Project

The Results and efficiency of railway infrastructure financing within the EU (Ten-T-Rail)

Upon request by the Committee on Budgetary Control (CONT) this study analyses the results, efficiency and effectiveness of the EU investment in rail infrastructure with a special focus on cross border rail projects. Beginning with a discussion of the reasons for the moderate success of EU railway policy it investigates four case studies with a focus on effectiveness of funding schemes and success of removing bottlenecks, particularly at border crossings, to improve attractiveness of the railway mode. Recommendations are given for a more efficient joint development of a European rail network by the Member States and the EU and a further development of funding schemes tailored to railways.

This study intends to answer the question of whether the EU financing of railway infrastructure is an efficient and effective way of achieving European objectives to ensure the smooth functioning of the internal market and to strengthen the economic and social cohesion of Member States. Can this be done by eliminating transport bottlenecks and improving the mobility of goods and persons between the Member States? The objective of this study is to assess four case studies of proposed TEN-T projects for their impacts, efficiency and effectiveness of implementation. This assessment is accompanied by the analysis of benefits and overall impact of the investment in cross-border projects including their impacts on regions and economies of the countries involved.

The study begins with an overview of European railway policies and investment strategies. Funding instruments are analysed, including new schemes, and suggestions made by advisory groups. Four case studies are presented to investigate the efficiency of rail investment strategies including the funding schemes applied. The impacts on border crossings are the focus of analysis. Based on the findings the study presents conclusions with regard to the efficiency of rail investments and their finance, together with their European added value. Finally it provides recommendations for streamlining European financial support in order to accelerate railway investments, in particular to remove bottlenecks at border crossings. The research is carried out as a desk study completed by selected interviews and data analysis provided by the European Commission, in particular DG Regio and INEA.

Literature review, sector interviews and case studies lead to the following key recommendations:

  1. Although the EU railway policy, including supporting investments into TEN-T railway projects, have not achieved the goal of substantial shifts from road and air to rail there are indicators to suggest that the policy is on the right track. It has to be continued with increased intensity and consistency to strengthen the market position of railways and foster the sustainable development of the transport sector.
  2. The improvement of border crossing rail sections is often ignored by the countries concerned because the national railway companies give little priority to network sections with low traffic volume. The European value of efficient border crossings can be very high and in many cases achieved with a combination of organisational intelligence and modest investments.
  3. Improvements to the EU rail network needs high funding efforts from the national budgets and can be supported by private investors. As long as private funding requires high and reliable revenues stemming from project operation, railway investments will have little chance of attracting private investors. Therefore the role of the state will prevail for railway infrastructure finance, either through direct grants or by providing guarantees and taking risk.
  4. Nevertheless “private like” financing models can be applied for railway infrastructure finance. An initial example is the construction of a concession model with extensive state guarantees for a combined road/rail project, as for instance a bridge or a tunnel (Oeresund model). This offers the opportunity to finance parts of the rail facility with revenues from road users. Among the case studies analysed there are projects which can be considered for this type of finance, such as the rail access investments for the Danube bridge at Calafat.
  5. A second option is to apply “concession like” models which can be constructed as PPPs but define the provision and availability of a project for the concession period as the performance of the concessionaire, instead of delivering revenues. The railway undertakings, the infrastructure manager and the state share in refinancing the capital costs of the project. The French HSR link Tours-Bordeaux gives an example for such a financing scheme.
  6. A third example is the construction of funding schemes for which the long-term investment needs are defined on the one hand and the sources of finance on the other hand. The Swiss model provides an extreme case for combining taxes, project revenues and income from road tolling, i.e. a massive cross-finance. A similar scheme could be prepared by changing Directive 2011/76 accordingly and allow mark-ups to support rail. At least the mark-ups for external costs of air pollution and noise could be transferred to more environmentally friendly transport modes such as rail.
  7. Some regional studies and European-wide macro-economic analysis have revealed substantial wider economic benefits of cross-border projects. Whether such benefits accrue directly in the border regions depends, of course, on the regional structure, as in the Oresund case where both Copenhagen and Malmo benefit. In the case of PBKAL, London, Paris and Lille receive benefits, while peripheral regions which are poorly connected to the HSR stations, e.g. Kent and Nord pas de Calais on both sides of the channel, do not gain.
  8. The analysis of case studies gives rise to streamline the plans for developing the HSR network and complement this backbone infrastructure by regional rail networks which provide good access to the HSR stations and improve the inter- and intraregional interconnectivity.
  9. The Oresund case also reveals that intense cooperation between the Member States and their willingness to implement access infrastructures to connect the large scale new infrastructure with the smaller regions is of importance for the success of a project in terms of creating wider regional benefits. Lack of cooperation and missing regional access links hamper the achievement of regional benefits of cross-border infrastructures.

Final Report

Duration

4 May 2015 - 10 November 2015

Client

  • European Parliament

Partner

  • M-Five

Website