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Indicator Assessment
The use of passenger transport in Europe is predicted to increase by more than 50 % by 2050, compared with 2013. Freight transport use is predicted to increase by 80 % (EC MEMO/13/897). With such significant growth in transport use expected, it is important that prices are monitored to ensure that users are given appropriate incentives to use more environmentally friendly modes of transport. Changes in transport prices affect the decisions individuals and businesses make about transport, so fair and efficient price signals are required. To encourage this, one of the proposals of the 2011 Transport White Paper, which seeks to further promote the attractiveness of non-road modes of transport, is to confront all modes with their full costs (including the costs of negative externalities).
The price of transport reflects changes in the market, such as vehicle technology developments and international energy price evolution, as well as state interventions through regulations, subsidies and taxation (see TERM021). Government actions can internalise the environmental externalities of different modes of transport through economic incentives. The tax systems of many countries already internalise some external costs either overtly or as a consequence of revenue raising through transport-specific taxes. This can cause users to shift between different modes of transport. Economic incentives for shifting between different modes of transport can be identified by monitoring transport prices by mode.
Prices are relatively easy to measure and compare over time, as long as the product or service in question stays the same. However, variations take place over time, affecting the reliability of comparisons. For example, people tend not to purchase the same cars now as they did 10 years ago or use the same types of transport services (in terms or price and/or quality) as previously.
Therefore, only limited conclusions about trends in transport prices can be drawn. Most care should be taken when interpreting car purchase and air travel prices. The price and quality of these have changed more than other transport products or services during recent years. For example, an increasing proportion of air travellers are choosing low-cost carriers that offer a lower service level for lower prices.
On average, over the last 5 years, transport price indices for the 28 EU Member States show that real (inflation-adjusted) passenger transport prices — apart from those for car purchases and the operation of personal transport equipment — have increased.
Vehicle purchase prices have steadily fallen in relation to average consumer prices over this time making cars more affordable. Together with a rise in incomes, this may have been an important driving force behind the increase in vehicle ownership in the EU (see TERM032). The increase in vehicle ownership is linked to an increase in the use of cars as a transport mode. This often leads to increased demand for transport and, consequently, environmental pressures, as the costs associated with vehicle use are relatively low and many cost items are fixed (e.g. depreciation, insurance and vehicle tax). Similar trends are seen in the newer Member States, where the increase in the affordability of cars is even more pronounced.
In the past, a rise in air travel price indices was not regarded as representative because of the growing market share of low-cost airlines and greater competition. More decisively, prices have decreased significantly for certain routes, generally those associated with leisure trips and off-peak trips. In contrast, the real cost of rail travel has risen steadily since 2000. Since an increasing proportion of passenger rail transport (especially high-speed) is electric, prices are less closely tied to the price of crude oil.
Little information is available regarding freight transport prices. Using the United Kingdom as an example, prices for freight transport by commercial ferry and by road increased slightly over the period 1998-2018. Prices for freight transport by sea, however, were variable, but, in general, declined over this period. Prices for freight transport by sea are largely a result of economies of scale (larger ships, lower average shipping weights and longer distances).
There is wide variation in the levels of taxation and road user charges across Member States, creating a distorted road freight market. Operating costs are significantly lower in some countries than in others, which is one of the reasons for the large proportion of sub-contracted road freight operations: companies will outsource non-profitable jobs to smaller companies, especially in eastern Europe (EC, 2014a). This level of fragmentation can mean that small operators are not able to fully recover costs resulting from, for instance, increases in fuel prices; often companies struggle to pass costs on to the consumer, which may be keeping freight prices artificially low. It is estimated that transport accounts for a relatively low proportion (maximum 10 %) of the price of final products (Christidis and Brons, 2010). This has an impact on the distance a product travels from where it is grown or produced to where it is consumed. Establishing a fair but competitive market across Europe requires further harmonisation between Member States (EC, 2014b).
This indicator looks at real price indices of passenger transport based on a fixed transport product in the 28 EU Member States, relative to an average consumer price index, the Harmonised Index of Consumer Prices (HICP).
The HICP gives comparable measures of inflation for the countries and country groups for which it is produced. It is an economic indicator that measures the change over time in the prices of consumer goods and services acquired by households. In other words, it is based on a set of consumer price indices calculated according to a harmonised approach and a single set of definitions.
In particular, the HICP provides the official measure of consumer price inflation in the euro zone for the purposes of monetary policy and the assessment of inflation convergence, as required under the Maastricht criteria (also known as convergence criteria).
Price indices are used taking 2015 as a reference point (i.e. 2015 = 100). All indices are relative to the overall consumer price index (HICP), CP00 (HICP — all items (global or overall index/rate)). However, for the freight case study a reference point of 2010 = 100 is used.
According to the 2011 Transport White Paper, 30 % of road freight transported over more than 300 km should be transported by other modes of transport, such as rail or water transport, by 2030, and more than 50 % should be transported by other modes of transport by 2050. As for passenger transport, most medium-distance passenger transport should be by rail by 2050. Given the significant growth predicted in transport demand, further measures are needed to achieve these aims.
The cost of transport reflects market changes such as vehicle technology developments, international energy price evolution and state interventions through regulations, subsidies and taxation (see TERM021). Government actions can internalise the environmental externalities of different modes of transport, which can lead to users to shift between modes of transport. This indicator, which monitors transport prices by mode, can be used to monitor the development of economic incentives for shifts in the modes of transport used (TERM020).
No targets currently exist for transport user prices in the (liberalised) transport market. However, by applying fair and efficient pricing, the balance between transport modes may be affected, since the level of externalities and room for improvement may differ between modes. The 2011 Transport White Paper highlights the need to further promote the attractiveness of non-road modes of transport through a two-pronged strategy: first, to confront all modes with their full costs (including the costs of negative externalities), and, second, to directly improve the market conditions for non-road modes of transport.
Data on transport prices are collected annually from individual Member States by Eurostat. The HICP — a comparable index of consumer prices produced by each EU Member State — is used. The prices are calculated according to a harmonised approach and a single set of definitions, and they provide an official measure of consumer price inflation in the euro zone for the purposes of monetary policy.
Gap filling was not used in the development of this indicator.
No methodology references available.
No uncertainty has been specified.
The accuracy of the HICP is generally considered high. The accuracy of source data is monitored by assessing the methodological soundness of price and weight sources, and adherence to the methodological recommendations. There is a variety of data sources for both weights (national account data, household budget survey data, etc.) and prices (visits to local retailers and service providers, and central data collection via post, telephone, email and the internet are used). The type of survey and the price data collection methods used ensure sufficient coverage and timeliness. The outlets, from which price data are collected, are chosen to represent the existing trade and services network and are usually based on three main criteria: (1) popularity with consumers, (2) significant turnover from consumer sales and (3) availability of goods and services included in the HICP basket. All private households in the economic territory of the country are covered, whether resident or not and irrespective of income.
Furthermore, Eurostat and the Member States are actively working with an action plan concerning quality adjustment and sampling issues. Best practices have been agreed for a range of specific goods and services (in particular cars, consumer durables, books and CDs, clothing and computers).
The HICP does not capture changes caused by market shifts from one product to another of higher (or lower) quality. In particular, the increasing market share of low-cost air carriers for passenger travel does not put downward pressure on the price index. This issue is likely to have a significant impact on demand.
No uncertainty has been specified.
For references, please go to https://eea.europa.eu./data-and-maps/indicators/real-change-in-transport-prices/assessment-2 or scan the QR code.
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