Reforming Transport Pricing in the European Union

Reforming Transport Pricing in the European Union

A Modelling Approach

Transport Economics, Management and Policy series

Edited by Bruno De Borger and Stef Proost

This timely book deals with the problem of pricing passenger and freight transportation within Europe. The contributors argue that current legislation affecting pricing and regulation is increasingly less successful in dealing with market failures and externalities such as congestion, air pollution, noise and accidents. Technological progress and greater European co-operation has brought increased scope for the reform of transport policies.

Chapter 3: Policy reform packages

Bruno De Borger, John Peirson and Roger Vickerman

Subjects: economics and finance, environmental economics, transport, environment, environmental economics, transport, urban and regional studies, transport


Bruno De Borger, John Peirson and Roger Vickerman 3.1 INTRODUCTION The previous chapter resulted in two specific lessons for transport policy design. First, it suggested that there does not exist a single policy instrument that internalises all externalities simultaneously. Individual price and non-price instruments may be quite successful in internalising individual externalities (for example, insurance premiums to tackle accident risks, fuel taxes to correct for CO2 emissions, direct emission regulation to reduce other air pollution), but a coherent transport policy necessitates a welldesigned policy package, consisting of an appropriate combination of instruments. Second, the discussion made it clear that from an efficiency viewpoint an increasing reliance on pricing instruments is necessary. Moreover, internalising the congestion externality is difficult with the existing price instruments, so that new pricing tools will have to be introduced that allow differentiation of charges in time and space in function of local and temporal variations in congestion. One of the main objectives of this book is to study the implications of various policy packages for transport demand and for overall welfare in a number of different European cities and countries, using a numerical optimisation model specifically designed for this purpose. In this chapter we present the policy packages that were selected for the empirical analysis reported on later in the book. The criteria for the selection of the policy packages were the following. First, they had to be consistent with a stronger emphasis on pricing instruments, as suggested by economic...

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