Tax and Regulatory Policies for European Transport Getting There, But in the Slow Lane

Abstract

This paper reviews policy developments in the EU transport sector. The EU has successfully introduced the external cost concept into policy thinking. In the policy orientations, there has been too much emphasis on climate and energy objectives. Also modal share objectives are popular among policy makers but are not a good guideline for transport policies. The transition from high fuel taxes to distance charges has begun for trucks, but the charges need to be differentiated according to place and time. The same transition will also develop for cars, as soon as implementation costs have been reduced and public acceptance has improved. EU transport policy priorities can be to allow and promote the progressive substitution of high diesel and gasoline taxes by other car and truck user charges that depend on place and time, to scale back overambitious implementation of biofuel and electric car policies and reorient resources to R&D for cleaner vehicles, to efficiently regulate distance charges for trucks and to assure an unbiased assessment of infrastructure investment needs. Member country priorities can be to move away from high vehicle ownership and fuel taxes to local congestion charges; the extra burden on motorists might be offset by scaling back vehicle excise taxes and to complement the introduction of road pricing with peak-load pricing for public transport. 1 We thank Ian Parry for several rounds of detailed suggestions, and Herman Vollebergh, Kurt Van Dender and the participants of the CESIfo/EC/IMF/PBL conference on "Energy Tax and regulatory policy in Europe: reform priorities and research needs" (Munich, nov 2014) for useful comments on a first draft. We are grateful to EIBurs program for financial support and to Chau Man Fung for research assistance. transport 3. Airplanes, cars and trucks use almost exclusively oil products and are the most carbon intensive activities in the transport sector. Passengers (€ct/vkm for cars and buses and €ct/tkm or pkm for rail and air) Freight (€ct/vkm for trucks and €ct/tkm for rail) Urban (20%) Medium to long distance (80%) local Medium to long distance Cars (70%) Other (30%) Cars (80%) Rail, air (20%) Trucks (100%) Trucks (72%) Rail, ship, pipeline (28%)

Taxing vehicles, fuels, and road use

“…There is evidence that vehicle taxes have strong effects on vehicle choice, so they are effective in that sense see, e.g., (OECD, 2016 [17]). However, setting taxes at appropriate levels is difficult, and experience suggests vehicle taxes risk resulting in high abatement costs and high costs in terms of revenue forgone (see (D'Haultfoeuille, Givord and Boutin, 2013 [18]).…”

“…Fiscal objectives could then be met through a second instrument. However (D'Haultfoeuille, Givord and Boutin, 2013 [18])show, on the basis of the experience with the French feebate ("bonus-malus system"), that careful policy design is needed as otherwise unexpected and unintended effects can occur (in casu, higher CO2 emissions in the short run given increased acquisition of new vehicles with only marginally lower emissions).…”

“…Concerns about interactions between transport taxation and urban land use arise mainly from the potential impact of low transport prices on urban sprawl 18 and the associated negative effects (such as reduced biodiversity, higher emissions from transport fuel use and energy use in homes, reduced aesthetic value, higher costs of public infrastructure, etc.). Conversely, the exacerbating effect of urban sprawl on transport volumes and the external costs that come with them are often criticised as well.…”

Reforming the EU Energy Tax Directive: Assessing the Options

“…As regards other vehicle externalities, the main ones are congestion (costs that drivers impose on other road users through adding to delays on busy roads), accidents (risks drivers pose to pedestrians and other vehicle occupants and to third parties through property damages, medical costs, and so on) and wear and tear on the road network (mainly caused by vehicles with heavy axle weights). All of these externalities are better addressed through other measures than fuel taxes (e.g., de Borger and Proost 2014), such as peak period congestion fees and kilometer-based tolls on trucks related to their axle weight, and set at a national or sub-national level. Until these more novel pricing instruments are comprehensively implemented however, economic efficiency requires reflecting all these environmental costs in existing fuel taxes.…”