"Commission proposal: internalisation of artificial costs to road transport sector..."


"The Commission looks at road transport from an ideological point of view: as a battlefield in the big fight against climate warming – and they don't do any body count!" comments Ari Vatanen, Member of the European Parliament and the Chairman of the Mobility for Prosperity in Europe -association (www.mobilityeurope.eu).

Report: Environment concultancy CE Delft: Handbook as an pdf file.

Review: Institute for Transport Economics at the University of Cologne, Baum et al. (2008): As an pdf file

Like it did with the 2001 White Paper on European Transport Policy, the Commission will again have to change its course after a while. The Commission's communication on "External transport costs and their internalisation" is based on a CE Delft-produced IMPACT Handbook which is based on false premises and does not stand for proper scrutiny.

Ari Vatanen explains: "The Commission is trying to internalise artificial costs, not external costs – which are already included – to road transport, in order to force a so called modal shift. But modal shift will not happen; our well being and prosperity are rooted on individual road transport. By going ahead with internalising costs that are mostly already paid for, road transport would only become more expensive and thus further reduce people's purchasing power."

There cannot be a realistic alternative to road transport as it is the only mode which provides competitive door-to-door transport, economically and fast. "At first glance, the idea of modal shift may look sensible but is not as it doesn't take into account the user's point of view." Ari Vatanen summarises.

ANNEX TO A PRESS RELEASE, July 8th, 2008, MEP Ari Vatanen


1) Internalisation of external costs lies on false premises

The Commission's coming communication on "External transport costs and their internalisation" is based on a CE Delft-produced IMPACT Handbook, which, in turn, is based on false premises. For example, the Handbook does:

- not take into account the external benefits of road transport to society, so does not include a proper cost-benefit analysis, as part of the Commission's own "Better Regulation Agenda"
- not take into account subsidies paid to railways and to public transport (falling under the definition "external costs of one mode of transport paid for by society as a whole")
- not include into external costs' calculation the taxes and charges which are already paid for by the road user today, amounting to, at least, €249 billion per year (or 2,4 % of EU-25 GDP according to the Commission's own estimations)
- not take into account strikes within (state-owned) monopolies in for example the rail sector (causing recently in France up to €300 million losses/day)
In addition it lists as external costs categories which are deemed internalised fully or partly (such as congestion and accident costs).

2) Environmental targets - lost!

The principle behind the communication, the Polluter Pays Principle, does not decrease pollution but only punishes some sectors which are a necessity for society. Instead, possible alternatives such as the Cheapest Cost Avoider Principle would tackle precisely the problem of pollution and would not hurt the economy.  

3) Economic rationale - lost!

Internalisation according to the Handbook proposals would cause the inflation rate in the EU to skyrocket by 2 to 3 % more than current level. Even a modified proposal would mean a loss of up to 100 000 jobs per year for the EU 27 – while the Handbook model would cause a loss of 75 000 jobs in Germany alone.

4) Social dimension - lost!

The social dimension has gone unnoticed. Ari Vatanen explains: "Fuel taxes in the EU equal €260/CO2-tonne – ten times the price of the CO2-tonne. Despite this plus all the other charges, nine out of ten people choose a motor vehicle because it is the best solution to their varied transport needs. Increasing artificially the costs will not reduce the road transport but only increase both transport and consumer prices. This will further reduce purchasing power. It will hurt hardest the poor: they will find themselves worse off as they are unnecessarily made dependent of public transport networks."

5) Fairness - lost!

If the Commission stubbornly insist on levying more taxes and charges on road transport, it must make sure that they will be fully allocated back to the road sector to update and improve the current infrastructure, which will in turn decrease those costs in the first place; otherwise it would cause a further distortion of the internal market and ever greater social unfairness coupled to a continued decline of road safety (as proven by the failing target of the EU to cut road deaths by 50 % by 2010).

Further information on both principles:
Baum et al. (2008) pp. 4-5.