European Green Deal : what implications for state aid in the rail sector?

In its European Green Deal the European Commission sets the objective of achieving climate neutrality in Europe by 2050. To support the delivery of this objective in relation to transport, which accounts for a quarter of the EU’s total greenhouse gas emissions, the Commission has declared 2021 as the European Year of Rail. A significant modal shift will be needed from less environmentally sound modes, such as road in particular, but also aviation, towards the greenest modes, namely rail and inland waterways, without compromising the connectivity of goods and persons, which is at the heart of the single market.

This, in turn, will require measures to manage better, and to increase the capacity of railways and inland waterways, which the Commission has pledged to propose by 2021. COVID-19 has hit the transport sector particularly hard. There is a broad consensus that EU and national regulations should seize the opportunities afforded by the recovery plans to exit the crisis to promote the twin green and digital transformations. The 19th Florence Rail Forum, co-organised by the Transport Area of the Florence School of Regulation together with the Commission’s DG COMP and DG MOVE, examined the role of State aid in meeting the challenges of the Green Deal.

Evaluations are currently underway of the relevant State aid guidelines including those pertaining to railways. Any revision will have to reflect the policy objectives of the Green Deal and ensure a level-playing field in the internal market. Investments will be paramount to boosting intermodal freight transport, in particular in transshipment terminals but also more generally in rail infrastructure (to ensure interoperable and sufficient capacity), and, possibly, in rolling stock or technology (e.g., automation for train composition).

The Forum discussed the cases that justify State aid in order to support investment as well as operations, and moreover, the conditions under which State aid should be declared compatible to make intermodal freight transport attractive. The possibility and conditions to set up public service obligations for (structurally non-viable) rail freight routes was also discussed in view of ensuring sufficient capillarity and addressing the issue of the unprofitable last mile service. As regards passenger rail, the forum examined the demonstration of the necessity of public service contracts by public authorities.

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