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Tuesday, September 29, 2009

Finding the resources for sustainable transport

The European Commission has published a new publication called "A Sustainable Future for Transport", which includes information on finding the resources for sustainable transport. The transition towards a low-carbon economy will impose a substantial overhaul of the transport system. This will require considerable and well-coordinated funding, but the necessary resources will be difficult to find: the current economic crisis is putting public finances under pressure and is likely to be followed by a phase of budgetary consolidation. Ageing will increasingly absorb public funds for pensions and health care.

Transport generates a substantial amount of revenues for public budgets. Energy taxes amount to 1.9% of GDP, most of them coming from fuel taxes on road transport and the private car. A further 0.6% of GDP is collected in the form of vehicle taxes. In addition to taxes, there are also tolls and charges for infrastructure use. Transport users thus already pay a significant amount, but the price they pay often bears little connection to the real costs on society of their choices.

Investment in transport infrastructure is mainly financed with public funds, which often also cover around 50% of operating costs of public transport services. The use of public funding in addition to ‘user-pays’ sources is justified on the basis of wider socioeconomic benefits (e.g. regional development, public goods). These benefits should be assessed through project appraisal methods progressively harmonised at EU level. Total infrastructure costs in road transport — that is fixed cost plus maintenance — are estimated at about 1.5% of GDP.

According to the available estimates — which refer to road transport — the most common external costs reach 2.6% of GDP. These costs are generically paid by all citizens, thus not in ways that are related to the externalities: the incentive effect and the benefits of price signals are lost. The Treaty principle that the polluter should pay is not respected in all cases.

The Commission proposed last year a stepwise strategy for the internalisation of external costs in all transport modes, which contemplates, among other measures, the inclusion of aviation in the EU emission trading scheme from 2012 and the introduction of internalisation charges for heavy goods vehicles. Where appropriate, action from Member States and international organisations should complement this strategy and ensure that users’ costs include relevant externalities for all modes and vehicles. The development of technology — for example on-board units and global positioning systems for tolling — will facilitate the future implementation of this strategy. Internalisation charges to complement revenues from energy taxation are likely to be necessary in any event, since excise duties on oil derivatives will presumably decline with wider diffusion of vehicles running on alternative sources of energy.

It is also predictable that the transport sector has to become increasingly self-financing in relation to infrastructure. Congestion charges, which represent the cost of infrastructure scarcity, can give a good indication of the needs for additional capacity and can provide funding for expansion of infrastructure or for alternative transport solutions.

Source  European Commission - DG Energy and Transport

More information  European Commission - DG Energy and Transport

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