Transport infrastructure and environment

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As mobility increases, Europe’s roads and skies are becoming increasingly saturated – leaving policymakers with two options: to increase existing capacity or to optimise it, notably thanks to the introduction of infrastructure charging schemes.

Background

The transport sector is essential for Europe's prosperity and competitiveness, generating an annual turnover of around €363 billion (or 4.5% of EU GDP) and employing more than 8.2 million people. If one takes into account related services, including the manufacture of cars, planes, trains and ships, as well as infrastructure construction, trade and tourism, the jobs and wealth stemming from transport are even greater. 

However, the transport sector also produces a wide range of negative 'external effects', i.e. costs that are imposed on wider society but not borne directly by the user, including:

  • Deterioration of existing infrastructure; 
  • large land use; 
  • congestion; 
  • greenhouse gas emissions, widely recognised as the main cause of global warming;
  • air and noise pollution, which pose health hazards, including respiratory problems such as asthma, and; 
  • injuries and death through traffic accidents. 

Road transport, which represents roughly 84% of all passenger transport and 44% of freight transport, is by far the worst offender, but air transport is also increasingly under the spotlight, due to the sector's impressive growth rates of more than 5% per year. 

An EU White Paper published in 2001 ("European transport policy for 2010: time to decide") called for transport growth rates to be "decoupled" from economic growth and for a "modal shift" from roads and air transport towards more sustainable travel modes, including shipping and rail. 

However, in a 2006 review of the policy, the Commission reneged on its commitment to control the spiralling growth in transport demand, pleading instead for measures aimed at tackling the negative effects of transport – notably through improved logistics and traffic management, and the promotion of cleaner, safer vehicles. 

Issues

  • The "capacity crunch" 

Given the expected traffic evolution, Europe will face an ever growing gap between transport capacity and demand. The problem is worst for road and air transport. 

In many cities, road traffic is already slower now than it was in the days of horse-and-cart travel and is estimated to cost the economy around €100 billion a year.

As regards air travel, studies show that, by 2025, at least 60 European airports will be unable to handle the daily traffic without encountering delays or unaccomodated demand. 

Such capacity constraints cause costly delays that are not only counterproductive to overall economic competitiveness and growth, but also generate knock-on environmental and safety costs. 

  • Optimising existing infrastructure or building more? 

Traditionally, bottlenecks in transport infrastructure have been addressed by building extra capacity. However, in many urban areas – where the demand for transport is highest – possibilities for the further expansion of infrastructure are limited. 

What's more, a number of reports have found that the construction of new roads and airports to relieve congestion is ineffective because it only serves to induce new traffic. On the other hand, a study undertaken by a Norwegian research organisation, the SINTEF Group, claims that infrastructure capacity increases are directly linked to decreases in polluting emissions from motor vehicles. Using a traffic micro-simulation, it showed, for example, that upgrading narrow, winding roads or adding a lane to a congested motorway can yield decreases of up to 38% in CO2 emissions, 67% in CO emissions and 75% in NOx emissions, without generating substantially more car trips (EURACTIV 11/04/07). 

A report on airport capacity, adopted by the European Parliament on 11 October 2007, also warns that tackling growing congestion levels cannot be done simply by "optimising existing capacity" and that additional airports will "necessarily" have to be built. It adds that building new capacity would help avert "unnecessary air pollution caused by en route or ramp congestion" (EURACTIV 11/10/07). 

  • Developing infrastructure charging 

Because most transport modes fail to fully cover their external costs, users currently pay a much lower price for their mobility than the real cost to society and the environment, keeping demand artificially high. 

It is thought that confronting users with these costs by imposing charges on infrastructure could ensure a more efficient usage of transport, while addressing some of its negative consequences and, at the same time, raising funds for investing in new or optimised infrastructure and alternative transport modes. 

At EU level, the only directive on charging so far covers only the use of road infrastructure by heavy freight vehicles. However, this so-called 'Eurovignette Directive' excludes the possibility of integrating any environmental and health costs into toll prices until a "common methodology for the calculation and internalisation of external costs that can be applied to all modes of transport" is agreed upon (see our LinksDossier on Eurovignette). 

It gave the Commission two years after the Eurovignette Directive's entry into force to present a model to the Council and Parliament. The EU executive delivered on this commitment on 8 July 2008, when it presented a review of the Directive as well as a 'Strategy for the internalisation of external costs', as part of a wider Communication on 'greening transport' (EURACTIV 09/07/08).

The idea of establishing a uniform 'user-pays' system for all forms of transport is not new, but it has usually been brushed under the carpet due to the complexity of calculating external costs  and to national governments' reluctance to introduce these unpopular schemes.

The Commission has therefore opted for an optional scheme, under which member states would not be obliged to impose such taxes but could choose to do so for vehicles weighing more than 3.5 tonnes, on any part of their road network, as of January 2012.

The question of which costs should be considered as transport-related externalities – whether it should just be air pollution, or also factors like costs related to being stuck in congestion or the hospital costs of people involved in traffic accidents – is the main bone of contention. Under the Commission's plans, congestion, noise and air pollution costs could be integrated into toll prices but charging trucks for CO2 emissions would remain forbidden.

Another issue is what to do with the money raised from internalising these costs: subsidisation of new infrastructure for the taxed transport mode or cross-subsidisation of cleaner transport alternatives? The Commission is proposing that revenues generated by external cost charges be earmarked towards measures aimed at reducing road transport pollution at source, improving CO2 and energy performance of vehicles and developing alternative infrastructure for transport users, the communication states. But governments have already expressed their reluctance over this idea.

Positions

"For efficiency as well as for fairness purposes, the costs and nuisances related to transport activities should be borne to a large extent by those who produce them," the European Commission states in its consultation document

The International Union of Public Transport (UITP) agrees that the financial cost for using different transport modes should reflect their real cost to society, particularly as regards cars: "The poor contribution of private car usage to covering the external costs it produces creates a situation of unfair competition with the 'softer' modes of urban transport (public transport, cycling and walking)." 

It therefore calls on the Commission to target private car use and parking. "Public transport should be exempted of tax burdens and should benefit from the revenue of hypothecated taxation on indirect beneficiaries," it adds. 

It also asks the Commission to stop focusing solely on long-distance transport and freight – as the current Eurovignette Directive does – because the majority of transport-related external costs are related to passenger traffic in urban areas. 

However, the European Association of Automobile Manufacturers (ACEA), the European Road Federation (ERF), the International Tourism Alliance (AIT)  and the International Automobile Federation (FIA) argue that "motoring already pays for itself". They say existing taxes, including fuel and vehicle registration and ownership taxes, reach over €360 billion – easily covering the costs inflicted by road users. Thus, if market measures are taken to make up for emissions of CO2, current taxes that are not based on external cost estimates should be scrapped, they say. 

The road industry also insists that only CO2 be considered as an external cost to society, because internalising the marginal costs of accidents and congestion "is neither feasible nor the most efficient instrument available to deal with these serious social issues". 

A study prepared for ACEA explains that increasing the cost of using cars would have no impact on road safety because the "probabilistic nature of car accidents" goes against the "rationale of internalisation to make economic agents aware of the costs they inflict upon society and induce them to modify their behaviour".

What's more, the road industry says that the benefits generated by transport, including job creation, trade, competitiveness, social cohesion and poverty alleviation, should be integrated into cost calculations. 

It also insists that any income raised from road usage be invested back into optimising road transport. "We are against cross-subsidising, where all the income from the road sector is used to invest even more massively into the rail sector. We simply cannot allow that when there are still so many roads in Europe that need improving," the ERF  told EURACTIV.

The Community of Railways (CER), the European Rail Infrastructure Managers (EIM) and the European Transport Workers’ Federation (ETF) say the current non-application of the 'polluter pays' principle "has significantly hampered the ability of the rail sector to operate under fair conditions, as well as to finance investment itself". 

“Rail is currently one of the modes of transport which produces the least external costs. Cars create three times as much external cost as trains and aviation more than twice as much. Yet costs such as congestion, accidents, noise, global warming and air pollution, are not incorporated into the price for mobility,” complained Chairman of the European Railway Industries (UNIFE)
André Navarri.

Despite this, the associations point out, charges on roads "are either cheaper than or approximately as expensive as charges for access to the rail infrastructure. This provides little incentive for logistic operators to use rail rather than road over long distances; railways are at a competitive disadvantage." 

The EIM also notes that, while rail is taxed under the EU's Energy Taxation Directive, aviation is exempted from energy taxes. "This unsustainable and unfair fiscal treatment should be discontinued," it insists, adding: "The unfair treatment for rail is made even worse through its inclusion in the EU Emissions Trading Scheme, which does not affect road and air transportation." 

The rail sector thus calls on the Commission to come up with a pricing model that reflects all external costs, and where cross-modal financing is "clearly established as a key principle", in order to allow for further investments in railway infrastructure and achieve "the required increase in volume of transport by rail". 

However, airlines  retort that most plane journeys cover either long distances or short ones counting natural obstacles, for which there are "no realistic alternatives". "Therefore, any comparison of CO2 performance between transport modes is irrelevant as they accomplish different missions and meet different demands," stresses the Association of European Airlines (AEA)

It adds that encouraging a modal shift "cannot provide a proper solution to the global problem of climate change, nor can it resolve the local issue of airport congestion".

The International Air Transport Association (IATA) further notes aviation's "significant progress" towards reducing its environmental and social impacts, and the "substantial positive externalities" the sector generates by paying in full for the building, maintenance and use of its infrastructures – thus "connecting many industries within the national economy and to the wider global economy".

"Aviation makes the highest net contribution of all modes when expressed in terms of passenger journeys", whereas rail and light rail (urban transit) networks make a negative net contribution, because they are heavily subsidised and fail to cover their infrastructure costs, states IATA. 

Airlines therefore reject any form of cross-subsidisation where rail companies would receive additional government subsidies, paid for by the aviation sector. 

The looming airport capacity crunch is also a matter of concern for airportsACI Europe Director General Olivier Jankovec says optimising capacity "will be far from sufficient to cope with traffic demand over the next 20 years. Airports must be permitted to plan, finance and build in time the new facilities that are needed to respond to airlines' and passengers’ needs. This is a prerequisite not only for the competitiveness of Europe's aviation industry, but also for that of Europe's economy, in line with the Lisbon Strategy." 

The European Federation for Transport and Environment (T&E) rejects the argument that that transport is already heavily taxed, saying that total taxes for transport, which it estimates at less than €400 billion, "only recoup about half of the total social costs", which include external costs and subsidies received by each transport mode, and are estimated at as much as €923 billion or 9% of EU GDP. "The use of Market Based Instruments is necessary to close the baffling €500bn gap between social costs on the one hand, and taxes and charges of the other hand," it insisted. 

In response to calls for additional infrastructure for road and air transport, CEE Bankwatch Network, an NGO monitoring the activities of international financial institutions notes: "It is impossible to build one’s way out of congestion," adding: "Building road infrastructure inflates transport demand just as printing money creates inflation." 

"The fear that controlling traffic growth may be detrimental to competitiveness also needs further examination in the light of rising oil prices. 71% of all oil consumed in the EU is used by transport: 60% of all oil consumed in the EU is used by road transport alone, with 9% by air transport," it stresses in a report entitled 'Lost In Transportation'. 

It thus calls on the European Investment Bank – which it claims lends three times more to the car industry than to other industrial sectors – to put an end to its "planes, loans and automobiles culture" and "stop pouring financing into new capacity for those modes", saying that: "making investments into energy-intensive modes of transport now is likely to prove poor value for money in the near future." 

Timeline

  • 15 Jan. 2008: Commission published a Handbook on the estimation of external cost in the transport sector.
  • 8 July 2008: Commission presented a review of the Eurovignette Directive and a 'Strategy for the internalisation of external costs' for each transport mode as part of a wider Communication on 'greening transport'.

Further Reading

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