How the EU can better align spending with its climate and energy targets

The EU’s Multiannual Financial Framework (MFF) determines how EU money is spent. The current €1 trillion budget runs from 2014 to 2020 with almost €100 billion earmarked for investment in the transport sector. The current MFF Regulation states that “the Commission should present a proposal for a new multiannual financial framework before 1 January 2018”. This budget would most likely start from 2021.

Transport is the largest source of EU emissions and accounts for around a quarter of EU GHG emissions. Meanwhile air pollution from road transport contributes to over 400.000 premature deaths per year, 26.000 people die in traffic annually and the EU economy loses €100 billion every year in congestion. A large portion of the EU’s budget is currently spent on expanding road infrastructure and building up fossil fuel infrastructure (e.g. LNG terminals). A future EU budget should invest tax payers money more carefully, and prioritize investment in infrastructure that reduces the environmental impact of transport and assists member states in reaching their climate goals. In particular the post-2020 budget should:

1. Increase the Importance Given to Climate Change when Selecting Projects. The infrastructure we build today will still be there in 2050. The European Commission must develop a comprehensive and transparent methodology – comparable to the environmental impact assessment - to assess the climate impact of prospective projects. A reliable climate impact assessment methodology that is applicable across all EU spending schemes is crucial to ensure that there is alignment between investment and climate targets. Furthermore, the climate impact could determine the level of EU co-financing. This would not only support the EU’s decarbonisation efforts but also avoid wasting billions of taxpayers’ money on stranded assets.

2. Support Electrification and Cities. The defining challenge of the next decades is to decarbonise the economy. This can only be achieved by transitioning to an economy and a transport sector that run on clean, renewable electricity. The investment needs and opportunities in both the power and transport sector are enormous and a future EU budget should reflect this. This would require a shift from building new infrastructure to upgrading existing infrastructure. In addition, a future budget should better support cities. 75% of Europeans live in urban areas and 80% of EU GDP is created in cities. A much larger portion of the budget should be devoted – and accessible - to European cities so they can build the high quality transport infrastructure they need to prosper. The EU could also promote a centralised procurement service and standardise the application for joint city procurement.

3. Be based on EU Own Resources that Encourage the Shift to Zero Emission Transport. To fill the gap Brexit will leave, the EU will likely need new resources. These should be generated from taxing carbon-intensive energy, for example by reforming the energy tax directive and including aviation in the VAT-framework. Ending tax breaks for diesel fuel and aviation companies would generate over €40 billion in additional tax revenue per year, part of which could be channeled to the EU as own resources.

Also, in the reports below, CE Delft researches the biggest transport projects so far in the 2014-2020 EU budget and looks at to what extent the EU is investing in urban mobility.