By / December 12, 2012

A fair deal for cars: What do cars really cost us? Who pays for those costs?

On 6 December 2012 the Greens Group of the European Parliament hosted a conference on the external costs of road transport (cars…

Loyalty free EC DG © European Union.

On 6 December 2012 the Greens Group of the European Parliament hosted a conference on the external costs of road transport (cars in particular). At the same occasion a study conducted by the Technical University of Dresden (Germany) was presented.

The cost of (not)-owning a car

Royalty free picture European Commission DG Employment © European Union

Three percent of European Union GDP is said to be taken up by external costs relating to road transport, such as noise, pollution, accidents and climate change, according to the findings of the study.

The study – which is a compilation of current estimates of external costs that they approximate, so it is a realistic mean according to the organisers of the conference – considered that each car in the EU causes costs of €1,600 per year, i.e. equivalent to €373 billion, i.e. nearly 3% of EU GDP, mainly due to accidents and climate change – accidents (41%), climate change (37%), the rest air pollution, noise and others. But a quarter of households in Europe don’t have a car! Annually, each citizen whether they own a car or not, is estimated to pay 750 EURO (paid by the state from their tax money) annually to cover these costs.

The study’s message is: Car use is expensive. There are ‘hidden external costs’. From the fact that these costs are ‘hidden’, road transport appears cheap to users, where in fact it is not. Therefore the choices transport users make are ill informed and based on an incorrectly ‘cheap’ perception of car use. By making these costs known and ‘internalising them’, transport choices can become more rational and self-regulating market mechanisms will be allowed to apply themselves. This will ultimately make road transport use cheaper, as external costs will decrease!

The White Paper on transport had established the need for such costs to be internalised, allowing the real cost of road transport to be ascertained. No concrete measures have since been taken by the European Commission on this matter. Only the Eurovignette for heavy goods vehicles has taken it into account. MEPs, for their part, have already introduced amendments along these lines in legislative proposals relating to the Connecting Europe Facility (CEF) and the guidelines for the Trans-European Transport Network (TEN-T).

Taxation of cars

The conference tackled also the taxation policy of cars and lorries. Some attention went to the impact of the low diesel tax rate in some countries, like Luxembourg (33c/litre, whereas in most other states its around 44c/litre). But with lorries having a range of around 2,500km, Luxembourg is already encouraging fuel tax tourism – and this position makes it hard for other states to raise the level. But charging lorries for each kilometre travelled is increasingly widespread across Europe – since 2005 Germany has been charging lorries for the use of motorways and some highways (lorries over 12 tons), with the costs set by the number of axles, emissions standards and kilometres travelled. Total revenue was around 4.5 billion in 2011. France is launching a similar scheme in 2013, Spain is planning it, and Portugal already has it in place. Britain has also plans to introduce charges for foreign lorries.

A solution

Michael Cramer, Member of the EP Transport Committee, is highly critical of the fact that “it is repeatedly claimed that car traffic is the cash cow of the EU. The new study by the Technical University of Dresden shows the opposite is true”. He acknowledges that car use provides undeniable advantages for European citizens, but until external costs have been internalised, mobility choices will not be effective. The Greens therefore called for the internalisation of external costs to be speeded up through European legislation, as set out in the White Paper for transport in 2010.

The webstreaming of the conference “A fair deal for cars” is available here. The study “The true cost of automobility” can be consulted on the Greens Group website.

The presentations of the conference can be found here.

Further reading:

IEEP et al (2007) Reforming environmentally harmful subsidies Final report to the

European Commission’s DG Environment, March 2007

The calculation of external costs in the transport sector a comparative analysis of recent studies in view of Commission’s ‘Greening Transport Package’ : study / EP IPOL (2009)

Strategy for the internalisation of external costs’ (SEC(2008) 2207, accompanying COM(2008)435), : a common methodology to charge all external costs across the whole transport sector.

Book: Towards ecological taxation : the efficacy of emissions-related motor taxation / David Russell (2011) (Available in the EP library)

Library thematic dossier: External costs of transport    (internal link)

With thanks to Hana Rihovsky.

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