EXTERNAL TRANSPORT COSTS AS ELEMENT OF PLANNING POLICY

Sanja Steiner, Ph.D., Dragan Badanjak, Ph.D., Josip Bozicevic, Ph.D.

University of Zagreb, Faculty of Transport and Traffic Engineering, Croatia

INTRODUCTION

Transport sector is one of the key factors of the economic and social development, both from the aspect of revenues in GDP, as well as from the aspect of the basic needs of living in a modern society - the need for mobility. Transport affects directly the expansion of industrial market, consequently implying the economic growth, improvement of the living standard, competition among regions and local communities and physical expansion and infrastructure integration. However, the physical interaction does not necessarily reflect also the optimal transport situation. Transport planning based on satisfying a chaotic uncontrolled growth of transport demand, and not based on a targeted inducing of the "desired" demand, can in the long run bring to significant disturbances, especially regarding the presence of transport modes in the traffic structure i.e. unbalanced development of transport branches.

Negative dimension of the previously applied "policy avoiding resistance" and favouring investments into the road transport infrastructure tends to be actually represented by external costs of transport, i.e. costs of accident, environmental pollution and congestion, that have not been internalised in transport sector. Considering this from an economic aspect and by classifying the transport-caused costs in different sectors, the volume of external transport costs may be estimated, which reaches almost the level of the transport sector revenue.

Transport policy greatly determines to which extent the influence of transport is going to be positive, that is, negative. Coherent transport policy can contribute to reduction of the budget expenses for the transport sector by providing the conditions for efficient management of infrastructure or the instruments for internalisation and reduction of transport external costs.

TRANSPORT POLICY VERSUS SUSTAINABILITY

The European countries differ both regarding the level of transport development as well as in the priorities of development plans. On the one hand are the countries of the European Union with developed transport systems, and on the other the countries in transition, that have poorer transport infrastructure and fleet as well as inefficiently organised transport. In transition countries the efforts of institutional restructuring of government management of transport infrastructure are particularly noticeable. However, the developed countries as well deal seriously with issues of privatising the transport sector and the transport infrastructure.

Common Transport Policy of the European Union

In 1992 the European Commission approved the White Paper with the provisions of the Common Transport Policy of the European Union. Assessing the negative impact of the previous unsystematic transport development, based exclusively on the criterion of demand, a new approach was adopted, the approach of intermodality in the development concept, i.e. of planning an integrated transport system in which certain transport branches and transport modes are complementary. The main factors of the radical shift in the development philosophy and the beginning of implementing the concept of goal-oriented transport planning through the instruments of transport policy can be summarised as follows:

·        Establishment of a single market stimulated the traffic growth, whose annual rate between 1980 and 1994 amounted to 2% within the countries of today’s EU and 2.4% between the EU and other countries. However, the structure of the traffic growth was not uniform, so that certain transport branches were preferred over the others. Thus, road freight transport in the period between 1980 and 1996 grew per 3.5% annually, and at the same time railway freight transport was falling 1.1% a year between 1980 and 1990 and 2.6% in the period between 1990 and 1996. The shift in the transport structure in the EU countries over a longer period of time is important – the share of railway freight transport was reduced in 1970 from 32% to 14% in 1996 and to 8% in 1998, whereas the share of road freight transport increased from 49% in 1970 to 73.6% in 1998.[1]

·        Unbalanced development resulted in escalation of negative transport dimensions, manifested in congestion, pollution, and fatalities in road transport, as well as negative social implications due to the fall or loss of traffic, closing down of certain transport routes and services in railway transport.

·        Diversity of technical standards, fragmented structure and traditional development at national levels has extremely negative effects on the efficiency of the transport system as a whole.

·        The amount of external transport costs, which almost reaches the revenue amount of the transport sector, requires a redefinition of transport infrastructure management principles.

The approach to planning at a systemic level and consideration of intermodality has been applied in setting the objectives of the EU Common Transport Policy. These objectives can be generalised as follows:

·        forming of a Trans-European network,

·        fair pricing in transport,

·        environmental protection,

·        transport safety,

·        social cohesion,

·        stronger internal market, and

·        stronger external dimension of a single market.

In 1995 the European Commission accepted the action programme of transport development up to the year 2000, which more or less successfully provided the basis to all the strategic development objectives of the EU transport sector.

Numerous reports and final documents related to undertaken activities and their results, as well as proposals for follow-up activities, actualise the discussions about the key elements of the common transport development strategy among the member countries and represent the frame of the future legislation.

Significant advances were achieved in intensifying the internal market for transport activities; in integration of transport systems within the Trans-European Transport Network, in creating compatible transport management systems, in implementing intelligent transport systems; promotion of transport sector intermodality and best practice in local and regional passenger transit and in improvement of safety in all transport branches. Improvements are present also in the concept and use of transport related research at the EU level; in the shift in attitude towards environmental protection as a component of transport policy and in aspects of transport connections with the Central and East European countries.

A problematic field, where no consensus among the member countries has been achieved yet, and which is slowing down the process of solving the problem, refers to the issue of pricing related to infrastructure and the external costs.[2] The European Commission has therefore accepted the White Paper about a phase-approach to the concept of pricing for the common transport infrastructure in the European Union.[3]

In spite of declared readiness by EU members, the implementation of guidelines of the Common Transport Policy regarding investment policy at national levels has not been realised (excluding the 14 Essen TEN projects), so that the investment structure is 65% in roads, 25% in railways and 10% in other branches (1999).[4]

About 10% of the EU road network suffers from daily congestion, about 20% or railway network are described as bottlenecks, 16 main international airports report delays of more than 15 minutes on 30% of flights and consequently extra fuel consumption of 6% of the total annual consumption.

Therefore, there is a requirement for a more consistent approach to the planned development goals, especially in the context of EU enlargement and the threatening growth of traffic demand. The new White Paper of the European Committee[5] proposes a package of 60 specific measures of the transport policy as instruments to implement the principal guidelines of railway revitalisation, quality improvement in road transport sector, promotion of water transport, intermodality achievement, Trans-European transport network upgrading, safety improvement, effective infrastructure charging, users' rights and obligations, high quality urban transport, functional R&T, globalisation effects management and environmental objectives for sustainable transport system.

Experiences of Transport Policy in the Transition Countries

Central and East Europe countries are in the process of political and economic transition and they tend towards joining the European Union, which shows its interest for partnership through various instruments of technical and financial assistance in their economic restructuring, and in balancing the legal framework of integration.

From the aspect of application in the transport sector, the most important are PHARE[6] and ISPA[7] instruments, as well as new CARDS[8] program.

With the aim of establishing more efficient infrastructure systems and gradual catching up with the transport standards of Western Europe, under the authority of the European Conference of Ministers of Transport (ECMT), a new multimodal network of Pan-European transport corridors was defined at the Conferences on Transport (Prague 1991, Crete 1994, Helsinki 1997).

In 1996 the European Commission initiated the Transport Infrastructure Needs Assessment (TINA) project with the aim of stimulating development of a multimodal transport network in EU accession candidate countries, and of defining the future Trans-European transport infrastructure network in the expanded European Union. At the end of 1999 the TINA project was completed, and the final document estimated the necessary investments for the period between 1998 and 2006 at about 87 billion €. The image of the enormous needs in the transport sector of the EU accession countries is supplemented by the data that direct investments in the transport infrastructure through PHARE programme in the period from 1990 to 1998 amounted to 905.4 mill. €.

The development and the density of road network as well as the system of its maintenance in the majority of transition countries are not at a satisfactory level.[9] According to the PHARE programme data for the year 1999, there are significant differences in quantitative and qualitative dimension of the road network among the countries of Central and Eastern Europe (CEEC) and the countries of the European Union (EU). Length and density of motorways network in the CEEC amount to 2,850 km and 2.7 kilometres per 1000 square kilometres, respectively. For comparison, in EU countries they amount to 51,336 kilometres and 15.8 kilometres per 1000 square kilometres, respectively.[10]

The characteristics of the existing railway lines are obsolete technical parameters. The data from the PHARE programme confirm substantial differences in the quality of the railway infrastructure and in the level of transportation services between countries of the Central and Eastern Europe and the EU countries. Length and density of railway network in the CEEC amounts to 65,400 kilometres and 60.6 kilometres per 1000 square kilometres, respectively. For comparison, length and density of railway network in EU countries amount to 152,723 kilometres and 46.0 kilometres per 1000 square kilometres, respectively.

Transition countries lack a developed modern multimodal transport. Therefore the need for multimodal and integral operation of the transport network was stressed at the Pan-European Conference on Transport i.e. a need for intermodal options of the existing infrastructure usage, mainly combined/integral transport.

While developed EU countries are redefining their national policies of transport development towards stimulating demand for environmentally friendlier transport modes[11] i.e. reducing the demand for road motor transport, and while they are introducing instruments of various operative restrictions in roads usage in order to compensate the external costs, national plans of transport development in transition countries focus precisely on investments into road transport infrastructure.

This is confirmed by the data on PHARE-funds distribution for financing the transport development programme of individual transition countries according to which 52% of the funds are allocated to roads, 32.4% for railway, 3% for air transport, and 0.5% for waterway transport.

The estimated costs of the proposed transport infrastructure development measures of the EU accession countries in the period between 1998 and 2006, according to the data from the final report of the TINA project also match the distribution regarding transport modes - 53% of total funds are planned for the roads, 36.1% for railway, 4.8% for air transport and airports and 2.3% for water transport and river ports.

EVOLUTION OF METHODOLOGY FOR TRANSPORT EXTERNAL COSTS INTERNALISATION

External costs are transport caused social costs that have not been internalised in transport sector but are compensated for from sources of other public sectors or communities. At present direct charging for the usage of transport infrastructure does not cover these costs.

In general, external costs are divided into accident costs, environmental costs and congestion costs.

Accidents and environmental categories participate with different shares in the total external costs: 29% accidents, 25% air pollution, 23% climate change, 7% noise, 3% nature and landscape, 1% separation in urban areas, 1% space scarcity in urban areas and 11% additional costs from up-and downstream processes. [12]

Indicative according to the study results is the segmentation of external costs per transport branches. The share of road transport in total external costs is 92%, air transport 6%, railway transport 1.7% and water transport 0.3%. Two thirds of external costs are caused by passenger transport, and one third is caused by cargo transport.

At the level of Europe and in the context of main Common Transport Policy guidelines, fundamental researches have been carried out with the aim of valorisation of the amount of external costs. Regarding the complexity and undeveloped scientific methodology of estimation as well as lack or limitation of data inputs, the research results at national and regional levels differ significantly. The differences are especially pronounced in monetarisation of external costs due to different criteria of evaluation.

The European Commission Green Paper from 1995 estimates the amount of external costs of transport in EU at 1.5% GDP accident costs, 0.6% GDP environmental costs and 2% GDP congestion costs.

Uncovered external costs in transport sector, according the research project results (INFRAS & IWW) on the sample of the EU countries and Switzerland and Norway, refer to accident costs in the amount of 7.8% of GDP and congestion costs in the amount of 0.5-3.7% GDP. According to the performed research UNITE, the amount of external costs of transport in Switzerland is ca. 10% GDP, and in Germany ca. 2.7% GDP.

More precise valorisation of external costs from the aspect of transport policy is a premise of more realistic determination of relations between revenues and expenses of the transport sector. However, for the implementation of the sustainable development concept, the current knowledge about the quality dimension of transport is also sufficient, as well as orientation values of uncovered external costs. In argument for the positive i.e. negative effects of transport and the need for optimising the transport characteristics as function of the wellbeing of people, the qualitative dimension of the mobility status is crucial, whereas economic evaluation of external costs can be in the function of a political regime of the transport system reforms regarding improved economic effects.

Within the 4th Framework Transport RTD 277 projects have been realised according to the topics, and in accordance with the Common Transport Policy guidelines, the topics prevailing include the projects with the aim of methodological standardisation, gathering and processing of data, informatisation, and statistical recording. The results of the research have a supportive function for the policy makers. In the period between 1997 and 2000 one billion Euros were invested in the Transport RTD.

The starting guideline in the methodology of internalising external costs of transport is the provision of individual mobility in a way that will satisfy the users rights, but the non-users rights as well, of a certain transport infrastructure and the social interests. In the end, the internalisation is reflected through real evaluation and by directly charging the user for using a certain infrastructure.

Internalisation of external costs in the transport sector and their reduction can be realised in different ways. For the moment, only for the sake of pilot-research methods of direct charges for using the infrastructure have been implemented according to the criteria of the travelling distance, vehicle characteristics related to fuel and noise pollution, urban/rural zone of usage and time and place of using urban infrastructure. Implementation of the above criteria would provide fairness of charging since all the relevant parameters of vehicle characteristics, place and time of the travelled distance would be taken into consideration.

Apart from direct charging as function of internalising external costs, the efficiency of methods of their reduction, as a rule, is conditioned by legal standardisation and control system.

This refers to speed limiting, education of drivers and safety standards of vehicles, as well as technical standards of infrastructure and signalling.

CROATIAN TRANSPORT POLICY

The investments into the transport sector in Croatia (excluding investments into telecommunications and post) in the period between 1996 and 1998 were at the level of 2.1% GNP, and these were mainly related to the development of the road network, whereas the volume of investments into other transport branches was substantially lower.

In 1999 the share of the transport sector (affairs and services of transport and communication) in the budget expenditures was 11.2% or 3.7% GNP. The capital expenditure, which refers to the road construction and maintenance, amounted to 1.6% GNP. The income share of the transport sector (transport, storage and communications) in the structure of GNP was 9.2%.

The trend of favouring the capital investments into road infrastructure is continuing through the project of progressive construction of motorways, and the inadequate investment policy is accompanied also by intensified regime of fuel taxes, which tends to be maximally eliminated in the development concepts of EU from the aspect of internalisation of external costs.

The transport policy in Croatia is marked by inconsistency and branch fragmentation without development concept and comprehensive goals and is exclusively based on public financial sources (budget).

There is a lack of inter-department co-ordination and harmonisation of regulative measures regarding key questions, mainly of the legal, tax and social policies, as well as in solving critical problems:

·        Restructuring of non-profitable state companies in the transport sector

·        Irrational management of the transport infrastructure

·        Absence of equal market conditions for all the transport branches

·        Failure to implement transport management principles (mainly urban transport) by inducing the demand for non-road transport modes and public transport

·        Failure to determine external costs of transport and to carry out the reduction measures

·        Failure to use scientific resources.

The guidelines of the necessary legislative changes result from the status of Croatia in the process of political and economic transition, as well as the strategic goal of integration into the European Union.

Two levels of necessary legislative adjustment in transport sector can be generalised:

·        by establishing the framework of transition to the free market system with controlled influence on the transport infrastructure management (structural reforms)

·        by harmonising the national transport sector with the EU regulations, primarily regarding institutional and legal aspects of regulators, and technical as well as safety standards of exploitation.

CONCLUSION

Valorisation of external transport costs is the key element in designing transport policy.

According to the assumptions of common transport policy of EU, as well as the ECMT strategy of sustainable transport development, the main goals of complementary transport policy are:

·        target planning and managing of traffic flows,

·        reduction of the harmful influence of transport on the environment,

·        improved transport safety,

·        increased efficiency of transport system,

·        compensation for consequences of deregulation and liberalisation of the transport market.

Some goals seem to be insensitive to the criteria of satisfying the real transport demand, but in the long run they ensure optimal integration of transport sector into the national and international frames of progressive economic development.

Economic justification of implementing the planned goals of transport policy is based on the estimate of the amount of external transport costs, which is in Croatia, due to the low quality transport system, certainly greater than the average at the EU level.

Implementation of transport policy goals assumes consistent co-operation of transport and other government departments in order to ensure the efficiency of transport policy instruments in the key aspects.

• regulative policy,
• transport management,
• investment policy,
• tax policy and price policy,
• physical/urban planning,
• social policy.

Apart from capital investments in environmentally friendly transport infrastructure, the transport policy at the national level can additionally stimulate these transport modes by various mechanisms - e.g. by subsidising and through benefits, but also by higher taxes on road vehicles, which is a significant method of compensation for external costs of road transport, and by expansion of the toll charging and higher tolls on road infrastructure.

LITERATURE

1. External costs of transport – Accident, Environmental and Congestion Costs in Western Europe. INFRAS/IWW, University of Karlsruhe, Zürich/Karlsruhe, 2000.

2. Transport Infrastructure in the European Union and Central European Countries 1990-1999, Statistic in focus, Transport–theme 7-4-02, Eurostat, 2002.

3. Competitive and sustainable growth programme UNITE – UNIfication of Accounts and Marginal Costs for Transport Efficiency, Deliverable 5, Pilot accounts – Results for Germany and Switzerland, ITS – University of Leeds, 2002

4. European Commission Green Paper “Towards Fair and Efficient Pricing in Transport – Policy Options for Internalising the External Costs of Transport in the European Union”, COM (95)691

5. European Commission White Paper “Fair Payment for Infrastructure Use: A Phased Approach to common Transport infrastructure Charging Framework in EU”, COM (98)466

6. Common Transport Policy – Sustainable Mobility: Perspectives for the Future”, COM (98)716

7. European Commission High Level Group on Transport Infrastructure Charging “Final Report on Estimating Transport Costs”, 1999

8. European Commission High Level Group on Transport Infrastructure Charging “Final Report on Options for Charging Users Directly for Transport Infrastructure Operating Costs”, 1999

9. European Commission White Paper “European Transport Policy for 2010: Time to Decide”, COM(01)370

10. ECMT Sustainable Transport Policies, 2000

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