Introducing Environmental Externalities into Transport Pricing: Measurement and Implications

Abstract It is European Commission policy to charge modes of transport according to the marginal social cost of their use of the infrastructure, including environmental costs. However, progress in implementing this process has been slow, partly because of the difficulty of measuring and valuing these costs. This need has led to a great deal of research in this area in recent years. The paper presents the results of some of this research, and in particular of the European Commission‐funded Unification of Accounts and Marginal Costs for Transport Efficiency (UNITE) project. UNITE used the Impact Pathway Approach developed in the ExternE project series to provide a bottom‐up methodology for the estimation and valuation of marginal social costs of transport, taking into account the diversity of circumstances in terms of location (e.g. population density, and speed and direction of winds) and time of day. The paper first explains the approach used for the measurement and valuation of environmental costs and then presents results on both total and marginal costs. It then discusses the results of a parallel project using the same methodology that estimated the marginal social cost of road use at a very disaggregate level for different vehicle types, locations, types of road and times of day for Great Britain. The results show that off the main network and outside the conurbations, private cars are currently overcharged, but elsewhere they are charged too little, particularly in the main conurbations. Buses, and even more so heavy goods vehicles, are undercharged to a greater extent. Only a kilometre‐based charging system capable of charging at different rates by vehicle type, type and location of road, and time of day is capable of reflecting all these differences; due to the development of global positioning satellite (GPS) technology, such systems are now becoming available.