Internalising the external costs of transporting hazardous substances

Since the aircraft crash in Amsterdam’s Bijlmer apartment block and the massive firework explosion in a residential area of Enschede, off-site safety has been high on the Dutch political agenda. In tandem, government policy on the transport of hazardous substances has also been reviewed. The Ministry of Transport and Public Works (Transport Safety Division) asked CE to examine whether the external costs associated with such transport can be ‘internalised’ and, if so, what options are available. The study had three ba-sic aims: to bring company policy on hazardous transport more in line with society’s broader interests, to allocate the social costs of that transport to the proper parties, and to meet the government’s risk standards at lower cost.
The external costs associated with accidents and near-accidents involving this kind of transport are difficult to quantify, but are probably at least an order of magnitude lower than the cost of maintaining and creating ‘off-limits’ zones around certain kinds of infrastructure. The latter already amount to several hundred million euro a year or more and may rise substantially if policy in this area is tightened.
A preliminary analysis seems to indicate that, despite external costs being difficult to quantify, there are several interesting options for improving the extent to which they are internalised:

  • by improving insurance coverage of hazardous substance transport;
  • by introducing a charge on insurance premiums for such transport;
  • by quoting and perhaps trading in rights to use routes along or through ‘high-risk’ zones.

The principal recommendation of the study is to elaborate these options in more detail, to gain a better idea of their respective pros and cons.


More about