COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, SEC(2008) 2208 COMMISSION STAFF WORKING DOCUMENT accompanying the COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Strategy for an internalisation of external costs and the Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 1999/62/EC on the charging of heavy goods vehicles for the use of certain infrastructures Impact assessment on the internalisation of external costs {COM(2008) 435} {COM(2008) 436} {SEC(2008) 2209} EN EN COMMISSION STAFF WORKING DOCUMENT Impact assessment on the internalisation of external costs accompanying the proposal for a directive amending Directive 1999/62/EC on the charge of heavy goods vehicles for the use of certain infrastructures (COM(2008)aaa) and a Communication on the internalisation of external costs (COM(2008)bbb) {SEC(2008) ccc} {SEC(2008) ddd} Lead DG: TREN Other involved services: ECFIN, EMPL, ENTR, ENV, SG, JRC, TAXUD Agenda planning or WP reference: TREN/2008/023, TREN/2008/73 Executive summary When amending Directive 1999/62/EC on charging heavy goods vehicles (HGV) for the use of infrastructure in May 2006, the European Parliament and the Council stated1 that: “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”. The amending Directive adds that: “This model shall be accompanied by an impact analysis of the internalisation of external costs for 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”. The present impact assessment focuses on the internalisation of external costs of noise, air pollution, climate change, congestion and accidents from heavy goods vehicles and other transport means through pricing instruments such as charges, taxes or tradable permits. It analyses the options for internalising external costs in HGV tolls in order to revise Directive 1999/62/EC and the options for internalising external costs in other modes of transport such as railways, aviation, maritime and inland waterways. The problem definition highlights the following elements: - the diversity of tax and charge systems across Member States and across modes of transport which generally fails to give the right price signals to users. - implementing an internalisation strategy in road transport may lead to issues such as traffic detour, lack of public and impact on the internal market that might mitigate the effectiveness of instruments. Therefore, traffic diversion, public acceptability, the use of 1 Article 11 of Directive 1999/62/Ec as amended by Directive 2006/38/EC. EN 2 EN new technologies and enforcement aspects should be considered in the analysis of impact and the comparison of options. - if nothing is done, Member States have limited scope for internalisation since the current Directive on infrastructure charging in road transport does not allow to do so for heavy goods vehicles (HGV) and the current Directive on infrastructure charging in railways allows mark-ups for external costs under certain conditions. The revision of Directive on infrastructure charging in road transport should be a first step in the strategy of internalisation of external costs. A set of policy options has been analysed, also with the help of modelling tools. An option analyses the impact of charging external costs in road freight transport. This policy option would lead to a revision of Directive 1999/62/EC. Three variants have been analysed: charging for air pollution and noise costs, charging for air pollution, noise and CO2, charging for air pollution, noise and congestion. Another policy option envisages charging air pollution, noise and CO2 in all modes of transport. The results of the analysis of impact show that mobility is practically maintained as the reduction of traffic in road freight transport is almost completely compensated by an increase in other modes. The impact on GDP and efficiency varies across policy options and can be negative. However, the results of the models cannot capture some benefits such as the improvements in health and human well-being derived from the reduction of environmental emissions and the improvement of safety. The reduction of external costs would benefit to citizens and contribute to improving welfare. The comparison of selected quantitative and qualitative criteria allows identifying preferred options. Policy option 2C – charging for air pollution, noise and congestion in road freight transport – allows maintaining sustainable mobility while limiting negative economic and social impact. Policy option 3B – charging for air pollution, noise, CO2 in all modes – gives also evidence of the best combination of these effects. Sensitivity analysis and implementation issues also suggest practical steps to initiate a stepwise strategy of internalisation. EN 3 EN 1. PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 1.1. Preliminary Remarks on the scope of the Impact Assessment 1.1.1. The request of the EU legislator When amending Directive 1999/62/EC on charging heavy goods vehicles (HGV) for the use of infrastructure in May 2006, the European Parliament and the Council stated2 that: “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”. The amending Directive adds that: “This model shall be accompanied by an impact analysis of the internalisation of external costs for 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”. The current impact assessment focuses on the internalisation of external costs from heavy goods vehicles and other transport means through pricing instruments such as charges, taxes or tradable permits. It is part of the Commissions work programme (TREN/2008/073 and TREN/2008/023) and of the Green Transport Package. The objective of the internalisation of external costs is to provide a clear and correct price signal to the transport users so as to influence their behaviour. It should lead to an improvement in transport efficiency as transport users will base their decisions upon the price mechanism in accordance with the principle that the user and polluter pays for the costs they generate. Furthermore, setting the pricing which includes social costs should provide incentives that are consistent with greater sustainability of transport activities. 1.1.2. Scope of the impact assessment The request from the EU legislator requires looking at the internalisation of external costs in the charges levied on heavy goods vehicles, but also mentions the need to analyse these issues in other modes. The scope of this impact assessment is limited to pricing based internalisation measures. Internalisation of external costs should lead to a reduction of external costs. However, in presence of rigid demand resulting from, or combined with different other market failures (producing lack of alternatives, low incentive to buy clean vehicles…), other tools such as regulation, infrastructure policy or research support can be used in complementary and mutually reinforcing ways (see box 2). 1.1.2.1. Internalisation of external costs in all modes of transport For reasons of fairness and efficiency, the request of the European legislator explicitly referred to the need to carry out an analysis not only for road transport but also in other modes of transport. 2 Article 11 of Directive 1999/62/Ec as amended by Directive 2006/38/EC. EN 4 EN Internalisation is already foreseen in some cases. The EU legislation addresses charging issues in railways in Directive 2001/14/EC. According to this Directive, infrastructure managers are obliged to charge all trains for access to infrastructure to recover the costs of operating the train service. They have the possibility to charge for external costs (article 7). According to the Directive, "charging of environmental costs which results in an increase in the overall revenue accruing to the infrastructure manager shall however be allowed only if such charging is applied at a comparable level to competing modes of transport" (article 7). The situation is different in other modes of transport. Internalisation of external costs within the TENs is not allowed in the current Eurovignette if it leads to extra-revenues (see below 1.1.2.2). However, Member States are free to apply tolls or user charges on roads other than those on the trans-European network, including for the internalisation of external costs. Member States are also equally free to apply charging schemes to passenger cars. The Commission considers that, for reasons of subsidiarity, the decision whether to internalise or not is best left