[Publication] EU funding of transport projects

Original publication: July 2019
Authors: José Manuel VASSALLO, Laura GARRIDO.
Short link to this post: http://bit.ly/2lHo8Mc
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Summary

The study provides recommendations for improving the future effectiveness of European Union (EU) funding instruments that support transport projects. These instruments are supposed to comply with three main goals: (i) achieving socioeconomic convergence among Member States (MS); (ii) completing the Trans European Transport Network (TEN-T); and (iii) tackling specific transport challenges such as decarbonisation, digitalisation, etc. Overall, there are three different types of EU funding instruments available for transport projects: EU grants, European Investment Bank (EIB) loans and innovative financial instruments. Some EU funding instruments are mostly focused on supporting TEN-T projects, while other instruments have greater flexibility to finance projects not necessarily included in the TEN-T.

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As of today, the performance of the EU funding instruments for transport projects has room for improvement. These instruments have not been so effective in fulfilling transport policy priorities. The current EU allocation seems to be insufficient, especially for the Connecting Europe Facility (CEF) and the Cohesion Fund (CF). The allocation of traditional cohesion policy instruments is too much influenced by MS towards national and regional priorities whereas the allocation of more sophisticated instruments does not seem to be balanced across regions. The evaluation of projects and programmes funded by the EU often lack focus on results and impacts. Administrative procedures, especially in cross border projects, keep on being an obstacle for the effective delivery of projects. The capacity of MS remains being critical to manage EU funding. Finally, there is still certain overlapping among different funding sources.

In the last few years, mobility is experiencing a revolution driven by the impact of digitalization and new cleaner energy sources. The improvement of batteries along with the growth of alternative fuels is steadily reducing the weight that fossil fuels had traditionally played to power transport means. All these changes will require larger funding resources for transport projects, whose availability may be threatened by political pressures to reduce the EU budget or prioritize it to different policies.

Given that framework, regarding funding priorities, the study recommends: (i) raising the amount of funding to transport needs, especially CEF and CF; (ii) increasing the amount allocated to adapt infrastructure to future mobility needs; (iii) promoting measures to improve integration and interoperability; (iv) prioritising metropolitan areas and declining regions; and, (v) allowing funding instruments to finance the maintenance and operation of infrastructure.

Regarding organizational improvements, the study recommends: (i) adopting tougher measures to encourage MSs to give greater priority to cross-border projects; (ii) defining more flexible approaches to combine resources coming from different priorities (ICT, energy, environmental, social), or even different instruments; (iii) setting a minimum common evaluation framework, both ex-ante and ex-post, applicable to all transport projects receiving EU support; (iv) establishing clear guidelines for innovative instruments; and, (v) simplifying and homogenising the administrative procedures.

Regarding governance reforms, the study recommends: (i) establishing independent supervision of the common evaluation framework for transport projects funded by the EU; (ii) constituting a single EU Transport Agency; (iii) providing guidance to less developed regions and countries to modernize their institutions; and (iv) promoting a greater harmonization of charging, taxation and subsidy approaches.

Link to the full study: http://bit.ly/629-199

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Selection of figures:

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Table 1: Summary and classification of instruments

This is a summary table of the most important EU funding instruments for transport described over this chapter.

Figure 6: Illustrative summary of EU funding instruments

Figure 6 is an illustrative figure of the most important EU funding instruments for transport described over this chapter.

Figure 5: EFSI – financial structure and eligible sectors

Initially, EFSI consisted of a EUR 16 billion portfolio guarantee from the EU budget provided to the EIB Group complemented by a EUR 5 billion capital contribution from the Bank, that was expected to enable the EIB Group to provide over EUR 63 billion of additional financing and leverage up to EUR 315 billion in investment throughout the EU until 2018.46 The EU guarantee allows the EIB Group to support projects with a higher risk profile than that usually assumed by the Bank. In 2017, the duration of the fund was extended until 2020, and both its risk-bearing capacity and its target in terms of investment mobilised were increased.47 In addition, another policy area was added to the seven main areas to be originally supported by the fund.

Figure 4: CEF’s allocation during the current and the next MFF, in EUR billion

In the transport area, the CEF’s main objective is to support the development of the Core Network and its nine corridors. To that end, an overall budget of EUR 24.05 billion was allocated to TEN-T projects in the current MFF. This represented a threefold increase compared to its predecessor, the TEN-T programme 2007-2013. The budget is divided into two main envelopes: (i) a general envelope, which is available to all MSs, and (ii) a cohesion envelope, only available to the MSs eligible for the CF. The specific amounts set for each envelope and those proposed for the next MFF 2021-2027, including the new Military mobility, can be observed in Figure 4.

Figure 3: TEN-T core corridors of the Core Network

As such, the TEN-T is currently structured in two different layers: (i) a comprehensive network, aiming at ‘ensuring the accessibility and connectivity of all regions in the Union, including the remote, insular and outermost regions’13 and (ii) a core network, consisting of ‘those parts of the comprehensive network which are of the highest strategic importance for achieving the objectives of the TEN-T policy’14. According to the TEN-T guidelines,15 the core network should be implemented by 2030, and the comprehensive one by 2050.

The purpose of this study is to provide comprehensive information on the current status of the funding provided by the EU to transport projects (including the main achievements/benefits and issues/problems), to highlight different alternatives available for the future MFF 2021-2027 and to propose recommendations for improving the effectiveness of EU funding. To that end, the methodological approach outlined in Figure 2 has been conducted.