Progress towards a more sustainable transport system has become an imperative in the European Union (EU), as in many other parts of the world. The Gothenburg European Council has singled out the transport sector as one of the four priority areas where sustainability policy development has to be put on a faster track. Achieving such progress requires better integration of environmental considerations into transport policy and a clear and quantitative picture of the sector and the way in which it is developing. This is the second European Environment Agency (EEA) indicator-based report on transport and the environment. The key messages of this year’s report confirm many of the trends, problems and challenges highlighted in TERM 2000. Overall, the report shows that transport is becoming less and not more environmentally sustainable, and integration efforts have to be redoubled. The majority of the key messages have ‘sad faces’, indicating an unfavourable trend or a large distance from the policy objective. Inexorable growth in road transport and aviation is resulting in increasing threats to the environment and human health. The growth in greenhouse gases, in particular, is worrying. To reach the Kyoto targets and beyond (as further reductions of greenhouse gas emissions will be needed) it is essential to reduce substantially the use of fossil fuels in transport. Efforts are also needed to improve the environmental performance of rail transport and shipping, although these remain the least environmentally damaging motorised modes overall. Internalisation of external costs, generally recognised as an essential integration tool, is still facing many barriers. However, the picture we present is not entirely gloomy. A few key messages carry ‘smiley faces’, indicating a positive trend. These mainly relate to the technological and fuel improvements that have resulted in vehicles becoming less polluting per transport unit. A significant improvement in air quality in many cities is the result. And there are several ‘neutral faces’, indicating some positive development, though not enough to meet the relevant objective. The European Council at its summit in Gothenburg stressed the need to improve internal policy coordination between different sectors. TERM 2001 shows that to restrain the growth in transport, efforts are indeed needed in various other sectors. The transport sector’s dependency on fossil fuel clearly runs counter to the objectives of the European strategy for the security of energy supply. Action is also required in the tourism sector; tourism travel is the fastest growing category of passenger transport. Industry has an essential role in the development of more transportefficient production and distribution systems and in the improvement of freight logistics; ‘just-in-time’ deliveries continue to have significant transport implications. Meanwhile, I am pleased to note that the TERM model is increasingly being adopted by other sectors. In our Environmental signals 2001 indicator report, published recently, we already use some key indicators to give a comparable picture of the development in the various sectors. Together with its partners, EEA is also developing indicator-based reporting systems on energy and agriculture. A good coordination between sectoral reports is needed; EEA is developing a common reporting framework for sectors. Developing clear targets for the transport sector is essential. Decoupling transport from economic growth and stabilising the modal split — the share of the transport market taken by the different transport modes — at 1998 levels are the two transport objectives included in the Sustainable Development Strategy and the revised Common Transport Policy. It will be a challenge for TERM to monitor progress towards these targets and, most importantly, to assess whether these objectives are sufficient to result in significant environmental improvements. The sustainable development strategy establishes the link between the Sixth Environment Action programme, the Cardiff process for integrating environmental concerns into sector policies and the Lisbon process, which integrates employment, economic reform and social cohesion. To monitor these processes, it is necessary to complement the TERM indicators with a system of socio-economic indicators. Together with the Commission services we are investigating how to concretise this. Although the assessment in TERM 2001 focuses mainly on the EU level, it is our intention to develop TERM into a tool for country benchmarking. This will help countries to compare their performances and to learn lessons from their success stories and failures. The extent to which TERM information is actually used by policy-makers in the formulation of their integration policies is as yet unclear. It is, however, encouraging that the Transport Council has requested the Commission to ensure the long-term continuity of TERM. It is equally important to evaluate the relevance of the TERM approach for policy use needs regularly, so as to match TERM closely to emerging policy information needs. We would therefore greatly appreciate readers’ feedback on this report.