The aim of this report is to deal with eight different sources of externalities; noise, security of supply, impact on infrastructure (both the planning of new infrastructure and consumption phase), climate, air pollution, road safety, congestion and water.
The analysis of policy instruments covers all four transport modes: road, rail, water and air transport. The description begins with a review of related international agreements and EU regulations. The domestic policies are then discussed from the point of view of whether they influence the marginal cost of an activity or not.
The number and types of policy instruments vary greatly with respect to the external effects that are affected. A policy instrument designed to internalize the externality from noise is the flight Landing and Take-Off fees (LTO fees). Even other externalities associated with landing and take-off are built into these fees, however. In the road sector, it is clear that the level of noise is influenced by a large number of policy instruments discussed in the study.
There are examples of the policy instruments used for internalization of external costs assessed in the study:
The external effects caused by the consumption of infrastructure, especially wear and tear of roads, are internalized with the help of the energy tax, and in some cases with bridge tolls. The wear and tear of railroad tracks is internalized with track access charges, which affect rail traffic volumes. The LTO charges on aviation, as well as shipping charges are intended to finance the departments concerned rather than to internalize some externalities. Finally, the infrastructure construction in itself affect all the other studied externalities so that, for example, the choice of investments in road versus public transport can affect future emissions, and urban design can affect urban sprawl.
The energy tax, which is basically a fiscal tax, contributes to the internalization of several other externalities besides road wear and tear. By influencing the marginal cost per vehicle kilometre, energy tax affects noise, security of supply, air pollution, road safety, congestion and also to some extent the external effect on the water. In fact, the only externality whose internalization is not affected by the energy tax is the climate. The reason for this is that this external effect can be considered to be internalized by means of the carbon tax and the EU’s Emissions Trading Scheme (EU ETS).
Thus, the climate impact is internalized with policy instruments designed for energy-intensive sectors ("trading sector") through emissions trading and by special instruments for other sectors. Emissions from electricity generation, for example, which affects rail transport and even electric cars, are internalized through the EU ETS. Also flights are now included in the EU ETS.