The transport sector is a significant contributor to carbon dioxide emissions worldwide and globalization has led to long and fragmented supply chains. Road transport dominates the UK transport sector and is responsible for 26% of UK carbon dioxide emissions.

Fuel in the UK is heavily taxed when compared to Europe as a whole. Fuel taxes paid by the UK road transportation sector exceed the environmental damage costs of its carbon dioxide emissions by a factor of 2.6 times. This means that the scope to increase fuel taxes to reflect climate change concerns is limited by the competitive disadvantage that UK operators would face. Trucost’s report examines the environmental impacts of operating road transport in the UK and to what extent the UK and EU governments are dealing with these impacts. The findings show that carbon dioxide emissions account for 75% of the environmental damage from pollution caused by operating the UK road sector. Heavy Goods Vehicles (HGVs) fuel taxes are roughly equivalent to their social costs (emissions, noise and accidents). External congestion costs for HGVs are about twice as high as the damage cost of all HGV emissions. Competitive concerns limit scope for further fuel tax increases as a means of reducing carbon dioxide emissions. The best environmental outcome would be achieved by road user charges combining with fuel taxes rather than replacing them.