EU funds for transport

The new rules for EU transport spending should guarantee that taxpayers’ money only goes towards sustainable finance.

The discussions on new rules for EU transport spending are ongoing and will be concluded in 2020 with the new EU budget. T&E argues that only projects which protect the environment and biodiversity while delivering measurable steps towards a low-carbon, climate-resilient and resource-efficient economy should be supported. T&E advocated strengthening the rules on spending EU funds on transport projects to ensure that cleaner projects are prioritised. Our priorities are explained here.

What was the problem?

Up to 2013, the rules for spending EU funds on transport projects did not encourage sustainable finance for greener projects and failed to properly consider the resulting impacts on emissions of greenhouse gases, air pollutants, noise, land use, habitats and biodiversity. There was no real incentive to make sure money was sustainable finance, ie that it went towards more sustainable projects. Nor even did the rules direct the funding to projects where would help the most people, such as in cities or poorly connected regions.

It was often argued that because the lion’s share of the ‘TEN-T’ (Trans-European transport networks) budget was earmarked for rail projects, that would be enough to ensure the sustainability of transport investments. This assumption is wrong. Spending from cohesion funds, with a budget over ten-times bigger, heavily favoured roads. And not all rail projects are environmentally sustainable.

As a result, much of the €13bn each year that the EU spent on transport (ca. €1bn/year from the TEN-T budget and €12bn/year from cohesion funds for poorer regions), went towards environmentally harmful projects such as regional airport developments and high-speed rail lines where the real need was questionable. Almost 50% of the EU investment in transport projects went to roads and aviation.

The financial impact is even higher because projects are co-funded with national government funds and private finance. Without the offer of EU cash, many co-financed projects would simply not go ahead.

Is the problem solved by the new rules?

Not entirely. The EU pledged to spend at least 20% of the approximately €1 trillion budget for 2014-2020 on climate protection and adaptation goals. But it is falling short of this goal and it’s impossible to know how transport spending is included.

On paper, the EU has committed in the meantime to a 70% cut in carbon emissions from transport, compared with 2008. This target comes from the European Commission’s White Paper on transport of March 2011.

In practice, things are not going as well. Transport is the only sector that has seen its emissions increase over the past two decades. Transport now emits around 31% of all the greenhouse gases in Europe (including aviation and shipping), which makes it the biggest emitter.

So new sustainable finance rules for EU spending on transport are very important. Projects seeking EU funds should have to prove they’re playing a role in decarbonising transport and such assessments should be made publically available.

In existing legislation that defines EU spending, as well as the rules and guidelines, there are indicative (very long) lists of projects annexed to the TEN-T Guidelines and CEF regulation. These lists were pre-negotiated between the Commission and national governments and indicate national political priorities. But then the lists were considerably added to by members of the European Parliament during the political process in a bid to gain EU funds for their constituencies. Being on the priority list is no guarantee of receiving funds, but projects which are not in the list will not be eligible.

In the cohesion funds rules, T&E identified a major barrier to sustainable finance: projects which generated revenues (for example via an infrastructure charge) were eligible for less money. So an untolled motorway could get more money than a tolled motorway, or even than a rail link because EU law obliges infrastructure charges for railways. As a result, countries were asking the EU to pay for free roads (often where there was not enough transport demand to make them financially viable), whilst building tolled roads themselves. These rules have now been updated to encourage user-pays projects and ensure a more level playing field for rail.

The new rules for EU transport spending should guarantee that taxpayers’ money only goes towards sustainable finance.

What happens next?

The EU will be working on the post-2020 EU budget between 2017-2020. The timeline has been disrupted by the ongoing Brexit discussions, which will change the structure of the EU Budget. The Commission reflection paper that was published in June 2017 suggests reforms that include new ‘own resources’, which would mean the creation of new financial sources to the EU budget from the European economy. They list fuel taxes and carbon pricing as two potential sources of revenue for the EU budget that could also aid in decarbonising transport. 

What should be done?

The European Commission should publish its methodology, including socio-economic cost-benefit analysis and environmental impacts, showing how projects will be appraised and selected to receive funding and demonstrating that it is in line with the sustainability priorities in the new rules. This will encourage project promoters to factor sustainability into their proposal preparations. After the call for proposals, the Commission must show that the methodology is consistently and transparently applied, to justify the final project selection.

The Commission and national governments must also make sure that local people are properly consulted, before any project planning starts or before any funds are granted. The project proposals should be published so that the public can comment on them and so that the transport forecasts can be checked. In the past, transport forecasts have routinely been exaggerated by project promoters to try to make a stronger economic case. The result is seen in several extremely expensive and environmentally damaging construction projects then carrying very few passengers, for example, some high-speed rail lines in Spain, regional airports in Poland and underused motorways in Portugal.

The EU rules on smarter transport spending should be further clarified at the earliest opportunity, to require mandatory application of the polluter-pays principle for all EU funded projects, and to offer higher funding rates in relation to projects that reduce environmental damage and on the basis of a ‘climate rating’.