13 Freight transport
| (a)
(30276)
17295/08
C(08) 7713
(b)
(30281)
17294/08
+ ADDs 1-7
COM(08) 847
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Commission Communication providing guidance on state aid complementary to Community funding for the launching of the motorways of the sea
Draft Regulation (EC) No. …/2008 amending Regulation (EC) No. 1692/2006 establishing the second "Marc Polo" programme for the granting of Community financial assistance to improve the environmental performance of the freight transport system
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| Legal base | (a) —
(b) Articles 71(1) and 80(2) EC; co-decision; QMV
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| Documents originated | (a) 11 December 2009
(b) 10 December 2009
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| Deposited in Parliament | (a) 16 December 2009
(b) 18 December 2009
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| Department | Transport |
| Basis of consideration | Two EMs of 15 January 2009
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| Previous Committee Report | None
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| To be discussed in Council | (a) None planned
(b) March 2009
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
13.1 In 1997 a five-year programme, Pilot Actions for Combined
Transport (PACT), to assist the start-up of new intermodal services
shifting freight off the road to other modes of transport, was
established. In the light of experience gained through PACT a
broader grant programme to support modal shift, called Marco Polo,
was established in July 2003 to run from 2003 to 2006. The programme
was renewed, as Marco Polo II, for the period 2007-2013, in October
2006. It has a budget of €400 million (£380 million)
and is expected to shift more than 140 billion tonne-kilometres[67]
of freight from the road reducing carbon dioxide emissions by
8,400 million kilogrammes.
13.2 The objectives of the Marco Polo programme are
to:
- reduce road congestion;
- improve the environmental performance of the
freight transport system within the Community; and
- enhance intermodality.
It does this by facilitating the shift of transport
of international freight from road to rail or waterway. It provides
financial assistance for:
- Modal Shift Actions —
support for non-road freight services;
- Catalyst Actions — support for actions
to overcome structural (that is, non-regulatory) barriers to the
efficient functioning of non-road freight services;
- Common Learning Actions — promoting Cooperation
in the freight logistics market;
- schemes linked with use of so-called "Motorways
of the Sea" — that is, intra-Community sea routes promoted
as alternatives to land routes; and
- Traffic Avoidance Actions — innovative
projects that reduce the need for transport through design of
the supply chain.
13.3 An external evaluation of the 2003-06 Marco
Polo programme made a number of suggestions for the continuing
programme, including:
- allow projects with a longer
duration;
- lower the threshold for inland waterways modal
shift projects;
- publicise the scheme more effectively;
- take more account of congestion reduction in
project evaluation;
- make understanding the application evaluation
process easier ; and
- a commission analysis of the existing programme
to identify strengths and weaknesses and to suggest enhancements
to make the programme more effective.[68]
The acceptability of these suggestions was tested
by the Executive Agency for Competitiveness and Innovation, which
manages the Marco Polo II programme, with a short stakeholder
consultation. 1,500 organisations across the Community were sent
detailed questionnaires and replies were received from 97, from
20 Member States (including six from the UK), Norway and Serbia.
Those who responded were broadly in favour of the suggested actions.
13.4 Motorways of the sea projects can be eligible
for funding from a number of Community and national sources. Depending
on the type of project, bidders may seek funding from the Marco
Polo II or the Trans-European Transport Network programmes, as
well as from the European Regional Development Fund and the Cohesion
Fund. Motorways of the sea projects may also be topped up using
state aid — subject to the Commission's "Community
guidelines on State aid to maritime transport",[69]
issued in 2004, which apply to state aid to encourage short sea
shipping and which limit aid for operational costs to 30% for
up to 36 months and for investment costs to 10% for the same period.
The complex funding framework is confusing for potential bidders
and has resulted in differing advice on eligibility being offered
by different Member States.
The documents
13.5 The Commission Communication, document (a),
is intended to clarify the eligibility rules for motorways of
the sea project funding under the Marco Polo II and Trans-European
Transport Network programmes and to explain how the various funding
streams interact. Under Regulation (EC) No. 1692/2006, which governs
Marco Polo II, motorways of the sea projects are, in prescribed
circumstances, eligible for funding of up to 35% for a maximum
period of 60 months. The Regulation also allows state aid to be
paid to the projects, subject to absolute financial and time limits
and the relevant state aid rules on State aid. The Commission
now makes clear that:
- if the Marco Polo II programme
has to limit funding levels, due to over-subscription, Member
States can top up the funding to the prescribed limits;
- the same eligible costs cannot receive funding
from more than one Community scheme; and
- in relation to the confusion between the short
sea shipping state aid guidelines and the Marco Polo II limits,
if a motorways of the sea project is submitted in response to
a Marco Polo II programme call for bids for funding, Marco Polo
II rules apply. That is the funding limit is 35% for up to 60
months, irrespective of whether the funding is ultimately derived
from the Marco Polo II programme, the European Regional Development
Fund or the Cohesion Fund.
13.6 Under Decision No 1692/96/EC, which governs
the Trans-European Transport Network programme, motorways of the
sea projects are eligible for funding of up to 35% for up to 24
months for "duly justified start up" costs. The Commission
now makes clear that:
- motorways of the sea projects
submitted in response to a Trans-European Transport Network programme
call for bids for funding are eligible for a maximum state aid
of 30% over 24 months, provided the appropriate conditions are
met;
- this aid can be a top up to Community funding
if this funding is not the maximum allowable; and
- this permission is irrespective of the Community
funding source, be it the Trans-European Transport Network programme,
the European Regional Development Fund or the Cohesion Fund, as
long as the motorways of the sea application is made under the
Trans-European Transport Network guidelines and is successful
under the tender evaluation process.
13.7 Following the external evaluation of the Marco
Polo Programme and the Executive Agency for Competitiveness and
Innovation's consultation the Commission presents this draft Regulation,
document (b), to amend four aspects of Regulation (EC) No. 1692/2006
to improve the Marco Polo II programme. The four matters addressed
are:
- encouraging the participation
of SMEs;
- lowering the tonne-kilometre thresholds for project
eligibility;
- increasing the funding values; and
- simplifying programme administration.
13.8 The detailed amendments to achieve these aims
are:
- allowing single organisation
applications — at present an application can be made only
by a minimum of two organisations, at least one of which must
be based in a Member State. This is to benefit SMEs who may not
have the necessary contacts to put together bids involving organisations
from other Member States;
- doubling the funding value from €1 (£0.95)
per 500 tonne-kilometres to €2 (£1.90) per 500 tonne-kilometres
and refining the calculation of modal shift tonne-kilometres currently
only the weight of freight shifted is used, for the future tare
weight, the freight plus the container in which it is carried
and the vehicle by which it is drawn, will be used. These two
measures are to make the scheme more attractive to potential bidders
and will also ameliorate the effects of higher costs precipitated
by the current global economic downtown;
- calculating project thresholds over the whole
life of the project in tonne-kilometres only (with the exception
of Common Learning Actions, where the present threshold will remain,
and Traffic Avoidance), rather than, as at present, using tonne-kilometres
and the equivalent in euros and vehicle-kilometres.[70]
This is to make the scheme's rules easier to understand;
- making the modal shift project threshold 80 million
tonne-kilometres of shift annually over the life of the project
for all shifts except to inland waterways, where the shift is
to be 17 million tonne-kilometres annually. This replaces the
current threshold of 250 million tonne-kilometres over the life
of the project, together with a subsidy need of at least €500,000
(£476,000). The additional change for inland waterways is
because such have been under-represented in the programme, largely
due to the fragmented structure of the sector;
- making the project threshold for Catalyst Actions
30 million tonne-kilometres of traffic avoidance or modal shift
annually rather than the present subsidy request of €2 million
(£1.90 million). This, in effect, lowers the threshold to
€360,000 (£343,00) over the life of the project;
- making the project threshold for motorways of
the sea 250 million tonne-kilometres of modal shift annually,
equivalent to 750 million tonne-kilometres over the project lifetime,
rather than the present threshold of 1.25 billion tonne-kilometres
over the life of the project and €2.50 million (£2.38
million) subsidy requested. This is to encourage more and smaller
motorways of the sea projects, which are under-represented currently
in successful bids;
- making the project threshold for Traffic Avoidance
80 million tonne-kilometres or 4 million vehicle-kilometres of
avoidance annually. This replaces the present two, alternative,
thresholds — 500 million tonne-kilometres shifted and €2.50
million (£2.38 million) subsidy requested or a conditional
traffic avoidance amount of at least 10% of freight volume measured
in either tonne-kilometres or vehicle-kilometrs;
- imposing a minimum project duration of three
years and allowing the possibility of a six month extension. At
present only Common Learning Action projects are subject to a
minimum duration and there is no possibility of extension for
any project. As projects are not allowed to show profits, consortia
have been artificially tailoring the length of the project to
coincide with profit forecasts and some projects have start-up
problems which mean that the modal shift comes towards the end
of the project and beyond the eligible funding period;
- considerably simplifying the rules to allow spending
on ancillary infrastructure for all projects (with the exception
of Common Learning Actions) in the same way as any other necessary
expenditure. At present there is a complex set of conditions that
apply to infrastructure funding which varies across action types
— different time and financial limits and different eligible
costs, as well as environmental and other legislative conditions
could apply. This has led to a situation where only the amortisation
of movable assets has been financed through Marco Polo. However
infrastructure costs cannot be funded if they represent more than
10% of the eligible costs;
- providing for a three year work plan to be agreed
by comitology, instead of, as at present an annual agreement;
and
- expanding the current project evaluation criterion
"environmental merits" to include wider external cost
savings to bring it into line with "Greening Transport"
policy.[71]
13.9 The Commission's impact assessment for the draft
Regulation says that the proposed changes will "bring added
value" to the Marco Polo II programme. Specifically it suggests
that the changes will:
- be more effective in securing
increased tonne-kilometre traffic avoidance and modal shift;
- bring about a better balance between modal shift
and traffic avoidance actions and between different modes and
project types;
- enable reductions in administrative costs and
burdens to encourage a greater diversity of enterprises to apply
by simplifying the legal base and management of the programme;
and
- increase the amount of external benefits.
The Government's view
13.10 In his Explanatory Memorandum on the Commission
Communication, document (a), the Parliamentary Under-Secretary
of State at the Department for Transport (Paul Clark) says that
the Government supports the broad objectives of motorways of the
sea and recognises the environmental and sustainability benefits
for the Community as a whole. He then comments that the Communication
provides helpful clarification for potential UK bidders and administrators
alike as it defines the levels to which funding is available,
for what parts of a project, and from which Community funding
stream. It might therefore encourage more high quality bids for
motorways of the sea projects.
13.11 In his Explanatory Memorandum on the draft
Regulation, document (b), the Minister says that the modal shift
of freight transport from road to water or rail is consistent
with the Government's aims to reduce the environmental impact
of road freight transport and it supports the proposed revisions
to the Marco Polo II Regulation, as it envisages that these will
help to maximise the benefits from the programme.
13.12 The Minister comments further that:
- UK companies have been successful
in applying for project funding under the programme and the Government
believes that the revisions could encourage more bids from UK
companies, in particular SMEs, due to the lowering of minimum
thresholds for the overall costs of projects;
- the Government will be seeking to ensure that
the criteria for evaluation of successful project proposals continue
to be in line with UK transport policy and represent Community-wide
value for money. However it does not anticipate that the changes
to the thresholds and administration of the scheme will have any
adverse impacts;
- all projects are assessed and evaluated on the
basis of objective criteria by three independent expert panels,
subject to scrutiny under the comitology procedures. This system
has worked well to ensure that project funding is a sensible use
of resources and that there is no unacceptable market distortion;
- although changes intended to the comitology procedure
will mean that there is no formal vote on the projects selected
for funding, voting is already a formality;
- Member States will retain the ability to formally
query and/or object to a project if they feel that there are good
grounds to do this during the life of the project — this
safeguard is important if, for example, the Government felt that
a project might lead to unwelcome impacts on an existing market
or service and wanted the Commission to investigate;
- as with the current situation, the Government
will continue to make potential UK bidders aware of the programme
through the appropriate industry bodies; and
- the overall costs of the programme will remain
at €400 million over the period 2007-2013, so there are no
financial implications arising from the proposed revision.
Conclusion
13.13 The clarifications in the Commission Communication
and the changes proposed in the draft Regulation appear to improve
the incentives for a modal shift of freight transport. This is
useful, so whilst clearing both documents, we draw them to the
attention of the House.
67 "Tonne-kilometre" is a unit of measure
which represents the transport of one tonne over one kilometre. Back
68
See http://ec.europa.eu/dgs/energy_transport/evaluation/activites/doc/reports/transports/2007_no65_ex_post_evaluation_
marco_polo1_en.pdf. Back
69
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2004:013:0003:0012:EN:PDF.
Back
70
"Vehicle-kilometre" is a unit of measurement which represents
the movement of a vehicle over one kilometre. Back
71
(29850) 11851/08 + ADD1: see HC 16 -xxx (2007-08), chapter 15
(8 October 2008). Back
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