Rethinking the development and financing of transport infrastructure.

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The transportation infrastructure of the future won’t just consist of roads, railways and bridges. It will also include electric vehicle charging points, filling stations for alternative fuels, and various types of digital infrastructure, including widely available high-speed internet. Decisions concerning future infrastructure investments have the potential to accelerate the transport transformation, or, alternatively, to entrench the existing transport system, which will make charting a new path even more difficult and expensive. In this connection, there are two main challenges: (1) to convert and maintain infrastructure such that costs are fairly distributed in line with environmental and social criteria; and (2) to find sources of financing that can make up for falling revenues from fossil fuel and vehicle taxes.

  • Smart infrastructure planning can encourage emissions reductions

    In 2016, the revised version of the Federal Transport Infrastructure Plan (Bundesverkehrswegeplan), the federal government’s most important planning document for transport infrastructure, was adopted.162 This planning document sets forth 270 billion euros worth of investments up to 2030. While the Federal Transport Infrastructure Plan identifies the reduction of harmful emissions and greenhouse gases as an overarching priority, it allows that planned investment projects will only lead to annual CO2 reductions of 0.4 million tonnes.163 In this way, the 2030 Federal Transport Infrastructure Plan does not adhere to the goals of the 2050 Climate Action Plan (Klimaschutzplan), which was also adopted in 2016. The 2050 Climate Action Plan foresees CO2 emissions reductions of the transport sector of 40 to 42% over 1990 levels by 2030. As the sector currently emits some 160 million tonnes of CO2 annually, this means that emissions reductions of 4.7 million tonnes per year are required.

    Against this backdrop, there is a need to review the Federal Transport Infrastructure Plan and the associated supplementary acts with the aim of identifying whether adjustments can be made so that planning is in accordance with emission reduction goals. We believe that the adjustments should follow a yet to be developed 2030 Transport Transformation Policy (Verkehrswendekonzept 2030). This policy should stipulate the measures required to usher in the transport transformation (see Insight 1). As a comprehensive planning document, the 2030 Transport Transformation Policy should take economic, ecological and social factors into consideration in a balanced way while pursuing the goal of optimising the overall transport system.164 In order to ensure public support, the development of the 2030 Transport Transformation Policy should accommodate the participation of the citizenry while also seeking to transfer decision making responsibility to the local level.165 By treating local authorities as more than just agents executing orders from above, active participation from below can be promoted while also undercutting tendencies for the development of infrastructure projects of excessively large size.166

    The planning of transport infrastructure should be informed by the principle of “rail before road”. Indeed, for the mobility revolution and the clean-energy transition in transport to succeed, it will be essential to set priorities and targets in the financing and planning of infrastructure in order to achieve the greatest possible shift from road to rail transport. Yet it will not be enough to simply invest less in roads and more in railway capacities. There must be enhanced human resources dedicated to the planning and engineering of new rail infrastructure. Furthermore, it would be beneficial to allocate funding for rail network expansion for periods longer than five years, which is the normal budget time frame at present. In order to achieve emission reduction targets in the transport sector, the carrying capacity of existing infrastructure should be additionally enhanced though digitalisation, automation and improved signals technology.

    Rail network expansion should be oriented to improving European core network corridors. A particular focus should be placed on the elimination of bottlenecks in “seaport hinterland areas” and at particularly busy rail hubs, such as Cologne. Adding new capacity to busy hubs will be essential for reducing chronic delays in the transportation of people and goods.

    An additional important goal should be to create sufficient opportunities for trains to overtake one another, as different travel speeds are customary when transporting people and goods. The improvement of rail networks to accommodate freight trains, which in Europe are typically 740 meters long, would be relatively inexpensive, but has not been assigned a high priority in infrastructure planning to date.

    While rail transport has inherent environmental advantages, as a mode of transport it is being confronted by increasingly stringent environmental standards. The electrification of rail lines is a key challenge at present. Some 59% of rail lines are electrified, but this percentage is too low. If the installation of overhead wires would be economically inefficient due to irregular use, carbon-neutral train operations should be achieved with batteries and/or fuel cell technology. Furthermore, the noise created by rail transport must be reduced not only to encourage public support for rail network expansion, but also for human health reasons (see Insight 8).

    When planning road infrastructure, alternatives to new construction or expansion should be considered to a greater extent; in some cases, it would even make sense to eliminate certain roads. During planning a key priority should be given to the “big picture”, including the integration of European-wide networks, as well as spatial and regional planning issues. It should be possible to avoid certain infrastructure expansion measures by improving the integration of local and regional actors. For example, when taking the economic, ecological and social requirements of transport infrastructure into account, one might find that a modified travel route through a city is preferable to directing traffic around that city. To name a further example, the rehabilitation of old rail bridges can be preferable to the construction of new road bridges.167


    162. BMVI (2016d).
    163. BMVI (2016d), p. 24 ff.
    164. Bracher, T. et al. (2014).
    165. Roland Berger (2013).
    166. Bodewig-Kommission (2013).
    167. BUND (2017).

  • The infrastructure of the future is more than concrete and steel

    In this way, rail transport in combination with shared and multimodal mobility solutions will be important components of the transport infrastructure of the future. Yet we will also need new digital infrastructure, charging points for electric vehicles, and alternative fuel filling stations.

    The government will need to coordinate the widespread deployment of infrastructure for the charging of electric vehicles while also ensuring technical standards are adhered to. In this regard, regulators will need to adopt common standards for cables and plugs (and, potentially, for cable-free inductive charging) while also ensuring an open market for competition. In addition, transparent billing methods for charging stations services must be guaranteed. “Mobility cards” that enable customers to flexibly use different modes of transport to arrive at their destinations should incorporate the possibility of using charging stations operated by different providers.

    The establishment of universal standards for the installation of overhead wires and hydrogen fuel infrastructure for heavy long-haul trucks is also likely to be an important issue. Within the scope of the implementation of the EU Directive for the Deployment of Alternative Fuels Infrastructure, policymakers should consider whether it is expedient to provide subsidies for several alternative fuel types at the same time. It could potentially be more beneficial to select a single fuel solution for subsidies in order to minimise economic costs while generating synergies (see Insight 8).

    The expansion of digital infrastructure represents a cornerstone of the transport transformation. The widespread availability of high-speed broadband and mobile internet as well as the adoption of the 5G mobile internet standard will be an important springboard for propelling technology-based innovation in the transport sector. In particular, ubiquitous high-speed internet would help to enable semi-automated transport solutions, which could become fully automated at a later date (see Insight 5). IT technology offers incredible latent potential for the transport sector. An important insight is that dynamic control systems such as self-driving cars require reliable, real-time data transfer.

    Among other things, infrastructure that is designed for connectivity would allow intelligent pricing systems for road use, enable the calculation of optimal routes based on one or several forms of transportation, and ease the scheduling of shared vehicle use. However, the potential offered by advanced IT systems can only be fully exploited if existing transportation infrastructure such as traffic lights, traffic signs and public parking spots become more intelligent and are embedded in larger networks. In this way, the digitalisation of traditional transportation infrastructure will play an important role for networking vehicles and increasing their efficiency.

    Policymakers have a responsibility for enabling non-discriminatory access to electric-vehicle charging points and alternative-fuel filling stations. If existing business models prove to be inappropriate for ensuring that necessary infrastructure is installed and operated, then the government must take action to ensure that financing conditions and regulatory rules are reliable and adequately designed to encourage a successful transformation of the transport sector.

  • New ways of financing navigate the transport transformation

    Today, public investment in transport infrastructure is financed with proceeds from energy taxes. Generating revenues of some 40 billion euros annually, energy taxes represent the German government’s most important consumption tax.168 Of this amount, the federal government spends some 10 billion euros annually on transport infrastructure.169 The revenues not used for transportation spending flow into the general budget. These tax revenues are set to shrink with each passing year as the energy transition in transport continues and fossil fuel consumption declines.

    Figure 10.1 shows end consumer prices for each 100 km driven when relying on various vehicles and energy types. It also details the share of these costs collected as taxes. Taxes on electricity are lower in absolute and relative terms than taxes on diesel and gasoline. One cause is the low level of taxes on electricity (2.05 cents per kWh); another is the higher efficiency of electric motors in comparison to combustion engines. The other electricity price components mandated by the government – including the EEG levy and grid usage fees – are paid by end consumers, but do not flow into the federal government’s budget.



    Electricity taxes generated revenues of 6.6 billion euros in 2014.170 Assuming electricity tax rates remain the same, the additional revenues produced by the electrification of the transport sector would not be sufficient to compensate for the decline in tax revenues from lower diesel and gasoline consumption. Accordingly, adequate funding for infrastructure projects is not assured over the long term, and new solutions for infrastructure financing need to be explored.

    There are various arguments in favour of increasing the use-based financing of transport infrastructure as an alternative to the existing tax-based system. Recommendations along these lines have been issued by two commissions that were formed by the transport ministries of the German states: namely, the Daehre and Bodewig Commissions.171

    In addition to ensuring funding for transport infrastructure, user-based financing would allow ecological factors to be taken into consideration. With the introduction of a toll-road system, it would be possible to allocate the internal and external costs of transportation to the economic actors who are responsible for creating them (in line with the “polluter pays principle”). German autobahns already have a toll system for trucks weighing over 7.5 tonnes. In 2018 the system will be expanded to all federal highways (Bundestraßen). In accordance with the “Eurovignette” Directive, EU member states must establish toll systems for heavy freight vehicles. While the first version of the Directive adopted in 1999 only dictated the implementation tolls for the use of certain roads, the amended 2011 version foresees surcharges for externalities such as air pollution.

    German policymakers are currently working to develop an “infrastructure fee” for personal vehicle use. Unfortunately, this fee will not set incentives for more ecological behaviour, as fee levels will not vary based on the number of kilometres driven. To support the transition to sustainable transport, we advocate the adoption of a toll that would be collected based on kilometres driven. Furthermore, we believe toll levels should be designed to reflect the externalities and infrastructure usage costs associated with each specific vehicle. The toll should be variable in time and space in order to promote more efficient traffic flows. Finally, the toll system should be designed in a cost-effective way and should also provide for reliable data security.172

    There is a need for financing not only for transport infrastructure in a narrow sense, but also for electricity infrastructure. Indeed, the expansion of the power system must be expedited as an essential step in the transport transformation (see Insight 9). The expansion of electricity infrastructure has been financed to date with the EEG levy and grid usage fees. Both of these surcharges are components of the electricity price, and they are primarily paid by household consumers. Road users who rely on fossil fuels do not make a contribution to the expansion of electricity infrastructure with their vehicle use.

    Additional research and debate are needed to clarify whether current burden-sharing arrangements for power-system financing should remain unchanged, or whether the overall system of taxes and levies for the transport and power sectors needs to be reformed.173


    168. BMF (2015)
    169. Wieland, B. (2016)
    170. BMF (2015)
    171. Daehre-Kommission (2012); Bodewig-Kommission (2013)
    172. FÖS (2016)
    173. BMWi (2016c).

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