Financing the Trans-European Networks

The Trans-European Networks (TENs) are jointly funded by the European Union and the Member States. Financial support from the EU serves as a catalyst, with the Member States providing the bulk of the financing. The financing of the TENs can be complemented by Structural Fund assistance, aid from the European Investment Bank (EIB) or contributions from the private sector. A major reform was introduced across the TENs with the establishment of the Connecting Europe Facility (CEF) in 2013, renewed in 2021.

Legal basis

Title XVI of the Treaty on the Functioning of the European Union, Article 171 of which stipulates that EU aid may be granted to projects of common interest that meet the requirements laid down in the guidelines.

Regulation (EU) 2021/1153 of 7 July 2021 establishing the Connecting Europe Facility.

Objectives

The general objectives of the CEF include building, developing, modernising and completing the trans-European networks in the transport, energy and digital sectors (3.5.1) and facilitating cross-border cooperation in the field of renewable energy, taking into account the long-term decarbonisation commitments and the goals of increasing European competitiveness. In line with the Union objective of mainstreaming climate actions, the CEF contributes 60% of its budget to climate objectives through its actions.

Achievements

A. Defining general conditions for project funding

Generally, EU funding has served as a catalyst for projects. Member States must raise most of the funding, except in the case of Cohesion Fund aid, where the EU has traditionally made a more substantial contribution.

The first principles governing funding were laid down in Council Regulation (EC) No 2236/95 of 18 September 1995, which set out general rules for the granting of Community financial aid in the field of trans-European networks.

1. EU aid for projects has taken one or several of the following forms:

  • Co-financing of project-related studies and other technical support measures (up to 50%);
  • Contributions towards fees for guarantees for loans from the European Investment Fund or other financial institutions;
  • Interest subsidies for loans granted by the EIB or other public or private financial bodies;
  • A variety of other types of financial instruments besides grants: equity and debt; loan guarantees and venture capital, and capacity building and risk sharing facilities;
  • Direct grants for investments in duly justified cases;
  • Competition between qualified tenderers and by a selection based both on cost and quality considerations.

2. The following project criteria have been progressively laid down:

  • EU aid to telecommunications and energy networks must not cause distortions of competition between businesses in the sector concerned.
  • Projects must help to achieve the networks’ objectives set out in the respective guidelines for the Trans-European Transport Network (TEN-T) (Regulation (EU) No 1315/2013) and the Trans-European Energy Network (TEN-E) (Regulation (EU) 2022/869).
  • Projects must be economically viable.
  • The maturity of the project and the stimulative effect of EU intervention.
  • Direct or indirect effects on climate, the environment and employment, progressively including increasingly complete cost-benefit analyses, environmental impact analyses, the climate proofing of projects, etc.
  • Coordination of the timing of different parts of the project, for example in the case of cross-border projects.
  • The financed projects have to comply with EU law and EU policies, in particular in relation to environmental protection, competition and the awarding of public contracts. Successive regulations laying down general rules for the granting of EU financial aid introduced a range of new elements. The financial framework for the 2014-2020 period allocated EUR 29.4 billion to the TENs, of which EUR 24 billion went to transport (TEN-T) and approximately EUR 5.4 billion to energy (TEN-E).

Following the Commission’s 2020 proposal to revise Regulation (EU) No 347/2013 on guidelines for trans-European energy infrastructure, the revised Regulation (EU) 2022/869 contributes to achieving the EU’s 2030 targets for energy and climate and its objective of climate neutrality by 2050. It also helps to ensure interconnections, energy security, market and system integration, competition that benefits all Member States, and affordable energy prices. The guidelines mostly end EU support for new natural gas and oil projects and introduce mandatory sustainability criteria for all projects of common interest (PCIs).

On 14 December 2021, the Commission published a legislative proposal revising the trans-European transport network guidelines to align them with the European Green Deal objectives and the climate targets of the EU Climate Law. The proposed regulation seeks to coordinate the European transport corridors and the horizontal priorities. It also aims to ensure that progress is made on each corridor and horizontal priority and that this happens in a coherent manner. Therefore, the Commission will be required to consult the European Coordinators for the core network corridors when examining applications for Union funding under the CEF for each European transport corridor or a horizontal priority within the mandate of the European Coordinator. The European Coordinators are required to verify whether projects proposed by the Member States for CEF co-funding are consistent with the priorities of the corridor work plan.

On 27 July 2022, the Commission presented an amended proposal to reflect the modified geopolitical context, including an extension of four European Transport Corridors to Ukraine and Moldova. The Parliament mandate for negotiations with the Council was adopted in April 2023. Following negotiations with the Council, Parliament adopted the revised TEN-T regulation on 22 April 2024. It is expected to come into force in the summer of 2024.

Reacting to the instability and global energy market disruption caused by Russia’s invasion of Ukraine, in May 2022 the Commission presented the REPowerEU Plan with the double aim of tackling the climate crisis and ending the EU’s dependence on Russian fossil fuels, which are being used as an economic and political weapon. The proposed measures focus on energy savings, diversification of energy supplies (including importing liquefied natural gas) and the accelerated roll-out of renewable energy (including green hydrogen). The plan contained some additional gas infrastructure investments, estimated at around EUR 10 billion, to complement the existing PCI list. In addition, a faster rollout of electricity PCIs was considered essential for adapting the power grid to future needs and will be supported through the CEF.

B. Additional funding possibilities

1. EU Structural and Cohesion Funds

In the 2014-2020 period, over EUR 6 billion from the European Regional Development Fund and EUR 25.95 billion from the Cohesion Fund were made available within Thematic Objective 7 ‘Promoting sustainable transport and improving network infrastructures’ to provide EU co-financing to support a multi-modal Single European Transport Area by investing in the TEN-T. Moreover, additional resources and instruments from the European Fund for Strategic Investments (later redubbed InvestEU), Horizon 2020 (now Horizon Europe), and the Recovery and Resilience Facility were put in place to foster investment opportunities in the TEN-T.

2. European Investment Bank aid

No territorial restrictions apply to EIB loans, as they are granted based on banking criteria, which include the financial (ability to repay), technical and environmental feasibility of the project.

C. 2021-2027 financial framework

The Commission put forward its proposal for the EU’s next long-term budget in 2018. This was followed by legislative proposals for 37 sectoral programmes. In addition to the EU Structural and Cohesion Funds, the Horizon Europe and InvestEU funds provide complementary funding for TEN, including research and innovation in the areas of clean energy, transport and digital technologies. In response to the unprecedented crisis caused by COVID-19, on 27 May 2020, the Commission proposed the temporary recovery instrument NextGenerationEU, with a budget of EUR 750 billion, as well as targeted reinforcements to the 2021-2027 EU budget. EU Heads of State or Government finally reached a political agreement in July 2020, and Parliament and the Council endorsed it in November 2020.

Connecting Europe Facility

Since December 2013, a new TEN infrastructure policy has been in place in the EU, with a budget of over EUR 30.4 billion for the period up to 2020 (EU-27), and of over EUR 33.7 billion for the 2021-2027 period: the Connecting Europe Facility (CEF).

A. General objectives

The CEF aims:

  • To build, develop, modernise and complete the trans-European networks in the transport, energy and digital sectors and to facilitate cross-border cooperation in the field of renewable energy, taking into account the long-term decarbonisation commitments and the goals of increasing European competitiveness;
  • To achieve smart, sustainable and inclusive growth;
  • To promote territorial, social and economic cohesion;
  • And to enhance access to and the integration of the internal market, with an emphasis on facilitating the synergies between the transport, energy and digital sectors.

1. In the transport sector, support will be reserved for projects of common interest aimed at:

  • Fostering efficient, interconnected and multimodal networks and infrastructure for smart, interoperable, sustainable, inclusive, accessible, safe and secure mobility, in accordance with the TEN-T guidelines (Regulation (EU) No 1315/2013);
  • Adapting parts of the TEN-T for the dual use of the transport infrastructure with a view to improving both civilian and military mobility.

2. In the energy sector, support will aim to:

  • Contribute to the further integration of an efficient and competitive internal energy market and to the interoperability of networks across borders and sectors, facilitating the decarbonisation of the economy, promoting energy efficiency and ensuring security of supply;
  • Facilitate cross-border cooperation in the area of energy, including renewable energy.

3. In the digital sector, the CEF will support:

  • The deployment of and access to safe and secure very high capacity networks, including 5G systems, and to the increased resilience and capacity of digital backbone networks on EU territories by linking them to neighbouring territories, as well as to the digitalisation of transport and energy networks.

B. CEF budget 2021-2027

Within the framework of the EU budget for 2021-2027, in 2018 the Commission proposed extending the CEF programme beyond 2020 with the overall goal of supporting investment in European infrastructure networks in the transport, energy and telecommunications sectors. The proposed CEF total budget amounted to EUR 42.3 billion (in current prices) and specifically earmarked EUR 30.6 billion for transport, EUR 8.65 billion for energy and EUR 3 billion for digital networks. Synergies between the three sectors and enhanced cross-border cooperation in the field of renewable energy are among the key areas to be targeted by the post-2020 CEF to accelerate the digitalisation and decarbonisation of the EU economy.

In transport, the CEF aims to accelerate the completion of both layers of the TEN-T and the deployment of European traffic management systems, such as the European Railway Traffic Management System and Single European Sky ATM Research project, and to support the transition towards smart, sustainable, inclusive, safe and secure mobility, by introducing a European network of charging infrastructure for alternative fuels. The proposal envisages that the new CEF will also support civilian/military dual-use transport infrastructure to adapt Europe’s transport networks to military requirements and improve military mobility in the EU. Following this, the Commission also adopted an ‘Action plan on military mobility 2.0’ in November 2022 to ensure better-connected and more secure military mobility.

In response to the COVID-19 pandemic, the Commission published its adjusted multiannual financial framework (MFF) proposal on 27 May 2020. However, the special European Council meeting in July 2020 led to a reduction in the proposed funding for the CEF transport budget (EUCO 22/20). The European Parliament gave its consent to the regulation on the 2021-2027 MFF on 16 December 2020. In March 2021, Council and Parliament negotiators reached a provisional agreement, in line with the July 2020 European Council conclusions, to divide the funding as follows:

  • Transport sector: EUR 25.81 billion, including EUR 11.29 billion for countries that benefit from the Cohesion Fund and EUR 1.69 billion for actions relating to military mobility;
  • Energy sector: EUR 5.84 billion;
  • Digital sector: EUR 2.06 billion.

The Council arrived at a common position on 16 June 2021 and the agreement was adopted by Parliament at second reading on 7 July 2021. In June 2023, an agreement was concluded with Ukraine to associate the country to the CEF and enable Ukrainian projects to be submitted for EU funding in the transport, energy and digital sectors.

Role of the European Parliament

In support of the TENs, Parliament has consistently called for the funding of more environmentally friendly modes of transport to be prioritised, allocating over 50% of infrastructure funding to rail projects (including combined transport) and setting a ceiling of 25% for road projects. Furthermore, Parliament has emphasised the need for the Commission to ensure the coordination and coherence of projects financed by contributions from the EU budget, the EIB, the Cohesion Fund, the European Regional Development Fund or other EU financing instruments.

When taking decisions on the yearly EU budgets, Parliament has paid attention to the appropriations allocated to both the CEF and Horizon programmes. In response to the Commission’s 2018 proposal on the post-2020 CEF, the Committees on Transport and Tourism and on Industry, Research and Energy prepared a joint draft report, which noted the lack of ambition in terms of CEF allocation for transport and highlighted the investment needs of the sector, in addition to the benefits that improved connectivity could deliver for the EU. It emphasised the need to further simplify the rules of the CEF and the importance of coherence between the various EU funds supporting projects in the transport, energy and digital sectors. The rapporteurs pointed out the need to reinforce parliamentary scrutiny of the priorities of the CEF and to improve how it is monitored. The joint report included an increase of around 20% in the budget allocated to transport projects. The envisaged increase in the CEF budget could not, however, be accommodated in the underlying multiannual budget for the period 2021-2027. The final act (Regulation (EU) 2021/1153) was published in July 2021.

In July 2020, Parliament adopted a resolution in which it welcomed the deal on measures in response to the COVID-19 pandemic as a positive step, but expressed its regret about cuts to the grant component of the recovery fund, among other things.

In its resolution of 10 July 2020 on the revision of the guidelines for trans-European energy infrastructure, Parliament highlighted the need to ensure that spending and selection of PCIs is in line with commitments made under the Paris Agreement.

In its position of 5 April 2022 on the revised TEN-E regulation, Parliament secured funding for projects that repurpose current natural gas infrastructure for hydrogen transport and storage for a transitional period (until the end of December 2029).

For more information on these topics, please see the websites of the Committee on Transport and Tourism and of the Committee on Industry, Research and Energy.

 

Ariane Debyser / Kristi Polluveer / OLENA KUZHYM