Report: New tools for evaluating emissions reduction measures in transport

The aim of environmental policy in the transport sector is to plan and select measures that reduce emissions cost-effectively. However, there have not yet been established principles and tools in place for examining the cost impacts of the measures. In its work, the Holistic Economic Evaluation of Transport Emission Reduction Measures (HEETRA) project has developed models and principles for calculating the emissions and costs of passenger and freight traffic that can be used to comprehensively examine the cost impacts and cost-effectiveness of climate policy measures in the transport sector.

The tools and principles developed in the project make it possible to assess the impacts of various measures, such as emissions trading in road transport and subsidies for the purchase of electric trucks, and to compare their cost-effectiveness. The tools guide the user to consider the impact mechanisms that bring about changes in the transport system, that is, how actors adapt to changes in the operating environment, such as emissions trading.

Cost-effectiveness of EU emissions trading scheme for road transport as an example calculation

One of the examples examined in the project was the EU emissions trading scheme for road transport, which is estimated to increase fossil fuel prices by 7–8 per cent from 2027 onwards. The example calculation estimated an increase of 13 cents/l in energy taxes for petrol and 14 cents/l for diesel starting in 2027. The results show that emissions trading in passenger transport will achieve cumulative CO2 emission reductions of 0.29 megatonnes by 2030 compared to the baseline scenario. At the same time, total passenger transport costs for households will increase by EUR 290 million despite reductions in mobility, modal shifts and changes to the type of propulsion used in vehicles. When it comes to passenger transport, the cost of reducing emissions will be EUR 1,028 per tonne of reduced CO2 emissions.

In terms of freight transport, the rising energy price due to emissions trading will lead to an improvement in the efficiency of road transport by increasing average loads and reducing average fuel consumption. However, these changes are not sufficient to prevent a significant increase in freight transport costs due to emissions trading. The total cumulative freight transport costs for 2023–2030 are EUR 144 million higher than in the baseline scenario and the cumulative emission reductions are 0.09 Mt, so the cost-effectiveness of the measure per tonne of CO2 emissions reduced is EUR 1 583.  If it is possible to adapt to emissions trading with a modal shift from road transport to rail and water transport, and if the transition is already implemented gradually starting in 2023, the cumulative total costs of freight transport will even decrease by EUR 91 million.  The emission reductions will be significantly greater, 0.24 Mt, meaning that the cost of the reduction will be EUR -380/t. The results of the modal shift assessment show the importance of long-term and predictable climate policy for the cost-effectiveness of emissions reductions in transport, as the measures needed for the shift can be implemented before the costs of emissions trading are realised.

The example calculations present a detailed analysis that has been difficult to assess with previous tools. The calculation models developed in the project also implement the recommendations presented in the literature for assessing the impact of measures compared to the baseline scenario and for drawing up sector-specific scenario models that include different modes of transport. The tools and assessment principles developed in the project, such as evidence-based flexibilities that make it possible to assess impacts from the perspective of households, businesses and general government finances, therefore represent a significant step forward in the overall economic assessment of the dimensions of transport emissions reduction measures. In the future, the results of the project will be available to authorities responsible for planning climate policy in the transport sector.

The evaluation was conducted by the University of Tampere as part of the implementation of the Government’s analysis and research plan for 2022. The calculation tools developed in the project are available to anyone interested. To access them, fill in the form at https://research.tuni.fi/verne/heetra/

Inquiries: Professor Heikki Liimatainen, University of Tampere, tel. +358 40 8490 320, heikki.liimatainen(at)tuni.fi

The Government’s joint analysis, assessment and research activities (VN TEAS) produce data used to support decision-making, everyday operations and knowledge-based management. They are guided by the Government’s annual plan for analysis, assessment and research. The content of the reports published in the publication series of the Government’s analysis, assessment and research activities is the responsibility of the producers of the data in question and does not necessarily represent the view of the Government. For more information, visit https://tietokayttoon.fi/en.