European Investment Bank worldwide transport investments 1996-2005, excluding subsidization of car and aircraft manufacturing industries. Click to enlarge.

The report, which focuses on the EIB’s funding of transport projects during 1996-2005, raises questions about using public money to support transport sectors that pay few of their external costs. For example, almost a third of EIB industry loans subsidize car manufacturing—three times more to automakers than to any other sector. The EIB has also invested heavily in aviation, “already heavily subsidized and the fastest-growing source of CO₂ emissions in the EU.”

As the house bank of the European Union, the EIB is obligated to support the EU’s objectives and commitments. Yet Lost in Transportation argues that the EIB’s transport-related operations follow EU transport policy intermittently at best, and tend to undermine rather than contribute to commitments to counter climate change or environmental damage caused by the transport sector.

Goals of the White Paper. The European Commission’s 2001 White Paper on Transport had set out goals and actions that were considered essential to the reduction of the environmental impact of transport in the EU. Among other objectives, it sought a shift it transport from road and aviation modes, as well as a reduction in the overall growth of transport.

The White Paper also laid out the EC’s intention to continue with the development of the Trans-European Transport Network (TEN-T), a massive road-and-rail program originating from proposals tendered by the European Roundtable of Industrialists (ERT) lobby group. TEN-T has been presented as a project which would reduce the environmental impact of European transport.

Financing Trans-European Transport Networks (T-TEN). However, the rail component of TEN-T has been sorely neglected compared to the road projects: in 2004 the European Commission estimated: “For road, less than 4% of the length of planned links will still not be completed by 2010, and, for rail, up to 50% of the length of planned links will remain uncompleted.” The primary benefit of TEN-T is now stated to be reduction in travel time via the construction of 30 high-speed corridors - yet the EU insists that the corridors “will slow the increase of CO₂ by about 4%.”

Priority T-TEN projects have often been proposed by national governments and industry associations for infrastructure which may otherwise not have been built, such as the Øresund Fixed Link between Denmark and Sweden, which cost around€2 billion (US$2.7 billion). In the case of the Øresund bridge and tunnel, many Danes have relocated from Copenhagen to Malmö, Sweden, on the other side of the bridge, to take advantage of cheaper housing, resulting in heavy commuter traffic along the 48 km/20 mile route. However, when such projects have not been popular with travelers, the EIB has financed measures to promote their use—and thus more travel.

Decoupling: Opportunity Lost?. The result, says Bankwatch, is that “...the vast sums (EUR 112 billion between 1996 and 2005, and almost EUR 15 billion in 2005 alone) invested by the EIB on the transport sector in the last decade have not helped to deliver the EU White Paper on Transport’s goals of modal shift and decoupling of transport from growth, nor have they contributed to the halting of climate change.” To the contrary, the Bank is said to be “supporting the status quo by increasing environmentally unfriendly transport modes and is fueling rather than cooling climate change.”

Decoupling refers to the disassociation of the increase of a desirable trend, such as economic growth or a provided service, from growth in an undesirable side effect of that trend. In terms of public investments into individual transport projects, a decoupling policy requires not only a shift towards modes of transport with the lowest external costs, but also a limit on the growth of modes with higher external costs. This can take various forms, such as financial (dis)incentives such as taxes. Local and regional bundling of policies in “push-pull&rquo; or “carrot-and-stick” combinations, such as a congestion charge is concert with expanded and cheaper public transport, has proven effective in many cities.

However, when asked what the EIB is doing to encourage structural changes in the transport sector to address transport demand, officials replied “The EIB addresses these issues by financing sustainable urban transport schemes, or projects promoting the use of alternative transport fuels such as biofuels,&rquo; as well as other “downstream” solutions, according to Bankwatch.

According to a Soft Mobility Paper released last July by the Greens/European Free Alliance, 10% of car journeys in the EU are shorter than a kilometer, 30% are shorter than three kilometers, and 50% are shorter than five kilometers. Half of the continent’s car journeys could be avoided altogether by walking or cycling for twenty minutes or less. However, “the ‘predict and provide’ ideology still dictates most of the EIB’s transport investments, and it has made no commitment to avoid investments, even selectively, in the least sustainable modes, nor to avoid financing capacity increases in road and air traffic,” according to the report. Seventy percent of the EIB’s road investments have financed roadways, and have often led to usually in a significant increase in capacity.

Investing in Air Travel. The EIB has not acknowledged limiting the growth of air traffic as a policy objective, and instead refers to the need to “minimize its environmental impact.” The Bank finances aviation in three main ways:

• Airport infrastructure (modernisation or expansion);

• Airlines (modernisation or expansion); and

• Air traffic management projects.

Aviation sector financing has often involved expansions in capacity, and therefore an expansion of the noise, pollution and greenhouse gases resulting from aviation.

The Bankwatch report concludes that the EIB &ldqo;must stop financing the heavily-subsidized aviation sector, restrict road financing to safety and maintenance projects, and restrict support for the car industry to research and development of more efficient or new technologies.”  Bankwatch recommends that the EIB develop policy for the transport sector that supports the aims of the White Paper, and which prioritizes public transport, transport management systems, inter-modal facilities, pedestrian travel, and bicycle infrastructure.

The Bankwatch report comes just two months after the European Environment Agency’s (EEA) report Transport and environment: on the way to a new common transport policy found that road transport created the majority of transport emissions and greenhouse gases, while air travel virtually doubled between 1990 and 2004, and five months after the EEA released the report Urban sprawl—Europe’s ignored environmental challenge, which detailed the spread of urban sprawl in the EU.

The European Investment Bank was created in 1958 as a non-profit, policy-driven public bank to provide financing for capital investment that would further European Union policy objectives. EIB has a mandate from EU finance ministers to lend an average of €44 billion (around US$60 billion) each year—roughly three times as much as the World Bank normally lends annually—during the current 2007-2013 EU development period.

Resources:

• CEE Bankwatch report: Lost in Transportation

• Commission of the European Communities White Paper, December 9, 2001: European transport policy for 2010: time to decide

• 2007 EIB Information Magazine

• Soft Mobility Paper: Measures for a climate-friendly transport policy in Europe

• European Environment Agency: Urban sprawl in Europe: The ignored challenge (January 2007)

• Trans-European Transport Networks (T-TEN)