31 May, 2023

Utilisation of EU funds for the transformation of the transport sector


Márton Vargha, Andrzej Ancygier

Possible sources of EU funding

There are several key sources to fund the transformation of the transport sector. While each is focusing on a different aspect of EU policy, all of them may be partly applicable to transport projects:

  • The EU’s cohesion funds dedicate a significant part of the budget to reducing disparities between Member States, which can be leveraged to reduce transport disparities.
  • The Connecting Europe Facility (CEF), is the channel through which the European Commission directly supports transport projects.
  • Interreg aims to develop European Territorial Cooperation.
  • The Recovery and Resilience Fund (RRF) is a recent mechanism intended to reduce the burden of the economic crisis caused by the Covid-19 pandemic, and which includes significant funding.
  • The European Investment Bank (EIB) gives direct loans and has other financial services, also for transport infrastructure projects.
  • NetZeroCities supports European cities to drastically cut down greenhouse gas emissions.

Emissions reduction projects are at a competitive disadvantage

The EU’s current funding system must change significantly and regulatory change is needed to make the decarbonisation of transport a success. The EUKI funded project Towards a Climate Neutral EU: Efficient Allocation of EU Funds
conducted a survey of CSO, which identified 14 core regulatory issues that are reflected in the state of funding for emissions reductions

Key issues include:

  • In many cases, EU money has been spent on activities that contradict the EU’s declared aims, including investments that directly or indirectly supported the use of fossil fuels and/or destruction of biodiversity.
  • EU money is allocated for so-called development, i.e. overwhelmingly physical investments. At the same time, there are often serious deficiencies in the operation and maintenance of important public services (education, public transport etc.). In the long term, the new investments will not be sufficient (even if they are implemented properly) without the efficient operation of important public services. Moreover, it does not make much sense to pour money into new physical developments while important sectors (education, public transport, etc.) are grossly underperforming.
  • “Free” EU money in some cases resulted in investments that subsequently proved to be useless.
  • Indicators measuring the effects of EU funding, including climate tracking methodology, are often inappropriate. Among others, the monitoring of greenhouse gas emissions from EU funded projects, and nationally funded projects, is practically non-existent.

One major reason why projects that hinder climate goals are often funded is the outdated structure of the application evaluation process. When it comes to investments that will obviously reduce carbon emissions, the decision on whether a project is eligible for EU support is usually made using a cost-benefit analysis (CBA).

The biggest problem is that when CBAs are carried out, the importance of the journey time reduction that a project can achieve is over-weighted. An over emphasis on journey time reductions often fails to account for the fact that shorter trip times mean individuals may take more trips, increasing carbon dioxide emissions unless emissions intensity is also reduced.

Another problem with journey time reduction as a criterion is that it can only be estimated with great error, and it is difficult to detect if an applicant exaggerates its extent in order to obtain funding. As it stands, projects with less ambitious CO2 emissions reduction impacts often win over projects which may have more significant CO2 emissions reduction impacts due to the over-weighting of the journey time-savings metric.

As the most important benefit of a project for us is the reduction of carbon dioxide emissions, it is clear we must redesign the project evaluation process in favour of decarbonisation over the CBA currently in use – especially with regards to the superficial journey time estimates. The main objective must be to reduce CO2 emissions and include relevant associated projects which support investment viability and impact over time.