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Internalisation of external costs
Globalisation has created a new economy, based on the free movement of people, goods, and services. Due to its high quality, door-to-door services, road transport has become a vital production tool, as an integral part of any logistics system. Thus any penalty on road transport is an even greater penalty on the economy as a whole.
Road transport, like most human activities, has negative side effects, like emissions and noise. These are labelled as “external effects”, whose associated costs are called “external costs”. The challenge is to reduce these costs in an optimal way and to achieve sustainable development in road transport, as indicated by the IRU 3 “i” strategy, based on innovation incentives and infrastructure.
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IRU Position on the internalisation of external costs.
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Detailed IRU observations on the recent EU proposal on internalising external costs.
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The Cheapest Cost Avoider Principle.
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The Internalisation of External Costs in Transport: From the polluter pays to the cheapest cost avoider principle, December 2007, Centre for the Study of Law and Economics, Saarland University, Germany.
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- The internalisation of transport’s external costs requires sound cost-benefit analyses, as advocated by the Cheapest Cost Avoider Principle.
- Charging should be applied to all transport modes.
- Revenues from road charging must be earmarked to the road transport sector rather than lost in the overall state budget and inefficient transport modes.
- To ensure economic growth and remain competitive, it should be recognised, once and for all, that the polluter-pays principle is economically outdated and environmentally misguided, as it does not address the problem…Polluter pays, problem stays!
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In economic circles, the Cheapest Cost Avoider principle has long superseded the Polluter-Pays principle |
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The Cheapest cost avoider principle has won Ronald Coase a Nobel Prize in 1991 |
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The Internalisation of External Costs in Transport: From the polluter pays to the cheapest cost avoider principle
December 2007, Centre for the Study of Law and Economics, Saarland University, Germany
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The Cheapest Cost Avoider Principle and Regulatory Impact Assessment: Towards better regulation of European transport
Seminar, March 2008
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Comparative Analysis of Energy Consumption and CO2 Emissions of Road Transport and Combined Transport Road/Rail
IRU/BGL, January 2002
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Economic cost of barriers to road transport
Hague Consulting Group, January 1998
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The Influence of Road Toll for Trucks on the Modal Split Road – Rail in Transport of Goods
TransCare, March 2006
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IRU Press releases
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Polluter pays, problem stays
The European Commission's proposal on the internalisation of external costs and the revision of the Eurovignette Directive will penalise the EU economy without achieving its stated objectives.
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Where is the sound cost-benefit analysis?
IRU advocates the Cheapest Cost Avoider Principle for assessing the internalisation of external transport costs and warns the European Commission that the proposed EU tax collection scheme will simply make Europe less competitive.
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Press briefing
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Bertil Dahlin
President of the IRU Liaison Committee to the European Union
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Michael Nielsen
IRU General Delegate to the European Union
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Nicolette van der Jagt
Secretary General of the European Shippers’ Council
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Prof. Dr. Schmidtchen
Center for the Study of Law and Economics, German
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Press coverage
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European Voice (08/07/2008) - Read... |
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DVZ (28/06/2008) - Read... |
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Frankfurter Allgemeine Zeitung (05/02/2008) - Read...
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Internationales Verkehrswesen (03/2008) - Read...
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Transport Echo (02/2008) in French / in Dutch |
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Verkehrsrundschau (22/02/2008) - Read...
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Wirtschaftskammern Österreichs (07/03/2008) - Read...
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DVZ (7/02/2008) - Read...
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Le Lloyd (04/02/2008) in French / in Dutch
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Transport en Logistiek (22/02/2008) - Read...
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International Freighting Weekly (25/02/2008) - Read... |
IRU representations
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IRU Head of Sustainable Development, Jens Hügel addressed a conference organised by the European Federation for Transport and Environment (T&E) on the future of road charging, and highlighted that the current approach contradicts the EU Lisbon agenda and that the current approach by the EU leads to: The Polluter pays but the problem stays.
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The internalisation of external costs in the transportation system
Discussion paper, December 2007
“What is at stake is not clarification of a rhetorical controversy among specialists, but the calibration of the Commission’s whole transportation policy.”
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External Costs in the Transport Sector – A critical review of the EC Internalisation Policy
Study for the European Automobile Manufacturers Association (ACEA) – Executive Summary
“The EC Handbook takes congestion as external costs. The analysis shows that congestion costs are borne by the motorist who caused them. Therefore, they are actually internalized. Around two thirds of accidents are covered by insurance companies, thus this proportion is also internalised. Only air pollution, climate costs and, proportionally noise costs, remain as external costs.”
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Internalisation of external costs in road transport (Eurovignette) With great expectations come great responsibilities
Press release of the European Association for Forwarding, Transport, Logistic and Customs Services (CLECAT), May 2008
“If the Commission is to follow a coherent approach in tackling external costs in road transport, the revenue from charges should be strictly earmarked to the road transport sector. This is the only way to reach the objective of decreasing external costs of road transport whilst maintaining a level playing field with other (competing) modes. It must also be clear that the revision of the Eurovignette Directive is the first step of a process aiming at internalising external costs in ALL transport modes.”
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Internalising external costs of transport
Position paper of the European Shippers’ Council (ESC), April 2008
“As an organisation representing the interests of users of transport services, the ESC would not be defending one mode of transport above another….The ESC agrees that the European Commission has to take action to reduce external costs of transport modes, but we would suggest the following basic requirements: the revenue generated must go toward solving the problem; all transport modes need to pay for the external costs; keep in mind the costs already paid.”
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Position of the Allgemeiner Deutscher Automobil-Club (ADAC) on the European Commission’s Initiative “Internalisation of external costs in transport”
April 2008
“Costs for constructing, maintaining and operating infrastructure are not considered by the European’s Commission Handbook. This must be criticised in that the revenue to be allocated to different modes is neither quantified nor compared to the cost.”
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EC Handbook on estimation of external costs in the transport sector
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Proposal for the revision of the Eurovignette Directive
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