorporates 
neo-classical  elements,  like  production  functions,  but  also  Keynesian  elements  as  the 
dependency  of  investments  on  consumption.  These  have  been  extended  according  to  the 
requirements of the ASTRA objectives e.g. such that investments are also made dependent on 
exports.  

The macro-economic module provides several important outputs to other modules. The most 
important  one  is,  obviously,  gross  domestic  product  acting  as  one  of  the  major  drivers  for 
exports.  Labour  productivity  is  another  element  among  factors  that  drive  the  foreign  trade 
module.  Finally,  disposable  income  per  adult  affects  car  purchasing  in  the  vehicle  fleet 
the 
five  major  elements  constitute 
following 
module.  The 
macroeconomics module.  

functionality  of 

the 

The  sectoral  interchange  model  reflects  the  economic  interactions  between  25  economic 
sectors  of  the  national  economies  by  an  Input-Output  table  structure.  The  structure  of  25 
economic sectors is based on the NACE-CLIO system established by EUROSTAT for input-
output data. The input-output tables are driven by changes of final demand. The structure of 
the tables can either change due to shifts between sectors of final demand and due to changes 
in transport and energy costs that are part of the intermediate inputs in the input-output table. 
The  main  output  taken  from  the  input-output  model  are  the  sectoral  production  value  (total 
output) and the sectoral gross value added. The sectoral production value is the major driver 
for the generation of domestic freight. 

The  second  element,  the  demand  side  model  depicts  the  four  major  components  of  final 
demand:  consumption,  investments,  exports-imports  (which  is  modelled  in  detail  in  the 
foreign trade module) and the government consumption. All indicators of the demand side are 
modelled on the basis of 25 economic sectors, including 10 service sectors. 

The  basic  element  of  the  supply  side  is  a  production  function  of  Cobb-Douglas  type 
calculating potential output that incorporates the three major production factors labour supply, 
capital  stock  and  natural  resources  as  well  as  technical  progress  referred  to  as  total  factor 
productivity  (TFP)  Total  factor  productivity  is  endogenised  depending  on  sectoral 
investments, freight transport time-savings and labour productivity changes.  

The fourth element of MAC consists in the employment model that is based on value-added 
as  output  from  input-output  table  calculations  and  labour  productivity.  Employment  is 
differentiated into full-time equivalent employment and total employment in order to capture 
the  growing  importance  of  part-time  employment.  In  combination  with  the  population 
module, unemployment can be estimated via regulation of activity rate of labour force. 

The  fifth  element  of  MAC  describes  government  behaviour.  Government  revenues  are 
differentiated  into  revenues  from  social  contributions,  direct,  indirect  and  other  taxes  and 
additionally  transport  pricing  revenues.  Transfers  to  households,  subsidies,  government 
consumption  and  investments  form  expenditures.  Categories  that  are  endogenised  comprise 
VAT  and  fuel  tax  revenues,  direct  taxes,  import  taxes,  social  contributions  and  revenues  of 
transport charges on the revenue side as well as transport investments, interest payments for 

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government debt, government consumption, unemployment payments, transfers to retired and 
children, on the expenditure side.  

(3) The regional economics module (REM) mainly provides the generation of passenger trips 
and  freight  transport  volume  representing  the  first  of  four  stages  of  the  classical  four-stage 
transport  modelling  approach.  The  number  of  passenger  trips  is  driven  by  the  number  of 
people  belonging  to  different  age  classes,  their  employment  and  car-ownership  situation. 
Passenger  trip  generation  is  performed  individually  for  each  of  the  75  functional  zones 
implemented  in  the  ASTRA  model.  Each  of  the  modelled  29  European  countries  is 
subdivided  into  up  to  four  zones  composed  of  groups  of  homogenous  NUTS-II  zones.  The 
functional zones were identified by analysis of settlement patterns and GDP per capita. 

Domestic freight transport depends on sectoral production values that are translated into flows 
for the fifteen sectors, which produce goods by means of value-to-volume ratios. International 
freight transport is generated by sectoral trade, output of the foreign trade module, and value-
to-volume ratios are used again to compute the correspondent traffic volume. ASTRA uses a 
development  trend  of  value-to-volume  ratios  as  experts  project  higher  growth  of  exported 
values  than  amount  of  goods,  which  implies  an  appreciation  of  exported  goods.  For  freight 
distribution  and  the  further  calculations  in  the  transport  module  the  demand  volumes  of  the 
fifteen  sectors  are  aggregated  into  three  goods  categories:  bulk  goods,  general  cargo  goods 
and unitised goods. 

(4)  The  foreign  trade  module  (FOT)  is  subdivided  into  an  INTRA-Europe  and  a  Europe  to 
rest-of-the-world  (RoW)  countries  model.  The  rest-of-the-world  countries  were  aggregated 
into nine regions, consisting of: NAFTA, Latin and Middle America, Japan, China, India (e.g. 
India, Pakistan), East Asian Tigers (e.g. South Korea, Thailand, and Malaysia), Oceania (e.g. 
Australia, New Zealand), Turkey and Rest-of-the-world countries. Both, INTRA-Europe and 
Europe-RoW models are mainly driven by the development of relative productivity between 
the  29  European  countries  or  between  the  29  European  countries  and  rest-of-the-world 
countries,  GDP  growth  of  importing  country  and  world  GDP  growth  as  external  factors  to 
trade.  Additionally  the  INTRA-Europe  trade  flows  depend  on  the  development  of  averaged 
generalized cost of transport between each of the country pairs. The resulting export-import 
flows of these two trade models then are fed back into the macroeconomics module as part of 
the  final  demand.  Secondly,  the  INTRA-Europe  trade  model  provides  monetary  flows 
between countries that were transformed via value-to-volume ratios into international freight 
demand within the REM module. 

(5)  The  major  input  of  the  Transport  Module (TRA)  is  the  link  based  transport  demand  for 
passenger  and  freight  transport.  Using  individual  transport  costs  for  each  transport  mode  in 
Euro per km and individual transport time matrices per mode the transport module calculates 
the  modal  split  based  on  a  classical  Logit  functions  depending  on  generalised  costs 
(Ortuzar/Willumsen,  1998).  The  development  of  passenger  transport  costs  per  mode  is 
modelled similar for all modes and starts from exogenously calculated initial costs per km for 
each  passenger  mode,  differentiated  into  countries  and  the  three  trip  purposes  business, 
personal  and  holiday.  An  exogenous  trend  for  the  cost  development  is  constituted  for  each 
mode. Furthermore the development of costs per km for the usage of cars is influenced by the 
endogenous  calculated  fuel  price  development  and  by  the  introduction  of  road  pricing  in 
several  countries.  Similar  to  the  calculation  of  costs  per  km  for  each  passenger  mode  the 
transport times per mode and km are generated based on initial time matrices for each mode. 
For  national  transport  the  generation  and  distribution  steps  of  a  classical  4-stage  transport 
model are ruled by the REM module, while for the international freight transport, generation 

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and distribution are replaced by input from the foreign trade model. In the final stage all flows 
are  assigned  to  domestic  networks  to  model  capacity  limitations  and  time  reactions  of  the 
various modes. 

As the assignment stage and the resulting congestion effects on transport times and therefore 
transport behaviour can only be modelled by a highly detailed transport network model, the 
transport module in ASTRA can be combined through an interface with the transport network 
model VACLAV. VACLAV uses a regional classification on the NUTS3 level, i.e. with about 
1,300 regions for West Europe and the accession countries to the European Union. 

(6) The major input for the Environment module (ENV) are the vehicle-kilometres-travelled 
generated by the TRA module per transport mode and distance band respectively. Based on 
these  traffic  flows  and  the  information  from  the  vehicle  fleet  model  on  the  drives,  car 
categories  and  emission  standards,  the  environmental  module  calculates  the  most  important 
transport  emissions  -  CO2,  NOx,  CO,  VOC  and  soot  particles  -  for  each  distance  band. 
Emission generation is differentiated according its source in: emissions from vehicle and fuel 
production, emissions caused by cold starts and the hot emissions. Other than the emissions 
also  fuel  consumption  and  fuel  tax  revenues  from  transport  are  computed  by  this  module. 
Traffic  flows  and  accident  rates  for  each  mode  form  the  input  to  calculate  the  number  of 
accidents in the European countries. The expenditures for fuel, the revenues from fuel taxes 
and  value-added-tax  (VAT)  on  fuel  consumption  are  transferred  to  the  macro-economic 
module and provide input to the economic sectors covering fuel products and the government 
revenues. 

(7)  The  Vehicle  Fleet  Module  (VFT)  calculates  the  vehicle  fleet  composition  for  all  road 
modes for the modelled 29 European countries. Vehicle fleets are differentiated into different 
age  classes  based  on  one-year-age  cohorts  and  into  different  emission  standard  categories. 
Additionally, the car vehicle fleet is differentiated into gasoline and diesel powered cars with 
different  cubic  capacity  categories.  The  car  vehicle  fleet  develops  according  to  the  income 
changes, the development of population and the development of the fuel prices. The vehicle 
fleet composition of bus, light-duty vehicles and heavy-duty vehicles mainly depends on the 
driven  kilometres  and  the  development  of  average  annual  mileages  per  vehicle  of  these 
modes.  The  purchase  of  vehicles  is  translated  into  value  terms  and  forms  an  input  of  the 
economic  sectors  in  the  MAC  that  covers  the  vehicle  production.  The  vehicle  fleet  model 
considers also scrapping of a certain share of vehicles during the average lifetime. 

in 

(8)  Finally 
the  Welfare  Measurement  Module  (WEM)  major  macro-economic, 
environmental and social indicators can be compared and analysed. Also different assessment 
schemes that combine indicators into aggregated welfare indicators for instance an investment 
multiplier are provided in the WEM. In some cases, e.g. to undertake a CBA, the functionality 
is  separated  into  further  tools  to  avoid  excessive  growth  of  the  core  ASTRA  model  by 
including the assessment framework directly within the model. 

HOW THE MODELS COMPLEMENT 

The  analysis  of  impacts  relies  on  different  models.  All  these  models  have  been  used  in  a 
complementary  ways.  TRANSTOOLS  results  have  been  used 
in  Astra  modelling. 
TREMOVE and TRANSTOOLS have also been used to support the REFIT indicators. 

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Table 1: Use of models for the analysis of impact 

Analysis of Impact 

Model  

Transport 

TRANSTOOLS 

Cost 

Traffic 

Modal shift 

Economic 

Macroeconomic 
evolutions 
(GDP,  investment,  exports, 
TFP, 
consumption, 
employment) 

ASTRA 

Level of internalisation 

REFIT, based on TREMOVE 

Environment 

Environmental costs 

TRANSTOOLS 

Noise 

Social 

Safety 

REFIT (based on TREMOVE 
and TRANSTOOLS) 

TRANSTOOLS 

REFIT 
TRANSTOOLS) 

(based 

on 

Equity 

REFIT (based on EDIP) 

Regional welfare 

TRANSTOOLS 

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Annex 12: Description of the reference scenario 

The development of the reference scenario (No New Actions) considers the policy framework 
set by already taken decisions as well as European strategy documents. The reference scenario 
is  built  on  the  current  situation.  So  for  all  modes  all  currently  existing  taxes,  charges  and 
regulation remain. This includes existing infrastructure charges, fuel taxes, harbour dues, etc. 
In  addition  to  the  current  situation,  the  reference  scenario  assumes  that  all  policy  proposals 
that are in the pipeline are implemented as well as the options offered by 2006/38/EC are used 
by all Member States (see part 4 of the impact assessment). 

1. TRANSPORT EVOLUTIONS 

Table 1: Evolution of freight transport 

EU-25, 2020, billion ton*kms 

Short-Sea  Rail 

Road 

IWW 

All 
modes 

Reference 2000 

Reference 2020 

1363

2350

465

864

1800

2853

224

325

3851 

6392 

Growth 2000-2020 

72,5%

85,8%

58,5%

45,0%

66,0% 

Table 2: Evolution of passenger transport 

EU-25, 2020, billion pass*km* 

Reference 2000 

Reference 2020 

Air 

Rail 

Road 

Total 

440 

423 

4197 

5060 

795,8322962 

550,9763 

5512,47 

6859,279 

Growth 2000-2020 

80,9% 

30,3% 

31,3% 

35,6% 

* Combined TRANSTOOLS-TREMOVE results. As TRANSTOOLS does not include intra-NUTS 3 traffic, a combination 
with TREMOVE has been made. Reference 2000 is using the Pocket book figures.  

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Graph 1: Evolution of the share of international road freight transport in total traffic 

Share of international road freight transport in total traffic

international share 2020

international share 2000

UK
EL
IE
PL
SK
HU
FI
DE
IT
FR
EU
ES
SW
PT
CZ
DK
AT
SI
NL
LT
LV
BE
LU
EE

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

80,00%

90,00%

100,00%

bn ton-kilometres

Source: IMPACT/TRANSTOOLS 

2. THE BRIDGE BETWEEN ASTRA AND TRANSTOOLS 

The Trans-Tools  model  is  based  on  traffic network and simulates interzonal traffic between 
NUTS3  regions  for  passenger  (respective  NUTS2  regions  for  freight)  transport.  Due  to 
computation constraints ASTRA is not able to simulate on a similar spatial level and therefore 
uses  functional  zones  instead  of  real  NUTS  regions.  Thus  in  ASTRA  every  country  is 
subdivided  in  up  to  four  functional  zones  (cluster  of  NUTS  II  regions  according  similar 
population density and other variables). All NUTS zone based trip and time data coming from 
the Trans-Tools model is transformed to the functional zone based structure of ASTRA. After 
this transformation ASTRA uses passenger trips respective freight volumes and travel times 
from  the  Trans-Tools  model  for  the  base  year  2000  and  for  the  final  year  2020  for  the 
reference  scenario  and  for  policy  option.  In  comparison  to  static  models  like  Trans-Tools, 
ASTRA as a dynamic model requires inputs for all simulation years in between. Hence, the 
inputs  from  Trans-Tools  are  linear  interpolated  to  derive  the  input  for  the  whole  simulation 
period  from  2000  to  2020.  Thus  no  significant  break  is  expected  for  the  reference  scenario 
(where  no  policy  is  implemented);  but  for  policy  option  4,  where  kilometre  charges  (and  at 
the  same  time  revenues)  are  changed  according  the  marginal  cost  pricing  principle.  These 
changes were implemented for 2009 and the following years.  

Passenger  trips,  freight  volumes  and  infrastructure  user  charges  are  implemented  in  the 
ASTRA transport module. In order to provide feedbacks to the economy ASTRA uses micro-
macro bridges to simulate the impacts of transport cost, time and finally behaviour changes. 
Passenger  transport  performance  is  used  to  calculate  the  share  of  consumption  for  transport 
products  and  services.  Furthermore,  ASTRA  simulates  the  impacts  on  import  and  export 
flows between the European countries by analysing the changes in transport times and costs. 
Technological  improvements  and  hence  increasing  total  factor  productivity  are  induced  by 
reductions in total freight transport time. 

Additionally,  ASTRA  is  able  to  take  the  use  of  toll  revenues  into  account.  Revenues  from 
road charges can be fed  back into the system in terms of balancing the national budget and 
reducing  the  government  debts  or  in  terms  of  improving  the  national  competitiveness  via 

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refunding the revenues for direct tax reductions. In the latter the expenditures are given back 
to all private households balancing the total disposable income of private households. 

3. MACROECONOMIC TRENDS 

Graph 2: Macroeconomic trends of Reference Scenario 

Macroeconomic aggregates for EU27 in baseline scenario

]
0
0
1
=
0
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2
r
a
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x
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[

220

200

180

160

140

120

100

GDP

Investment

Consumption

Employment

Exports

Gross Value Added

TFP

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Source: IMPACT/ASTRA 

Graph 3: Average annual investment growth rate investments in the goods sectors of 
EU-27 (in € 2000) 

Growth of investments EU27 by goods sectors until 2020 in the reference scenario [% ]

140%

120%

100%

80%

60%

40%

20%

0%

y
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Source: IMPACT/ASTRA 

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Graph 4: Average annual growth rate of employment in the goods sectors of EU-27 (in € 
2000) 

Growth of employment EU27 by goods sectors until 2020 in the reference scenario [% ]

50%

40%

30%

20%

10%

0%

-10%

-20%

-30%

-40%

y
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Source: IMPACT/ASTRA 

Graph  5:  Average  annual  growth  rate  of  exports  in  the  goods  sectors  of  EU-27  (in  € 
2000) 

Growth of exports EU27 by goods sectors until 2020 in the reference scenario [% ]

180%

160%

140%

120%

100%

80%

60%

40%

20%

0%

y
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Graph 6: Average annual growth rate of gross value added in the goods sectors of EU-27 
(in € 2000). 

Growth of gross value added EU27 by goods sectors until 2020 in the reference 
scenario [% ]

160%

140%

120%

100%

80%

60%

40%

20%

0%

-20%

y
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Source: IMPACT/ASTRA 

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Annex 13: Analysis of Impact of Policy options 2 and 3 

1. CHANGES IN TAXES AND CHARGES IN POLICY OPTIONS 

Table 1: Summarized changes in total taxes and charges per scenario, per mode (2020) 

Freight 

Passenger 

Total  increase 
in 
charges/taxes 
in 2020 

(billion €2000) 

Scenario 

Road 

Rail  IWW Total 

Road Rail Aviation  Total 

freight

passenger 

2A 

PO 
(central 
estimates) 

12 

PO  2A-  only 
MS with tools  11 

PO  2A  (high 
estimates) 

24 

0 

0 

0 

0 

0 

0 

12 

11 

24 

0 

0 

0 

0 

0 

0 

0 

0 

0 

2B 
PO 
(existing  fuel 
tax) 

PO 
2B 
(lowering  fuel 
tax) 

PO 2C 

PO 3A 

PO 3B 

22 

0 

0 

22 

0 

0 

0 

17 

24 

12 

22 

0 

0 

1 

1 

0 

0 

1 

1 

17 

24 

14 

24 

0 

0 

0 

0 

0 

0 

1 

1 

0 

0 

2 

2 

0 

0 

0 

0 

0 

0 

3 

3 

Source: summarized modelling input data (based on TREMOVE 2.44 fleet and mileage data 
for 2020, EU-19). 
1 Including LDT.  

Remark: These data do not show changes in overall revenues, since they are based on traffic 
volumes in the baseline from TREMOVE. TRANSTOOLS runs are limited to inter-NUTS-3 
traffic. 

Source: IMPACT Study 

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2. ANALYSIS OF IMPACT OF VARIANTS OF POLICY OPTION 2 ON MOBILITY 

Graph 1: Analysis of impact on freight transport (ton lifted) 

Impact of charging road freight (PO 2 variants)

12,00%

10,00%

8,00%

6,00%

4,00%

2,00%

0,00%

-2,00%

-4,00%

o
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PO 2A-central estimates

PO 2A- only MS with tolls

PO 2A- high estimates

PO 2B- existing fuel tax

PO 2B- lower fuel tax

PO 2C

PO2C all

Maritime

Rail

Road

IWW

All modes

Source: IMPACT/TRANSTOOLS 

Graph 2: Analysis of impact on freight transport (ton km) 

Impact of charging road freight transport (PO 2 variants)

15,00%

10,00%

5,00%

0,00%

-5,00%

-10,00%

o
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Maritime

Rail

Road

IWW

All modes

PO 2A-central estimates

PO 2A- only MS with tolls

PO 2A- high estimates

PO 2B- existing fuel tax

PO 2B- lower fuel tax

PO 2C

PO2C (all)

Source: IMPACT/TRANSTOOLS 

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Graph 3: Analysis of impact on passenger transport (number of trips) 

Impact of charging road freight transport (PO 2 variants)

4,00%

3,00%

2,00%

1,00%

0,00%

-1,00%

-2,00%

o
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Aviation

Rail

Road

All modes

PO 2A-central estimates

PO 2A- only MS with tolls

PO 2A- high estimates

PO 2B- existing fuel tax

PO 2B- lower fuel tax

PO 2C

PO2C (all)

Source: IMPACT/TRANSTOOLS 

Graph 4: Analysis of impact on passenger transport (passenger-km) 

Impact of charging road freight transport (PO 2 variants)

5,00%

4,00%

3,00%

2,00%

1,00%

0,00%

-1,00%

-2,00%

o
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PO 2A-central estimates

PO 2A- only MS with tolls

PO 2A- high estimates

PO 2B- existing fuel tax

PO 2B- lower fuel tax

PO 2C 

PO 2C (all)

Aviation

Rail

Road

All modes

Source: IMPACT/TRANSTOOLS 

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3.  MACROECONOMIC 
REFUNDING 

IMPACT:  COMPARISON  OF  OPTIONS  WITH 

Graph 5: Analysis of impact on consumption with refunding 

Impacts on consumption with refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
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C

[

1,0%

0,8%

0,6%

0,4%

0,2%

0,0%

-0,2%

PO2A
central
PO2Bhigh

PO 2C

PO2C
(all)
PO 3A

PO 3B

2000

2002

2004

2006 2008

2010

2012

2014

2016 2018

2020

Source: IMPACT/ASTRA 

Graph 6: Analysis of impact on investment with refunding 

Impacts on investments with refunding for EU27 

PO2A
central
PO2Bhigh

PO 2C

PO2C
(all)
PO 3A

PO 3B

%
n
i

U
a
B
o
t

e
g
n
a
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C

[

1,4%

1,2%

1,0%

0,8%

0,6%

0,4%

0,2%

0,0%

-0,2%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Source: IMPACT/ASTRA 

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Graph 7: Analysis of impact on exports with refunding 

Impacts on exports with refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

0,1%

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

-0,5%

-0,6%

-0,7%

-0,8%

-0,9%

PO2A
central
PO2Bhigh

PO 2C

PO2C
(all)
PO 3A

PO 3B

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT/ASTRA 

Graph 8: Analysis of impact on GVA with refunding 

Impacts on gross value added with refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

0,4%

0,3%

0,2%

0,1%

0,0%

-0,1%

-0,2%

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT/ASTRA 

PO2A
central
PO2Bhigh

PO 2C

PO2C
(all)
PO 3A

PO 3B

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Graph 9: Analysis of impact on TFP with refunding 

Impacts on total factor productivity with refunding for EU27 

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

2,0%

1,5%

1,0%

0,5%

0,0%

-0,5%

PO2A central

PO2Bhigh

PO 2C

PO2C (all)

PO 3A

PO 3B

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: IMPACT/ASTRA 

Graph 10: Analysis of impact on employment with refunding 

Impacts on employment with refunding for EU27 

PO2A
central
PO2Bhigh

PO 2C

PO2C
(all)
PO 3A

PO 3B

%
n
i

U
a
B
o
t

e
g
n
a
h
C

[

0,2%

0,1%

0,0%

-0,1%

-0,2%

-0,3%

2000 2002 2004 2006 2008

2010 2012 2014 2016 2018 2020

Source: IMPACT/ASTRA 

EN 

165 

   EN 

 
 
 
 
 
 
 
 
 
 
 
4. SECTORAL IMPACTS OF POLICY OPTION 2A 

Graph 11: Impact on growth of investment in the goods sectors of EU-27 – PO 2A 

Impact on growth of investments EU27 by goods sectors until 2020 in Policy option 2A 
central  [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,0%

-0,1%

-0,1%

-0,2%

-0,2%

-0,3%

-0,3%

-0,4%

y
g
r
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n
E

l

s
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M

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P

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O

g
n
i
r
u
t
c
a
f
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n
a
M

Graph 12: Impact on growth of consumption in the goods sectors of EU-27 – PO 2A 

Source: IMPACT/ASTRA 

Impact on growth of consumption EU27 by goods sectors until 2020 in Policy Option 
2Acentral [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,0%

-0,1%

-0,1%

-0,2%

-0,2%

-0,3%

y
g
r
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n
E

l

s
a
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M

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A

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M

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l

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s
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M

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p
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P

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c
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t
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a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

EN 

166 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 13: Impact on growth of employment in the goods sectors of EU-27 – PO 2A 

Impact on growth of employment EU27 by goods sectors until 2020 in policy option  2A 
central [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,0%

-0,1%

-0,1%

-0,2%

-0,2%

-0,3%

-0,3%

-0,4%

-0,4%

y
g
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n
E

l

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d
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P

l

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h
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O

g
n
i
r
u
t
c
a
f
u
n
a
M

Graph 14: Impact on growth of gross value added in the goods sectors of EU-27 – PO 2A 

Source: IMPACT/ASTRA 

Impact on growth of gross value added EU27 by goods sectors until 2020 in scenario 2Ac [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,4%

0,3%

0,2%

0,1%

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

y
g
r
e
n
E

l

s
a

t

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M

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l

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c
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A

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M

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C

l

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s
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I

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M

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C

s
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u
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P

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a

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M

i

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c
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E

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l

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c
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e
V

d
o
o
F

s
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l
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T

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p
a
P

s
c
i
t
s
a
P

l

r
e
h
O

t

g
n
i
r
u

t
c
a

f

u
n
a
M

Source: IMPACT/ASTRA 

EN 

167 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
POLICY OPTION 2B 

Graph 15: Impact on growth of investment in the goods sectors of EU-27 – PO 2B 

Impact on growth of investments EU27 by goods sectors until 2020 in Policy Option 2b 
High [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,0%

-0,1%

-0,1%

-0,2%

-0,2%

-0,3%

-0,3%

-0,4%

y
g
r
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n
E

l

s
a

t

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M

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l

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A

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n
M

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l

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a
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C

l

a
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I

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c
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M

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C

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P

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M

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V

d
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F

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T

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a
P

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a
P

l

r
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h
O

t

g
n
i
r
u

t
c
a

f

u
n
a
M

Graph 16: Impact on growth of consumption in the goods sectors of EU-27 – PO 2B 

Source: IMPACT/ASTRA 

Impact on growth of consumption EU27 by goods sectors until 2020 in Policy option 2b 
[% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,05%

0,00%

-0,05%

-0,10%

-0,15%

-0,20%

-0,25%

y
g
r
e
n
E

l

s
a
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M

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r
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t
l
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c
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A

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M

i

l

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a
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C

l

a
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I

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c
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M

s
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C

s
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P

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M

i

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E

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V

d
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F

s
e

l
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T

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p
a
P

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c
i
t
s
a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

EN 

168 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 17: Impact on growth of employment in the goods sectors of EU-27 – PO 2B 

Impact on growth of employment EU27 by goods sectors until 2020 in policy option 2b 
high [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

-0,5%

-0,6%

-0,7%

y
g
r
e
n
E

l

s
a
t
e
M

e
r
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t
l
u
c
i
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g
A

l

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a
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n
M

i

i

l

s
a
c
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C

l

a
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I

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c
a
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s
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C

s
t
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P

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M

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V

d
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F

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T

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c
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P

l

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O

g
n
i
r
u
t
c
a
f
u
n
a
M

Graph 18: Impact on growth of gross value added in the goods sectors of EU-27 – PO 2B 

Source: IMPACT/ASTRA 

Impact on growth of gross value added EU27 by goods sectors until 2020 in policy option 2b 
high [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,2%

0,1%

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

-0,5%

-0,6%

y
g
r
e
n
E

l

s
a
t
e
M

e
r
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t
l
u
c
i
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A

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M

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i

l

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a
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C

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I

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C

s
t
c
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d
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r

P

l

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M

i

s
c
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l

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c
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V

d
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F

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e

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T

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p
a
P

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c
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s
a
P

l

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h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

EN 

169 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
POLICY OPTION 2C and 2C (all) 

Graph 19: Impact on growth of investment in the goods sectors of EU-27 – PO 2C 

Impact on growth of investments EU27 by goods sectors until 2020 in policy option 2C 
[% ]

y
g
r
e
n
E

l

s
a
t
e
M

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t
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A

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a
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M

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l

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a
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C

l

a
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u
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n
I

i

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a
M

s
r
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t
u
p
m
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C

s
t
c
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d
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r
P

l

a
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M

i

s
c
n
o
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t
c
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E

l

l

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V

d
o
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F

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e

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T

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p
a
P

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c
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t
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a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

Impact on growth of investments EU27 by goods sectors until 2020 in PO2C (all) [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0.3%

0.2%

0.2%

0.1%

0.1%

0.0%

-0.1%

-0.1%

-0.2%

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,4%

0,2%

0,0%

-0,2%

-0,4%

-0,6%

-0,8%

-1,0%

y
g
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n
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A

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g
n
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r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

EN 

170 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 20: Impact on growth of consumption in the goods sectors of EU-27 – PO 2C 

Impact on growth of consumption EU27 by goods sectors until 2020 in policy option 2C 
[% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0.1%

0.1%

0.0%

-0.1%

-0.1%

-0.2%

-0.2%

-0.3%

-0.3%

-0.4%

y
g
r
e
n
E

l

s
a
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M

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r
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A

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M

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C

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I

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C

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P

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d
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t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

Impact on growth of consumption EU27 by goods sectors until 2020 in PO2C (all) [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,3%

0,2%

0,1%

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

y
g
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n
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g
n
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c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

EN 

171 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 21: Impact on growth of employment in the goods sectors of EU-27 – PO 2C 

Impact on growth of employment EU27 by goods sectors until 2020 in policy option 2C 
[% ]

y
g
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n
E

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M

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P

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a
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M

i

s
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l

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d
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a
P

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c
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a
P

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h
t
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g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

Impact on growth of employment EU27 by goods sectors until 2020 in PO2C (all) [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0.6%

0.4%

0.2%

0.0%

-0.2%

-0.4%

-0.6%

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

-0,5%

-0,6%

-0,7%

-0,8%

-0,9%

y
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p
m
o
C

s
t
c
u
d
o
r
P

l

a
t
e
M

i

s
c
n
o
r
t
c
e
E

l

l

i

s
e
c
h
e
V

d
o
o
F

s
e

l
i
t
x
e
T

r
e
p
a
P

s
c
i
t
s
a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

EN 

172 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 22: Impact on growth of gross value added in the goods sectors of EU-27 – PO 2C 

Impact on growth of gross value added EU27 by goods sectors until 2020 in PO2C [% ]

y
g
r
e
n
E

l

s
a
t
e
M

e
r
u
t
l
u
c
i
r
g
A

l

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a
r
e
n
M

i

l

i

s
a
c
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C

l

a
i
r
t
s
u
d
n
I

i

s
e
n
h
c
a
M

s
r
e
t
u
p
m
o
C

s
t
c
u
d
o
r

P

l

a
t
e
M

i

s
c
n
o
r
t
c
e
E

l

l

i

s
e
c
h
e
V

d
o
o
F

s
e

l
i
t
x
e
T

r
e
p
a
P

s
c
i
t
s
a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

Impact on growth of gross value added EU27 by goods sectors until 2020 in PO2C (all) [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,6%

0,4%

0,2%

0,0%

-0,2%

-0,4%

-0,6%

-0,8%

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,4%

0,3%
0,2%
0,1%
0,0%

-0,1%
-0,2%
-0,3%

-0,4%
-0,5%
-0,6%

-0,7%

y
g
r
e
n
E

l

s
a
t
e
M

e
r
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t
l
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c
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r
g
A

l

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a
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n
M

i

l

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s
a
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C

l

a
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r
t
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d
n
I

i

s
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n
h
c
a
M

s
r
e
t
u
p
m
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C

s
t
c
u
d
o
r

P

l

a
t
e
M

i

s
c
n
o
r
t
c
e
E

l

l

i

s
e
c
h
e
V

d
o
o
F

s
e

l
i
t
x
e
T

r
e
p
a
P

s
c
i
t
s
a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

EN 

173 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
POLICY OPTION 3A 

Graph 23: Impact on growth of investment in the goods sectors of EU-27 – PO 3A 

Impact on growth of investments EU27 by goods sectors until 2020 in policy option 3A 
[% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,0%

-0,1%

-0,1%

-0,2%

-0,2%

-0,3%

-0,3%

-0,4%

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,0%

-0,1%

-0,1%

-0,2%

-0,2%

-0,3%

-0,3%

-0,4%

y
g
r
e
n
E

l

s
a
t
e
M

e
r
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t
l
u
c
i
r
g
A

l

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a
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n
M

i

l

i

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a
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C

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a
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t
s
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d
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I

i

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c
a
M

s
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C

s
t
c
u
d
o
r

P

l

a
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e
M

i

s
c
n
o
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t
c
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E

l

i

l

s
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c
h
e
V

d
o
o
F

s
e

l
i
t
x
e
T

r
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p
a
P

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i
t
s
a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Impact on growth of investments EU27 by goods sectors until 2020 in policy option 3A 
[% ]

y
g
r
e
n
E

l

s
a

t

e
M

e
r
u

t
l

u
c
i
r
g
A

l

s
a
r
e
n
M

i

l

i

s
a
c
m
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C

l

a
i
r
t
s
u
d
n

I

i

s
e
n
h
c
a
M

s
r
e

t

u
p
m
o
C

s
t
c
u
d
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r
P

l

a

t

e
M

i

s
c
n
o
r
t
c
e
E

l

l

s
e
c
h
e
V

i

d
o
o
F

s
e

l
i
t
x
e
T

r
e
p
a
P

s
c
i
t
s
a
P

l

r
e
h
O

t

g
n
i
r
u

t
c
a

f

u
n
a
M

Source: IMPACT/ASTRA 

EN 

174 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 24: Impact on growth of consumption in the goods sectors of EU-27 – PO 3A 

Impact on growth of consumption EU27 by goods sectors until 2020 in policy option 3A 
[% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,00%

-0,05%

-0,10%

-0,15%

-0,20%

-0,25%

y
g
r
e
n
E

l

s
a
t
e
M

e
r
u
t
l
u
c
i
r
g
A

l

s
a
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n
M

i

l

i

s
a
c
m
e
h
C

l

a
i
r
t
s
u
d
n
I

i

s
e
n
h
c
a
M

s
r
e
t
u
p
m
o
C

s
t
c
u
d
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r
P

l

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t
e
M

i

s
c
n
o
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t
c
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E

l

l

s
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c
h
e
V

i

d
o
o
F

s
e

l
i
t
x
e
T

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p
a
P

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c
i
t
s
a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Graph 25: Impact on growth of employment in the goods sectors of EU-27 – PO 3A 

Source: IMPACT/ASTRA 

Impact on growth of employment EU27 by goods sectors until 2020 in scenario 3A [% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,00%

-0,05%

-0,10%

-0,15%

-0,20%

-0,25%

-0,30%

-0,35%

-0,40%

-0,45%

y
g
r
e
n
E

l

s
a
t
e
M

e
r
u
t
l
u
c
i
r
g
A

l

s
a
r
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n
M

i

i

l

s
a
c
m
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h
C

l

a
i
r
t
s
u
d
n
I

i

s
e
n
h
c
a
M

s
r
e
t
u
p
m
o
C

s
t
c
u
d
o
r
P

l

a
t
e
M

i

s
c
n
o
r
t
c
e
E

l

l

s
e
c
h
e
V

i

d
o
o
F

s
e

l
i
t
x
e
T

r
e
p
a
P

s
c
i
t
s
a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

EN 

175 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 26: Impact on growth of gross value added in the goods sectors of EU-27 – PO 3A 

Impact on growth of gross value added EU27 by goods sectors until 2020 in policy option 3A 
[% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0,3%

0,2%

0,1%

0,0%

-0,1%

-0,2%

-0,3%

-0,4%

y
g
r
e
n
E

l

s
a

t

e
M

e
r
u

t
l

u
c
i
r
g
A

l

s
a
r
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n
M

i

l

i

s
a
c
m
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h
C

l

a
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s
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d
n

I

i

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n
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c
a
M

s
r
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t

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m
o
C

s
t
c
u
d
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r
P

l

a

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M

i

s
c
n
o
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t
c
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E

l

i

l

s
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c
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e
V

d
o
o
F

s
e

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T

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p
a
P

s
c
i
t
s
a
P

l

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e
h
O

t

g
n
i
r
u

t
c
a

f

u
n
a
M

POLICY OPTION 3B 

Source: IMPACT/ASTRA 

Graph 27: Impact on growth of investment in the goods sectors of EU-27 – PO 3B 

Impact on growth of investments EU27 by goods sectors until 2020 in policy option 3B 
[% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0.0%

-0.1%

-0.1%

-0.2%

-0.2%

-0.3%

-0.3%

-0.4%

y
g
r
e
n
E

l

s
a
t
e
M

e
r
u
t
l
u
c
i
r
g
A

l

s
a
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n
M

i

i

l

s
a
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C

l

a
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r
t
s
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n
I

i

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c
a
M

s
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C

s
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r
P

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M

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s
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l

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V

i

d
o
o
F

s
e

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t
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T

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e
p
a
P

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c
i
t
s
a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

EN 

176 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 28: Impact on growth of consumption in the goods sectors of EU-27 – PO 3B 

Impact on growth of consumption EU27 by goods sectors until 2020 in policy option 3B 
[% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0.1%

0.0%

-0.1%

-0.1%

-0.2%

-0.2%

-0.3%

y
g
r
e
n
E

l

s
a

t

e
M

e
r
u

t
l

u
c
i
r
g
A

l

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a
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M

i

l

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C

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I

i

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C

s
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P

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F

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P

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O

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g
n
i
r
u

t
c
a

f

u
n
a
M

Graph 29: Impact on growth of employment in the goods sectors of EU-27 – PO 3B 

Source: IMPACT/ASTRA 

Impact on growth of employment EU27 by goods sectors until 2020 in policy option 3B 
[% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0.0%

-0.1%

-0.2%

-0.3%

-0.4%

-0.5%

-0.6%

-0.7%

y
g
r
e
n
E

l

s
a

t

e
M

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r
u

t
l

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c
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A

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M

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C

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C

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P

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M

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F

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T

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p
a
P

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P

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O

t

g
n
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r
u

t
c
a

f

u
n
a
M

Source: IMPACT/ASTRA 

EN 

177 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 30: Impact on growth of gross value added in the goods sectors of EU-27 – PO 3B 

Impact on growth of gross value added EU27 by goods sectors until 2020 in policy option 3B 
[% ]

]

%
n

i

U
a
B
o
t

e
g
n
a
h
C

[

0.4%
0.3%
0.2%
0.1%
0.0%
-0.1%
-0.2%
-0.3%
-0.4%
-0.5%
-0.6%
-0.7%

y
g
r
e
n
E

l

s
a
t
e
M

e
r
u
t
l
u
c
i
r
g
A

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M

i

l

i

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C

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a
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C

s
t
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P

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M

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t
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V

d
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F

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T

r
e
p
a
P

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c
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t
s
a
P

l

r
e
h
t
O

g
n
i
r
u
t
c
a
f
u
n
a
M

Source: IMPACT/ASTRA 

4. IMPACT ON EXTERNAL COSTS OF VARIANTS OF POLICY OPTIONS 2 

Graph 31: Evolution of CO2 external costs (PO2 variants) 

Evolution of CO2 external costs (PO 2 variants)

)
s
o
r
u
e

n
b
(

o
i
r
a
n
e
c
s

e
c
n
e
r
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f
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r

o
t

e
v
i
t
a
l
e
r

s
n
o
i
s
s
i
m
e

2
O
C
n
i

s
e
g
n
a
h
C

15,00%

10,00%

5,00%

0,00%

-5,00%

-10,00%

Gasoline
passengers
(road)

Diesel
passengers
(road)

Road freight

Rail
passenger

Rail freight

IWW

T OT AL 

PO 2A-central estimates

PO 2A- only MS with tolls

PO 2A- high estimates

PO 2B- existing fuel tax

PO 2B- lower fuel tax

PO 2C

PO2C (all)

Source: IMPACT/TRANSTOOLS 

EN 

178 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 32: Evolution of Nox external costs (PO2 variants) 

Evolution of Nox external costs (PO 2 variants)

)
s
o
r
u
e

n
b
(

o
i
r
a
n
e
c
s

e
c
n
e
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f
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t

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v
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t
a
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s
n
o
i
s
s
i
m
e

x
o
N
n
i

s
e
g
n
a
h
c

15,00%

10,00%

5,00%

0,00%

-5,00%

-10,00%

Gasoline
passengers
(road)

Diesel
passengers
(road)

Road freight

Rail
passenger

Rail freight

IWW

T OT AL 

PO 2A-central estimates

PO 2A- only MS with tolls

PO 2A- high estimates

PO 2B- existing fuel tax

PO 2B- lower fuel tax

PO 2C

PO2C (all)

Source: IMPACT/TRANSTOOLS 

Graph 33: Evolution of PM10 external costs (PO2 variants) 

Evolution of PM10 external costs (PO2 variants)

15,00%

10,00%

)
s
o
r
u
e

5,00%

0,00%

-5,00%

-10,00%

n
b
(

o
i
r
a
n
e
c
s

e
c
n
e
r
e
f
e
r

o
t

e
v
i
t
a
l
e
r

s
n
o
i
s
s
i

m
e

0
1
M
P
n
i

s
e
g
n
a
h
c

Gasoline
passengers
(road)

Diesel
passengers
(road)

Road freight

Rail
passenger

Rail freight

IWW

T OT AL 

PO 2A-central estimates

PO 2A- only MS with tolls

PO 2A- high estimates

PO 2B- existing fuel tax

PO 2B- lower fuel tax

PO 2C

PO2C (all)

Source: IMPACT/TRANSTOOLS 

EN 

179 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5. IMPACT ON CONGESTION OF VARIANTS OF POLICY OPTIONS 2 

Table 2: Congestion indicator (whole road network) 

Note: differences are computed with respect to Impact1 

Scenario 

congestion_network

Difference 

Impact1 

PO 2A (central) 

PO 2 Only Member 
States charging 

PO 2 (high values) 

PO 2B (same fuel 
taxes) 

PO 2B (min fuel taxes) 

PO 2C 

PO2C (all) 

PO 3A 

PO 3B 

Source: TRANSTOOLS 

28,62% 

28,35% 

28,58% 

28,23% 

28,39% 

28,87% 

27,38% 

26,56% 

28,43% 

28,40% 

-0,27% 

-0,04% 

-0,39% 

-0,23% 

0,25% 

-1,25% 

-2.06% 

-0,19% 

-0,22% 

EN 

180 

   EN 

 
  
6. REGIONAL WELFARE IMPACTS 

EN 

181 

   EN 

 
 
EN 

182 

   EN 

 
 
 
EN 

183 

   EN 

 
 
 
EN 

184 

   EN 

 
 
 
7. METHODOLOGY USED TO ESTIMATE WELFARE 

The analysis below has been provided by JRC who modelled transport evolutions.  

It  is  based  on  the  estimation  of  consumers  welfare  gain/loss  and  of  the  change  in  the  total 
external  cost  of  transport.  The  original  theoretical  analysis  suggested  that  these  should  be 
estimated on a link basis for all transport modes. There is however a strong limitation in doing 
so in a multi-modal network model, since modal shift and route choice changes would lead to 
demand curves of unknown shape for each link. 

In  order  to  solve  that  problem,  the  analysis  focuses  on  larger  geographic  areas  (NUTS  2  or 
country level) for which the aggregate transport demand curves have a more orthodox shape. 
At that geographic level, the influence of modal split and route choice is less distorting and 
the  demand  curve  is  linear  and  downwards  sloped.  With  this  level  of  aggregation,  the 
customers  behaviour  is  orthodox,  with  the  demand  decreasing  when  charges  increase,  and 
vice  versa.  This  also  simplifies  the  welfare  analysis,  thus  constituting  a  logical  assertion, 
given that the changes in traffic volumes are assumed to be small and therefore the area below 
the  demand  curve  can  be  calculated  as  a  triangle  in  first  approximation.  Finally,  since  the 
represented  curve  yields  the  demand  as  a  function  of  generalized  cost,  it  is  important  to 
remark  what  cost  stands  for.  As  a  matter  of  fact,  the  cost  is  in  turn  a  function  of  several 
variables.  

More concisely, the generalized cost is defined as follows: 

LGCTC
ext

,(

,

,

)

=

Tk
1

+

(

k

2

+

C

ext

+

)
LG

 (€/veh) 

where: 

T and L are time to cross the link (in hours) and link length (in km) respectively. 

k1 is the value of time (€/h*veh). 

EN 

185 

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k2 is the driving cost (€/km).. 

Cext is the toll price (€/km). 

G is the generic cost (€/km). 

This definition of generalized cost is based on the parameters of the TRANSTOOLS model 
that affect demand and route choice. There are of course several other factors that affect user 
behaviour, but since they remain constant in all scenarios compared they would not influence 
the result. 

The change in the level of external cost is a function of the change in transport volumes and 
the  external  cost  factor  for  each  mode and  link.  This  external  cost  factor,  Cext  (measured  in 
€/veh*km), was estimated on the basis of the charges calculated in the IMPACT study, which 
in  turn  correspond  to  external  cost  of  transport  using  the  marginal  social  cost  pricing 
approach. 

The  algorithm  for  the  estimation  of  welfare  gains  differs  in  the  two  main  cases  of  user 
reaction: 

Case 1: 

If  an  increase  in  average  charges  takes  place  in  a  certain  region,  the  traffic  volume  in  this 
region  will  decrease.  This  fact  yields  a  welfare  loss  represented  by  the  red  triangle.  On  the 
other  hand,  this  traffic  reduction  improves  the  external  cost  in  this  region,  since  less  traffic 
means less congestion, less fuel consumption, etc, as shown in the blue square.  

Comparing one scenario with the reference scenario 1, the colored areas equal: 

Welfare

 :

−

)(
CV
1

2

−

C
1

)

2

External

(C- :

V

ext

−

V
1

)

2

(
V

1
2
cost

Where C1, V1 are the generalized costs and traffic volumes in scenario 1 and C2, V2 are the 
generalized costs and traffic volumes in the scenario we want to estimate welfare gains for. 

From the IMPACT study, we have defined that (C2-C1) ≈Cext. If differences in times and other 
costs are small, one can also assume that T1≈T2 and G1≈G2, Consequently, the red area would 
roughly equal half the blue area and the net effect in this region would be positive. 

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C2 

C

Cext 

V2 

V1 

Figure 1.Case 1. 

In practice there are some differences between T1 and T2 due to the change in travel times as a 
result  of  changes  in  congestion  levels.  In  most  cases  however  the  difference  is  not  large 
enough  to  change  the  order  of  magnitude  of  the  two  areas.  Consequently,  the  welfare  gain 
from the reduction of externalities is higher than the loss in consumer surplus. 

Case 2: 

If a decrease in charges takes place in a certain region, the traffic volume in this region will 
increase. In this case, there would be a welfare gain represented by the blue triangle. On the 
other  hand,  this  traffic  increase  leads  to  an  increase  in  external  cost,  as  shown  in  the  red 
square. Therefore, the colored areas equal: 

Welfare

(
V

−

)(
CV
1

2

−

C
1

)

2

External

(C- :

V

ext

−

V
1

)

2

- :

1
2
cost

As stated in the previous case, if T1≈T2 and G1≈G2, we have that (C2-C1) ≈Cext and the blue 
area would equal half the red area. As a result, the net effect would be negative. 

EN 

187 

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C

C2 

Cext 

8. TOTAL WELFARE 

Table 4: Total net welfare gain 

PO 2A 
PO 2Bi 
PO 2Bii 
PO 2C 
PO2Call 
PO 3A 
PO 3B 

Source: TRANSTOOLS 

V1 

V2 

Figure 2. Case 2. 

Total net welfare gain 
TRANSTOOLS road transport network  
Billion €, year 2020 
0.87 
0.84 
0.03 
1.83 
2.30 
0.90 
0.85 

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Annex 14: Implementation Costs and Administrative costs 

Table 1: Overview of implementation costs of road pricing schemes 

Data source 

Study or 
real 
figures? 

Technology 
involved 

Investments 
per user (€) 

Operational 
costs per user  

(€ p.a.) 

Road pricing for all vehicles on all roads 

Ministry of Transport, 
2005 (km charging) 

Ministry of Transport, 
2005 (km charging + 
congestion charging) 

Ministry of Transport, 
2006 (km charging) 

Study 

GPS 

280 – 507

53 – 147

Study 

GPS 

275 – 513

63 – 138

Study 

GPS 

163 – 338

31 – 119

DfT (2004) 

Study 

GPS 

662 – 4,925

128 – 433

Road  pricing  for  HGVs 
only 

Ministry of Transport, 
2005 (GPS) 

Ministry of Transport, 
2005(DSRC) 

Study 

GPS 

818 – 1,660

156 – 409

Study 

DSRC 

1,250 – 1,500

250 – 667

Austria 

Germany 

Switzerland 

Real 

Real 

Real 

DSRC 

GPS 

DSRC 

417 – 617

58

500 – 1,000

393- 508

450 – 565

100

Source: CE Delft, 2005; DfT (2004); Ministry of Transport, 2005; 2006; Oehry, 2006. 

Note: The gray labelled data has been used for the implementation cost estimates in this report. 

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Table 2: Assessment of administrative Costs 

Amendment  of  Directive  1999/62/EC  on  charging  heavy  goods 
vehicles 

The  main  administrative  cost  will  stem  from  the  obligation  for 
Member  States  who  decides  to  charge  external  costs  to  report  to 
the EC every year the total revenue of the charge 

Tariff 
(€ per 
hour) 

Time  
(hour) 

Price 
(per 
action 
or 
equip) 

Freq 
(per 
year) 

Nbr  
of  
entities 

Total nbr
of  
actions 

Total  
cost 

Regulatory 
origin 
(%) 

No. 

Ass. 
Art. 

Orig. 
Art. 

Type of 
obligation 

Description 
of required 
action(s) 

Target group 

i 

e 

i 

e 

10 MS can be expected to opt for an external cost 
charge 

Int 

EU 

Nat  Reg 

1 

1§1 

12 

Notification 
of (specific) 
activities 

Familiarising 
with 
the 
information 
obligation 

National 
administration 

27,4*

10,00 

274,0 

1,00 

10 

10 

2.740 

100% 

Retrieving 
relevant 
information 
from 
existing 
data 

Producing 
new data 

National 
administration 

National 
administration 

Filling  forms 
and tables 

National 
administration 

Submission 
of 
(recurring) 
reports 

Submission 
of 
(recurring) 
reports 

Submission 
of 
(recurring) 
reports 

Other 

Producing 
new data 

National 
administration 

2 

3 

4 

5 

TOTAL 

20,00 

548,0 

1,00 

10 

10 

5.480 

100% 

10,00 

274,0 

1,00 

10 

10 

2.740 

100% 

2,00 

54,8 

1,00 

10 

10 

548 

100% 

27,4

27,4

27,4

27.4 

500 

13700 

1.00 

10 

* German national public administration hourly labour costs. Eurostat.  

EN 

0,0 

190 

10 

0 

137000 

148508 

EN 

 
  
 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Average cost 

Charge 

CO2 

Efficiency 

Elasticity 

External cost 

Fixed cost 

HGV 

Internal cost 

LDV 

LTO 

Marginal cost 

MOC 

MOPED 

pkm 

Annex 15: Glossary 

Average  cost  consists  of  total  cost  divided 
by  a  measure  of  output.  In  the  case  on 
infrastructure,  it  would  correspond  to  total 
cost  of  infrastructure  (fixed  and  variable) 
divided by vehicle-km.  

is  a  proportional  payment 
A  charge 
required  in  exchange  for  a  clearly  defined 
service. For example, a toll charge will give 
access to the use of a specific infrastructure 
(bridge, motorway, etc…). 

Carbon  dioxide  is  a  major  greenhouse  gas. 
It contributes to climate change. 

Refers  to  the  efficient  allocation  of  scarce 
resources. In this case, marginal social cost 
equals marginal social benefit.  

Proportional change in demand in response 
to  a  price  increase  or  decrease  (price 
elasticity).  

External costs are costs which the user of a 
good or service does not pay for.  

Cost which are not dependent on the traffic 
volume.  

Heavy duty vehicles above 3.5 tonne gross 
weight 

Internal  costs  are  costs  which  are  directly 
paid by the user 

Light Duty vehicles (vans up to 3.5 tonnes 
gross weight) 

Landing take off 

Marginal costs reflect the additional cost of 
an additional vehicle.  

Motorcycles 

in 
Low  powered  motorized  vehicles, 
general  two-wheeled  (scooters,  motorized 
bicycles, small motorcycles). 

Passenger kilometre 

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Permit system 

Social cost 

Tax 

Tkm 

Vkm 

to 

A  tradable  permit  scheme  is  a  mechanism 
by  which  the  authorities  set  a  maximum 
level of pollution or use of an infrastructure 
and  assign 
individuals/operators  a 
quantity of permits that corresponds to this 
level.  The  individuals/operators  can  then 
trade  permits,  improving  the  efficiency  in 
the  distribution  of  efforts  or  in  the  use  of 
the infrastructure. 

Social  cost  is  the  sum  of  external  and 
private cost 

A  tax  is  a  required  payment  of  money  to 
governments that are used to provide public 
goods  and  services  for  the  benefit  of  the 
community  as  a  whole.  Examples  are  fuel 
tax, circulation tax, registration tax.  

Ton-kilometres 

Vehicle-kilometre.  One  kilometre  travelled 
by a single vehicle.  

EN 

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