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Cost-effective reduction of fossil energy use in the European transport sector: An assessment of the Fit for 55 Package

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  • Marten Ovaere

  • Stef Proost

Abstract

This paper surveys climate and energy policy in the EU transport sector covering the road, aviation, and shipping sectors. We summarise current policies, focusing on the Fit for 55 Package, and categorise them according to their targeted decision stage (consumption, investment, or research) and the type of instrument being used (e.g. cap-and-trade, tax, mandate, performance standard, or subsidy). Next, we analyse the cost-efficiency of the different policies and instruments. We find that they address a range of market inefficiencies, but that there are still a number of aspects that can further improve the cost-effectiveness of current EU climate policies in the transport sector. For example, higher taxes and an emission performance standards for aviation and shipping, the right combination of R&D investments and learning-by-doing policies, and balancing implicit carbon prices by revising the road tax system and adding congestion tolls and charges. Finally, European policy has important side effects on the rest of the world that need to be taken into account in the selection of policies. This improved set of policies can support a sustainable recovery and reach the European Union s climate targets at the lowest cost.

Suggested Citation

  • Marten Ovaere & Stef Proost, 2021. "Cost-effective reduction of fossil energy use in the European transport sector: An assessment of the Fit for 55 Package," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 21/1031, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:21/1031
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