Presentation to the UWE , Wavre 15/11/2014 Vicenç PEDRET CUSCÓ Deputy Head of Unit

1.  Charging for infrastructure use and the internalisation of externalcostsIn the context of the Mid-term review of the European Commission’s 2001 White Paper on Transport Presentation to the UWE, Wavre 15/11/2014 Vicenç PEDRET CUSCÓ Deputy Head of Unit Unit Economic Analysis, Impact Assessment, Evaluation and Climate Change EUROPEANCOMMISSION

2. PRICING IN THE CONTEXT OF THE COMMON TRANSPORT POLICY OBJECTIVES • INTERNAL MARKET, FREE PROVISION OF TRANSPORT SERVICES WITH NON DISTORTED COMPETITION: AVOID NATIONAL DISCRIMINATION TO TRANSPORT SERVICE OPERATORS • TRANS-EUROPEAN NETWORKS, COHESION AND ACCESSIBILITY: PERIPHERY VS TRANSIT COUNTRIES • MODAL INTEGRATION: LEVEL PLAYING FIELD • SAFETY: INTERNALISATION, REGULATION • INTEGRATION OF ENVIRONMENT : INTERNALISATION, REGULATION, POLLUTER PAYS PRINCIPLE. • EMPLOYMENT: SOCIAL EFFECTS OF PRICING

3. THE 2001 WHITE PAPER • To fight congestion, accidents and CO2 emissions without hampering economic growth. • Objective: gradual decoupling of transport and GDP by re-balancing modal split and improving quality and safety.

4. A changing transport context: Evolution of transport demand and GDP EU-25 (1995=100) Directorate-General for Energy and Transport

5. Most likely 2000-2020 growth in demand European transport Overall • Freight: +50% • Passengers: +35% • GDP: +52% Freight • Road: +55% • Rail: +25% • Short sea shipping: 59% • Inland Waterways: +28% Passenger • Private car: +36% • Rail: +19% • Aviation: +108% Directorate-General for Energy and Transport

6. A changing transport context • Environmental commitments (Kyoto) • Dependency on expensive foreign oil • Changed international context: terrorism, globalisation • Low economic growth (at the time), ageing and pension burden on growth and productivity • Enlargement: EU has continental dimension, transport environment is more diverse • Evolving transport industry: consolidation, internal market • Innovation, new solutions

7. The 2006 White Paper mid-term review • Policy lines to continue along the lines set by the 1992 and 2001 White Papers • A broader and more flexible toolbox to meet new challenges: from LIPS in 2001 to LIPS + LUIS in 2006 (*) • To optimise transport modes separately and in conjunction: "co-modality". • In the short term, decoupling of negative effects of transport. (*) Liberalisation, Investment (TENs), Pricing, Safety Logistics, Urban transport, Innovation (ITS,biofuels), Security

8. A changing transport context: Conventional air pollutants and Greenhouse gases EU-25 (1990=100) Directorate-General for Energy and Transport

9. The 2006 White Paper mid-term review: priorities • Mobility: The EU must offer the necessary level of mobility to people and business • Protection: protect the environment, ensure energy security, promote minimum labour standards, protect the passenger and the citizen. • Innovation: increase the efficiency & sustainability of the growing transport sector, develop & bring to the market new innovative solutions • International dimension: the EU must be a united, leading player in the international transport stage

10. Combat Climate Change – a Priority for the EU On the top of the European Agenda:Spring European Council (8-9 March 2007) • Objective: limit temperature increases to max 2°C • EU Leadership: • Firm independent commitment to achieve at least 20% GHG reductions by 2020 (over 1990) • Measures: • Energy efficiency in buildings and products • ETS • Promotion of biofuels for road transport (10% by 2020) • Minimum road fuel taxes (~0,36 €/litre for gasoil) • Proposed legislation on CO2 and cars • ….

11. Combat Climate Change – a Priority for the EU Communication "20 20 by 2020 Europe's climate change opportunity" COM(2008)030 : • "Since the revised ETS will only cover less than half of the GHG emissions, an EU framework is needed for national commitments to cover the remaining emissions – covering areas like buildings, transport, agriculture, waste and industrial plants falling under the threshold for inclusion in the ETS. The target for these sectors would be a 10% reduction in emissions from 2005 levels, with specific targets for each Member State”. 

12. A changing transport context: Energy consumption by mode Directorate-General for Energy and Transport

13. Greening of Transport • Improve the sustainability of transport • Different initiatives: • “Chapeau” Communication • Report on what has been done to improve sustainability • Internalisation of external costs : Strategy • Revision of the Directive 1999/62/EC (« Eurovignette ») • Communication on measures to reduce noise in railways

14. Internalisation of external costs: Request of the European legislator • “No later than 10 June 2008, the Commission shall present, after examining all options including environment, noise, congestion and health-related costs, a generally applicable, transparent and comprehensible model for the assessment of all external costs to serve as the basis for future calculations of infrastructure charges”. • “This model shall be accompanied by an impact analysis of the internalisation of external costsfor all modes of transport and a strategy for a stepwise implementation of the model for all modes of transport. The report and the model shall be accompanied, if appropriate, by proposals to the European Parliament and the Council for further revision of this Directive”.

15. Impact Assessment on the internalisation of external costs: State of Play and Roadmap IMPACT Study - On the assessment of external costs - and the impact of options on pricing scenarios. Consultations - Expert Meeting on external costs assessment on 22.11.07. - Online stakeholder consultation 29.10 to 31.12.07 - High level stakeholder conference 31 January 2007 Cooperation with other services, Steering group, IAB - IA interservice group - Close cooperation for modelling with JRC and ENV. - IA cleared by IAB - Use other sources such as RTD projects Deadlines - Targeted date adoption of the initiative: 10 June 2008 (now 8 July).

16. Strategy for internalisation of external costs • All modes of transport • Air transport: proposal to include aviation in ETS. • Road transport • Rail transport • Maritime and inland waterways

17. Internalisation • Internalisation: what does it mean? • Each transport user should also pay for the social costs he generates when using a transport service • Why internalise? • Polluter pays principle (Treaty), User pays (Eurovignette) • Economic efficiency • Systematically disregarding of costs leads to inefficiencies (congestion, public health nuisances) • Awareness and change of behaviour • Users aware of the total costs of transport • Choices (mode, vehicle, routing) based on total costs

18. Choosing the most appropriate economic instruments • Three economic instruments • Taxation • User charge • Permit emissions • Apply the most appropriate instrument to external costs • Congestion, air pollution, noise • CO2

19. Common framework of internalisation • Common principle: social marginal cost pricing • Common methodology • Formula to calculate external costs • Recommended default values • Transparency and non-discrimination • How to use these data • Differentiation according to vehicle, fuel, time and location

20. Current charging legislation: the Eurovignette directive (1) Legal framework in the road sector: the Eurovignette Directive as amended by Dir 2006/38/EC • Allows distance-based or time-based charging to recover infrastructure costs subject to a methodology • Heavy goods vehicles above 3.5 tons and to TENs road network • Road charging allowed on other roads • Toll levels related to infrastructure costs but may vary (congestion, pollution) without additional revenues • Specific conditions in mountains areas • Report for the assessment and internalisation of external costs for all modes by June 2008

21. Current charging legislation: the Eurovignette directive (2) Toll calculation: • Costs of construction (capital costs, including returns) • Costs of maintaining and developing • Costs of operating Member States may vary the toll rates according to : • a) EURO emission class (air pollution)- up 100 % variation (as from 2010 variation is obligatory for new toll systems) • b) Time of day and level of congestion- up to 100 % variation Possibility to apply mark-ups to tolls in the case of roads in sensitive areas, in particular in mountainous regions • Maximum mark-up = 25 % of the average toll. The mark-up must be authorized by the Commission, earmarked to priority projects

22. What next? Efficient price: + Marginal cost to the producer (damage to infrastructure) User pays(Eurovignette) + marginal congestion costs imposed to other users + marginal external costs (environmental, accidents) Polluter pays (Treaty) = Short run marginal social costs + additional cost recovery or development charge (two part tariff, Ramsey) User pays (Eurovignette)

23. Handbook on external cost estimation inthe transport: Stakeholder conference • Exemplary values: Heavy Duty Vehicles HDV > 32 t, EURO 3, Diesel • €ct/vkm • Urban • Peak 109.8 • Off-Peak Day 34.8 • Off-Peak Night 40.6 • Interurban • Peak 54.4 • Off-Peak Day 19.4 • Off-Peak Night 20.3

24. Wider Commission strategy • Need for complementary measures… • Offering alternative modes • Offering alternative technologies • Enabling change of behaviour • …so that transport users react better to new price signals

25. Conclusions • The objective of the EU policy is to ensure mobility and protection through innovation measures and good governance while fostering competitiveness and prosperity. • Any pricing proposal should provide a framework to enable Member States, with due regard for the subsidiarity principle, to give economic incentives to transport through a differentiated price structure that better reflects costs to society, including external costs. • This Community framework is an important complement to the internal market, guaranteeing sustainable freedom of movement.