Environmental rail charges in Europe: a review

European legislation implies the use of marginal social cost pricing in rail access charges levied on rail operators. Thus, they may include specific environmental charges to internalise the impacts of rail transport. However, when applying these principles in practice, several difficulties call for second-best settings adapted to the particularities of the rail market. In this context, few European railway administrations are already implementing rail access charges with an environmental dimension. This paper reviews the literature on the issue and assesses the current European experience in noise and air pollution rail charges. For this purpose, an analytical framework is built on the definition of four basic dimensions: charging approach, allocation of abatement efforts, degree of differentiation and intermodal approach. The qualitative examination of the existing systems suggests that the level of environmental surcharges can be generally increased given the low substitutability between rail and road and that the range of abatement possibilities should be enlarged by further differentiating charges. It is also found that the pricing scope should be adapted to achieve particular cost-efficient allocations of abatement efforts among rail operators and upstream agents. Finally, further research requirements for a quantitative assessment are defined.