pricing technical report 3-2004 web

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Transport price signals

Monitoring changes in European transport prices

and charging policy in the framework of TERM

Technical report No 3/2004

European Environment Agency


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Legal noticeThe contents of this publication do not necessarily reflect the official opinions of theEuropean Commission or other institutions of the European Communities. Neither the

European Environment Agency nor any person or company acting on behalf of theAgency is responsible for the use that may be made of the information contained in thisreport.

All rights reservedNo part of this publication may be reproduced in any form or by any means electronicor mechanical, including photocopying, recording or by any information storage retrievalsystem, without the permission in writing from the copyright holder. For rights oftranslation or reproduction please contact EEA project manager Ove Caspersen (addressinformation below).

Information about the European Union is available on the Internet. It can be accessedthrough the Europa server (http://europa.eu.int).

Cataloguing data can be found at the end of this publication.

Luxembourg: Office for Official Publications of the European Communities, 2004

ISBN 92-9167-693-4

EEA, Copenhagen, 2004

European Environment AgencyKongens Nytorv 6

DK-1050 Copenhagen KDenmarkTel. (45) 33 36 71 00Fax (45) 33 36 71 99Enquiries: http://www.eea.eu.int/enquiriesWebsite: http://www.eea.eu.int

Cover design: EEALayout: Brandpunkt a/s

Acknowledgements

The report was prepared by Jos Dings, CE Delft, the Netherlands.

Project Managers for the European Environment Agency: Hans Vos, Wouter de Ridder and

Peder Jensen.


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iii

Contents

1 Background and purpose ...................................................................51.1 Background .................................................................................5

1.2 Purpose of this report ...................................................................5

1.3 Structure of this report .................................................................5

1.4 Demarcation ...............................................................................6

2 Theoretical and policy context of transport price signals ...................7

2.1 Graphic model and terminology ......................................................72.1.1 Explanation of the graphical model ........................................72.1.2 Terminology used in this report............................................. 8

2.2 Two dimensions of transport price signals ........................................9

2.3 Dimension 1 changes in transport prices ......................................9

2.4 Dimension 2 changes in transport charging policy .........................92.4.1 Possible aims of transport charging policy ............................ 102.4.2 Distinguishing between transport charge levels

and structures .................................................................. 112.4.3 Summary ........................................................................ 12

2.5 Conclusion: two dimensions and two key questions ........................ 12

3 Current TERM indicator fact sheets ..................................................14

3.1 Transport prices (TERM 20) ......................................................... 14

3.2 Fuel prices and taxes (TERM 21) .................................................. 14

3.3 Transport taxes and charges (TERM 22) ........................................ 15

3.4 Subsidies (TERM 23) .................................................................. 15

3.5 Expenditure on personal mobility by income group (TERM 24) .......... 15

3.6 External costs of transport (TERM 25) ........................................... 15

3.7 Internalisation of external costs (TERM 26) .................................... 16

4 Improving the indicators .................................................................17

4.1 Monitoring changes in transport user prices ................................... 174.1.1 How do transport prices evolve by mode? ............................ 174.1.2 How much on average is spent on transport? ........................ 17

4.2 Monitoring changes in transport charging policy ............................. 174.2.1 Some methodological issues ............................................... 174.2.2 Definition of three sub-questions ........................................ 204.2.3 Answering sub-question 1: External costs and charges

per vehicle type ................................................................ 204.2.4 Answering sub-question 2: Progress in charge levels ............. 224.2.5 Answering sub-question 3: Progress in charge structures ....... 24

5 Summarising the revised indicators for transport price signals .......27

6 References ......................................................................................29

7 List of terms and abbreviations .......................................................32


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Transport price signalsiv

Annex A List of TERM indicators .......................................................33

Annex B Current TERM transport pricing indicators ..........................35

Annex C History of EU transport charging policy ...............................41

Annex D Instruments for charging for social costs ...........................45

Annex E Overview of EU studies .......................................................47


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5Background and purpose

1 Background and purpose

1.1 Background

The European Environment Agency(EEA), jointly with the CommissionsDirectorate-General for theEnvironment, Directorate-General forTransport and Energy and the StatisticalOffi ce Eurostat, developed the transportand environment reporting mechanism(TERM). TERM aims to monitorprogress in integrating environmentalconcerns into transport policy

throughout Europe and comprises40-odd indicators, which cover allrelevant aspects of the transport andenvironment system (see Annex A fora complete list of TERM indicators andindicator groups). These indicatorsform the building blocks for regularlypublished environmental issue reports,such as TERM 2000 (EEA, 2000), TERM2001 (EEA, 2001a) and TERM 2002 (EEA,2002), and focus reports such as Road

freight transport and the environment inmountainous areas (EEA, 2001b).

One of TERMs seven indicator groupsdeals with transport price signals. Allindicators related to transport prices,charges, taxes, subsidies etc. feature inthis group. Following the publicationof TERM 2000, and an expert workshopon transport pricing indicators in 2001,it became apparent that this indicatorgroup required a slight revision, to

beer reflect the scientific and politicaldebate on internalisation of externalcosts. An alternative set of indicatorswas developed and used in the twosucceeding TERM reports in 2001and 2002. The most important changemade to the set of indicators was theinclusion of a price structure element(that is, the tax- or charge-componentof the transport user price or fuel price),complementing the information already

available on price levels (that is, theactual price users pay for transportservices).

Aer working for two years with thisslightly altered set of indicators, thetime has come for the next and final step towards a set of useful andunderstandable indicators dealingwith transport price signals withinTERM. The EEA therefore asked CEDel to develop a technical reportabout indicators needed to monitordevelopments in transport prices andtransport pricing policy, explaining indetail why and how certain indicators

will support in future reporting ontransport prices and transport chargingpolicy.

1.2 Purpose of this report

The main purpose of this report is toprovide the methodological descriptionand technical background for the(revised) set of TERM indicators that

optimally monitors trends in transportprices and transport charging policy.

1.3 Structure of this report

This report is structured as follows.

Chapter 2 provides the theoreticaland political background oftransport prices and transportcharging policy, explaining the

different cost types and the role andaims of correct pricing in transport.

Chapter 3 provides an overview ofthe currently used TERM indicatorsand an analysis of their strengthsand weaknesses in monitoringtrends in transport prices andtransport charging policy.

Chapter 4 focuses on the monitoringof transport charging policyand explains what indicator

improvements are needed to do so ina meaningful maer. Chapter 5 to conclude gives a short

overview of the new and completeset of price signals indicators.


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Transport price signals6

1.4 Demarcation

This report takes the Commissionspricing principle marginal social costpricing as a starting point for analysis.This pricing principle is included inthe White Paper Fair payment forinfrastructure use a phased approachto a common transport infrastructurecharging framework in the EU(EC, 1998).

The report does not aim atimplementing the proposal, that is,to fully elaborate the indicator set bypopulating it with data. Of course,implementation aspects like data

availability do play a major role inthe proposal, as these determine thefeasibility of actually developingindicators.

The report will cover the principalmodes of transport: road, rail, air andwaterway transport, for both passengerand freight transport.

Finally, it is worth noting that thepricing principles presented primarilyapply to public infrastructure. Privatecompanies will, where relevant, be morelikely to charge for full infrastructure(fixed plus variable) costs for costrecovery, instead of marginal (variable)infrastructure costs for optimalpricing. In the case of public-privatepartnerships (PPP), the focus willprobably shi to cost-recovery. If PPPsgain in importance, this could have aninfluence on some of the dimensionsof the indicators proposed later in thereport, in particular where they includeinformation for which the currentlychosen principle of marginal social cost

pricing is relevant.


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7Theoretical and policy context of transport price signals

2 Theoretical and policy context oftransport price signals

The aim of this chapter is to set thecontext for the discussion on transportprices and transport charging policy, by:

presenting a graphical model thatprovides a simplified overview ofthe system of transport prices andcharging policy in order to introduceterminology;

describing in more detail thetheoretical and political context oftransport price signals;

describing the indicator needs tomonitor developments in transportprice signals.

2.1 Graphic model and

terminology

Transport price signals appearanywhere in the transport system, frommarket prices, via government taxesto tolls. The graphic model presentedbelow provides a simplified overview ofthe system of transport costs, prices andcharging policy. The model is furtherexplained in the next section.

2.1.1 Explanation of the graphicalmodel

Starting in the upper le corner, themodel shows that all types of transport

Social costs

Resource costs Vehicles Fuels

Maintenance

External costs Infrastructure Pollution

Congestion Accidents

Resource costs

plus charges

Transport

charges

Levels

Structures

Levels Structures

Transport prices

Transport demand

Structures

FuelsOther

LevelsFuels

Other

Reduction by innovation

Reduction by demand loss

(Profits/losses)

!

Figure 2.1 Conceptual model describing the various price signals within the transport

system


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require investments in vehicles,maintenance of vehicles, and thepurchase of fuel, which all cost money.These costs are called the resource costsof transport, borne by the users becausethey are incorporated in the prices paid.These costs are generally a result ofmarket transactions.

The upper right corner reflects the costsof transport that are generally not oronly partly borne by individual users.These are called external costs. Theyinclude costs of air pollution, noise,safety risks to others, infrastructurecosts, and also the costs of congestion.Congestion is a special case. Taking the

perspective of the transport sector asa whole, congestion costs are borne bytransport users and hence are internalto the system. From an individualtransport users point of view, however,users that cause congestion are notnecessarily the same as those who sufferfrom congestion, and hence congestioncosts are at least partially external.Likewise, variable infrastructure costsare external to the user since those who

cause such costs are not necessarilythose who pay for it. This vision isfurther supported in this report, since itis in line with the supported vision onoptimal pricing, for which the principleof marginal social cost pricing (seeSection 2.4) forms the basis.

Resource costs and external coststogether form so-called socialcosts.Social costs include all relevant costs tosociety.

Going down from the upper rightcorner, the government comes in withtransport charges and taxes. Someare fixed, such as annual road taxes;some are use-dependent such as fueltaxes, primarily on petrol and diesel.But there are also other use-dependenttaxes in place, such as tolls or therecently introduced London congestion-charging scheme. Current taxes and

charges partly internalise externalcosts. Improved internalisation isachieved by adapting taxes and chargesin two ways. By adapting charge ortax levels to bring them beer in line

with external costs, and by adaptingcharge or tax structures, for example, bymaking them use-dependent. Improvedinternalisation of external costs willresult in reduced external impacts eitherthrough reduced transport demand, orvia reduced effects per unit of transportservice, for example, by innovation.Sections 2.3 and 2.4 further explain this.

Going to the le, a transport company(such as a road haulier or airline) willtranslate the resource costs it facesand the government taxes and chargesimposed, intotransport prices it chargesto users, and it will incur profits orlosses.

This graphical model is typically validfor transport service providers. Apartfrom the profits or losses component,it is also relevant for individuals, usingnon-collective means of transport(private cars, etc.).

2.1.2 Terminology used in this report

As is already clear from the explanation

of the graphical model, a correctunderstanding of the meaning androle of infrastructure and externalcosts, and of the marginal concept isessential in this report. The line takenin this report is that the correct targetof pricing policies is the individualuser of infrastructure services, and thatthe correct way of pricing is that theindividual user should be charged theadditional (marginal) costs incurredbut not paid for. Such costs include

variable infrastructure costs (mainlywear and tear). They also includeenvironmental costs, costs of accidentsand costs of congestion, usually referredto as external costs. From the point ofview of the individual user, variableinfrastructure costs are also externalcosts. However, to stress that correctpricing includes these costs, the termused in the report will be marginalinfrastructure and other external costs.

The graphical model in the previoussection and the remainder of the reportuse a number of other terms that areexplained in Table 2.1.


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2.2 Two dimensions of transport

price signals

Prices are a main factor in a marketeconomy. Prices of the various transportservices, and their development boththrough time and vis--vis othereconomic parameters, such as incomeand general price developments(inflation), have an impact on the

demand for transport services. Hence,prices as such, regardless of theircomposition, are important marketsignals. Their composition maers,however, or rather the way governmentcharges and taxes reflect external costsin the preferred way. From this, twobasically different dimensions of pricesignals appear:

price signals related to transportprices;

price signals related to transportcharging policy.

Both the overall price signals and thepart related to charging policies arerelevant from an environmental point ofview, and hence to monitor both typesof price signals with indicators in thecontext of TERM.

2.3 Dimension 1 changes intransport prices

Transport prices have an impact ontransport demand and modal split, via

so-called price elasticities. Aer all,when the price of transport decreases, itbecomes cheaper to travel, and givena certain budget available for travelling allows for more travelling. If such adevelopment only affects some transportmodes (such as air and road transport),it will affect the aractiveness of thesemodes, and thus (again through priceelasticities) the modal split. Transport

demand and modal split are, in turn,important determinants of the transportsectors impact on the environment. Thiseffect is indicated by the outer loop ofFigure 2.1 Reduction by demand loss.

Indicators aimed at monitoring theeffects of price signals on transportdemand and modal split should help toanswer the following key question:

How are transport prices by mode

evolving and what is the impact of that

on transport demand?

2.4 Dimension 2 changes in

transport charging policy

Transport charging policy is the seconddimension of price signals in thetransport system. This section focuseson this second dimension describing

the possible aims of transport chargingpolicy and the importance of not onlyknowing how much is charged (chargelevels), but also how transport usersare charged (charge structures) and

Table 2.1 Terminology in this report

Transport prices Prices users pay for transport services per unit of trans-

port

Resource costs Costs excluding government charges and taxes, paid for by theuser

Fixed/variable costs Fixed costs are use-independent; variable costs are use-dependent; this is particularly relevant for infrastructure costs

External costs of transport Costs of transport not paid for by the user generally includescosts of using infrastructure, and costs of congestion, accidentsand environmental impacts

Social costs of transport Full economic costs of transport, that is, resource costs plusexternal costs

Transport taxes and charges Levies applied by the government to the transport system ontop of existing costs, for example fuel taxes, vehicle purchase orownership taxes, infrastructure charges

Transport and infrastructurecharging policy

The way in which transport and the use of infrastructure arebeing charged by the government


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ends with formulating the key questionof how to address transport chargingpolicy with indicators.

2.4.1 Possible aims of transportcharging policy

Charging transport is not an aim initself; it is done for a variety of purposes:

forfiscal purposes: to achieve acertain contribution of the transportsector to fiscal revenues, in this casethe levies are usually called taxesinstead of charges;

for business purposes: to cover thecosts of (and possibly make a profit

on) certain pieces of privately-ownedinfrastructure;

for cost-recovery purposes: to makethe transport sector as a wholepay for its infrastructure costs,environmental and safety costs, or tocreate a level playing field betweensectors or States;

for effi ciency purposes (maximisesocioeconomic welfare): by chargingindividual users for the extra costs

they impose on others with theirtransport decisions (infrastructure,environment, safety).

Most transport charging strategiesapplied in the past and present are moreor less a mixture of the four purposes,albeit the emphasis varies case by case,and gradually shis in time. Originally,fiscal and/or business purposes were themost important reasons for transportpricing. With the increasing complexity

of the transport system and theincreasing tax burden on the sector, theequity issue (fair treatment of competingtransport modes, infrastructure costcoverage) became more dominant. Overthe last decade, transport charginghas gained momentum as a means ofincreasing socioeconomic welfare, byreducing some negative impacts oftransport, such as congestion, pollution,and safety risks, and the absence of

payment for variable infrastructurecosts, whilst respecting the benefits that

users get from transport. In the event ofan increasing number of publicprivatepartnerships, cost-recovery will becomemore important again.

In this report, the fourth aim oftransport pricing policy is the guidingprinciple: to maximise socioeconomicwelfare,that is, reduce negative impactsof transport whilst respecting itsbenefits. Most recently published EUtransport policy documents implicitlyor explicitly do so (see ANNEX C History of EU transport charging policyfor details) and formulate the otherpurposes (fiscal, business and equity)more or less in terms of boundary

conditions, as follows.

The Commissions 1995 Green Paperon Fair and effi cient pricing intransport (European Commission,1995) announced that infrastructurecharging policy should, in principle,aim at full cost recovery, coveringboth capital costs (and not currentexpenditures) and operating costs.

The Commissions 1998 White Paper

on Fair payment for infrastructureuse (European Commission, 1998)introduced the so-called marginalsocial cost (MSC) (1) pricing as theleading principle for Europestransport charging policy. Therecovery of infrastructure cost wasno longer an aim in itself, but waspresented as a likely consequence ofthe MSC pricing strategy.

The Commissions 2001 White Paperon the European transport policy

for 2010 (European Commission,2001) did not explicitly mentionmarginal social cost pricing as theleading principle, but it also did notexplicitly change its strategy towardstransport pricing.

The recently proposed directivefor road infrastructure charging(European Commission, 2003)would allow Member States tobase their average charge levels on

full infrastructure costs (excludingconstruction-related costs that have

(1) MSC means marginal infrastructure and other external costs, where marginal costs refers to the additionalcosts of one extra unit of mobility, one extra vehicle, vessel or aircraft kilometre.


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already been covered) and externalaccident costs, and to differentiatethese average levels on the basisof the number of axles, axle loads,engine Euro-class, time of day/levelof congestion, environmentalsensitivity, population densityand accident risk. This proposaladdresses only transport withheavy goods vehicles on mainitineraries, that is, freight transporton all motorways that are part of thetrans-European transport networkand on trunk roads. The chargerates according to this proposalmight deviate in level from chargescalculated exactly following the

principle of marginal social costpricing. The differentiation optionsin the proposal accommodate acharging structure that fully reflectsdifferences in categories of heavygoods vehicles and their externalimpacts.

The European Parliament underlinesthe main principles of transportpricing policy as proposed bythe Commission, but does not

specifically favour marginal costpricing (given the reference to thecosts of infrastructure construction)and adds a few extra boundaryconditions, such as taking intoaccount the interests of remoteregions, disabled people, publictransport, etc.

The ECMT supports maximisingsocial welfare, or so-calledinternalisation of external costs,and it considers that the main aims,

besides economic effi ciency andsustainability, is to promote faircompetition between modes andcountries.

Maximising socioeconomic welfareimplies that transport should onlytake place when the social benefits arelarger than the social costs. This impliesthat transport should only take placewhen the users benefits exceed the raw

internal costs plus the taxes and charges.This implies that taxes and chargesshould ideally reflect the marginal costsof using infrastructure, including theexternal costs of congestion, accidents

and environmental impacts. This isreferred to in the remainder of thereport as the marginal infrastructure andother external costs. This is shown withthe exclamation mark (!) in Figure 2.1.

It is worth noting that economicinstruments such as transport chargesand taxes are not the only tools forreducing external effects from transportand increasing socioeconomic welfare.Extensive direct regulation, supportedor not by financial incentives, hasresulted in, for example, improvedenvironmental characteristics ofcars, trucks, fuels, etc., and hencehas lead to reduced external effects.

As a consequence, they have had animpact on transport price levels andtransport price structures. However,economic instruments have theadvantage over command-and-controltype of instruments by leaving finaltransport decisions to the marketinstead of imposing them on themarket. This flexibility in principle leadsto more effi ciency and thus greatersocioeconomic welfare, because:

measures are taken by those that facethe lowest compliance costs, whereascommand-and-control measuresoblige everyone to take measures;

those that perceive the greatestbenefits from their trips will continuewith these trips, whereas command-and-control measures apply toeveryone under the regime.

2.4.2 Distinguishing between transport

charge levels and structures

Not only the level but also the structureof transport user prices is relevant. Ifcleaner vehicles are cheaper to drivethan dirty vehicles, the market willmove towards greater utilisation ofcleaner vehicles. Transport user pricestructures can thus drive innovations tocleaner, safer and more silent transport,and hence reduce the external costs of

transport. An important basic principleof this report is therefore the strictdistinction between transport price, taxor charge levels and structures.


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Charge levels tell us how much transportis charged. This is relevant becausetransport charges may increasetransport user prices and thereforereduce demand for transport of aspecific mode. This could eventuallylead to either a modal shi, or to a netloss of demand via the so-called priceelasticity of demand, and hence to lessnegative impacts of transport.

Charge structures tell us how chargingtakes place, that is, what the charge baseis, which components are included, andhow the charges are differentiated. Theytherefore tell us what incentives are builtin the charges. Via differentiation and

modulation of existing transport taxesand charges, governments can stimulatetransport innovation and effi ciency,without necessarily making transport asa whole more expensive. For example,by charging relatively clean Euro 4trucks less than the somewhat dirtierEuro 3 trucks, hauliers are stimulatedto purchase and drive less pollutingvehicles. Another example is the fueltax, which stimulates the purchase of

relatively fuel-effi cient vehicles. Thisinnovation also reduces negative impactof transport, but without necessarilydecreasing demand for transport (innerloop in Figure 2.1).

2.4.3 Summary

The analysis in this section leads to thefollowing conclusions:

The main aim of effi cient transport

pricing policy is to reduce theexternal and infrastructure coststhat each transport user causeswhilst respecting the user benefits.In economic terms, this is also calledmaximising transport effi ciency ormaximising social welfare.

A transport charging system withthat purpose thus consists of changesin transport price, tax and chargelevels as well as structures.

Hence, the indicators in the groupon price signals should answer thefollowing key operational questionrelated to transport charging policy:

Are transport taxes and charges,

which are imposed on each individual

transport movement, becoming better

aligned (in terms of both their structure

and level) with marginal infrastructure

and other external costs?

The reference level for transport usercosts to achieve the economic optimumis alignment with marginal social costs.Marginalbecause we are concerned withthe additional costs of adding one moreuser to the system, socialbecause, as wellas in private costs, we are interested inthe costs to other users of the transportsystem and to society as a whole,including impacts on safety and the

environment.

2.5 Conclusion: two dimensions

and two key questions

The indicators in the TERM group onprice signals serve two functions:

providing information on thedevelopment of transport prices, so

as to explain changes in transportdemand and modal split, andassociated changes in environmentalimpacts (dimension 1 changes intransport prices);

providing information on theevolution of transport chargingpolicy away or towards marginalinfrastructure and other externalcosts (dimension 2 changes intransport charging policy).

The indicators should answer two keyquestions:

how are transport prices by modeevolving and what is their impact ontransport demand?

are transport taxes and charges,which are imposed on eachindividual transport movement,becoming beer aligned (in terms ofboth their structure and level) with

marginal infrastructure and otherexternal costs?

The next chapter describes the currentset of TERM indicators related to


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price signals. The following chapterpresents the required improvements andadjustments to this indicator set in orderto become beer usable in providinganswers to the two key questions.


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3 Current TERM indicator fact sheets

Its main weakness is that it does notexplain where price developments comefrom: from market developments orchanges in government charges, taxes orsubsidies.

3.2 Fuel prices and taxes

(TERM 21)

This indicator monitors developments offuel prices and taxes in road transport,

in all 15 EU Member States and fouraccession countries. Developmentsin absolute price levels, differencesbetween petrol and diesel, and taxincentives for unleaded and low-sulphurfuels are monitored.

The main strength of this indicator isthat it shows the development over timeof one of the most important driversfor fuel consumption and hence of CO

2

emissions, and currently one of the mostimportant government instrumentsto influence the price of transport (seeSection 3.1). This indicator thereforehelps to explain developments in energyeffi ciency of vehicles, CO

2emissions by

Before describing the requiredimprovements to the current TERMindicators on price signals, an overviewof these indicators and theirinterrelationship is provided (2).

The TERM indicator group on transportprice signals currently contains sevenindicators, which are related to eachother as illustrated by Figure 3.1.

3.1 Transport prices (TERM 20)

This indicator also called Realchange in passenger and freighttransport price by mode describesthe real change in price indices ofpassenger transport (for all 15 MemberStates) and freight transport (Dutch casestudy only).

The main strength of this indicator is

that it shows the development over timeof one of the most important driversfor transport volume, namely transportprices. This indicator therefore helps toexplain demand growth and modal shidevelopments.

= Indicator

Transport taxes

and charges

Internalisation of

external costs

Subsidies

Fuel prices

and taxes

Transport user prices

Transport demandModal split

Exependiture on

personal mobility

External costsof transport

Transport prices Transport charging policy

Figure 3.1 Current TERM indicators in the group on price signals and their

interrelationships

(2) See Annex A for the list of all current TERM indicators.


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15Current TERM indicator fact sheets

mode, demand growth and modal shidevelopments.

Its main weakness is that developmentsare only shown for road fuel prices, andthe fact that fuel taxes are increasinglybeing considered a rather bluntinstrument for the internalisation ofexternal costs. In Europe, the focusof transport charging policies shistowards distance- and territory-basedcharging instead of fuel-based charging(captured in the indicator on transporttaxes and charges, see Section 3.3).

3.3 Transport taxes and charges

(TERM 22)

This indicator basically forms theumbrella for the indicator on fuel pricesand taxes (see Section 3.2) and theindicator on subsidies (see Section 3.4).The indicator has never been fullydeveloped due to lack of data.

3.4 Subsidies (TERM 23)

Subsidies are government interventionsaimed at lowering the price of certaintransport services. It is the balance oftaxes, charges and subsidies that shouldbe compared with the marginal costs inorder to obtain a correct insight into theextent to which transport is effi cientlypriced. However, this indicator has alsonot yet been developed due to lack ofdata.

3.5 Expenditure on personal

mobility by income group

(TERM 24)

The indicator on expenditure onpersonal mobility has been developedfor the TERM 2000 report (EEA, 2000,p. 75) and has not been updated since.This has to do partly with an absenceof updated data and partly with the

absence of a necessity to update the

indicator, as the average share of incomespent on transport is more or less stable.

The main strength of this indicatoris that it provides the necessaryinformation needed to understand theimplications of changes in transportprices. Aer all, if transport becomescheaper, while at the same time theshare of income spent on mobilityremains constant, one can buy more orbeer transport services. This meansin practice and given the fact thattime spent on transport is a more orless stable factor that one can buyfaster and more comfortable transport.This has implication for both transport

demand and the modal split (3).

The main weakness of the indicator isthat it cannot truly capture all elementsof transport expenditure, because ofthe many different costs types that itshould cover. In the case of private cartransport, for example, it should containvehicle purchase costs, maintenance,taxes, tolls, etc. In the case of publictransport, it concerns the sum of all

tickets used, plus costs associated withgeing to the pick-up point and back.Such costs are diffi cult to determine onan average EU scale.

3.6 External costs of transport

(TERM 25)

Since marginal infrastructure andother external costs differ fromsituation to situation, they can never

be fully captured by a single indicatorThis indicator shows minimum andmaximum estimates of these costs pervehicle-kilometre for all passenger andfreight transport modes (minimum andmaximum of the average values percountry).

Its main strength is that this indicatorindicates a level for effi cient transportcharging, as it shows the bandwidth

of marginal external costs per vehicle-kilometre.

(3) When choosing between two modes of transport, often only the perceived costs are taken into account (that is,only the extra costs of making a trip, thus not including fixed costs). This further affects the relation betweentransport prices by mode and the modal split.


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Its main weakness is that theinformation is not based on statistics,which have not been developed yet, buton estimates made in different studies,which vary between studies. Neitherdoes the indicator provide insight intothe development of external costs overtime.

3.7 Internalisation of external

costs (TERM 26)

This indicator shows the degree inwhich Member States have introducedprice signals that are directly relatedto external costs, such as air pollution,

safety risks, or congestion.

Its main strength is that it is a powerfulsummary of very scaered anddiverging information on the structure oftransport charges.

Its main weakness is that the indicatortries to summarise very complexand highly divergent information. Ittherefore loses important informationsuch as a description of what the actualsignal is, how important it is, andwhether any changes have been recentlyimplemented.


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17Improving the indicators

4 Improving the indicators

total fuel price show the level of fuelprices aer government interventionthat is partly done for the purpose ofinternalising external costs (see 4.2.1 How to treat fuel prices and taxation?).

4.1.2 How much on average is spent ontransport?

The indicator Expenditure on personalmobility (TERM 24) partly answersthis question. However, the indicator

touches upon passenger transport only.A similar indicator could reflect theaverage costs of the transportation ofgoods compared to other costs suchas those related to the productionand distribution of goods, but suchdiscussion falls out of the scope of thisreport.

4.2 Monitoring changes in

transport charging policy

The key question related to transportcharging policy is (see Section 2.4):

Are transport taxes and charges,which are imposed on each individualtransport movement, becoming beeraligned (in terms of both their structureand level) with marginal infrastructureand other external costs?

Before discussing in detail whatindicators need to be adjusted or addedto the monitoring system in order tobe able to answer this question, a fewmethodological issues need to be solvedfirst.

4.2.1 Some methodological issues

How to treat revenues from transportcharging?

The revenues of transport pricingplay an important role in fiscal policy.Marginal social cost pricing impliesthat users should be charged for theadditional costs they cause by using

Following the indicator description ofthe previous chapter, the question ishow to revise this indicator set in sucha way that it best reflects the theoreticalprinciples and political discussions asset out in Chapter 2.

As discussed in Chapter 2, the pricesignal indicators should monitorchanges in transport user prices on theone hand, and changes in transportcharging policy on the other. These

two dimensions of monitoring are thesubject of discussion in the followingtwo sections.

4.1 Monitoring changes in

transport user prices

The key question related to transportuser prices is (see Section 2.3):

How are transport user prices evolvingby mode and what is the impact of thaton transport demand?

From this key question, two sub-questions follow:

1. How do transport prices evolve bymode?

2. How much, on average, is spent ontransport?

4.1.1 How do transport prices evolve bymode?

Despite having some weaknesses, theindicator already in use Transportuser prices (real change in passengerand freight transport price by mode)(TERM 20) provides suffi cientinformation to answer this sub-question.This indicator will remain unaffected.

The indicator on fuel prices and taxes(TERM 21) provides a more detailedanalysis than when looking solely atthe total fuel price. The tax and chargecomponents and their share in the


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transport services, but not for sunkcosts, such as costs of infrastructureconstruction financed from publicfunds. Recovering these costs willdiscourage optimal use of capital stockthat has already been paid. This raisesthe question whether transport chargesfor marginal infrastructure and externalcosts will suffi ce to fund investmentin new infrastructure. This issue wasinvestigated in several reports over thelast years, for example in a recent ECMTreport on optimal taxes and charges(ECMT, 2003b). The main conclusionfrom these studies is that at the levelof the transport sector as a whole revenues from optimal charges would

exceed the fixed and variable costs ofinfrastructure.

Revenues from transport pricing will notbe included in the monitoring system, asthese total revenues give no indicationas to whether transport pricing policy ismoving in the right direction or not.

How to treat subsidies, for example onpublic transport?

Some transport sectors are currentlysubsidised. In particular, publictransport by bus and, generally toa somewhat lesser extent, by trainis subsidised by national, regionaland local governments. Subsidiesinfluence the net charge levels that arelevied upon transport. For example,subsidising train tickets on the onehand may cancel the financial effect ofcharges for the use of rail infrastructure.As such, subsidies could be classified as

negative charges. This approach was, forexample, followed in the study Effi cientprices for transport (CE Del, 1999).

Transport subsidies will not be includedin the quantitative analysis of transportcharges and costs for two reasons.

Including subsidies in the calculationof net charge levels would implythe statement that ideally no single

form of transport were to receivesubsidies. This is a statement thatcannot be underpinned in thecontext of this report.

It would require an enormouseffort to gather and update dataon subsidies given to all kinds oftransport in all Member States.Usually such data are very hard toget and hard to assess. The currentTERM monitoring system alreadycontains an indicator on Transportsubsidies, but this indicator wasnever implemented, due to lack ofdata. Although it would be useful tohave this indicator implemented, nochanges are expected with respect todata availability.

How to treat expenditure oninfrastructure costs?

A second important category ofgovernment expenditures, besidessubsidies, includes transportinfrastructure costs.

Costs consist of investment cost andrunning costs, which need to be treateddifferently.

Infrastructure investments will not beincluded in the monitoring system for

transport pricing, because the indicatorson transport pricing should be limitedto the transport costs and charges thatare marginal, that is, directly dependenton infrastructure use. Infrastructureinvestment is typically a sunk, thatis, non-marginal, cost of mobility andshould therefore not be included in acharging system. In an economicallyeffi cient framework, decisions oninfrastructure investment should bebased on social cost-benefit analysis,

taking into account the costs and benefitsof additional infrastructure for thesociety, economy and the environment.

How to treat other fixed costs (parking),and fixed charges?Not all external costs of transport dovary with traffi c volume, and certainlymany transport charges do not. Forexample, external costs of parking those space costs that are not

including in the parking costs onlyapply to standing vehicles. Parking costsand fees can be considered as marginalfees as they vary with parking time andrepresent opportunity costs of the space


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foregone. However, for reasons of scopeand data availability, they will not beincluded in the monitoring system ontransport charging.

Vehicle purchase taxes (in the countrieswhere they are applied) and ownershiptaxes do not depend on traffi c volumeand hence cannot be used to pricemarginal costs, although they may varywith environmental characteristics ofthe car on which they are imposed. Therevenues of these charges are a sourceof government income and are used inpart for investment in and maintenanceof infrastructure. When marginal socialcost pricing results in (an increase of)

variable charges, then the financialburden will increase and fixed chargesmay be used for offseing (part of)the increased burden. Marginal socialcost (MSC) pricing implies chargingfor marginal (variable) infrastructureand other external costs, hence fixedinfrastructure costs are not coveredunder this principle. There is, however,evidence that optimal pricing accordingto this principle results in revenues

from the transport sector that exceedthe revenues of the traditional chargingsystem (R. Roy et al., 2003).

How to treat fuel prices and taxation?We devote special aention to the issueof fuel taxation and fuel prices, as itcan be considered from three possibleviewpoints.

1. Fuelprices are an important variablebehind transport user prices and

therefore transport demand andmodal split (see Section 4.1.1).

2. Fuel taxation influences transportprice levels. Fuel taxation is, on aper-kilometre basis, currently oneof the most important elements inEU transport pricing. An importantadvantage of the fuel tax abovefixed taxes is that the charge to bepaid varies with the mileage driven.Moreover, it is an instrument that

is available for practical use in theshort term.3. Fuel taxation also influences

transport price structures. Fuel taxesare, in some cases, directly linked

to fuel-related emissions like CO2

(related to carbon content), SO2

(related to sulphur content), andto lead in the past. Differentiationof fuel taxes on the basis ofthese contents therefore can beconsidered a first-best instrumentto make users pay for the costsof these emissions. Although fuelconsumption of specific vehiclesgenerally shows some statisticalcorrelation with safety risks,other pollutant emissions, andinfrastructure damage, fuel taxationis generally not considered a first-best instrument to make users payfor these costs. The reason for this is

that the fuel tax does not give directincentives to reduce safety risks,pollutant emissions, or infrastructuredamage costs (see, for an overviewof possible instruments, Table D.1 inAnnex D).

Currently, EU-wide developments inpetrol and diesel prices and taxationare treated in the TERM indicator onfuel prices and taxes (TERM 21). This

indicator will be maintained to servetwo purposes:

the total fuelprices will be used indetermining the transport user prices(see Section 4.1.1);

the fuel tax component recalculated per kilometre for thevarious modes will be used todetermine the transport charge levels(see Section 4.2.4), whereas the fueltaxes per unit of CO

2emissions

will be treated for the analysis oftransport charge structures (seeSection 4.2.5).

How to treat VAT?The question now arises whether VATon excise duty and other charges oughtto be included in the transport chargingindicators.

From a tax law point of view, it could

be contended that VAT on excise dutyand other charges should be consideredas a specific transport tax and thereforeincluded here as a charge, because VATon excise duty is a tax on tax.


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From an economic point of view,however, excise duty and fixed vehiclestaxes should be assessed as payment forservices provided by the governmentin accordance with the direct benefitprinciple as intended in publicrevenue and expenditure statements.In this case, VAT on excise duty isgeneral taxation and not a special tax ontransport. The absence of VAT liabilityon some fixed vehicle taxes is a flawviewed from this angle.

In seeking to achieve a proper allocationof costs to the transport user, theeconomic approach to VAT should befollowed and not that of tax law. This

is why we have not included VAT onexcise duty in this study (4). The vastmajority of other studies follow thisapproach.

With respect to the indicators oftransport user prices, VAT is of courserelevant as it increases these pricesand hence affects behaviour. In theseindicators, VAT is therefore includedwhere relevant.

4.2.2 Definition of three sub-questions

Aer the methodological descriptionsand principal choices following fromthe previous chapters, there is enoughground for defining the sub-questionsfalling under the umbrella of monitoringcharging policy, to be answered withindicators.

The following sub-questions can be

distinguished.

1. What are the marginal infrastructureand other external costs of differentforms of transport and how muchof these costs are reflected in thetransport charges levied?

2. Are transport charge levels movingtowards marginal infrastructure andother external costs?

3. Are transport price structures

becoming beer aligned with

marginal infrastructure and otherexternal costs?

Each of the three sub-questions will befurther dealt with in the next sections.

4.2.3 Answering sub-question 1:External costs and charges pervehicle type

The question to be answered is: Whatare the marginal infrastructure and otherexternal costs of different forms of transportand how much of these costs are reflected inthe transport charges levied? The indicatorused will be External costs and chargesper vehicle type. The indicator will

provide an overview of the currentknowledge of marginal infrastructureand other external costs of differenttransport modes and vehicle types in theEU, and an overview of current chargeslevied on them. The indicator providesa static image of the current degreeof integration of costs and charges,and serves as a basis for the other twoindicators.

This indicator is probably the toughestone to implement seen from themany different transport modes andtransport circumstances whileat the same time it is also a veryimportant one to implement, as itforms an information basis for theother charging policy indicators (seeSection 4.2.4 and Section 4.2.5). It isexactly this information basis theexternal costs per vehicle type undervarious circumstances that raises

a lot of discussion. If this informationbasis is agreed upon, disagreements onthe other two indicators will be muchsmaller.

The nature of the sub-questionfurthermore implies that one singlegraph can never give enoughinformation. Marginal externalcosts vary by time, by location,by vehicle type, etc. Only a rather

sophisticated charging system will

(4) In reality, charges that do not attract VAT should also be corrected for the lack of VAT. In this case, however,we have elected not to do so because the government shows, through the absence of VAT liability, that theydeem these charges to be fiscal rather than economic in nature.


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be able to optimally deal with thesedifferences. Therefore, any indicatorthat aims to monitor external costs andcharges per vehicle type should containa set of graphs, providing a bestcompromise between accuracy andcomprehensiveness.

The indicator is for informationpurposes only and will not receive ajudgement (, or ). Aer all, theindicator provides an overview of thestatus quo: no trends away or towardsobjectives can be deduced from that.

Current indicatorsCurrently, the indicator on external costs

of transport (TERM 25) shows minimumand maximum (of per-country-averages)marginal infrastructure and otherexternal cost estimates of a selectednumber of vehicle types for allpassenger and freight transportmodes under a selected number ofcircumstances. A sub-indicator showsthat total external costs are large(approximately 8 % of GDP).

ModificationsThe main modification is thatinformation on transport charges willbe added. Furthermore, the numberof vehicle types to be assessed willincrease.

The key chart of the indicator shouldpresent:

Costs: worst and best case (seeTable 4.1) estimates of externaland infrastructure costs of differentmodes of freight transport, for onevehicle-kilometre travelled. Freightis chosen because EU-wide transportcharging is largely focusing onfreight, for internal market reasons.The following marginal cost itemswill be included: infrastructure; safety risks; air pollution; climate change;

noise.Congestion costs will not beincluded as these vary too widelydepending on the actual capacityutilisation (the costs may varybetween zero and something likeEUR 1 per kilometre);

Charges: current distance- or fuel-dependent European charges, pervehicle-kilometre, for Member Stateswith lowest and highest charges.

A possible sub-indicator could be anidentical presentation for passengertransport. In addition, the informationon total external costs, in billion euro orpercentage of GDP, will be retained asa second sub-indicator. The last sub-indicator has, strictly speaking, nothingto do with changes in charging, but isincluded to outline the importance ofexternal costs.

Table 4.1 Vehicle categories and traffic conditions to be included in the indicator

External costs and charges per vehicle type

Freight transport (main indicator) Passenger transport (sub indicator)

Road best case: a Euro 3 vehicle (produced200106) travelling 1 km on a motorwayoutside peak hours

Road worst case: Euro 1 (produced 199397)vehicle travelling 1 km inside an urban areaduring peak hours

Rail best case: an electric train runningoutside urban areas

Rail worst case: a diesel train running insideurban areas

Inland vessel: 1 average estimate

Sea vessel: 1 average estimate

Freighter aircraft: 1 average estimate

Passenger car best case: a Euro 3 vehicle(produced 200106) travelling 1 km on amotorway outside peak hours

Passenger car worst case: a Euro 1 vehicle(produced 199397) travelling 1 km inside anurban area during peak hours

Diesel bus: 1 average estimate

Rail short/medium distance; 1 average

estimate High-speed rail; 1 average estimate

Passenger aircraft: 1 average estimate


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A fictitious example of such an indicatoris shown above.

From this graph the followinginformation can be deduced:

1. With respect to the level of costs (themarginal infrastructure and otherexternal costs) available studiesshow that minimum and maximumestimates, excluding congestion,are EUR 0.10 and 0.19 per vehicle-kilometre respectively depending onthe Member State.

2. With respect to the level of charges,available evidence suggest thatcurrent charges are generally toolow.

3. With respect to the structure of costs,all cost categories have about thesame order of magnitude.

4. With respect to the structure ofcharges, it appears that this does notat all correspond with the structureof costs. In the case of road, the

largest part of charges is capturedby the fuel tax that only has a directand causal link to CO

2emissions,

which contribute to climate change.Other costs are hardly reflected in

charges, with the exception of thenew German kilometre-charging

scheme, which is partly dependenton the emission class of the vehicle.In the case of rail, most charges arerelated to the use of infrastructurecapacity. No countries have chargesdifferentiated with respect to tractiontype, noise emied, etc.

4.2.4 Answering sub-question 2:Progress in charge levels

The question to be answered is:Are

transport charge levels moving towardsmarginal infrastructure and other externalcosts? The indicator used is calledProgress in charge levels and providesa more dynamic image of the level ofuse-dependent charges levied upontransport in Europe. If this indicatordevelops according to plan, up- ordownward trends in the total level ofuse-dependent charges will becomevisible in a few years time.

The aim of this indicator is to assesswhether the average level of use-dependent charges per vehicle-kilometreis geing closer to the best available

Figure 4.1 Fictitious overview of the main indicator for freight transport

(40-tonne lorry)

0

5

10

15

20

25

Accidents

Noise

Climate change

Air pollution

Infrastructure

ChargesCosts

Eurocentsperkilometre


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estimates of marginal infrastructure andother external costs. Note that geingcloser does not automatically implythat taxes or charges should always beraised. There are situations where thetotal level of taxes exceeds marginalcosts, for example for passenger cartravel in rural areas outside rush hours.Taxation and marginal costs could bebrought more in line when fixed taxesand charges are reduced.

Current indicatorTERM currently contains an indicatorcalled Transport taxes and charges(TERM 22), but this indicator is neverimplemented due to lack of information

and a clarity on the most suitablemethodological approach.

ModificationsAs a main indicator, the mode-averagetrend in distance and fuel dependenttaxes and charges in freight transportwill be developed. The indicator on fuelprices and taxes will provide the basisfor calculating the fuel dependent taxesand charges.

The assessment of the indicator (is anupward trend positive or negative?)depends on the results of the indicatorsdeveloped under the heading of theprevious key question (Section 4.2.3). Ifthe taxes and charges generally appeartoo low, an upward trend is deemedpositive, and vice-versa.

Technically, the elaboration of suchan indicator is rather complex for the

following reasons.

No specific studies have beendone on this issue. No completeoverviews of current transporttaxes and charges are available forall EEA Member States. The OECDdatabase on environmental taxes andcharges is one of the sources, but wasnot developed specifically for thispurpose. Therefore, much new data

collection work needs to be done. With respect to the calculation offuel tax per vehicle-kilometre, theboleneck is primarily developmentsin the fuel effi ciency of the various

transport modes. This informationis rather incomplete. The transportand environment database system developed by the Directorate-Generalfor Transport and Energy andEurostat might play an importantrole in delivering such data.

With respect to other use-dependentroad transport taxes and charges,such as French, Italian, Spanish and,especially in the near future, Germanand Austrian motorway charges,the boleneck is that informationon the percentage of kilometresdriven on the motorway networkis incomplete, and thus a weightedaverage price development is hard to

calculate. With respect to the acceding and

candidate countries and non-road modes, the data availabilityis expected to be even morelimited. Therefore, priority goes todevelopments in EU-15 road charges,with the highest priority to freighttransport. Acceding and candidatecountries, and non-road modes canfollow at a later stage.

It can be expected that it will not betechnically feasible to calculate thedevelopment of charges per kilometrein exact percentages per year. But, itwill probably be possible to provideassessments like (fictitious numbers).

Available evidence suggests that theaverage level of charges paid perkilometre driven in a petrol-fuelledcar has dropped by more than 1 %

per year, which is considered as astrong negative trend.

Average charges paid by trucks onmotorways have risen between 0 and1 %, which is considered a slightlypositive development.

These assessments can be comparedwith a desired trend that is derivedfrom the previous indicators (externalcosts and charges per vehicle type, see

Section 4.2.4). Based on the exampleFictitious overview of the main indicatorfor freight transport (40-tonne lorry) (seeFigure 4.1), an upward trend is positive,a downward trend is negative.


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The final assessment is a when for all

modes the assessment is at least zeroand at least a quarter of al modes showsprogress, when there is no progress,and a neutral score in other cases.

In addition to the European averagetrend, more detailed informationcan be provided for by spliing upthe situation for different MemberStates (for example, Germany showsgood trends with introduction of the

kilometre-charge and increase of fueltaxes).

A possible sub-indicator could bean identical analysis for passengertransport.

4.2.5 Answering sub-question 3:Progress in charge structures

The question to be answered is:Aretransport price structures becoming beer

aligned with marginal infrastructure andother external costs? The indicator usedis called Progress in charge structures.This indicator provides a more dynamicimage of the degree in which varioustransport charges in various transportmodes are becoming more differentiatedor modulated on the basis of externalcosts, such as emissions or congestion.

The purpose of this indicator is to

assess whether transport pricing inEurope develops from flat, fixed orvariable, undifferentiated taxes that donot relate to external costs, to a morerefined (diversified) system that takes

infrastructure, safety, environmental and

congestion costs of specific vehicles indifferent times and places into account.

Current indicatorsThis question is currently assessed withthe indicator internalising of externalcosts (TERM 26). This indicator consistsof a number of tables with tick-marks() that indicate whether instrumentsthat directly apply to an external costcomponent are introduced in different

transport modes.

ModificationsThe table with tick-marks needs to beimproved and the analysis behind itneeds to be expanded. The indicator onfuel prices and taxes will provide thebasis for filling in the table concerningfuel dependent taxes and charges.

Firstly, the table with ticks will be mademore dynamic, so that it can be easily

seen whether any new refinementshave been introduced, or abolished.For example, ticks for new instrumentsbecome green, and ticks for abolishedinstruments become red. In this way,good and bad trends become visible.Examples of new developmentsinclude the German kilometre-chargesystem (November 2003), the Londoncongestion charge system (February2003), and the Dutch abolition of

purchase tax breaks for fuel-effi cientvehicles (January 2003). In addition,the total EU score of ticks could becalculated and compared with last yearsscore.

Table 4.2 Overview of possible score table for the freight transport modes

Trend in gap between MIEC and variable charges

Light lorry, motorways 0

Heavy lorry, motorways +

Light lorry, other roads Heavy lorry, other roads

Freight train, electric

Freight train, diesel

Inland shipping

Sea-borne shipping

Air freight

Notes: gap is becoming larger0 gap stays roughly equal;+ gap becomes smaller


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Secondly, categories will be added to thetable for special urban pricing schemesthat have multiple purposes, such asreducing urban congestion, improvingurban air quality, etc. (for example,London) and for shis from fixed tovariable taxation. The lines on leadedpetrol will be removed because this fueltype is phased out in the EU and close

to becoming phased out in the accedingand candidate countries.

Thirdly, the ticks will be weighedwith respect to their importance and

effectiveness. This weighing willbe based on a number of criteria, asfollows.

The quantitative importance of theinstrument concerned: how large isthe total incentive provided by theinstrument?

The degree in which the

differentiation is directly linked toenvironmental impact. For example,environmental differentiation offixed motor vehicle taxes is lessdirectly linked to environmental

Table 4.3 Indicator on internalisation of external costs: transport tax structures in EU Member States

A

ustria

B

elgium

D

enmark

Finland

France

G

ermany

G

reece

Ir

eland

It

aly

Luxembourg

N

etherlands

Portugal

S

pain

S

weden

U

KE

Ut

otal

Non-fuel-related taxes and charges

Air pollution Rail transport 1

Aviation 1

Water transport 6

Road freight 9

Road passenger 6

CO2

Rail transport 2

Aviation

Water

Road freight

Road passenger 3

Noise Rail transport

Aviation 7

Water transport

Road freight 2

Road passenger

Congestion Rail transport

Aviation

Water transport

Road freight 1

Road passenger 1

Total number of measures(excluding fuel taxes)

3 3 3 3 1 6 1 1 4 1 2 5 6 39

Fuel related taxes and charges

Lower tax for low-sulphur fuel

Carbon tax on diesel and petrol

Note: A tick in the above table means that tax and charges have been framed to provide a direct link between the tax/charge and the specific

external cost addressed. It does not necessarily mean that this external cost has been fully internalised. It also gives no information onthe absolute size of the charge or its revenues.

Source: EEA (National Reference Centres); Boeing, 2002; ACEA, 2001.


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impacts than environmentaldifferentiation of variable charges;also differentiated harbour duesbeer reflect environmental impactsthan fixed dues.

The degree in which thedifferentiation is roughly suffi cientto account for the external costsas mentioned in the previous factsheets.

Important changes will be marked boldred or bold green and count for two, lessimportant ones red or normal green. Theticks could stay that colour for a periodof three years or so.


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27Summarising the revised indicators for transport price signals

5 Summarising the revisedindicators for transport pricesignals

The graphical overview of the indicatorsin TERMs price signals group hasnow slightly changed compared to theprevious version (see Figure 3.1 onpage 14) and is presented in Figure 5.1.

There are two different types oftransport price signals. One type ofsignal is related to transport (user)prices and the other to transportcharging policy. The TERM indicatorsdealing with price signals should beable to monitor trends within bothdimensions.

One key question is defined for eachof the two price signal dimensions. For

each of these key questions a numberof sub-questions with indicators linkedto them are defined. The key questions,sub-questions and indicators on pricesignals are all summarised in Table 5.1.

Table 5.1 Overview of key- and sub-questions and the revised indicators to provide the

answers

Key question Sub-question Indicator(s) Static or

dynamic

1. How are transportuser prices evolvingby mode and what isthe impact of that ontransport demand?

1.1 How do transport pricesevolve by mode?

Transport user prices(real change in passengerand freight transportprice by mode)'(TERM 20)with input from fuelprices and taxes(TERM 21)

Dynamic

1.2 How much on average isspent on transport?

Expenditure on personalmobility (TERM 24)

Dynamic

2. Are transport taxesand charges, whichare imposed on eachindividual transportmovement, becoming

better aligned(in terms of boththeir structure andlevel) with marginalinfrastructure andother external costs?

2.1 What are the marginalinfrastructure and otherexternal costs (MIEC)of different forms oftransport and how

much of these costs arereflected in the transportcharges levied?

External costs andcharges per vehicle type

Static

2.2 Are transport chargelevels moving towardsmarginal infrastructureand other external costs?

Progress in charge levelswith input from fuelprices and taxes(TERM 21)

Dynamic

2.3 Are transport pricestructures becomingbetter aligned withmarginal infrastructureand other external costs?

Progress in chargestructureswith input from fuelprices and taxes(TERM 21)

Dynamic


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Figure 5.1 TERM indicators in the revised group on price signals and their

interrelationships

= Indicator

External costs and

charges per vehicletype

Progress incharge levels

Fuel pricesand taxes

Transport user prices

Transport demandModal split

Exependiture onpersonal mobility

Progress incharge structures

Transport prices Transport charging policy


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29References

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7 List of terms and abbreviations

EUR EuroCO

2Carbon dioxide, the principal greenhouse gas

Environmental costs Financial value assigned to negative environmentaleffects, based either on the costs of damage or on the costsof prevention, reduction or restoration

External costs An external cost is a cost not included in the market priceof the goods and services being produced, that is, a costnot borne by those who create it

External effects(of mobility)

Effects not taken into account by users in their transportdecision; in this report, the following are designatedexternal effects: noise nuisance, emissions, traffi caccidents (in part) and congestion

Greenhouse gas A gas that contributes to the natural greenhouse effect,that is, warming of the atmosphere due to the reductionin outgoing solar radiation resulting from concentrationsof such gases

HC Hydrocarbons; in this report, all hydrocarbonsInternalisation (ofinfrastructure andother external costs)

Incorporation of external effects into the marketdecision-making process through pricing or regulatoryinterventions

Marginal costs Additional costs of one extra unit of mobility, one extravehicle, vessel or aircra kilometre

MIEC Marginal infrastructure and other external costs

NOx Generic term for oxides of nitrogen (NO, NO2, and manyother), which contribute to acid rain, eutrophication andtropospheric ozone formation and indirectly to globalwarming and ozone layer changes

Effi cient transportpricing policy

A pricing policy in accordance with effi ciency principles,where the marginal social costs are imposed on theinfrastructure users through appropriate taxes andcharges

Passenger-kilometre passenger-kilometre, unit of passenger transportprovision: one person moved one kilometre

Transport (user) prices The price users pay per passenger kilometre of vehicle-kilometre of a certain transport mode

Transport charging A system in which governments impose specific transporttaxes and charges, for example, on fuels, vehicles, andinfrastructure use

SO2

Sulphur dioxideSocial costs(of mobility)

All costs, including external costs entailed by transportmobility.

Tonne-kilometre Tonne-kilometre, unit of freight transport provision: onetonne moved over one kilometre

Vehicle-kilometre Vehicle-kilometre, unit of transport: one vehicle movedover one kilometre


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33Annex A List of TERM indicators

Annex A List of TERM indicators

Code IndicatorGroup I Environmental consequences of transport

TERM 01 Transport final energy consumption by mode

TERM 02 Transport emissions of greenhouse gases by mode

TERM 03 Transport emissions of air pollutants (NOx, NMVOCs, PM

10, SO

x) by mode

TERM 04 Exceedances of air quality objectives (due to traffic)

TERM 05 Exposure to and annoyance by traffic noise

TERM 06 Fragmentation of ecosystems and habitats by transport infrastructure

TERM 07 Proximity of transport infrastructure to designated areas

TERM 08 Land take by transport infrastructure

TERM 09 Number of transport accidents, fatalities and injured (land, air and maritime)

TERM 10a Accidental oil spills from marine shipping

TERM 10b Illegal discharges of oil from marine shipping at sea

TERM 11a Generation of waste from end-of-life vehicles

TERM 11b Waste oil and tyres from vehicles

Group II Transport demand and intensity

TERM 12 Passenger transport demand by mode and purpose

TERM 13 Freight transport demand by mode and group of goods

Group III Spatial planning and accessibility

TERM 14 Access to basic services (average passenger journey time and length per mode,purpose and location)

TERM 15 Regional accessibility of markets and cohesion

TERM 16 Access to transport services

Group IV Supply of transport infrastructure and services

TERM 18 Capacity of transport infrastructure networks

TERM 19 Investments in transport infrastructure per capita and by mode

Group V Transport costs and prices

TERM 20 Transport prices (real change in passenger and freight transport price by mode)

TERM 21 Fuel prices and taxes

TERM 22 Transport taxes and charges

TERM 23 Subsidies

TERM 24 Expenditure on personal mobility by income group

TERM 25 External costs of transportTERM 26 Internalisation of external costs

Group VI Technology and utilisation efficiency

TERM 27 Overall energy efficiency and specific CO2

emissions for passenger and freighttransport (per passenger-km and per tonne-km and by mode)

TERM 28 Emissions per passenger-km and per tonne-km for NOx, NMVOCs, PM

10, SO

xby

mode

TERM 29 Occupancy rates of passenger vehicles

TERM 30 Load factors for freight transport

TERM 31 Uptake of cleaner and alternative fuels

TERM 32 Size and composition of the vehicle fleet

TERM 33 Average age of the vehicle fleet

TERM 34 Proportion of vehicle fleet meeting certain emission standards (by mode)


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Code Indicator

Group VII Management integration

TERM 35 Number of Member States that implement an integrated strategy

TERM 36 Institutional cooperation in transport and environment

TERM 37 Number of Member States with a national transport and environment monitoring

systemTERM 38 Uptake of strategic environmental assessment in the transport sector

TERM 40 Public awareness and behaviour


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35Annex B Current TERM transport pricing indicators

Annex B Current TERM transportpricing indicators

This annex presents a brief overview ofthe TERM indicators that belong to theindicator group price signals and thathave so far been produced (for a full listof indicators see Annex A):

transport prices (real change inpassenger and freight transportprices by modes);

fuel prices and taxes; expenditure on personal mobility

per person by income group;

total amount of external costsby transport mode (freight andpassenger); average external costper passenger-km and tonne-km bytransport mode;

implementation of internalisationinstruments (that is, economic policytools with a direct link with themarginal external costs and the useof different transport modes.

Transport prices(real change in passenger and

freight transport prices by modes)

Indicator title:Transport prices (real change inpassenger and freight transport pricesby mode)

90

95

100

105

110

115

120

125

Consumer prices

Water

Air

Road

Rail

200019991998199719961995

Source: Eurostat, 2002.

Key graph Real average EU-15 passenger transport price indices, 19952000 (1995=100)

Code:TERM 20

Key messageOn average, passenger transport priceshave increased at a higher rate thanconsumer prices over the past fiveyears a rather short period of time.In three countries (Denmark, Italyand Luxembourg), the opposite hasoccurred. Air transport prices haveshown the lowest increase in price of all

transport modes. For freight transportprices, no EU-wide data exists, but aDutch example shows that the prices ofroad, rail and inland waterway transporthave decreased by 36, 45 and 52 %respectively over the past 20 years.

Environmental contextIncreases in transport prices can havean impact on the environment. Thereduction of environmental impacts

can come either from substitutionbetween modes, or from improvedenvironmental performance of transportmodes. An electric locomotive producesmuch lower emissions than a diesel-powered one, and a Euro 5 lorryproduces 8090 % lower emissionsthan a Euro 1 lorry. Fair and effi cient


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prices should reflect such differences.Higher across-the-board transport pricesmay also result in lower demand fortransport.

Fuel prices and taxes

Indicator title:Fuel prices and taxes

Code:TERM 22

Key messageThe inflation-corrected EU averageprice of road fuel in January 2002

was about 510 % lower than in thefirst half of the 1980s. However, someincentives have been given to reducetotal fuel consumption and CO

2

emissions, because the share of taxes inthe fuel price has increased. The pricedifferential between petrol and dieselhas become smaller. Petrol becameabout 1520 % cheaper, diesel about10 % more expensive, primarily due tohigher diesel taxes. In rail transport,

fuel taxes are much lower; inland andseaborne shipping and aviation pay nofuel tax at all.

Key graph Real average EU-15 prices of a) diesel b) petrol (weighted average leaded/

unleaded), and c) weighted average petrol and diesel, over the period

19802002 (January 1986=100)

Note: Prices are those applicable in the middle of January, April, July and October each year.

Source: Eurostat, different volumes.

60

70

80

90

100

110

120

Weighted average

Petrol

Diesel

20001995199019851980

Environmental contextFossil fuel consumption is directlylinked with CO

2(the primary

greenhouse gas). The links with otherpollutant emissions (for example, NO

x,

HC, NMVOC, etc.) and noise alsodepend on vehicle technology (Euroand noise classes) and trip conditions,as well as the type of fuel. Therefore fueltaxes, originally instruments of fiscalpolicy, are also seen as instruments toreduce emissions from transport, inparticular CO

2. First, fuel taxes stimulate

reductions of fuel consumption, forexample, by stimulating fuel effi ciencywithin all modes. Secondly, they canstimulate a shi towards cleaner fuels,

for example from leaded towardsunleaded petrol, or to low-sulphur fuels.


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37Annex B Current TERM transport pricing indicators

Expenditure on personal mobility

per person by income group

Indicator title:Expenditure on personal mobility perperson by income group

Code:TERM 24

Key messageThe proportion of householdexpenditure on transport reflectschanges in income and consequent

Key graph Household expenditure on transport as share of total expenditure

Source: Eurostat.

0

3

6

9

12

15

Private transport

Public transport

19961992198819841980

Household bu

pricing technical report 3-2004 web

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