Explanatory Memorandum to COM(2004)475 - General rules for the granting of Community financial aid in the field of the trans-european transport networks and energy and amending Council Regulation (EC) n° 2236/95

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dossier COM(2004)475 - General rules for the granting of Community financial aid in the field of the trans-european transport networks and energy ...
source COM(2004)475 EN
date 14-07-2004
I Trans-european transport networks, the drivers of growth and cohesion

1. Without performing transport and energy networks, competitive economies do not exist. The building and efficient working of trans-European networks in the sectors of transport, energy and telecommunications which for more than ten years have been recognises as a Community policy represent an essential condition for the success of the internal market, to guarantee sustainable mobility, and for the security of energy supply in the enlarged Union. Despite this, the network is still faced with strong but uneven traffic growth which reinforces the need for sustainable development and the necessity to integrate the networks of transport and energy of the new Member States is an unavoidable imperative.

2. Completing the knitting together of the networks at Community level will require significant investment. The total amount of investments for realising the trans-European transport network (TEN-T) in the enlarged Union, as was approved by the Council and the Parliament on 29th April 2004, comes to more than EUR600 billion up to 2020. However, transport infrastructure and, in certain cases, that of energy falls short because of a lack of sufficient financing and a favourable framework of investments.

3. The amount necessary to complete the trans-European energy network (TEN-E) is estimated at about EUR28 billion for the priority projects alone. Although the transport network is largely financed by public funds, the trans-European energy network can normally call on financing from the operators in the sector.

4. In contrast to the telecommunications sector, where the emphasis is above all on applications, the trans-European transport and energy networks still require the building of important base infrastructure; in particular, missing links at the level of cross border interconnections remain in the networks. It is in this context that the European Council of December 2003 places the trans-European transport and energy networks at the centre of its Action for Growth.

5. In light of this evolution and in view of more efficient management it seems opportune to consider a regulation specifically for the transport and energy networks.

II. Insufficient financing for the trans-European transport networks.

1. A contrasting situation.

6. Already in 2001, the Commission's White Paper on the Common Transport Policy sounded the alarm on the delays in the completion of the network. In effect, in spite of the engagements made by the Member States at the Essen Council in December 1994 to complete the priority projects by the end of 2010, by the end of 2003, only 3 of these projects had been completed. Less than a quarter of the funding for the cross border sections of these projects had been found. At the current rhythm of investment, more than 20 years will be needed to complete the trans-European transport network as revised in 2004.

7. The necessary financing for the major projects in the transport infrastructure sector are national receipts, the Community budget, private investment, or a combination the three.

8. Concerning the national budgets, the Member States are often faced with budgetary constraints for financing their infrastructure linked to, amongst other things, respect for the stability and growth pact. National financing is however the most often subject to pressing national priorities and clearly shows its limits by giving priority to domestic sections of to the detriment of projects whose benefits fall on other states.

9. To complete its sources of financing, users are also increasingly called upon to finance infrastructure as was foreseen by the Commission proposal on the pricing of heavy goods vehicles (the Eurovignette directive) i.


10. The hope, often embraced, to see the growth of the participation of private investors remains for the moment, with a few rare exceptions, in vain. The rate of maximum co-financing authorised by the TEN regulation sets the rules for granting financial aid to the trans-European network i, a rate which was recently once again limited to 10%. Community aid cannot therefore play a real role as a catalyst for Public Private Partnerships (PPP). As was signalled by the European Council of December 2003 in the framework of the initiative for growth, aiding this type of PPP also requires the elimination of certain administrative obstacles, notably the shortcomings of the company accounts rules relating to PPP concessionaires.


11. However, the Van Miert Report considered that the private sector could contribute up to 20% of the total cost of these projects but under certain conditions. This would represent a major contribution for national budgets which are under heavy pressure to complete the network. In particular, this level of contribution is, however, dependant upon an increase in the rate of Community co-financing and that the financial instruments brought into play through the TEN financial regulation are adapted to cover specific post-construction risks.

12. It needs, nevertheless, to be emphasised that the completion of these trans-European transport infrastructures is not just a policy for major projects that has been the subject of criticism in some quarters. The aim, rather, is to stimulate trade and bolster the single market, reinforce cohesion and contribute to sustainable development. As was shown in the impact analysis undertaken in 2003, this programme is directly related to the objectives of sustainable development established by the Gothenburg European Council. 80% of the major projects relate to non-road mode. They will reduce CO2 emissions by 4% as well as atmospheric pollution, particularly in sensitive mountain regions. They will reduce road congestion by 14% and make time savings in interregional transport allowing significant economic benefits. These projects will contribute to stabilising the modal split and may even turn it in favour of more environmentally friendly transport modes on the major international axes. Overall, through their contribution to trade through the Member States and improving accessibility, there should be an increase in growth of 0.2-0.3% GDP corresponding to the creation or retention of 1 million permanent jobs i.


Contents

1.

2. New Needs


13. With the arrival of 10 new Member States in the Union, international traffic on often obsolete infrastructure networks will virtually double by 2020 and put further pressure on already over stressed capacity. The lack of effective trans-European connections to meet this new demand runs the risk of seriously handicapping the competitiveness of the Union, and the states, and the peripheral regions which can no longer - or will no longer - fully benefit from the advantages of the internal market.

14. The Commission, faced with this worrying prediction decide to draw up a precise inventory of the situation and identify the missing links which should be completed as a missing priority. The report of the high level group chaired by Mr. Karel Van Miert published in June 2003 only confirmed the urgency of implementing a much more ambitious programme at the level of the Union. It recommends in particular to reinforce the level of Community financial support and to concentrate actions on a series of priority corridors.

15. On the basis of the group's work, the Commission presented in October 2003, a proposal to revise the TEN-T guidelines and in particular update the list of priority projects henceforth 30 in number, including the 14 already identified at Essen. This proposal was adopted by the Parliament and Council on 29th April 2004. These projects were evaluated in detail by the Van Miert Group, then by the Commission in its detailed impact study. The timetables, the costs and the main characteristics of the projects are therefore now known, i even if their precise routes and impact on the local environment requires further examination.


2.

3. The value added of communnity financial support


16. Although, the Community is competent for the planning of the trans-European network, these powers have not been accompanied by an adequate financial structure to support the construction of the network.

17. Community financing offers, nevetheless, significant advantages over national financing. It offers stability of financing over a time frame that many national budgets, which are subject to the vagaries of the economy and changing preferences, cannot offer and plays a role in prompting the Member States to invest in projects with a high Community Value added while cooperating much more between themselves. They contribute to the implementation of transport policy, in particular by favouring the most sustainable modes, notably cross-border railway connections i, and they can also serve as a catalyst for building Public Private Partnerships.


18. A final key point argues not only for an increase in the rate of Community participation but also for the adoption as soon as possible of the overall financial envelope covering TEN-T major projects. Effectively, the principal priority projects with commencement dates between 2006 and 2008 (Brenner, Lyon-Turin-Venice-Triest-Ljubljiana-Budapest) or even those already underway (Perpignan-Figueras) will need assurances concerning the availability of Community financing for the period 2007-2013. If the amounts and the application rules for Community aid are only known at the last minute this will have very negative consequences on the Projects and lead to many years' delay in their inception. As the Community has become, for these projects, an irreplaceable partner in the creation of the financial plans, the absence of clarity would make this very difficult to finalise. This situation would be in total contradiction to the political decision taken by the Community acting together and in particular to the imperative need to complete the major projects rapidly as has been underlined by the European Parliament and Council on many occasions.

19. In spite of all these benefits, the resources allocated to TEN-T up to 2006 appear derisory in comparison to the costs of completing the network. The current Financial Regulation which sets out the general rules to award Community financial aid to trans-European networks, has for the period 2000-2006 a budget envelope of 4,600 million EUR (4.170 million EUR for transport i), hardly more than 600 million EUR per year for the period, a sum which is completely inadequate in relation to the needs identified and to the Member States requests for financial aid which represent many times this amount.


20. Even if 1,9 billion EUR is added by the Cohesion Fund, plus additional support from the European Regional Development Fund (ERDF), these two instruments only benefit certain countries or peripheral regions and not the infrastructure of central regions where congestion is concentrated. Contrary to general opinion most of the major projects on the trans-European networks are located in the countries which are not eligible for the two instruments.

21. In addition to this funding the European Investment Bank also contributes to network financing through loans. These have to be reimbursed and are essentially concentrated on projects with low risk rather than on more complicated rail or cross-frontier schemes which have lower short term profitability.

22. In practice the worst delays concern rail projects and cross-frontier links which limits the possibilities created by the opening of the railway market i, none of the major Alpine crossings such as the Brenner or Lyon-Turin, which have been spoken about since the 1980's, and which aim to relieve routes congested by heavy vehicles have been undertaken and their completion is not forecast, at the best, before 2015. They have in fact become one of the principle sources of congestion and imbalance between modes of transport on the major routes.


23. The completion of cross border sections - by means of appropriate Community Support - in conjunction with national sections will lead to increases in the profitability of these schemes to the benefit of other parts of the network. In practice, many major priority projects, such as the rail projects Paris-Brussels-Cologne-Amsertdam-London (PBKAL), have in the past suffered from the lack of continuity of the network.

24. In order to minimise such risks countries which are not directly concerned by the works but which receive benefits should be encouraged to provide financing for projects. This principle is already applied in the case of the agreement of 5 May 2004, between France and Italy, to construct the base tunnel on the Lyon-Turin route which will be financed 63% by Italy against 37% by France in order to rebalance the investment in the project overall taking account of the fact that the access routes to be built are largely in France.

3.

4. Significant financial needs


25. The financial requirements of the 30 priority projects identified in annex III of the guidelines for trans- European transport networks by the Council and the Parliament i alone account for 225 billion EUR the largest part of which falls in the period 2007-2013- about 140 billion EUR. The following table provides an estimate of the costs and annual support - between 2007 and 2013 - for three major priority projects which are among the best documented.


>TABLE POSITION>

26. If Community aid is attractive during the study phase because the maximum rate of support can be as high as 50% of costs, a fact which has been a contributory aspect in the start up of some of the priority projects, it is much less so during the construction phase. Since the total amount of Community aid cannot exceed 10% of the total investment cost, it means that works co-financed following a study phase do not even benefit from aid at the maximum level of 10%.

27. The adoption of the new Regulation for the granting of Community financial aid in the field of trans-European networks i already represents a very real advance as it allows aid to be concentrated on projects which have the greatest need (priority cross-frontier projects, or those crossing natural obstacles) and has the largest impact in terms of leverage, through doubling the maximum rate of support to 20% i. However, this situation still appears to be insufficient where some of the priority projects which are key components of the network are concerned and whose cost burden on the Member States is considerable (see table above).



28. The latest changes to the Regulation only concerned the maximum rate applicable to projects on the basis of a financial envelope within the existing financial perspectives. The financial impact and resources are therefore limited. In addition, it would appear necessary to complement national financing sources, both public and private, with an increase in Community funding in terms of the amounts of aid granted as well as in the rate of the intervention. This would strengthen the effect of Community aid in terms of leverage and allow the priority projects contained in annex III of the recently adopted Decision of the Parliament and Council on the TEN-Transport guidelines to be carried out according to the timetables foreseen.

4.

III. the new context for trans-european energy networks leading to new needs


5.

1. The internal energy market and the external dependance


29. In the energy sector, the Directives opening up electricity and gas markets in Europe are fundamentally changing energy markets and the energy sector. By 2007, the electricity and gas markets in all Member States will be fully open. It is essential that effective competition gets established quickly and that consumers have a real choice of service suppliers; that the quality of services, including supply security, remains high, with no black-outs; and that established European goals, notably on renewables, are achieved.

30. Successive European Councils (Stockholm (2001), Barcelona (2002), Brussels i (2003)) have recognised that inadequate infrastructure could undermine completely progress made on the energy market and regulatory framework.


31. The next years will be a challenging time for Europe, as external dependence grows and global energy markets remain turbulent. The Community's external gas dependence is projected to grow from 50% now to over 80% in 2030. The challenges involved were examined in the Green Paper on energy supply security i.


32. Internal and external infrastructural developments must be considered together. The European Council in Brussels (2003) noted that the development of energy infrastructures will ensure the full involvement of the new EU's neighbours and partner countries in the European market. Neighbouring countries play a vital role in the Community's energy policy, supplying a major part of the Community's natural gas requirements and transiting primary energy to the Community. They will progressively become important players in the Community's internal gas and electricity markets i.


33. The development of renewable energy in Europe may require new investments in existing energy systems, notably electricity grids. Strengthening the necessary grid infrastructure would be an essential part of an off-shore wind policy for the EU, for example i. This has already been recognised in the TEN-Energy Guidelines, in which several of the priority projects include offshore connections.


34. All of this has major implications for energy infrastructures. The use of existing infrastructures must shift to supporting new energy flows for which they were not originally designed. There will be a continuing need for new infrastructures over the next years. For the energy sector, Community Guidelines defining objectives, priorities and projects of common interest in trans-European energy networks (TEN-Energy) i have been adopted by the European Parliament and the Council.


35. Community financial support from the dedicated TEN-Energy budget line currently amounts to some 22 million EUR p.a. in the current period. So far, financial support has been given mainly to feasibility studies. Evaluations i conclude that these studies have been useful in stimulating cooperation, constructing options and getting authorisations. In financial terms, TEN-Energy support has typically amounted to less than 1% of total investment costs of projects. Some other EU instruments, each with their own focus i, have been used to support energy network development (structural funds, external cooperation programmes, European Investment Bank).



6.

2. The added value of the European action


36. As the internal energy market develops, the benefits of infrastructure investments are more widely shared than before. In concrete terms, an electricity interconnector which enables effective competition to develop across several markets, is of benefit to all those markets. A new Liquefied Natural Gas terminal will have an impact on security of supply and competition beyond the Member State in which it is built. While this increases the value of Europe-wide energy infrastructures, it changes the incentives for investments at Member State level. A European approach becomes more necessary as well as more valuable.

37. In the case of an electricity interconnector, for example, national Transmission System Operators would normally make the investment and the costs would be taken into account in the setting of regulated tariffs. However, their assessments of the interest of investments and of how much they can reasonably recoup via consumer tariffs are still essentially national. Thus, the European benefit from such interconnection investments may have to be specifically recognised and supported.

38. In the external gas supply case, investments are normally made by private sector energy companies i. Investors in gas supply infrastructure will have to deal with evolving political and economic situations, both externally and in the internal market (e.g. demand side security). The public European interest in secure gas supplies to the European market over the next couple of decades could warrant not only political support and the development of adequate frameworks for investments but also some sharing of the risks of early investments.


39. The establishment of an internal market in electricity and gas has increased the importance of adaptations to Europe's energy infrastructure to enable it to sustain the development of a competitive market in Europe and ensure secure supplies from neighbours. The liberalisation and integration of markets has also changed the incentives for investments. Inter alia, it draws new attention to investments which are essentially in the European interest. It also means that public support for investments in infrastructures must not distort competition.

40. The Community has already agreed on a list of energy infrastructure projects of common interest in this context, in the TEN-Energy Guidelines. Within this list, priority projects are identified. They are projects which, along with being compatible with sustainable development, are particularly important for the competitive operation of the internal market in Europe or for strengthening European security of supply.

41. These priority projects, already agreed as having definite European interest, warrant stimulation and support. Normally, support of studies up to and including early developmental work may provide sufficient stimulus. In exceptional cases, a contribution to construction may be needed, essentially related to the European interest which cannot reasonably be paid for by consumers in only one or two Member States.

42. In the past, with support focused mainly on studies, TEN-Energy support amounted to some 1% of investment costs of projects. In the new context, if 1.7% is taken as a guide, and applied to the total investment costs in Europe of the priority projects identified in the TEN-Energy Guidelines - 20 billion EUR, this would mean an average annual budget of some 50 million EUR for the period 2007-2013.

7.

3. Interconnecting electricity networks


43. TEN-E support would be focused on those projects or parts of projects identified in the TEN-E Guidelines i where the greatest value could be added by European support, encouraging progress in their implementation. TEN-E support would be granted only to economic projects aknowledged to be facing major difficulties in being financed by private investors alone. These are likely to be projects in which benefits are widely shared.


44. The Barcelona European Council in 2002 stressed the importance of completing missing links in electricity networks and set a concrete target for electricity interconnections of at least 10% of installed domestic electricity generation capacity. This level has not yet been met in several Member States. The electricity traded across borders in Europe is still only some 8% of consumption.The European Council also recognised that the 10% target may not be enough in cases where there is high market concentration.

45. Inadequate electricity interconnectors will also limit operational security of supply on networks, undermining efforts to prevent and manage electricity black-outs. An example is Italy, where reinforcement of electricity connections with neighbouring countries, especially Austria and Slovenia, would increase reliability and provide greater diversity. The coordinated operation of energy networks in the Community and neighbouring countries can contribute substantially to security of supply. In the longer term, inadequate electricity interconnection capacity will limit the efficient use of energy resources in Europe.

8.

4. Strengthening gas supply


46. The Community's external gas dependence is projected to grow from 50% now to over 80% in 2030. Given the time normally necessary for major projects involving investments in several countries, a prudent approach would imply that very substantial investments should be made now in new and improved networks to bring gas supplies to Europe from 3rd countries, including Russia, Algeria, the Caspian region, also Mashreq.

9.

IV. The need for a new framework for Transeuropean transport and energy networks


47. Beyond simple budgetary aspects, it is necessary to prepare a more ambitious revision of the provisions, the scope and the instruments of implementation of the TEN Regulation in order to take account of the priorities in the policy of trans-European network for the period 2007-2013 which are reflected in the recent decision on the TEN guidelines as well in the position of the Council.

48. In order to meet fully the objectives of the Community as regards development of the network, the new regulation establishes the general principles of granting of the aid which is based on the major following principles:

10.

Simplification


To simplify, the application of the detailed rules following the Communication on the financial perspective, decisions will be taken on the basis of comitology rather than by co-decision procedure.

The operational procedure of the committee established by the Regulation is modified in order to conform to the Decision of the Council of 1999 on comitology i. The essential choices for the priority projects involved joint decision and were consequently decided by the EP and the Council. Given the expérience gained in applying Regulation no 2236/95 and the nature of the competences given to the Commission by the present Regulation, it is proposed to choose a consultative Committee more capable to ensure implementation, through the rapid treatment of files.


11.

Conditionality


An essential point of the new regulation is that any aid is conditional upon compliance with principles of the Common transport and energy Policy. For transport this means more particular attention be paid to the modes of transport which are more environmentally friendly such as rail transport in particular freight, safety and security. In the same way, all requests for funding for high speed rail projects must be accompanied by a plan that analyses how capacity on existing infrastructure that is made available can be used to develop long distance freight services. Financing for transport and energy networks of under the TEN budget will also be subject to the guarantee of continuity and of the interoperability of the networks.

12.

Selection and concentration


Implementation of conditionality will mean greater selectivity of projects which will facilitate the concentration of aid on a reduced number of projects, in particular those which demonstrate the strongest added value for the community. This will both allow the expectations of the project promoters to be better taken into account and lead to more effective management.

The budget proposed for the TEN-T which amounts to slightly more than 20 billion EUR over the period 2007-2013 may seem impressive. The financial envelope (average) amounting to 2.9 billion EUR a year against hardly more than 600 million EUR for the current period, will make it possible to ensure a significant share of total investment with regard to certain TEN-Transport priority projects

In addition, in order to increase the leverage of Community resources, the whole budget will be concentrated on two groups of projects which represent the cornerstones of the trans-European transport network:

- the priority projects and among them special attention will be paid to projects that contribute to the integration of the internal market in an enlarged Community and which support contribute to reduce the imbalances between modes of transport in favour of those that are environmentally friendly, notably for long distance freight transport;

- other projects of common interest in particular the projects that contribute to the improvement of the quality of service offered on the network and which favour, inter alia, security and safety for users i, and provide for interoperability between the national networks, notably deployment programmes for systems of traffic management for rail, air and sea.


In the energy field, financing will be concentrated mainly on priority projects identified in the Guidelines decision n°1229/2003/EC. Support, covering initially feasibility studies will cover the development phase of the projects (preceding construction), including technical and environmental studies and will also include geological investigations and trialbores in difficult access areas which can make these activities expensive. Support for the construction phase would be justified in exceptional cases where the European value added would be very high or where natural obstacles are difficult to overcome. This could be the case for cross-border projects and projects involving interconnection with bordering countries.

13.

Proportionality


For the transport domain, it is envisaged by this regulation, to change the co-financing rate to a maximum of 30% for certain sections of the priority projects, and that in exceptional cases for cross-border sections, to change the rate to a maximum of 50%. The rates of grant proposed offer a greater incentive being related to the value added to the Community, expressed in terms of the benefits that fall to other Member States from the construction of a project. Under these conditions, it will be easier to ensure on the one hand the respect of timetables fixed by the recent decision on the guidelines, and on the other hand to guarantee the continuity of the network considering that to date cross-border sections allowing the connections of the various national networks were particularly penalised due to insufficient funds.

In addition, the increased co-financing rate will make it possible, for many projects which have to start between 2007 and 2010, to complete financial arrangements - which appear problematic today, thanks to the guarantee of Community financing over a 7-year period. It must however be noted that these rates are maximum rates - and that accordingly the average intervention rate will be significantly lower as much of this appropriation will also be used to support technological and industrial projects such as the interoperability, air traffic management under the agreement on 'single sky', safety or safety (which are not directly included in the priority projects).

In recognition of the much higher rate of Community grant than at present, the Member States shall provide solid guarantees based on a financial plan and firm commitments on the date of completion of the project. To this end the agreements between the Member States concerned and the Commission should reinforce the obligations on the States concerned to complete major projects

The Commission will ensure that the increase in the cofinancing rate does not involve delays in implementation of on-going projects, where the financial plan is still running. . In addition, to facilitate the coordinated implementation of some projects included in annex III of the Decision on the TEN Guidelines n° 884/2007 and as set out in article 17 a of the decision, the Commission can call upon a European coordinator.

14.

The following table describes the rates of aid by category of (transport) project



>TABLE POSITION>

In the Energy sector, support for studies could be up to 50% of eligible costs.TEN-Energy support for construction is normally be limited to 10% of eligible costs but in exceptional cases, for priority projects with particularly important financial challenges and also particularly important identified European benefits, normally cross-border projects or interconnections with neighbouring countries, support could be up to 20%. Given the competitive character of the energy sector, it is not proposed to increase the maximum support percentage above the level already agreed under the present TEN financial support Regulation.

TEN-Energy support for construction should be limited to the parts of projects located inside the Community. Support for studies could be based on the project as a whole, including its elements outside the Community.

For financial support to the construction of projects or sections of projects located in partner countries, the coordination with other EU instruments (Instruments devoted to the external policies, European Investment Bank etc) is essential, to allow for the possibility of financial support from these instruments for TEN-Energy projects in partner countries. Financial instruments such as venture capital, interest rate subsidies for loans, loan guarantees, coverage of non commercial risk, etc, may be available from these instruments for important infrastructure projects in our partner countries

Types of Aid.


A range of possibilities are available to promoters to facilitate the implementation of projects. In addition to interest rate subsidies - aimed at lessening the impact of interest on loans and seldom used up until now - and risk capital participation which are already covered by the existing Regulation, the creation of a guarantee fund, covering commercial risks specific to TEN projects in the post construction phase is one of the financial instruments proposed by the regulation. The objective of this new instrument is to provide leverage for the financing of TEN projects by the private sector. It should contribute to limiting the cost of financing and accelerate the conclusion of financial structures by the private sector, notably through private banks. The guarantee will be limited to the inception phase of a project and, or, to a maximum percentage of the private sector loans. A significant contribution from the Member States in which the projects are undertaken will be obligatory. The detailed proposal as well as the conditions and the methods to apply will be the subject of a separate communication. In view of the relative complexity of all these instruments it may be necessary to acquire experts to manage them.

15.

Management



The implementation of the projects is in the first place the responsibility of the Member States who adopt their own institutional approach. The actions undertaken have to be in keeping with the new Regulation which sets down the approach to be adopted, the respective responsibilities of the Commission and the Member States with regard to the selection and management of projects plus the monitoring of grants. In particular, the new TEN Regulation- although maintaining the key role of the Commission in the final selection of projects- proposes to allocate a major role to the Member States in relation to technical controls and the certification of costs.

The Commission reserves the right to delegate the management of the present programme for the trans-European transport network to an executive agency acting in compliance with the Council regulation N° 58/2003 of 19 December 2002. This would simply involve the transfer of certain management tasks to the agency and not affect the Commission's responsibilities in the area of planning.

16.

V. Comments on articles


Article 1 defines the object of the programme. This article is almost identical to article 1 of the current Regulation concerning the granting of financial support in the field of trans- European transport and energy networks.

Article 2 provides the definitions for the terms used in this Regulation.

Article 3 defines the eligibility criteria for proposals and corresponds to Article 2 of the current Regulation.

Article 4 sets out the rules to present requests for support and repeats a part of article 8 of the current Regulation.

Article 5 provides the selection criteria for the granting of aid in the transport and energy fields. The article specifies that special attention will be paid to priority projects which are to receive additional aid.

Article 6 defines the field of application of the Regulation which is identical to the current Regulation with the exception of the risks inherent in the post construction phase which are henceforth covered by a guarantee fund instrument.

Article 7 sets out the types of aid as well as the maximum rates of Community financial support. This article also specifies that the Commission shall set down the procedures, the timetable and the payments for the financial instruments by comitology.

17.

Article 8 establishes the provisions regarding the accumulation of Community aid for separate actions concerning the same project


Article 9 deals with the coordination and the compatibility with other Community policies which projects financed under this Regulation have to respect.

Article 10 establishes the Commission's responsibility for the implementation of the Regulation.

Article 11 provides for the Commission to create a multi-annual programme for priority projects and to define the amounts of financial aid for the period 2007-2013. An annual programme will define the criteria to grant aid to projects of common interest not included in the multi-annual programme..

Article 12 specifies the means to grant Community financial support through the adoption of annual budget decisions subject to the degree of progress of the project and the available budget. The article sets out the means of notification of the Commission's decisions.

Article 13 takes up the former Article 11 concerning payment provisions.

Article 14 covers the responsibilities of the Member States. They must ensure that actions which receive Community aid are monitored and verified.

Article 15 covers the control means to reduce suspend or cancel Community support and is almost identical to article 13 of the current Regulation. The Commission may require the reimbursement of support taking account of the proportionality principle.

18.

Article 16provides financial protection measures aimed to verify that the actions supported have been undertaken appropriately and to halt and take action against irregularities


Article 17 provides that the Commission will be assisted by a management type committee for the implementation of some articles of the Regulation.

Article 18 provides an ex-post evaluation of actions that have received support, either by the Commission or the Member States.

Article 19 provides for the Commission to report to the other institutions every three years on the activities that have been undertaken. This article also requires that the Member States and the beneficiaries shall publicise the Community aid.

Article 20 provides the budget reference amount for the period 2007-2013.

Article 21 provides a revision clause for the programme after 2013 on the basis of the basis of a report on the results to be submitted to Parliament and the Council before 2010.

Article 22 outlines the modification made by this Regulation to that currently in force (2236/95).

Article 23 provides for the entry into force of the Regulation and its application from 1st January 2007. For actions underway at the entry into force, the current Regulation n° 2236/95 remains in force.


19.

Annex to the explanatory memorandum


I. Community added value, subsidiarity and proportionnality.

* What are the objectives of the planned measure in relation to the Community's obligations?

Under Title XV of the Treaty, the Community has an obligation to contribute to the establishment and development of trans-European networks in the area of transport infrastructures. Community action shall aim at promoting the interconnection and interoperability of national networks as well as to provide a high degree of safety and security for the network users.

* Does the measure fall within the Community's exclusive competence or is competence shared with the Member States?

The competence is shared with the Member States.

* What is the Community dimension of the problem?

Transport infrastructure projects are very dependent upon the finance supplied by national budgets. However, national budgets tend to give greater priority to domestic projects than cross-frontier links, which can have a lower immediate profitability and pose more coordination problems. If the Community does not play a role in funding the majority of cross-frontier links, even although they lie at the heart of the trans-European network policy, will be subject to prolonged delays.

For energy networks, the Community dimension derives most strongly from the newly-established internal energy market. As has been recognised by the European Council on several occasions, inadequate infrastructure could completely undermine progress made on the energy market and regulatory framework. Over the next years, energy infrastructures in Europe need to be adapted to sustain energy flows for which they were not originally designed. Consumers throughout the Community will benefit from investments in interconnections etc to make functioning, Europe-wide networks. Similarly, they will all benefit from investments in new supply infrastructure from outside Europe, needed to deal with growing external energy dependence. Finally, these trans-European networks will encourage efficient use throughout Europe of energy resources, notably renewables.

* Can the objectives not be adequately achieved by the Member States?

Major projects to improve traffic flows have consequences that are far wider than the limits of national frontiers. It is hardly credible to expect that individual countries alone finance these projects where a large part of the benefits falls to other countries.

For energy networks, incentives for investment have been changed by energy market liberalisation and integration. Investments which are essentially in the European interest, such as some interconnectors, cannot reasonably be paid for by consumers in just one or two Member States.

* What is the most effective solution, that achieved by Community means or that achieved by national means? What specific added value is contributed by the planned Community measure and what would be the cost of taking no action?

Projects of European interest have already been identified in the decision of the Council and Parliament on the TEN-Transport guidelines. However, the national interest in investments to enable an integrated, competitive and safe transport infrastructure network in Europe to develop may not be as strong as the Community interest. Slow progress on cross-border investments-in particular the fourteen priority projects endorsed by the Essen Council in 1994-supports this conclusion. In contributing to develop trade, notably trade between the Member States, and improving accessibility, these projects should stimulate the potential for growth by 0.2 to 0.3% of GDP , which corresponds to a million permanent jobs. They will also reduce CO emissions by 4% in relation to existing trends. This Community support for European interest projects may be essential and in any case, would be justified. It is not so much the case of adding value to Member States actions as a specific focus on investments of European interest. The cost of not taking action would be inadequate infrastructure, undermining the development of the trans-European transport network, with direct effects on congestion, safety and accessibility of peripheral regions and indirect effects on the growth and competitiveness of the Union as a whole.

For energy networks, projects of European interest have also been identified, in the decision of Council and Parliament on the TEN-Energy Guidelines. However, the national interest in investments to enable an integrated, competitive energy market in Europe to develop may not be as strong as the Community interest. Slow progress on cross-border investments supports this conclusion. Thus, Community support for projects of European interest may be essential and in any case, would be justified. It is not so much a case of adding value to Member State action as a specific focus on investments of European interest. The cost of taking no action would be inadequate infrastructure, undermining the development of the internal energy market.

* Are the means of Community action proportionate to the objectives?

Support equivalent to roughly 15% of the (global) investment costs of the identified in transport projects of European interest, essentially cross-border, is proposed. The benefits in terms of leverage for the development of an interconnected and interoperable transport infrastructure network would be very great, as would be the costs of not doing this.

For the energy networks, the financial means proposed correspond to 1.7 % of the total investment costs in Europe of the priority projects identified in the TEN-Energy Guidelines. TEN-Energy support will need to be concentrated on particular parts of these priority projects, essentially difficult cross-border parts currently blocking progress towards Community objectives. The benefits in terms of the establishment of a competitive internal energy market, encouragement of diversity of external supply etc would be very great, as would be the costs in the longer term of not doing this.

* What is the most suitable act for achieving the objectives? (Recommendation, financial support, mutual recognition, legislation, etc.).

As a rule, Community financial support has to be based on Parliament and Council Regulation.

* In the case of legislation, is the scope, duration or intensity greater than what is necessary?

Due to the limitation of public investment, the difficulty to attract private investors, the Community support to infrastructures, reflecting their European benefit, is justified and it completes the existing policy framework as set in the Commission's White Paper on Transport and TEN-T guidelines.

For energy networks, financial support of investments, reflecting their European benefit, could be justified in some cases, even if, in liberalised markets, investments in energy transmission infrastructures is now normally made by national transmission system operators, with costs taken into account in the regulated tariffs.

20.

II. Impact assessment


In the framework of the revision of the TEN-Transport guidelines (COM (2003) 564) the Commission undertook an in-depth impact analysis of the proposal modifying Decision 1692/96/EC on the development of the trans-European transport network. The principal remarks of the document SEC(2003)1060 are as follows:

a. The TEN-T investment programme will stimulate Europe's competitivity and economy. It will contribute to the devemopment of international commerce, especially in the new Member States.

b. In the short term, the construction works will stimulate employment especially in the regions concerned.

c. In the longer term, the improvement in living conditions resulting from the increase in the opportunities for meetings and the development of commercial perspectives thanks to the improvement in connections and accessibility are estimated at 0.23% GDP and represent around a million sustainable jobs.

The investment needs have been estimated in the framework of the Van Miert report to be 600 billion euro fort the totality of the projects of common interest, of which 225 billion for the priority projects (140 billion for those projects during the period 2007-2013 alone).

For the energy networks, the impact assessment for the eligible projects, that is to say, the projects of common interest and especially the priority projects, was presented by the Commission at the same time as the proposal of 10 December 2003 for the new TEN-Energy guidelines i.


In the assessment it was concluded that the implementation of the projects identified in the current guidelines of June 2003 and those proposed in the new guidelines would have a positive impact on the economy as a whole; on cohesion, through the integration of the energy networks of the new Member States; on the environment, in facilitating the integration of the production from the sources of renewable energies; on the internal market in energy, in increasing the capacities for commercial exchanges; on the security of energy supply, in increasing the capacity for imports and in diversifying the sources and import routes; and finally on cooperation with neighbouring states.

It is clear that the support for the TEN-Energy network does not present the same advantages for all the types of energy infrastructure. In particular, the extention of the networks will be of benefit for large scale generation of electricity. On the other hand, the direct interconnection of energy souces with the local electricty distribution sustems (in common with certain renewable energies and combined heat and power technologies) do not fall within the TEN-Energy support mandate according to the current guidelines.

The proposed Community support will be useful for encouraging and accelerating the implementation of the energy infrastructure projects identified in the TEN-Energy guidelines and will therefore make possible the anticipated profits.