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We look at the priorities and implications of EU transport related cohesion spending for 10 Central and Eastern European countries, after their accession from 2007. To supplement our analysis, we investigate 8 case studies. The lessons learned will be crucial for Ukraine, as it progresses towards EU membership.
A quarter of EU cohesion funds was allocated to transport in CEEs
Out of €418 billion in cohesion funds, more than €104 billion was allocated to transport. Poland was the biggest beneficiary. The transport share of cohesion funds reduced by more than a third the 2014-2020 period compared to the 2007-2013 tranche.
Cohesion finance in Eastern Europe has been heavy on road investments
More than half of transport funds were disbursed to build or reconstruct roads. Twice as much funds were disbursed towards road infrastructure compared to rail. Roads were an easy win for member states for many reasons: underdeveloped road infrastructure, the need to complete the TEN-T networks, political attractiveness, and the simplicity and speed of absorbing the funds. The €57 billion road building programme led to significant growth in motorisation (+90%), passenger car traffic (+68%), emissions (+88%) since 2000. Productivity loss as a result of congestion amounted to more than €600 per person in major CEE cities. Although there was a 60% decrease in road fatalities, 7 CEE states are still lagging behind the EU average.
12x more road kilometres were (re)constructed with EU money compared to rail.
Up to 30,000 km were built or reconstructed with EU money. This compares to 2,600 km of rail. Almost two-thirds of rail projects have not been realised. Rail investment needs a high upfront capital cost and has lengthier implementation compared to road. Increased rail upgrade investments and matching the project and finance timelines will help even the rail-to-road ratio.
Urban transport investment was not on top of the cohesion agenda
Even though 64% of people in the 10 countries live in urban areas, urban transport and public transportation received just 14% of the cohesion funds. Bus and coach travel demand across the CEE countries barely changed since 2007. Romania bucked this trend, where local governments were interested in investing into zero-emissions urban transport. Meanwhile, Hungarian authorities splurged more than 25% of its cohesion budget into the grandiose metro line project in Budapest, despite an existing bus line operating just above the ground. This was reflected in poor demand projections and high construction costs.
Incentives to put road freight on rail contributes to modal shift
Road freight volumes in CEEs more than doubled between 2005 and 2022. However, Intermodal rail transport took only 2.5% of the rail freight activity in Poland in 2003. After €895 million of EU co-financed intermodal projects, the share of intermodal transport in rail freight rose more than fivefold to almost 14% by 2022.
Some airports received EU money, but not passengers.
€1.1 billion was channelled into airport infrastructure. We found a poor record of value for EU money. Some terminals were underutilised; some airports were built in other airport catchment areas. This contributed to demand dispersion and lower than expected passenger numbers. State aid was then used to support their operation, e.g. Polish Rzeszów or Łódź airports.
Recommendations for Ukraine
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Prioritise and exclude projects based on the following framework. Build targeted objectives around projects, making funding conditional on the adoption and implementation of policy measures promoting sustainable transportation. Assign higher weights for sustainable projects in a transport master plan:
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Systematically collect necessary transportation data and conduct robust data-based analysis of the costs and benefits, socio-economic and environmental impact of shortlisted projects. Estimate necessity and implementation effects using international units of price and up-to-date technical documentation.
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Implement the “polluter pays principle” in transportation planning and policy. To start with, toll heavy-duty vehicles to generate revenue for road and bridge maintenance and lower emissions. Implement the EU vehicle CO2 emission standards on new sales.
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