How can Europe ensure the long-term sustainability of transport infrastructure?

Speakers: Nieminen Pia, Ayala-Sender Inés, Zylberberg Laurent, Goger Thierry, Nicodème Christophe, Horvath Roman, Viaggi Riccardo
Moderator: von Glasenapp Helmut

On the 1st April 2019, PubAffairs Bruxelles organised in partnership with the Committee for European Construction Equipment (CECE) a debate on the question of how Europe can ensure the long-term sustainability of its transport infrastructure with Mr Roman Horvath, Policy Officer, Clean Technologies and Products, Sustainable Construction Team, European Commission, Ms Pia Nieminen, Policy Advisor, European Investment Bank, Ms Inés Ayala Sender MEP (S&D/ ES), Mr Laurent Zylberberg, Director, Groupe Caisse de Dépôts, Mr Thierry Goger, Secretary General, Partnership of National Road Research Centres (FEHRL), Mr Christophe Nicodème, General Director, European Union Road Federation (ERF) and Mr Riccardo Viaggi, Secretary General, CECE.

The moderator gave the floor first to Mr Roman Horvath, who started his introductory speech by informing the audience that he considered transport networks to be the arteries of the economy. The speaker warned that the networks are often now in need of a “bypass” which will require time and funding to maintain, among others, the post-World War 2 era steel and concrete structures, notably the period during which the core of European infrastructures were built. In this regard, the Commission published its “Discussion Paper on the state of transport infrastructure maintenance” in 2018, which provides an overview of the current situation in Europe. However, without a universal definition of maintenance and a homogenous funding approach, the speaker added, it has been difficult to compare in detail how states conduct infrastructure maintenance projects. The speaker subsequently highlighted that, after the financial crisis of 2008, many Member States limited their transport infrastructure budgets, while others continued to invest funds as a contra-cyclical measure. Also, EU Member States that used tolls found that, after the crisis, there were fewer road users and, as a result, the reduction in toll revenues impacted the budget for transport maintenance. In light of these financial constraints, Mr Horvath stated that it was 20-40% cheaper, thus better value for money, to conduct ex-ante maintenance rather than ex-post, while foreseeing that the future of maintenance would consider the lifecycle of infrastructures. The speaker continued by saying that the discussion paper has outstanding questions and invited participants to help develop viable solutions. Mr Horvath also highlighted that the EU is supporting transport infrastructure and maintenance through the Connecting Europe Facility (CEF), the European Fund for Strategic Investments, the European Cohesion Fund and the European Regional Development Fund. Mr Horvath concluded by explaining how the EU also valuably supports research projects through Horizon 2020.

Mr von Glasenapp then introduced Mr Riccardo Viaggi, Secretary General, CECE who presented a video on both the development of construction equipment to respond to transport infrastructure and maintenance challenges, and on the way forward to a more sustainable equipment usage.

Mr Viaggi started his intervention by calling for better coordination among all relevant infrastructure actors. He stated that the problems regarding infrastructure could not be viewed solely as a mobility question. Subsequently, Mr Viaggi welcomed the increase in funding through the Connecting Europe Facility as well as the possibility to mix different EU funds. However, he recognised that the majority of the sources of funding for transport infrastructure and maintenance are not European, but local, regional and national. By citing the case of the bridge collapse in Genoa, Mr Viaggi said that the plummet in funding recorded by a Commission study may also result in tragic consequences. He then warned the audience that infrastructure maintenance should no longer be considered as a cost to rectify decay. Instead, it should be viewed as an investment in maintaining the operation of the infrastructure and increasing the structures’ durability and value. Indeed, in the speakers’ opinion, maintenance ought not to be a standalone cost and future contracts should be awarded based on the need to provide lifecycle maintenance of the structure. Mr Viaggi added that tender selection should be based on the best quality and value, not only on cost. To achieve this, he called for public procurement practices to be overhauled. Whereas, from the industry perspective, the speaker reminded the audience that firms had begun to make machines digital, more productive and economically, socially and environmentally sustainable.

The moderator, after introducing the panellists, asked the speakers to consider how transport infrastructure and maintenance costs should be financed.

In reply to this question, Mr Viaggi said European strategic infrastructure needed to be financed at EU level, whereas secondary infrastructure are funded and operated at regional or national level. However, he added, infrastructure projects should not merely rely on public funds.

MEP Ayala Sender replied by saying that the lack of funding for infrastructure or maintenance projects is partly due the mistaken beliefs that maintenance projects are a cost not an investment that provides added value. The speaker added that there is a false perception that infrastructure projects result in higher emissions that run contrary to the Paris Climate Agreement. In addition, the MEP emphasised that another challenge to the maintenance of transport infrastructure is the upwards trend of people relocating to cities, putting assets under increased pressure, while disadvantaging those living far away from big cities. MEP Ayala Sender also said that she hoped that the Connecting Europe Facility for Transport would help fund infrastructure projects after the European Parliament introduced maintenance as a matter of non-secondary importance, while warning against foreign companies monopolising infrastructure and maintenance projects in the EU.

Mr Laurent Zylberberg quoted the future European guarantee mechanism, “InvestEU”, intended to be the successor of the so-called “Juncker Plan”. One of its two components will be open for a direct access to National Promotional Banks and Institutions (NPBIs) in order to finance, among others, local projects in the sustainable infrastructures sector, while providing technical assistance, as well.

Mr Christophe Nicodème confirmed that there was a big decrease in the spending and investment in road maintenance in Europe after the 2008 financial crash. He suggested that with the advent of electric vehicles, new mobility patterns and alternative means of travel, as well as the decay of old transport infrastructure, it is necessary to reassess how structures are built and financed. While EU funding is important, the speaker reminded the audience that less that 10% of the roads in Europe are under the oversight of the EU, while underlying that construction should be integrated with the long-term maintenance of an asset.

Turning the question on its head, Mr Thierry Goger suggested that instead of considering how to ensure the long-term sustainability of EU transport infrastructure, one should consider how transport infrastructure could help the long-term sustainability of Europe. The speaker pointed out that 40% of the EU’s assets are invested in road infrastructure, nonetheless, according to the speaker, the debate has often incorrectly been focused on maintenance as a cost, while the benefit of infrastructures has been taken for granted. He added that there needed to be more investment in research and development and that the benefits would surely be felt in the medium and long term. Mr Goger concluded by agreeing with MEP Ayala Sender by stating that the model for investment in infrastructure may change with the ‘gilets jaunes’ and those in favour of Brexit, as growth, jobs and mobility have emerged as crucial citizens’ demands.

Setting out the role and actions of the European Investment Bank (EIB), Ms Pia Nieminen confirmed that the shareholders of the Bank are EU member states. The speaker told the audience that 90% of EIB lending goes towards EU member states, while the remaining 10% is allocation outside of the EU. While the EIB does not offer grants, as EU institutions do, the EIB can lend up to 50% of the project cost. More specifically, 20% of the banking lending goes towards the transport sector, while 90% of those funds have been directed towards the construction of metro, tram and road infrastructure, and only the remaining 10% is used for air and maritime projects. The speaker also stated that the EIB could not finance transport maintenance projects, but it could help fund the renewal, or upgrading, of infrastructure. Indeed, unlike the European Commission, the EIB does not respond to calls for tender, but the projects are welcome to seek for financing at any moment.

The moderator asked the panel about the needs in the market, especially he queried which kind of differences can be found across Europe and what lessons have been learned from the past. He also asked the panel whether there was a difference in funding and managing principles according to the type of infrastructure and if innovative solutions could be applied.

Mr Nicodème responded that, for example, Eastern Europe required a greater degree of road infrastructure construction than Western or Southern Europe. However, the speaker highlighted that member states should avoid the mistakes made in large investments within new member states, such in the case of the development of the Spanish road system, which ignored maintenance over the lifecycle of the structures. Indeed, the speaker explained, the cost per kilometre over a 10-year period to maintain a regional road has increased, while the funds available for maintenance have reduced. The speaker also highlighted that it is of paramount importance for construction to automatically integrate the maintenance of a mid-to-long-term asset in order to avoid deterioration of the asset itself in value and functionality and that this principle should be maintained for every type of transport infrastructure.

MEP Ayala Sender said that the historic problem for the EU was that by responding to the financial crisis with austerity across Europe the maintenance efforts went neglected. While the Connecting Europe Facility has a budget of 30 billion euros, this sum is not enough to fund the development of transport, energy and digital infrastructures. The speaker also considered that banks often remain overly conservative in lending money for maintenance projects, although maintenance reduces costs in the long run. On the perspectives across member states, the speaker confirmed that during deliberations in the European Parliament on the Connecting Europe Facility, some rapporteurs resisted including maintenance provisions as in their respective countries’ infrastructures were recently built, hence not in immediate need of financing. The speaker concluded by saying that these principles should be applied to every type of infrastructure.

In replying to the questions posed by the moderator, Mr Viaggi said that the industry perspective is that there is often a difference in approach and funding between the EU and the national level. Regarding this question, the speaker reiterated his favour for a mix of funding and action between EU and national actors, but also warned against decisions on transport infrastructure and maintenance being held hostage to changes in political priorities of the ruling majority, as in the example of the Lyon-Turin cross-border rail link.

Ms Nieminen said that with the backing of the EU budget, the EIB has been able to finance more risky projects like the integration of electric vehicles and charging stations to promote the use of the new technology. The speaker told the audience that the EIB did finance the demonstration phase of installing charging station projects after part of the funding was secured via the Horizon 2020 programme.

Mr Laurent Zylberberg responded by saying that more must be done with less funding as the grants are reducing. He proposed using a mixture of new grants and financial instruments from private and public funds to deliver long-term financing and he concluded by stating that public funds have a crucial part to play in the context of the shortfall from private sources who are concerned about financing projects that could reduce their credit rating score.

Innovation has been applied to the field of inspection to help identify the condition of transport infrastructure, Mr Goger stated. He cited the example of sensors being embedded in pavements to automatically relay the status of the condition of pavement, allowing for improvements to be made ahead of a pre-determined inspection date. The speaker also said that the use of robotics, such as the use of drones to assess the need for maintenance has become more common. Mr Goger concluded that more investment in research was needed as in time their benefits will become evident.

The moderator posed a final question to the panel on how Europe can ensure the long-term sustainability of EU transport infrastructure.

Ms Nieminen highlighted that the election of a new European Parliament and a new European Commission could serve as momentum to influence these actors to deliver long-term sustainability of transport infrastructure in the EU.

In his conclusion, Mr Goger urged the positive externalities of infrastructure projects to be shown to reinforce the added value of the transport infrastructure for the mobility of goods and people. He also stated that maintenance and upgrading structures are a top priority, followed closely by resilience and digitalisation. He expressed his confidence that improvements could be achieved through innovation.

Regarding the attitude that actors should adopt, Mr Nicodème warned that there would surely be changes that the EU needs to anticipate and not merely react to. Mr Nicodème called for actors to work together and to not be separated by labels, such as public, private, local, national and European.

Mr Zylberberg concluded with a quote from the philosopher Antonio Gramsci, namely “we must be pessimistic when we think and optimistic when we act”.

Looking ahead, MEP Ayala Sender said that the European Union should continue to influence local, national and regional action and, in order to be effective, the EU must be able to promote itself positively to create change. The MEP finally championed a focus on maintenance for the benefit of accessibility, security and mobility.

In closing the debate, Mr Viaggi warned that the EU too often worked in silos, especially within the European Commission. The speaker added that, despite the effort made under the Construction 2020 Initiative, these dynamics have unfortunately persisted. However, he concluded the event by stating his optimism on the fact that this setting will change in the near future.

The Q&A session covered the following issues: the role of transport in mobility, the possibility of making funding conditional, the role of innovation and maintenance in reducing death rates on European roads, the role of the Construction 2020 Initiative, the differences among members states in conceiving maintenance of infrastructure, the difference in funding between the EU and the national level, challenging the dominance of foreign companies in Europe, the question of investing further in research, the question of strategic infrastructures, the scope of the Connecting Europe Facility (CEF), the question of public-private partnerships, the role of the EIB in financing infrastructures building and infrastructure maintenance.

Want to know more about the issues discussed in this debate? Then, take a look at the selected sources provided below!

Road to 2024 – CECE – Committee for European Construction Equipment – Elections Manifesto

Connecting Europe Facility, European Commission

Discussion Paper on the state of transport infrastructure maintenance. European Commission

European Construction Sector Observatory (including transport infrastructure)

European Fund for Strategic Investments, European Commission

InvestEU, European Commission

European Long-Term Investors Association

European Fund for Strategic Investments, European Investment Bank

Dedicated page on Transport, European Investment Bank (EIB)

Betting on the Long-Term: Rebuilding investment for the Europe of tomorrow, The Long-Term Investment Task Force of the Paris Financial Center

The High-Level Task-Force on Investing in Social Infrastructure in Europe, European commission and European Long-Term Investors Association

Horizon 2020, European Commission

Cohesion Fund, European Commission

European Regional Development Fund, European Commission

CECE – Committee for European Construction Equipment – Annual Economic Report 2019

Digitalising the Construction Sector: Unlocking the potential of data with a value chain approach,  CECE – Committee for European Construction Equipment

The Paris Climate Agreement, United Nations