Speech – Bridging transport’s financing gap: fair charging for the road ahead

Siim Kallas — Vice-President and Commissioner for transport

Conference on fair and efficient road pricing

Brussels, 6-12-2012 — /europawire.eu/ — Ladies and gentlemen,

I am delighted to be here with you today to explain how I see the challenges facing Europe’s road sector in the years ahead and how we can best tackle them.

Our transport network, built up over many generations, has allowed the EU to become a world leader in export industries, manufacturing and logistics.

It is a competitive advantage that we need to maintain. That means maintaining the network itself, streamlining and expanding it to meet rising demand, and building cross-border links to complete the single market.

That is no small task and will cost a lot of money. We estimate that at least €1.5 trillion will have to be spent on developing infrastructure up to 2030.

If we do not make these investments, our transport system will become even more saturated and inefficient. We also need smooth and well-maintained transport links to stimulate economic growth and create more employment.

In the EU, public investment in transport infrastructure has been falling over the last decades. Since the late 1970s, investments in inland transport entered a trend of steady decline. In 1975, they stood at 1.5% of GDP. By 2008, they had fallen below 0.8% – a record low.

Today, for example, Germany estimates its own underinvestment in road infrastructure at an annual €2.5 billion, for every year since 2002. And that is just for maintenance – not for building new roads.

Countries like Spain and Portugal, which recently built extensive motorway networks, find it increasingly hard to maintain them.

We cannot continue in the same way: Europe’s road network is saturated and we need to do something about it. Congestion is a huge problem that already costs European businesses and citizens the equivalent of 1% of the EU’s GDP. In more densely built areas, the cost is more than 2%.

What do these figures really mean, in context? More money is wasted by cars and goods stuck in traffic jams each year than the entire EU budget!

Ladies and gentlemen: there is a definite financing gap – one that public money cannot bridge on its own, even with ambitious European Commission financing proposals like the Connecting Europe Facility.

One of the biggest questions for today and for the future is how to ensure a fair and sustainable financial environment for all modes of transport. Here, the most important element is charging for the use of infrastructure: bridging the financing gap by making users, rather than taxpayers, pay for maintaining transport infrastructure.

Rail operators pay for using tracks, airlines pay for air traffic management and airport slots, ships pay port dues. Europe’s largest transport mode — road transport — pays for infrastructure in several uncoordinated and often incoherent ways. In fact, there is a whole patchwork of pricing systems.

This brings me to the heart of today’s conference: fair and efficient road pricing.

It allows infrastructure to be funded by its true users and beneficiaries.

Charging for using roads has several advantages.

It has an important part to play in shaping more sustainable transport behaviour and giving incentives for consumers to buy and use cleaner vehicles. In addition, as European transport moves towards using alternative fuels not based on oil, as I hope it will, public revenues from fuel excise duties can be expected to decline.

This is where charging can help to broaden and diversify the public revenue base. Apart from promoting rational use of limited road space, pricing can provide long-term funding for regular and timely maintenance of infrastructure. Equally importantly, it helps to make road use more even, and eases congestion.

For heavy goods vehicles, EU legislation has been in place for more than 10 years. But it urgently needs to be streamlined and standardised.

As I said earlier, there is a bewildering mix of charging systems: time-based vignettes, distance-based tolls with physical barriers, free-flow tolling systems based on satellite or microwave technologies.

Six Member States do not have any system in place at all.

This lack of EU-wide coordination creates distortion in the single market. It causes unnecessary traffic diversion from tolled motorways to other roads that are less well suited for heavy transit traffic, including in other Member States.

For international hauliers, this is a cross-border nightmare. It also causes massive administrative costs for micro-enterprises which constitute 80% of all road transport companies. A few months ago, the United States Congress passed a law to ensure full interoperability of U.S. electronic tolls by 2016. I can see no reason why the EU should lag behind in this area.

The variety of charging arrangements in Europe means that users receive blurred price signals when they travel, depending on the country and route they take.

So what should be the way forward? As you know, the European Commission is considering various options as part of a wider package of proposals for the EU road market due by the end of June.

Let me stress now that nothing has yet been decided. We will of course listen to the views of all interested parties as we carry out impact assessments and sift through the 300 or so replies to the public consultation that has just ended.

In the meantime, let me offer you a few ideas in my current thinking.

For HGVs, we can solve some of these problems by creating a Single European Tolling Area, where trucks would be charged on the same basis in all EU countries. This should be according to distance covered, the damage they cause to the roads and optionally, the magnitude of external costs generated.

Distance-based toll charging is better, more efficient and fairer than the vignette system, which can be a transition tool, not a long-term solution.

National electronic tolling systems must also become fully interoperable. This will allow operators to use all EU roads with one on-board unit and a single tolling contract.

With passenger cars, at the moment, there is little hard-and-fast EU legislation. Only 14 Member States apply a road charge system, which does not always fully respect EU principles of non-discrimination and proportionality.

Since motorists are increasingly being asked to pay for using roads, I believe they should be entitled to some basic rights already enjoyed by truck drivers.

– they must be protected against discrimination on nationality or residence;

– they have to be able to understand how tolls or other user charges are set; and

– they should be informed how the revenues are used. This is basic transparency.

Also, if we want to get serious about managing congestion, we need some measures that apply to cars and trucks alike.

Traffic congestion could be reduced sharply if just 15% of car users had an incentive not to use their vehicle during peak travel hours – if they chose to use another travel means, shared a car or delayed their journey, for example. Tolls that reflect the cost of infrastructure scarcity during peak hours would create a price incentive that could generate this effect.

Finally, the end-use of charging revenue is another area that could have more EU-wide coordination. Road charging can only contribute to sustainable transport and financing if the revenues generated are re-invested in transport, to maintain and improve infrastructure.

When tolls are levied as part of public-private partnerships, the revenues are directly used for financing infrastructure. But when they are levied by the state, given the large amounts involved, I think there is a good case for earmarking at least some funding for transport and some to the Trans-European Network.

Ladies and gentlemen,

I am not pretending that we have all the answers today. We will listen to all ideas from all parties as the months progress. But we do need to act quickly.

We live on a densely populated continent. We know urbanisation and city traffic will continue to grow – and our saturated roads cannot expand indefinitely.

So we need to encourage more sustainable and efficient travel behaviour, reduce road congestion and generate more revenue to invest in the transport sector.

We now have the technology to levy and vary road charges in a fair, transparent and reasonable way. I believe this is how we can make a good start.

Thank you for your attention.