1. 
Charging for infrastructure use and the internalisation of external costs In the context of the Mid-term review of the European Commission’s 2001 White Paper on Transport
Presentation to the UWE, Wavre 16/04/2017
Vicenç PEDRET CUSCÓ
Deputy Head of Unit
Unit Economic Analysis, Impact Assessment, Evaluation and Climate Change
EUROPEAN COMMISSION

2. PRICING IN THE CONTEXT OF THE COMMON TRANSPORT POLICY OBJECTIVES
INTERNAL MARKET, FREE PROVISION OF TRANSPORT SERVICES WITH NON DISTORTED COMPETITION: AVOID NATIONAL DISCRIMINATION TO TRANSPORT SERVICE OPERATORS
TRANS-EUROPEAN NETWORKS, COHESION AND ACCESSIBILITY: PERIPHERY VS TRANSIT COUNTRIES
MODAL INTEGRATION: LEVEL PLAYING FIELD
SAFETY: INTERNALISATION, REGULATION
INTEGRATION OF ENVIRONMENT : INTERNALISATION, REGULATION, POLLUTER PAYS PRINCIPLE.
EMPLOYMENT: SOCIAL EFFECTS OF PRICING

3. THE 2001 WHITE PAPER
To fight congestion, accidents and CO2 emissions without hampering economic growth.
Objective: gradual decoupling of transport and GDP by re-balancing modal split and improving quality and safety.

4. A changing transport context: Evolution of transport demand and GDP
EU-25 (1995=100)
Directorate-General for Energy and Transport

5. Most likely 2000-2020 growth in demand
European transport
Overall
Freight: +50%
Passengers: +35%
GDP: +52%
Freight
Road: +55%
Rail: +25%
Short sea shipping: 59%
Inland Waterways: +28%
Passenger
Private car: +36%
Rail: +19%
Aviation: +108%
Directorate-General for Energy and Transport

6. A changing transport context
Environmental commitments (Kyoto)
Dependency on expensive foreign oil
Changed international context: terrorism, globalisation
Low economic growth (at the time), ageing and pension burden on growth and productivity
Enlargement: EU has continental dimension, transport environment is more diverse
Evolving transport industry: consolidation, internal market
Innovation, new solutions

7. The 2006 White Paper mid-term review
Policy lines to continue along the lines set by the 1992 and 2001 White Papers
A broader and more flexible toolbox to meet new challenges: from LIPS in 2001 to LIPS + LUIS in 2006 (*)
To optimise transport modes separately and in conjunction: "co-modality".
In the short term, decoupling of negative effects of transport.
(*) Liberalisation, Investment (TENs), Pricing, Safety
Logistics, Urban transport, Innovation (ITS,biofuels), Security

8. A changing transport context:
Conventional air pollutants and Greenhouse gases EU-25 (1990=100)
Directorate-General for Energy and Transport

9. The 2006 White Paper mid-term review: priorities
Mobility: The EU must offer the necessary level of mobility to people and business
Protection: protect the environment, ensure energy security, promote minimum labour standards, protect the passenger and the citizen.
Innovation: increase the efficiency & sustainability of the growing transport sector, develop & bring to the market new innovative solutions
International dimension: the EU must be a united, leading player in the international transport stage

10. Combat Climate Change – a Priority for the EU
On the top of the European Agenda: Spring European Council (8-9 March 2007)
Objective: limit temperature increases to max 2°C
EU Leadership:
Firm independent commitment to achieve at least 20% GHG reductions by 2020 (over 1990)
Measures:
Energy efficiency in buildings and products
ETS
Promotion of biofuels for road transport (10% by 2020)
Minimum road fuel taxes (~0,36 €/litre for gasoil)
Proposed legislation on CO2 and cars ….

11. Combat Climate Change – a Priority for the EU
Communication "20 20 by 2020 Europe's climate change opportunity" COM(2008)030 :
"Since the revised ETS will only cover less than half of the GHG emissions, an EU framework is needed for national commitments to cover the remaining emissions – covering areas like buildings, transport, agriculture, waste and industrial plants falling under the threshold for inclusion in the ETS. The target for these sectors would be a 10% reduction in emissions from 2005 levels, with specific targets for each Member State”. 

12. A changing transport context: Energy consumption by mode
Directorate-General for Energy and Transport

13. Greening of Transport Improve the sustainability of transport
Different initiatives:
“Chapeau” Communication
Report on what has been done to improve sustainability
Internalisation of external costs : Strategy
Revision of the Directive 1999/62/EC (« Eurovignette »)
Communication on measures to reduce noise in railways
Objective of the package: improve the sustainability of transport.
- "Sustainable mobility", (disconnecting mobility from its harmful effects) , has been at the heart of the EU's Transport Policy for several years.
In its 2006 review of the 2001 White Paper, the Commission recalled the need to use a broad range of policy tools, ranging from economic instruments and regulatory measures to infrastructure investment and new technologies in order to achieve sustainable mobility.
In this package, the Commission promotes two different types of initiatives to make transport greener and more sustainable.
- Use of market-based instruments.
- Use of a set of complementary measures comprising regulatory instruments, infrastructure measures and research and development measures.
The package will comprise different initiatives which aim at making tranpsort more sustainable.

14. Internalisation of external costs: Request of the European legislator
“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”.
“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”.
Request of the legislator: Directive 2006/38/EC amending Directive 1999/62/EC on infrastructure charging in road freight transport.
Commission is clearly requested
to establish a model for the assessment of all exernal costs
To carry out an impact analysis of the internalisation of extenral costs for all modes of transport
To propose a stepwise implement of the model for all modes of transport

15. Impact Assessment on the internalisation of external costs: State of Play and Roadmap
IMPACT Study
- On the assessment of external costs
- and the impact of options on pricing scenarios.
Consultations
- Expert Meeting on external costs assessment on
- Online stakeholder consultation to
- High level stakeholder conference 31 January 2007
Cooperation with other services, Steering group, IAB
- IA interservice group
- Close cooperation for modelling with JRC and ENV.
- IA cleared by IAB
- Use other sources such as RTD projects
Deadlines
- Targeted date adoption of the initiative: 10 June 2008 (now 8 July).

16. Strategy for internalisation of external costs
All modes of transport
Air transport: proposal to include aviation in ETS.
Road transport
Rail transport
Maritime and inland waterways
All modes of tranpsort should be concerned by internalisation.
The EU has already strated with air tranpsort and the proposal to include aviation in ETS.
In road transport, revision of Eurovignette is part of the package. Important to put in context:
- will allow internalisation in railways as at this stage, it is not possible to internalise in railways (meaining to get accrue revenues from it) if it is not done in competing modes.
IN maritime, ongoing reflections at IMO on CO2.
IWW: NAIADES communication recalls the importance of internalisation.

17. Internalisation Internalisation: what does it mean? Why internalise?
Each transport user should also pay for the social costs he generates when using a transport service
Why internalise?
Polluter pays principle (Treaty), User pays (Eurovignette)
Economic efficiency
Systematically disregarding of costs leads to inefficiencies (congestion, public health nuisances)
Awareness and change of behaviour
Users aware of the total costs of transport
Choices (mode, vehicle, routing) based on total costs

18. Choosing the most appropriate economic instruments
Three economic instruments
Taxation
User charge
Permit emissions
Apply the most appropriate instrument to external costs
Congestion, air pollution, noise
CO2
Three economic instruments which can internalise. Each of them may not be adapted to all types of extenral costs. That is why it is necessary to look at the characteristics of extenral costs
Congestion, air pollution, noise: local characteristics of these extenral costs. REally linked to time, location…. User charge is more appropriate than taxation for example.
By contrast, CO2 emissions is related to fuel consumption. In addition, it has a global character. As a result, user charge are less adapted. Taxation (fule tax) or permit emissons may be more adapted to tackle this external costs.
As a result, there are different ways to internalise. There is not a unique way which would allow tackling all externalities.

19. Common framework of internalisation
Common principle: social marginal cost pricing
Common methodology
Formula to calculate external costs
Recommended default values
Transparency and non-discrimination
How to use these data
Differentiation according to vehicle, fuel, time and location
Despite these remarks, we can propose a common framework of internalisation.
Common principle as it has been often stated in Commission’s document: social marginal cost pricing shoudl be the recommended principle. It means that price should correspond to marginal cost: meaining the cost generated by an additional vehicle.
Common methodology. By propsoing formulas and default values, it is possible also to harmonise the way MS can estimate external costs.
Use of these data: differenciation, when possible, is the best way to take stick to the social marginal cost pricing. The help of tehcnologies can be helpful.

20. Current charging legislation: the Eurovignette directive (1)
Legal framework in the road sector: the Eurovignette Directive as amended by Dir 2006/38/EC
Allows distance-based or time-based charging to recover infrastructure costs subject to a methodology
Heavy goods vehicles above 3.5 tons and to TENs road network
Road charging allowed on other roads
Toll levels related to infrastructure costs but may vary (congestion, pollution) without additional revenues
Specific conditions in mountains areas
Report for the assessment and internalisation of external costs for all modes by June 2008
Charging remains a difficult political issue.
Constant tension between MS who seek to raise transport charges to reduce the negative impact of traffic in their country and the peripheral MS who fear any increase in transport costs as reducing their competitiveness.

21. Current charging legislation: the Eurovignette directive (2)
Toll calculation:
Costs of construction (capital costs, including returns)
Costs of maintaining and developing
Costs of operating
Member States may vary the toll rates according to :
a) EURO emission class (air pollution) - up 100 % variation (as from 2010 variation is obligatory for new toll systems)
b) Time of day and level of congestion - up to 100 % variation
Possibility to apply mark-ups to tolls in the case of roads in sensitive areas, in particular in mountainous regions
Maximum mark-up = 25 % of the average toll. The mark-up must be authorized by the Commission, earmarked to priority projects
Charging remains a difficult political issue.
Constant tension between MS who seek to raise transport charges to reduce the negative impact of traffic in their country and the peripheral MS who fear any increase in transport costs as reducing their competitiveness.

22. What next? Efficient price:
+ Marginal cost to the producer (damage to infrastructure)
User pays (Eurovignette)
+ marginal congestion costs imposed to other users
+ marginal external costs (environmental, accidents)
Polluter pays (Treaty)
= Short run marginal social costs
+ additional cost recovery or development charge (two part tariff, Ramsey)
Charging remains a difficult political issue.
Constant tension between MS who seek to raise transport charges to reduce the negative impact of traffic in their country and the peripheral MS who fear any increase in transport costs as reducing their competitiveness.

23. Exemplary values: Heavy Duty Vehicles HDV > 32 t, EURO 3, Diesel
Handbook on external cost estimation in the transport: Stakeholder conference
Exemplary values: Heavy Duty Vehicles HDV > 32 t, EURO 3, Diesel
€ct/vkm
Urban
Peak
Off-Peak Day 34.8
Off-Peak Night 40.6
Interurban
Peak
Off-Peak Day 19.4
Off-Peak Night 20.3

24. Wider Commission strategy
Need for complementary measures…
Offering alternative modes
Offering alternative technologies
Enabling change of behaviour
…so that transport users react better to new price signals

25. Conclusions
The objective of the EU policy is to ensure mobility and protection through innovation measures and good governance while fostering competitiveness and prosperity.
Any pricing proposal should provide a framework to enable Member States, with due regard for the subsidiarity principle, to give economic incentives to transport through a differentiated price structure that better reflects costs to society, including external costs.
This Community framework is an important complement to the internal market, guaranteeing sustainable freedom of movement.