For the European Union, transport means generating sustainable growth, creating new jobs and maintaining existing ones, significantly developing innovation, thus bringing about digitization and decarbonization of the sector. This means better connectivity and a single market in the future.
2014 marked the beginning of a new era of the TEN-T policy, with the EU aiming at effectively connecting the whole continent, a policy designed to close gaps between transport networks among Member States, to put an end to network bottlenecks, which are still an obstacle to the smooth functioning of the internal market and the overcoming of technical barriers, particularly in therail sector, where there are a number of incompatible standards.
Through the policy launched 5 years ago, the network will have to provide effective links from East to West and from North to South, with the responsibility of quickly and safely transporting goods and passengers across the continent and across its borders. Thus, the TEN-T Guidelines have clearly established the objectives for 2030: the core network needs to be complete and functional, without missing links and bottlenecks, which will make cross-border links become indistinguishable due to full integration and interoperability. In achieving its objectives, the EU has repeatedly reminded that funds of EUR 500 billion are required between 2021 and 2030 to complete the TEN-T Core Network and that such investment would generate an additional EUR 4500 billion or 1.8% of EU GDP. According to some EC analyses, the investments needed to build the core network between
2016 and 2030 would be EUR 750 billion, of which an allocation of EUR 607 billion is required for Core Network Corridors. Moreover, investments of EUR 1.5 trillion are needed for the construction of the TEN-T global network and other transport projects.
It is worth mentioning that in the estimates of the International Monetary Fund, the increase of public investment in transport infrastructure of 1% in GDP determines an increase of 1.5% in GDP over a period of four years. If countries implement infrastructure projects properly, the yield is much higher, reaching 2.6%.
In short, alongside the important contribution to the formation of the single market and the development of a sustainable system, the completion of the network by 2030 will mean the creation of 7.5 million jobs, a 1.6% GDP growth and a CO2 reduction by 26 million tonnes.
“We can achieve these goals,” states Violeta Bulc, EU Commissioner for Transport.
In the implementation of projects, European funding is vital, which, combined with the contribution of the Member States and the private sector, can lead to reaching the objectives underlined in the EU strategies and policies.
The EU is seeking to cater for the investment needs in transport through the Connecting Europe Facility, the instrument dedicated to transport projects (alongside energy and telecommunication), European Fund for Strategic Investment (EFSI), Horizon 2020 and European Structural and Investment Funds (ESIFs), which comprises the Cohesion Fund and ERDF.
Horizon 2020 includes a budget of EUR 6.3 million for smart, green and integrated transport, and the amount of EUR 70 billion is provided through the European Structural and Investment Funds (ESI Funds), such as the Cohesion Fund and the ERDF, including EUR 34 billion for the TEN-T infrastructure and EUR 36 billion for investments in transport projects linking or completing the TEN-T projects (clean transport and alternative fuel,
sustainable urban mobility, smart transport or active modes of transport being included here).
Under the CEF funding, there were over 39 calls (between 2014 and 2016), and there were 1852 eligible proposals submitted in total, with a requested funding of EUR 50.8 billion, which means twice as many calls. As a result of the grant agreement preparation, 925 projects have received a total funding of EUR 23.1 billion.
In the transport segment, the CEF supports studies and works for new infrastructure, rehabilitation and upgrading of existing lines for the creation of the EU transport network. The transport budget is EUR 23.4 billion, including EUR 11.3 billion for the Cohesion Fund eligible Member States. According to mid-term results, the CEF
funding has earmarked EUR 23.1 billion, with an estimate of total investments of EUR 45.3 billion being made available, of which the largest share will be recorded for the transport segment with EUR 41.6 billion. According to the CEF result report, following 11 calls for proposals, EUR 21.3 billion have been allocated to 604 projects that are in progress and account for 91% of the CEF Transport budget, and Cohesion Fund eligible Member States have received over 54% of the total funds mainly from the Cohesion envelope, but also from the General envelope. It is worth mentioning that 73% of the CEF Transport grants have been allocated to railway projects.
A share of 86% of the total transport funding is allocated to projects that contribute to the development of the nine Core Network Corridors. The largest funding, 19%, was allocated to the Rhine-Danube Corridor, followed by the North Sea-Baltic Corridor, with 16%. In terms of number of projects, the Mediterranean Corridor ranks first with
108 projects, followed by the Rhine-Danube Corridor with 82 projects.
By mode of transport, the railway received the highest funding in the first half of the CEF budget period. As the EU places emphasis on the decarbonization of the economy, the funding allocated is geared towards the development of environmentally friendly transport, and this has resulted in the largest CEF financial allocation being directed to rail transport, which plays a key role in reducing environmental impact. 236 railway projects received EUR 15.7 billion between 2014 and 2016, accounting for 73% of the total funding.
To reduce network bottlenecks, 181 projects, including 68 cross-border projects, will remove 239 network bottlenecks. The total investment in projects aimed at eliminating bottlenecks is EUR 32 billion, of which the amount of EUR 16.9 billion is CEF funding. Here, too, the railways come first with a total of 170 projects, of which 51 cross-border projects and 119 projects for other sections, but with an impact on cross-border traffic.
With regard to rail interoperability, 95 projects financed by the CEF aim at adapting, modernizing and improving railways across Europe. The total investment for these projects is EUR 14.4 billion, of which CEF has allocated EUR 9.1 billion. As part of the integration and interconnection policy, 29 projects will adapt 1,580 km of lines to European gauge (such as Rail Baltica). The European funding will contribute to the equipment of 5,439 km of lines with ERTMS, the electrification of 1,854 km of lines and the optimization of 2,759 km of freight lines.
Also designed for integration are the projects aimed at improving connectivity with ports. By 2020, new links to ports and terminals will be built, with CEF funding of EUR 107 million being allocated, whereas the total value of the projects is EUR 361.6 million. The projects include integration and interconnection through the construction of connections to the railway and one connection via a road terminal (port of Badajoz, Spain) for four maritime ports – Bahia de Algeciras, Barcelona and Valencia in Spain and Porto in Portugal, optimization of existing connections for five maritime ports – Zeebrugge (Belgium), A Coruna, Huelva and Seville (Spain) and Gdansk (Poland) and five inland ports – Strasbourg, Lyon (France), Bremerhaven and Regensburg (Germany) and Seville in Spain, and also
modernization of the existing connections for six rail-road terminals, namely Ostrava, Melnik (Czech Republic), Bremen – Bremerhaven in Germany, Barcelona in Spain and Padua and Genoa – Vado in Italy. In addition to the report analyzing CEF activity for 2014-2016, new rounds of calls were launched in 2017 with a budget of EUR 1.35 billion, in 2018 with a budget of EUR 450 million and in 2019 with a budget of EUR 100 million.
As part of 2018 CEF Transport call for the rail interoperability, 14 eligible proposals were submitted with a requested funding of EUR 86.7 million, but only 8 proposals received recommendation for financing with a recommended amount of EUR 48 million. For ERTMS there were 6 eligible proposals with a requested funding of EUR 93.2 million, 5 being recommended for financing of EUR 69.5 million, also, for innovation and new technologies, 41 eligible projects were submitted amounting to EUR 165.8 million, of which 13 were recommended for funding of EUR 71.47 million. For multimodal logistics platforms, 36 projects were submitted with a requested amount of EUR 192.8 million, of which 8 proposals were recommended with a financing of EUR 109 million.
Blending is better During the TEN-T & CEF Conference 2019, the EC and the European Investment Bank launched CEF Transport Blending Facility seen as an innovative financial instrument supporting transport projects with a significant impact on the sustainability and efficiency of the transport system.
The first CEF blending call was launched in 2017 with an indicative budget of EUR 1 billion, the introduction of this mechanism being considered as one of EC’s commitments to maximize private sector involvement in project implementation. The first deadline was July 2017, when this funding time attracted a major interest, with 68 proposals submitted by more than 110 applicants from 22 Member States, and the request for CEF funding under
this blending call was twice as high than the announced budget (the request for funding was EUR 2.2 billion, while the budget was EUR 1 billion).
“We have tested the blending and it works. In the last two years, the blending approach has mobilized EUR 7 billion
in transport investment. This was a strong message to create a really facility to cover the financial gap” Violeta Bulc said at the conference.
The 2017 pilot project was the basis for the CEF Transport Blending Facility announced in March. With an initial budget of EUR 200 million from the EU budget, it will finance ERTMS and alternative fuel infrastructure projects, by mobilizing EIB funds, both privately and from National Promotional Banks.
The blended call for project proposals in 2017 was different from the previous calls as a result of a series of four innovative features. First of all, the call is different from the others through the start of the process because, for the first time in the CEF a call was posted with two deadlines for the submission of proposals (July 2017 and April
2018), and another element involves the scope, as the call was published solely for proposals for works. In addition to traditional requirements, the minimum amount for the eligibility of project proposals in terms of total costs was set at EUR 10 million, and this minimum amount was reduced to EUR 5 million for project proposals submitted
under the “Innovation and New technologies” priority as a result of the amendment of November 2017 and applied only to proposals submitted within the second deadline.
The fourth feature concerns the concept of financial preparation. Thus, the applicants had to demonstrate that within 12 months from the signing of the grant agreement they could reach total financial closure with a private investor, the EIB or a national promotional bank.
For the implementation of the projects, the EC has established a “Facility” for the first time to allow for continued financial support until March 2021. “By its innovative nature, I have no doubt the Facility will facilitate investment and contribute to the modernization and better efficiency of European transport,” Bulc said.
This type of funding aims at combining the use of the CEF, the EIB and, where possible, the EFSI funds, as well as the funding from national promoting banks or investors from the private sector. The purpose of this mechanism is to maximize the leverage effect of the private sector involvement and capital in project implementation, while observing the principle of non-cumulative award.
The EU believes that TEN-T projects, although requiring significant investment, can be achieved through the mix of funding and financing provided by the different instruments and should be available as an integral part of the future combined instruments.
The mechanism was set up in cooperation with the EIB which will have a key role in the implementation of projects through this mechanism. “We are happy for this blending facility opportunity to combine the financing with the EU budget, and, together with the private sector, we can deliver the projects. As we move towards the next
financial programming period, we see this as an exciting pilot initiative to build on the success of the blending call, to complement financial instruments as well as to unlock further investments in the fields of alternative fuel vehicles, infrastructure and ERTMS,” EIB Vice-President, Vazil Hudak, said at the launching ceremony.
Blending is an innovative method for using CEF funding, the continued development of its potential, with significant effects on all the segments of the modes of transport, from innovation and digitization, to alternative fuels, multimodal hubs and vehicle fleets.
In addition to the involvement of various stakeholders, the Mechanism is also an instrument to simplify the financing of transport projects and will serve as a pilot project for the next budget years, i.e. 2021-2027.
It is worth mentioning that for the MFF 2021-2027, the EC proposed in June 2018 a budget of EUR 42.3 billion through the CEF, representing a 47% increase over the budget allocated in the current budget framework. Of the total amount, a budget of EUR 30.6 billion was proposed for the transport infrastructure, the remaining EUR 11.7
billion being earmarked for energy (EUR 8.7 billion) and the digital sector (EUR 3 billion). According to the EU target, 60% of the CEF 2027 will contribute to achieving climate goals.
In the next budget framework, too, the EU will focus stronger on the decarbonization of transport, which will lead to the prioritization of environmentally friendly transport modes, mainly rail transport, as well as the development of the charging system for alternative fuels. Also, CEF Transport will support the dual-use infrastructure, civilian and military, with the investment envelope amounting to EUR 6.5 billion. The Action Plan on Military Mobility was presented in March 2018. We discussed this topic discussed in our February issue. This year, the EC will identify sections of the TEN-T network that are suitable for military transport, and also those that need to be modernized and adapted requirements of such a type of transport. A list of priority projects will be announced.
The implementation of TEN-T core network projects will lead to significant benefits. For example, on railway, freight transport times will be reduced by over 45% on certain lines, and improvement in travel time on rail and ship links will determine the modal shift, which will increase the share of these modes of transport. Thus, for EU28, the rail sector activity is estimated to increase by 4.7% in 2030 compared to the reference level, with a sharp
increase of 5.8%, for EU15 (Western and South-Western states) versus +2.7% for EU13 (Central and Eastern states). The optimization of the performance of the rail freight traffic is the result of the implemented projects aimed at increasing the competitiveness of the railway traffic over long distances compared to the road traffic. Investments
include significant funding for the removal of bottlenecks and the construction of several facilities for transshipment from road to rail.
Travel times on the passenger rail segment will also be reduced, but to a lower degree than the freight. For Western and Central Europe (Benelux, Germany and France), time improvement will be less than 15% compared to the reference level, while improvement in the East will exceed 45%. At EU28 level, rail passenger transport activity will increase by 8.4% in 2030, with the highest share for EU15, i.e. 8.9%, as opposed to EU13 which will increase by 6%. Meanwhile, road traffic will decrease by 0.7% in EU28 compared to the reference level. If the ambitious objectives outlined and set by the EC are achieved in 2030, at least on the transport segment, by completing the TEN-T Core Network, there will be important benefits, such as the creation of more than 800 thousand new jobs, there will be 7.5 million person-years of jobs generated between 2017 and 2030 and there will be an additional GDP growth of 1.6%, while CO2 emissions will decrease by 26 million tonnes in the transport sector. The CEF has a key role to play in the implementation of the projects and will support projects with high added value for Europe, the effective completion of the TEN-T being vital to the mobility, economy and functioning of the single market. In fact, the CEF needs to be the connection to the single European market.