Air pollution from roads causes at least €70bn (£62bn) in health damage every year in the European Union, according to a new report, with diesel fumes responsible for three-quarters of the harm.

The research, commissioned by the European Public Health Alliance (EPHA), found the vast majority of the costs were borne by taxpayers through government-funded health services. But these costs could be reduced by 80% by 2030 if ambitious action were taken, the report concluded.

Diesel emissions have been in the spotlight since 2015 when Volkswagen was caught cheating regulatory tests. Virtually all diesel cars were then revealed to be pumping out far more pollution on the road than in official tests. Research in 2017 showed at least 38,000 people a year were dying early as a result of this failure.

In the UK, most urban areas have illegal levels of air pollution and ministers have lost three times in the high court over the inadequacy of their action. The latest government action plan, called “pitiful” by environmental lawyers, revealed air pollution was actually much worse than previously feared.

Some of the very latest diesel models do comply with official limits in real-world driving, but Zoltán Massay-Kosubek, policy manager at the EPHA, said: “I would not consider diesel as part of the solution, but as part of the problem. You can improve the filters but it still remains a fuel-burning technology.”

“Low and zero-emission alternatives would be a much more appropriate solution,” he said. “But as a public health advocate, I cannot stress enough the importance of walking and cycling, which give additional health benefits.”

The research used real world data on vehicle emissions and known impacts on health to calculate the total health costs for the 28 EU nations, including medical support, hospital admissions and early deaths. It took a conservative approach and only included health impacts conclusively linked to toxic air, such as heart attacks and lung diseases.

“Not all aspects of health problems related to air pollution are fully developed by research, such as probable links to diabetes and dementia,” said Massay-Kosubek. “We think we are just scraping the surface. I think the real picture is even bigger.”

Other researchers agree that the well-known harms are only “the tip of the iceberg”. The World Health Organization’s global figure of 7m early deaths is certain to be an underestimate, as it only includes particle pollution and the five most firmly linked causes of death. Early estimates using improved models indicate a total figure of 9m from particle pollution alone.

There should be tougher EU-level regulation of emissions, said Massay-Kosubek, but there is also a need for city-based initiatives such as diesel bans, pollution charges and car-free days. The report found that ambitious action by 2030, including two-thirds of new cars being electric or plug-in hybrid and a ban on all pre-2014 vehicles, would cut health costs by 80% compared with today. A less ambitious scenario, with a quarter of new cars being electric or hybrid by 2030, still cuts costs by 74%.

Medical campaigners welcomed the new report. “Our concern should first and foremost be the devastating costs to human health,” said Rebecca Daniels at the global health charity Medact. “To tackle this public health crisis, EU governments must commit to far reaching policies that see an immediate transition away from diesel vehicles.” Dr Jonathan Grigg, from Doctors Against Diesel, said he supported the report’s “high-ambition” scenario.

“It is important that we differentiate between the old diesel fleet and the latest generation of vehicles,” said a spokeswoman from the European Automobile Manufacturers Association (ACEA). “The latest-generation diesel cars emit very low NOx [nitrogen oxides] emissions not only in the lab, but also on the road. Modern diesel cars, supported by fleet renewal policies and combined with alternative powertrains, can therefore play a strong role in helping cities move towards compliance with air quality targets.”

The total cost to society from all forms of air pollution, not just from roads, is much higher than the figures in the new report and in the UK alone totals £20bn a year.