5.5.3 Non-climate policies

Climate change is a minor factor in decision making and policy in the transport sector in most countries. Policies and measures are often primarily intended to achieve energy security and/or sustainable development benefits that include improvements in air pollution, congestion, access to transport facilities and recovery of expenditure on infrastructure development. Achieving GHG reduction is therefore often seen as a co-benefit of policies and measures intended for sustainable transport in the countries. On the other hand, there are many transport policies that lead to an increase in GHG emissions. Depending on their orientation, transport subsidies can do both.

The impact of transport subsidies

Globally, transport subsidies are significant in economic terms. Van Beers and Van den Bergh (2001) estimated that in the mid-1990s transport subsidies amounted to 225 billion US$, or approximately 0.85% of the world GDP. They estimated that transport subsidies affect over 40% of world trade. In a competitive environment (not necessarily under full competition), subsidies decrease the price of transport. This results in the use of transport above its equilibrium value and most of the time also results in higher emissions, although this depends on the type of subsidy. Secondly, they decrease the incentive to economise on fuel, either by driving efficiently or by buying a fuel-efficient vehicle.

A quantitative appraisal of the effect of subsidies on GHG emissions is very complicated (Nash et al., 2002). Not only have shifts between fuels and transport modes to be taken into account, but the relation between transport and the production structure also needs to be analysed. As a result, reliable quantitative assessments are almost non-existent (OECD, 2004a). Qualitative appraisals are less problematic. Transport subsidies that definitely raise the level of GHG emissions include subsidies on fossil transport fuels, subsidies on commuting and subsidies on infrastructure investments.

Many, mostly oil producing, countries provide their inhabitants with transport fuels below the world price. Some countries spend more than 4% of their GDP on transport fuel subsidies (Esfahani, 2001). Many European countries and Japan have special fiscal arrangements for commuting expenses. In most of these countries, taxpayers can deduct real expenses or a fixed sum from their income (Bach, 2003). By reducing the incentive to move closer to work, these tax schemes enhance transport use and emissions.

Not all transport subsidies result in higher emissions of GHGs. Some subsidies stimulate the use of climate-friendly fuels. In many countries, excise duty exemptions on compressed natural or petroleum gas and on biofuels exist (e.g., Riedy, 2003). If these subsidies result in a change in the fuel mix, without resulting in more transport movements, they may actually decrease emissions of GHGs.

The most heavily subsidised form of transport is probably public transport, notably suburban and regional passenger rail services. In the USA, fares only cover 25% of the costs, in Europe 50% (Brueckner, 2004). Although public transport generally emits fewer GHGs per passenger-km, the net effect of these subsidies has not been quantified. It depends on the balance between increased GHG emissions due to higher demand (due to lower ‘subsidised’ fares) and substitution of relatively less efficient transport modes.