GLOSSARY

Ancillary infrastructure : The necessary and sufficient infrastructure to achieve the goals of the funded actions (Marco Polo II Regulation (EC) No 1692/2006, Article 2(h)). As Marco Polo projects are transport services projects, ancillary infrastructure should merely be adjustments to existing infrastructure that are necessary so that the transport service envisaged can be carried out.

Deadweight : Deadweight occurs where funding is provided to support a beneficiary who would have made the same choice in the absence of aid. In such cases, the outcome cannot be attributed to the policy, and the aid paid to the beneficiary has had no impact. Thus the share of expenditure which generates deadweight is ineffective by definition, because it does not contribute to the achievement of objectives.

DG Mobility and Transport : European Commission’s directorate-general for mobility and transport.

EACI : Executive Agency for Competitiveness and Innovation. In March 2008, this agency took over the daily project management of Marco Polo.

Interoperability (of the trans-European rail system) : The capability to operate on any stretch of the rail network without any differences, by focusing on making the different technical systems on the EU’s railways work together and avoiding operational and infrastructure barriers.

Marco Polo actions :

The Marco Polo programmes fund the following five types of actions:

1. Catalyst action: action under Marco Polo I and II (MP I and MP II) aimed at overcoming significant structural barriers in the freight transport market which prevent the market from functioning satisfactorily;

2. Modal shift action: MP I and II actions to shift freight from road to rail, inland waterways and short sea shipping or a combination of these transport modes;

3. Motorways of the sea action: MP II action aimed at modal shift by introducing a door-to-door service which shifts freight from long road distances to a combination of short sea shipping and other modes of transport;

4. Traffic avoidance action: MP II action aimed at avoiding traffic rather than shifting it, by focusing on the modification of production/distribution processes to achieve shorter distances, higher loading factors, fewer empty runs, reduction of waste flows, reduction of volume and/or weight or any other effect leading to a significant reduction of freight traffic on the road;

5. Common learning action: MP I and II action designed to deliver modal shift indirectly by enhancing know- ledge in the freight logistics sector and fostering advanced methods and procedures for cooperation in the freight market.

Marco Polo Programme Committee : Management committee consisting of the different representatives of the EU Member States and observers from participating third countries dealing with transport services.

Multimodal transport : The carriage of goods by at least two different modes of transport, such as road, rail, inland waterway or short sea shipping, from point of departure to destination.

Tonne-kilometre (tkm) : The transport of one tonne (1000 kg) of cargo over a distance of 1 kilometre. Since 2009, the rules have allowed tare to be included in the tkm shifted under the Marco Polo programmes.

EXECUTIVE SUMMARY

I. Since 2003, the Marco Polo programmes have financed transport service projects that shift freight transport from road to rail, inland waterways and short sea shipping. The first Marco Polo programme (Marco Polo I) had a budget of 102 million euro and ran between 2003 and 2006. The current Marco Polo II programme runs from 2007 to 2013 and has a substantially larger budget of 450 million euro. The aim of the scheme was to reduce international road freight traffic, thereby improving the environmental performance of freight transport, reducing congestion and increasing road safety.

II. The European Court of Auditors assessed whether the Commission had planned the programmes, and was managing and supervising them, in such a way as to maximise their effectiveness, and whether the funded projects were effective.

III. The Court found that the programmes were ineffective in as much as they did not attain their output targets, they had little impact in shifting freight off the roads and there are no data to assess the expected benefits of diminishing the environmental impact of freight transport, easing congestion and improving road safety.

IV. The mechanism used for programme payments made EU-funding disbursements conditional upon results, the selection procedure ensured that only high-quality projects were selected and these projects usually provided greater benefits for the broader community. However, there were not enough relevant project proposals put forward because the market situation and the entry conditions discouraged operators from taking advantage of the scheme. In addition, there was uncertainty about the limited quantities reported shifted, and half of the audited projects were of limited sustainability. Furthermore, projects would have started even without EU funding (deadweight).

V. Whilst the daily management of the programmes improved over time, the Commission did not carry out a sufficient analysis of market needs to assess the potential to achieve the policy objectives, and corrective actions could have been taken earlier. However, important programme weaknesses persist.

VI. Given the results of the current programmes, the Court recommends the Council, the European Parliament and the Commission to consider discontinuing EU funding for transport freight services following the same design as the Marco Polo programmes ("top-down supply-push") which led in particular to the weaknesses identified in this report (insufficient market uptake, absence of evidence of achieving the objectives, high administrative burden, poor sustainability and deadweight) and making continuation of such funding conditional upon an ex ante impact assessment showing whether and to what extent there is an EU added value. This would imply making a detailed market analysis of the potential demand and taking up the experience and best practices of Member States similar national support schemes. Only in the event of a positive assessment as to a meaningful EU action in this area, the Court recommends that the Commission take a series of actions to strengthen performance in future schemes.

INTRODUCTION

THE MARCO POLO PROGRAMMES AND MULTIMODALITY

1. Multimodality is about using two or more different transport modes to complete a single freight transport operation. Multimodal transport has generally been considered to be environmentally more sustainable as it reduces "road-only" transport operations. Increasing the use of multimodality has therefore been one of the EU’s main transport policy objectives for many years [1].

2. As part of this policy, in 2003 the EU legislator established a first Marco Polo programme (Marco Polo I, with a budget of 102 million euro) that ran between 2003 and 2006. It was followed by the current Marco Polo II programme (2007–13), which has a substantially larger budget of 450 million euro and extended scope. The objective was to counter the rise in international road freight transport by shifting the expected aggregate increase to railways, inland waterways and short sea shipping, or a combination of those transport modes. This was meant to reduce the environmental side-effects of freight transport, ease road congestion and improve road safety and contribute to efficient and sustainable mobility (see Figure 1).

3. For the period after 2013, the Commission has proposed continuing EU support for freight transport services, by promoting "the deployment of innovative transport services or new combinations of proven existing transport services, including through the application of "Intelligent transport systems" and the establishment of relevant governance structures" [2]. In the absence of an ex ante assessment, it is however not yet known how these broad objectives will be implemented, what are the specific objectives and priorities as well as the amount of funding deemed necessary.

FIGURE 1

MARCO POLO II PROGRAMME OVERVIEW AND OBJECTIVES (EX ANTE EVALUATION REPORT ON MP II, ECORYS, 15 JUNE 2004, P. 1)

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MANAGEMENT OF THE MARCO POLO PROGRAMMES

4. The Marco Polo programmes are centrally managed by the Commission. Project applications are received via annual calls for proposals and evaluated according to the funding conditions and eligibility, selection and award criteria. Initially DG Mobility and Transport [3] was responsible for the programmes in their entirety, however since March 2008, the Executive Agency for Competitiveness and Innovation (EACI) has managed the actual implementation of the scheme. Tasks are shared between DG Mobility and Transport and the EACI as follows:

(a) DG Mobility and Transport is responsible for programme management, which includes priority-setting, drafting and adoption of the annual work programme, drafting of documents for the annual call for proposals and publication of the call in the Official Journal, relations with the Member States’ authorities, evaluation of the programme’s implementation and impact, and supervision of the EACI’s management activity;

(b) The EACI advises potential applicants, receives, opens and evaluates project proposals, negotiates contract details with applicants, prepares Commission decisions for the awards of grants, receives periodic project reports, monitors projects, makes payments to beneficiaries and reports to the Commission.

5. The rationale behind Marco Polo was that market and regulatory failings discourage operators from setting up alternatives to road transport. The aim of the programmes is therefore to compensate transport operators for the initial losses on new or upgraded transport services that shift traffic from the road. The EU subsidy is calculated as the lowest amount out of: (i) one euro (before call 2009) or two euro (as of call 2009) for every 500 tkm shifted off the road; (ii) 35 % of the eligible costs (50 % for common learning actions); (iii) the cumulative deficit for the entire duration of the action. An example is given in Box 1.

6. In order to achieve the modal shift objective, different types of actions are foreseen (modal shift actions; catalyst actions and motorways of the sea actions, see the glossary) but the Marco Polo II programme also funds projects which aim at encouraging higher efficiency in international (mainly intra-EU) freight transport (the traffic avoidance actions).

BOX 1

AN EXAMPLE OF CALCULATION OF THE MP SUBSIDY AMOUNT

If a Marco Polo project would have been selected on the basis of the 2009 call and realised a modal shift of 600 million tkm and if this project had eligible costs of 35 million euro (including 4 million euro in ancillary infrastructure investments), ineligible costs of 9 million euro and generated 41 million euro in revenue, the following subsidy calculation would apply:

Amount 1: applying the contribution rate for the 2009 call of 2 euro/500 tkm gives an EU contribution for the volume shifted off the road of 2,4 million euro;

Amount 2: applying the maximum intervention rate of 35 % of the 35 million euro in eligible costs gives a second figure of 12,25 million euro;

Amount 3: the operation generated 41 million euro in revenue and 44 million euro in costs (both eligible and ineligible), giving a loss of 3 million euro.

In this case, the subsidy would be limited to 2,4 million euro, which is the lowest of the three amounts.

7. The programme also covers projects which do not directly provide a modal shift (as part of the common learning actions) as well as other expenditure (up to 5 % of the budget). As such, between 2009 and 2012, around 11,8 million euro in subsidies [4] have gone to:

- Projects implemented as part of the common learning action, which aim to deliver a modal shift indirectly by enhancing knowledge in the freight logistics sector and fostering advanced methods and procedures for cooperation in the freight market. Around 8,1 million euro was paid out by the end of 2011 for 16 projects;

- Accompanying measures, launched to support current actions and further development of the programme. These measures included communication activities to promote the programme, studies on inland waterways transport services and single wagonload traffic and also a contribution to a European programme for the support of Short Sea Shipping (for which 3,7 million euro was paid).

8. Out of the five types of actions the programme financed, projects of the modal shift action type are the core of the programmes and represent 80 % of the grant agreements signed (see Figure 2).

FIGURE 2

USE OF MARCO POLO PROGRAMMES FUNDING PER ACTION TYPE (ANNUAL ACTIVITY REPORT, EACI 2010, 5.4, POINT 1)

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AUDIT SCOPE AND APPROACH

9. The objective of the Court’s audit was to find out whether the Marco Polo programmes were effective. It did this by assessing whether the Commission had planned the programmes, and was managing and supervising them in such a way as to maximise their effectiveness. The Court also assessed whether a number of funded projects had achieved their objectives.

10. The audit covered Marco Polo I and the ongoing Marco Polo II up to July 2012. The work combined a range of audit procedures: examination of files, interviews, analysis of impact assessments, evaluations and survey results and a review of evaluations of project proposals. The Court also assessed the information available within DG Mobility and Transport on the support schemes implemented in the Member States, surveyed the national transport services support schemes existing at the time of the audit and interviewed selected national authorities participating in the Marco Polo Programme Committee during project audits.

11. This work was supplemented by interviews with relevant entities and on-site verification of the achievements of 16 completed projects of the "modal shift" action type (the core of the programme, see paragraph 8 above) in Belgium, Germany, France, Italy, Luxembourg and the Netherlands (see Annex I for project content and performance details). Box 2 provides a short description of two audited projects.

12. The 16 audited projects represented 19,5 million euro in commitments and 11,4 million euro in payments. Half of them were approved under MP I, the other half under MP II. Four were short sea shipping projects, one was a rail/inland waterways combination, and the remaining 11 were rail projects. Fourteen beneficiaries of the 16 projects were consortia of major transport companies, national railways companies or international shipping lines.

BOX 2

EXAMPLES OF AUDITED MARCO POLO PROJECTS

(a) Sirius 1 was a rail project carrying natural mineral water from the French production plant to various logistics platforms in Germany. The aim was to improve capacities and customer service and to support the company’s carbon footprint target (40 % reduction between 2008 and 2012 on direct responsibility scope and all brands).

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Loading water on trains at the production plant of S.A. des Eaux Minérales d’Evian.© European Court of Auditors

(b) Gulf Stream is a short sea shipping project offering a sea alternative for freight traffic between northern Spain and southern England. It is a roll-on/roll-off service operating return sailings every weekend between the Spanish port of Santander and Poole on the English south coast to overcome the weekend ban on trucks using the French national road network.

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Trucks leaving the ship, carrying their freight to destination over the weekend.© BAI SA Brittany Ferries Port du Bloscon

OBSERVATIONS

THE PROGRAMMES HAVE NOT BEEN EFFECTIVE

OUTPUTS FAR BELOW EXPECTATIONS …

13. The legislation had set quantified annual targets for the modal shift that both programmes were to achieve. For MP I, the annual target was 12 billion tkm. For MP II, the annual target was increased to "a substantial part" of 20,5 billion tkm [5] on the basis of a proposal for a 740 million euro funding envelope that was to include infrastructure support. Despite the fact that the amounts for infrastructure were rejected in the course of the legislative procedure, the original target was mostly maintained.

14. A comparison between the targets set and the reported programme achievements demonstrates continued and significant underperformance (see Table 1).

15. The reported modal shift data are final only for MP I, where they indicate that 22,1 billion tkm of freight was shifted from the road to other modes of transport. Although this result equates to removing from the road 1230000 truck journeys of 1000 km (the distance from Berlin to Paris) each carrying 18 tons of freight [6], it still represents only 46 % of the programme target.

16. Between 2007 and 2010, MP II achieved only 23,9 % of the committed traffic shift (see Table 1). Even though MP II is still running, it will not fully shift the targeted substantial part of 20,5 billion tkm/year because there has been insufficient response to the yearly calls for project proposals. Therefore, the programme funding made available will not allow the target to be achieved, even if all projects themselves were to be entirely successful.

… AND LITTLE IMPACT IN SHIFTING FREIGHT OFF THE ROADS

17. The programme support for MP I was supposed to shift at least the expected aggregate increase in road freight traffic as early as 2003. For MPII, the aim was changed to become shifting "a substantial part" of the expected aggregate increase in road freight traffic. Based on data provided by the Commission (DG Eurostat), Figure 3 shows that, in 2003, the roads bore 46 % of total freight transport in the EU, while maritime transport, rail and inland waterways accounted for 38 %, 11 % and 3,5 % respectively. By 2010, road transport had increased its overall share to 50 % of all freight transport, while maritime transport had decreased to 33 % and rail and inland waterways remained respectively at 11 % and 4 %.

TABLE 1

TARGETED, COMMITTED AND REPORTED VOLUMES OF FREIGHT SHIFTED FROM THE ROAD BY THE MARCO POLO PROGRAMMES IN BILLION TKM (COURT CALCULATIONS BASED ON COMMISSION AND EACI DOCUMENTATION [1111])

| Annual target | Committed shift [2222] | Reported shift (by EACI) | % achieved [3333] |

MP I | | | | |

2003 | 12,00 | 12,40 | 7,25 | 58,51 |

2004 | 12,00 | 14,38 | 6,33 | 43,99 |

2005 | 12,00 | 9,53 | 4,95 | 51,94 |

2006 | 12,00 | 11,40 | 3,55 | 31,17 |

MP I Total | 48,00 | 47,71 | 22,08 | 46,28 |

| average for MP I | 46,00 |

MP II | [4444] | | | |

2007 | 20,50 | 27,83 | 10,02 | 36,00 |

2008 | 20,50 | 16,33 | 3,40 | 20,82 |

2009 | 20,50 | 15,68 | 2,82 | 17,98 |

2010 | 20,50 | 14,15 | 3,40 | 24,03 |

2011 | 20,50 | 13,70 | 0,00 | 0,00 |

MP II 2007–11 | 102,50 | 87,69 | 19,64 | 22,40 |

| average for MP II 2007–10 ( 31.12.2012) | 19,16 |

Grand total | 150,50 | 135,40 | 41,72 | |

18. As a result of the financial and economic crisis that began in 2007, transport volumes in general have declined. Some transport modes have recorded severe losses: rail transport having fallen by 17,9 % and inland waterways traffic by 10,6 % [7]. When faced with the crisis, road transporters reduced their prices to keep their vehicles on the road. This provided both disincentives to switch to non-road modes and incentives to switch from non-road to road-only transport operations (reverse modal shift) and highlighted the cyclic vulnerability of the current programme design.

19. The reported modal shift of 22,1 billion tkm obtained for MP I represented only 0,3 % of all EU international road freight transport and around 25 % of the increase in EU international road haulage for the same period. The main reason for this is that the growth in international road freight transport between 2003 and 2006 (113,7 billion tkm) was much higher than originally forecasted (48 billion tkm).

FIGURE 3

USE OF TRANSPORT MODES FOR INTRA-EU, NATIONAL AND INTERNATIONAL, FREIGHT TRANSPORT OVER TIME (DATA PROVIDED BY EUROSTAT TO THE COURT)

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Source: Eurostat.

20. With regard to MP II, at the time of the audit, only a few projects had been completed and it was too early to make a final assessment of their effectiveness and potential impact. However, given the available budgetary appropriations and their limited take-up, it is unlikely that the programme will have a significant impact on shifting traffic off the road (see Table 2).

21. Road freight transport remains the dominant mode while rail and inland waterways are still at very modest levels. Figure 4 shows that, prior to 2007, road freight transport volumes increased year on year, that between 2007 and 2009 transported volumes dropped for all modes as a result of the crisis and that, as of 2009, there was a clear recovery in transported volumes, mainly on the road freight and maritime legs whereas rail and inland waterways did not manage to increase their share.

FIGURE 4

EU FREIGHT TRANSPORT BY MODE IN MILLION TKM (FIGURE 3 DATA PRESENTED AS A PERCENTAGE SHARE BY TRANSPORT MODE)

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Source: Eurostat.

THE REAL IMPACT CANNOT BE ASSESSED

22. The programme funding was supposed to support the policy goals of diminishing the environmental side-effects of freight transport, easing road congestion and improving road safety. The Court took note of the Commission’s estimates that, for each euro invested in the Marco Polo I programme, environmental benefits worth 13,30 euro were generated [8].

23. However, the available data on road congestion and on traffic accidents do not allow the real impact to be assessed as Eurostat has no agreed official methodology and no harmonised statistical data on road congestion, and the data on traffic accidents are incomplete. Moreover, although it is generally acknowledged that alternatives to road-only transport usually provide greater benefits for the broader community, the real leverage level is likely to be much lower. This is because of the fact that, between 2004 and 2010, the Marco Polo calulcator data [9] used were outdated and therefore inaccurate. Since 2004, road transport has gradually become cleaner as a result of research and innovation [10]. This was not taken into account by the Commission for its calls from 2005 to 2010. It was only in the 2011 call that new coefficients and a new methodology were used when quantifying the impact of freight transport by rail, inland waterways and short sea shipping. In some cases, these are not much more beneficial than the road-only option (see Annex II). For example: there is no longer much difference between road-only transport and diesel trains, small barges or conventionally fuelled roll-on-roll-off passenger ("Ro/Pax") ships sailing at 20 to 23 knots. As soon as Ro/Pax ships exceed a speed of 23 knots, it would even be better for the envir- onment to carry the freight by truck.

NOT ENOUGH RELEVANT PROJECT PROPOSALS PUT FORWARD …

24. The projects funded through this programme are one of the few examples where EU funding has to be disbursed on the basis of results. The Court recognises that the EACI has procedures which allow EU funds to be spent on projects that best meet the selection criteria. However, there are usually not enough high-quality projects proposed (only in 2004, the available resources were committed in full, see Table 2).

25. Thus, the MP programmes have problems in absorbing their appropriations. Of the 101,8 million euro in financial support available for MP I, only 41,8 million euro (41 %) was paid [11]. MP II has a programme budget of 450 million euro, of which only 77,8 million euro (25 % of the available budget) had been paid, mainly as advances, by end-2012. It is therefore likely that a significant amount of funding will remain unused and not serve the general objectives set.

TABLE 2

OVERVIEW OF PROJECTS AND FUNDS AVAILABLE, COMMITTED AND PAID UNDER THE MARCO POLO PROGRAMMES, IN MILLION EURO (COURT CALCULATIONS BASED ON DOCUMENTATION FROM THE COMMISSION AND EACI [5555])

| No of projects | Budget available | Funds committed | % committed versus total budget | Funds paid | % paid versus total budget |

MP I | | | | | | |

2003 | 13 | 15,0 | 13,0 | 86,7 | 7,3 | 48,7 |

2004 | 12 | 20,4 | 20,4 | 100,0 | 12,3 | 60,3 |

2005 | 15 | 30,7 | 21,4 | 69,7 | 12,8 | 41,7 |

2006 | 15 | 35,7 | 18,9 | 52,9 | 9,4 | 26,3 |

MP I Total | 55 | 101,8 | 73,7 | 77,3 | 41,8 | 41,1 |

MP II | | | | | | |

2007 | 20 | 58,0 | 45,4 | 78,3 | 18,7 | 32,2 |

2008 | 28 | 59,0 | 34,4 | 58,3 | 9,9 | 16,8 |

2009 | 21 | 66,3 | 61,9 | 93,4 | 23,2 | 35,0 |

2010 | 30 | 64,0 | 52,2 | 81,6 | 17,1 | 26,7 |

2011 | 18 | 56,9 | 33,6 | 59,1 | 8,8 | 15,5 |

MP I Total | 117 | 304,2 | 227,5 | 74,1 | 77,7 | 25,5 |

Grand total | 172 | 406,0 | 301,2 | | 119,5 | |

… BECAUSE THE MARKET SITUATION AND THE CONDITIONS TO ENTER DID NOT ENCOURAGE OPERATORS TO TAKE ADVANTAGE OF THE SCHEME

26. In addition to the change in market situation (see paragraph 18), a significant reason for the low take-up of appropriations is that getting support from MP programmes has proved to be long, risky, complicated and costly:

(a) It took the beneficiaries audited two years on average to obtain access to the scheme (from the date of the first project idea to arrive at signature of the grant agreement). Within this period, it took them on average one year from the date of closing the call until the date of signature of the grant agreements. They unanimously considered this to be too long a wait in a volatile business environment. The Court found that on several occasions customers were lost in the meantime. As changes to initial routes, to the products transported or to the starting points and destinations were not permitted by the Commission and the EACI for reasons of equity of treatment and fair competition, 53 of the 154 projects selected (or 34 %) between 2003 and 2010 were "non-starters or early terminators". They represented 64,2 million euro in commitments and 3,7 million euro in payments;

(b) Ancillary infrastructure investments remain entirely at the beneficiary’s own risk: although the legislation allows for the possibility of partial finance for such infrastructure, the funding mechanism usually only provides a subsidy by volume of tkm shifted and in practice renders it impossible for the programme to co-finance infrastructure investments;

(c) The programme conditions are considered by the operators to be too complex for the reality of everyday business, which explains why many beneficiaries used consultants to prepare the paperwork [12];

(d) Participation in the MP programmes is also costly [13]: based on the travel expenses of the staff made available by the consortium members, the consultancy fees and the costs of the man-months worked by the beneficiaries’ staff, the average cost of preparing an application, for the 16 beneficiaries audited, was 105000 euro.

UNCERTAINTY ON HOW MUCH TRAFFIC ACTUALLY SHIFTED OFF THE ROAD …

27. Column 4 of Table 1 gives figures for the reported volumes of freight shifted off the road. The audit was unable to obtain assurance that they were reliable. Firstly, where existing services were upgraded, the freight volumes declared as having been transported on the same route before the project start were accepted by EACI without any checks (these quantities are deducted at project completion so that the increase in modal shift can be calculated). Secondly, the first ex post financial audits of reported volumes of modal shift, which EACI completed only in 2011, revealed errors [14] and one case of reporting based on gross weight rather than net weight.

28. The Court’s audit of 16 projects revealed that only one project had exact figures for the quantities weighted on arrival at the terminals. In six cases, the tool used to record the net weight was not available for on-the-spot testing and for the nine remaining projects, this tool demonstrated a limited reliability of the audit trail and the increased risk of overpayments. For example, in one project no indication of weight was given on the transport document (CMR [15]), and in another the tests to compare the weight registered in the system with the weights stated on the corresponding CMRs gave no match and the beneficiary was not sure whether he had reported gross or net weights to the EACI.

… AND HALF OF THE AUDITED PROJECTS ARE OF LIMITED SUSTAINABILITY …

29. As funding one-off operations that are not sustainable would serve little purpose, the financed projects are expected to become viable during their lifetime, i.e. within a maximum of three years, and continue in operation afterwards. Although the Regulations specifically invoke sustainability as one of the funding conditions [16], this has neither been taken up in the grant agreements signed nor has sustainability been checked after project completion.

30. Moreover, the difficult operational environment particularly for railways has contributed to poor sustainability. Beneficiaries setting up railway services have faced high operational risks and, while in operation, have experienced difficulties with national railway companies because of unforeseen maintenance works, rail and port strikes and the absence of interoperability. In one of the projects audited, this led to the cancellation of 20 % of planned departures over the entire project period; in another, during the third year of operation, there were 44 incidents causing delays in delivery and service disruptions lasting more than a week; in a third project the beneficiary was compelled to make four locomotive changes along the route from its Romanian production plant to its distribution centre in the North of Italy.

31. Many beneficiaries of the programme have therefore decided to terminate projects well before the end of their contracts, and many of those completing a project either terminated or significantly changed the scope of the service after the project financing had ended. For 6 of the 16 projects audited by the Court, the subsidised service was no longer operational at the time of the audit (because of insufficient volumes or because one of the partners withdrew or went bankrupt) and two others continued but were reduced in scope.

… AND PROJECTS WOULD HAVE BEEN STARTED EVEN WITHOUT EU FUNDING

32. The evidence from the Marco Polo projects audited by the Court demonstrated that the EU funding allowed them to start the projects earlier, to increase the scale of the service or to have an earlier return on their investment.

33. However, the audit also found serious indications of deadweight as:

- 13 of the 16 beneficiaries audited confirmed that they would have started and run the transport service even without a subsidy;

- The evaluator Ecorys indicated that "the majority of the projects would also have started without subsidy" [17]

- The Commission as a manager of the programme, indicated in its most recent report to the European Parliament and the Council [18] that "42 % of beneficiaries stated that their projects would definitely have gone ahead without MP funds".

34. This is explained by the fact that (i) the transport of heavy goods over long distances would use sea, rail or inland waterways for cost reasons anyway, especially if shipments can be planned in advance, and (ii) MP funding covers such a small part of the total project cost that it cannot be seen as a real incentive (in the 16 projects audited by the Court, the subsidy covered only 2,8 % of the amount invested by the beneficiaries).

DAILY MANAGEMENT OF THE SCHEME HAS GRADUALLY IMPROVED …

35. In line with the normal practice of the Commission, the EACI’s work is guided by an Annual Work Programme (AWP) approved by the Commission. The Commission supervises the daily management of the MP programmes through the EACI’s quarterly reports, quarterly and biannual coordination meetings and quarterly steering committee meetings. A dedicated full-time policy officer from the Commission has regular contacts with EACI management and staff and participates in working meetings and, occasionally, in site visits. The EACI produces Annual Activity Reports (AAR) comparing actual performance with the AWP.

36. The Court found that the EACI has improved its MP project management over time by, among other things, (i) tightening the project selection procedure to ensure that only high-quality projects are selected, (ii) organising a helpdesk and functional mailboxes for potential applicants which the beneficiaries audited considered useful and effective, (iii) contributing to the knowledge base of the Commission through analytical reports, (iv) regularly monitoring the funded projects and (v) reducing payment delays.

… BUT THERE WAS INSUFFICIENT ANALYSIS OF MARKET NEEDS …

37. The MP programmes were designed to provide EU funding to partially compensate for the considerable outlay incurred by setting up new, or developing existing, transport services, in the expectation that increasing the supply of these services would create market demand ("top-down supply-push" [19]).

38. The structure of both MP programmes was based on a Commission proposal [20] using the outcome of a consultation of stakeholders organised before each of the programmes started. [21]

39. However, the Court does not consider this to be sufficient as operators will only change from road-only transport to other transport modes under normal market conditions if the circumstances (usually costs, time, reliability, volumes to be shipped and proximity of terminals) require such a change. To design a successful transport services support programme, therefore, there should have firstly been an analysis of why multimodal transport services were not being created, or developed, under normal market conditions, and how to overcome the potential obstacles or barriers hampering or preventing the creation or development of such services.

40. Since 2007, the potential for effectiveness of the MP programmes has further declined as a result of external causes: the financial and economic crisis has reduced overall transported volumes (see paragraph 18), and decisions by national railway companies to stop single-wagon deliveries for reasons of internal costs have had the immediate effect of obli- ging smaller companies to reconvert multimodal shipments to road-only transport. Moreover, a reverse modal shift (from ship to road) can now be expected because of recently adopted legislation [22].

… AND CORRECTIVE ACTION COULD HAVE BEEN TAKEN EARLIER

41. A 2007 evaluation report [23] cited a number of problems related to the first Marco Polo programme, such as inappropriate thresholds, inflexibility in the rules on tkm, and unclear and complex rules for the submission, selection and contracting of projects. However, the Commission, through its project and programme monitoring, was aware of delays in project implementation and difficulties to achieve the target earlier (since March 2006).

42. The 2008 impact assessment (IA) [24] provided for a number of possible options to improve the programmes by including a full revision of the legal basis, stopping the programme or introducing changes into MP II. The Commission’s proposal was limited to budgetary and technical amendments to MP II [25] (such as doubling the subsidy amount, considering empty containers and vehicle weight as eligible freight quantities, lowering thresholds and increasing flexibility) in an attempt to increase the attractiveness of the programme. However, these measures did not remedy the important programme weaknesses highlighted above.

43. Nor did the Commission make an in-depth assessment of the Member States’ national schemes supporting multimodality with a view to deriving lessons for a possible redesign of the MP programmes. The Court considers that there are lessons to be learned from national programmes that work on the demand side with limited administrative outlay by paying lump sums direct to road transport operators that decide to shift their trucks or containers from road to ship or rail (e.g. "Ecobonus" and "Ferrobonus" in Italy [26]). In one country (Austria), the national schemes also contribute to infrastructure investments in the ratio of expected modal shift to volumes actually shifted.

CONCLUSIONS AND RECOMMENDATIONS

44. The Marco Polo programmes are part of the transport policy objective to develop alternatives to the road-only transport of freight within the EU. The Court found the programmes to be ineffective inasmuch as (i) the targets set were only reached to a very limited degree, (ii) they had little impact in shifting freight off the roads, and (iii) there are no data to assess the expected benefits of diminishing the environmental impact of freight transport, easing congestion and improving road safety.

45. The mechanism used for programme payments made EU funding disbursements conditional upon results and the projects usually provided greater benefits for the broader community. However, there were not enough relevant project proposals put forward because of the market situation and the dissuasive conditions for the business environment (namely length of procedures, risks, complexity and administrative costs). In addition (i) there is uncertainty about how much traffic was actually shifted off the road, (ii) the funded services (projects) were in many cases significantly reduced in scope or discontinued and (iii) there is evidence that many projects would have started even without EU funding.

46. The daily management of the programmes has improved over time. Among other things, a sound project selection methodology ensures that only high-quality projects are selected. However, the Commission did not perform an adequate market analysis to assess the potential for success, did not consider new developments and did not take timely corrective action to tackle the programme’s ineffectiveness.

RECOMMENDATIONS

The Council, the European Parliament and the Commission should:

(a) Consider discontinuing EU funding for transport freight services following the same design as the Marco Polo programmes ("top-down supply-push") which led in particular to the weaknesses identified in this report (insufficient market uptake, absence of evidence of achieving the objectives, high administrative burden, poor sustainability and deadweight).

(b) Make possible continuation of funding such projects conditional upon an ex ante impact assessment showing whether and to what extent there is an EU added value. This would require a detailed market analysis of the potential demand from the operators and the taking into account of best practices of similar national support schemes. Only in the event of a positive assessment as to a meaningful EU action in this area, the Commission should in particular:

(i) set realistic targets of freight volumes to be shifted from the road; regularly review the programme outputs and results and take prompt action to remedy shortfalls in respect of the targets set;

(ii) make EU funding conditional upon results (for example, pro rata payments for volumes recorded shifted off the road);

(iii) assess the needs, limits and conditions for infrastructure and equipment support so as to share part of the risk with operators who build facilities to increase multimodal transport;

(iv) pursue measures to effectively tackle the technical, operational and infrastructure barriers that could be detrimental to the effectiveness of the projects, for example concerning cross border rail traffic;

(v) ensure that adequate data are available to demonstrate the performance achieved by the funded actions;

(vi) reduce, preferably to six months, the time necessary for project selection and contracting;

(vii) make sustainability of projects for at least three years after completion a necessary condition;

(viii) tackle the phenomenon of deadweight, by addressing it when evaluating the projects.

This Report was adopted by Chamber II, headed by Mr Harald NOACK, Member of the Court of Auditors, in Luxembourg at its meeting of 24 April 2013.

For the Court of Auditors

+++++ TIFF +++++

Vítor Manuel da Silva Caldeira

President

[1] The 1992 White Paper "The future development of the common transport policy" (COM(92) 494 final of 2 December 1992) saw shifting the balance between modes of transport as a main objective. The 2001 White Paper "European transport policy for 2010: Time to decide" (COM(2001) 370 final of 12 September 2001) confirmed the importance of revising the respective shares of transport modes to increase the sustainability of the European transport system. Intermodal transport was to be encouraged by investing in good connections between sea, inland waterways and rail. The main objective of the 2011 White Paper "Roadmap to a Single European Transport Area — Towards a competitive and resource-efficient transport system" (COM(2011) 144 final of 28 March 2011) is to reduce greenhouse gas (GHG) emissions by limiting the growth of road congestion and establishing efficient multimodal links.

[2] Article 38 of COM(2011) 650 final/2 of 19 December 2011.

[3] At that time called "Directorate-General for Transport and Energy".

[4] This represents 12,5 % of the amounts paid out of the programmes.

[5] Article 1 of Regulation (EC) No 1692/2006 of the European Parliament and of the Council of 24 October 2006 establishing the second Marco Polo programme for the granting of Community financial assistance to improve the environmental performance of the freight transport system (Marco Polo II) and repealing Regulation (EC) No 1382/2003 (OJ L 328, 24.11.2006, p. 1) stipulates that the programme should achieve: "(…) a traffic shift that is a substantial part of the expected yearly aggregate increase in international road freight traffic, measured in tonne kilometres (…)". According to Recital 2 of the same regulation, the yearly aggregate increase in international road freight traffic was estimated at the level of 20,5 btkm, Recital 4 of the same regulation indicates that the programme should help to shift "at least the expected increase in international road freight traffic, but preferably more".

[6] Source: EACI presentation at the MP Info Day, 28 June 2012.

[1111] Using the latest data available of 31.12.2012.

[2222] Quantities planned to be shifted on the basis of the grant agreements signed by the Commission and, since March 2008, EACI.

[3333] Reported versus committed shift quantities.

[4444] For MP II the annual target should be a "substantial part" of 20,5 billion tkm.

[7] Source: Eurostat "Statistics in Focus" 13/2012, 21.2.2012.

[8] EACI presentation at the MP Info Day, 28 June 2012.

[9] The "Marco Polo calculator" is an automated spreadsheet providing a comparison of the theoretical external costs pertaining to environmental factors (such as air pollution, climate change, noise) and to socioeconomic factors (like accidents, congestion and infrastructure). The calculation is expressed in euro per tkm, between the "road-only" transport solution and the alternative multimodal transport solution applied for (rail, inland waterways and short sea shipping).

[10] "Ex ante evaluation report on MP II", Ecorys, 15 June 2004, p. 56: "when comparing modern truck engines with outdated or high-speed ship engines, road transport might prove to be the environmentally favourable option".

[11] This included payments of 1,4 million euro for two projects implemented as part of the Catalyst action which did not support modal shift: the EU funding was paid for the conversion of a locomotive and for drafting project implementation reports.

[5555] Using the latest data available of 31.12.2012.

[12] Of the 16 projects audited, 14 beneficiaries, or 87 % used consultants.

[13] Recital 4 to Regulation (EC) No 1692/2006 and Recital 8 to Regulation (EC) No 923/2009 of the European Parliament and of the Council of 16 September 2009 amending Regulation (EC) No 1692/2006 (OJ L 266, 9.10.2009, p. 1) indicated an expectation that many small and medium sized enterprises (SMEs) would participate in the programme. As a result of the programme’s complexity, the high costs and the high thresholds below which there would be no co-funding, only 24 % of MP beneficiaries were SMEs (Source: EACI data).

[14] In one report an error of 20 % was identified ex ante by EACI.

[15] The CMR waybill is a document used in international road freight transport, based on the "Convention on the Contract for the International Carriage of Goods by Road" (a United Nations Convention, signed in Geneva on 19 May 1956).

[16] Article 5(1)(a) of Regulation (EC) No 1382/2003 of the European Parliament and of the Council of 22 July 2003 on the granting of Community financial assistance to improve the environmental performance of the freight transport system (Marco Polo Programme) (OJ L 196, 2.8.2003, p. 1) and Annex I to Regulation (EC) No 1692/2006.

[17] "Evaluation of the Marco Polo I programme", Ecorys, 7 November 2007, paragraph 3.6.

[18] COM(2012) 675 final of 21 November 2012, p. 6.

[19] "Ex ante evaluation report on MP II", Ecorys, 15 June 2004, Chapter 6.3.

[20] COM(2002) 54 final of 4 February 2002.

[21] Eg. see "Ex ante evaluation report on MP II", Ecorys, 15 June 2004, Chapters 2 and 7.

[22] Fuel costs for shipping will substantially increase from 2015 as a result of new sulphur rules and new general sulphur limits adopted in September 2012. This will return part of the freight currently carried by ships to the road. Source: European Maritime Safety Agency (EMSA) "Technical report", 13.12.2010 and COM(2011) 439 final of 15 July 2011.

[23] "Evaluation of the Marco Polo I programme", Ecorys, 7 November 2007.

[24] SEC(2008) 3022 of 10 December 2008, Option C.

[25] Regulation (EC) No 923/2009.

[26] The Italian administration managed both programmes with a budget of 235 million euro (out of which 193,5 million euro was paid out, an uptake rate of 82,3 %) with 15 FTE employees and at a cost of no more than 970000 euro/year, which brings the administrative cost to 1,2 % of the total programme budget.

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ANNEX I

DETAILS OF PROJECTS SAMPLED

Projects audited | Call | Country | Short description of project content |

MP I

AIN | 2003 | Belgium | Improve intermodal barge and rail transport to and from the port of Antwerp: increase the frequency of existing services or start up new services in anticipation of congestion problems resulting from road works planned on the Antwerp Ring. |

DUE LOKO-MOTION | 2003 | Germany | Project supplying rail traction services and interoperable through-traction with new multi-current locomotive for a rail-road block train service between Munich (Riem, Germany) and Cervignano del Friuli (Italy). |

BRIDGE OVER EUROPE | 2004 | The Netherlands | Multimodal (short sea/train/road) connection with the Iberian peninsula, with main focus on 45-foot container equipment, offering a viable and cost-effective alternative to South–NorthSouth road transport by trailer. |

BASS | 2005 | Germany | Project to increase the sea transport proportion of the overall goods traffic volume between western and central Europe on one hand and the Baltic States and the Community of Independent States (CIS) on the other. |

NEPOL EXPRESS | 2005 | Germany | Project to run a regularly scheduled rail connection between Rotterdam (Netherlands) and Poznan-Franowo (Poland). |

LUNA | 2006 | Italy | Combined rail shuttle service linking Italy, Germany and the Scandinavian market via Switzerland. |

RAIL | 2006 | Belgium | The project concerns two rail routes: to/from Golbey (FR) and to/from the north of Spain (Tarragona/Barcelona) via the rail/road terminal in Le Boulou (FR), connected with each other via a rail hub. |

LORRY RAIL | 2006 | Luxembourg | A North–South intermodal rail service for the transport of unaccompanied trailers between rail terminals at Bettembourg (Luxembourg) and Le Boulou (Perpignan) using special technology. |

MP II

GULF-STREAM | 2007 | France | Project to provide a direct maritime link between Poole (south coast of the United Kingdom) and Santander (northern Spain) for use by trucks that cannot drive through France because of weekend bans on the French mainland. |

ITABEL EXPRESS | 2007 | Italy | Regular block train connection from Pescara (central/southern Italy) to Mechelen (Belgium) for household appliances. |

SIRIUS 1 | 2007 | France | Project for the supply of water by train between the French production plant and the German market. |

VIKING RAIL | 2007 | Germany | Rail shuttle between Germany and Sweden to link car parts suppliers located in Germany with the manufacturing site in Gothenburg. |

EURO-REEFER RAIL | 2008 | The Netherlands | Railway service for refrigerated container transport of dairy products and other perishables with daily departures from Genk (Belgium) to Busto Arsizio (Italy); Zabrze (Poland) to Salzburg (Austria) and Piacenza and Padova (Italy); Busto Arsizio (Italy), Slawkow (Poland) and Budapest (Hungary) to Zeebrugge (Belgium); Munich (Germany) to Duisburg (Germany); and Herne (Germany) to Norrköping (Sweden). |

KTS | 2008 | Italy | Block train to link various manufacturing plants in Germany, Slovakia and Romania to a distribution centre in San Vito al Tagliamento (Italy). |

OFE | 2008 | Belgium | Project to operate a regular railway corridor for containers from Zeebrugge and Antwerp (Belgium) to Ottmarsheim (France). |

SCADAE | 2008 | Italy | Project to set up a direct service from the Adriatic ports of Koper (Slovenia), Venice, Ravenna and Ancona (Italy) to Thessaloniki (Greece), Istanbul and Izmir (Turkey). |

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ANNEX II

COMPARISON OF THE MP CALCULATOR COEFFICIENTS OVER TIME [1]

Transport mode | Subtypes | 2003 call [2] | 2004 call [3] | 2011 call modal shift only [4] |

Road | | 0,024 | 0,035 | 0,018 |

Rail | Diesel | 0,012 | 0,015 | 0,015 |

Electric | 0,004 |

Inland water ways | 1000–1500T | 0,005 | 0,010 | 0,014 |

1500–3000T (incl.mixed/ unknown) | 0,013 |

>3000T | 0,010 |

| Conventional fuel [5] | LNG | Seawater scrubbing | Freshwater scrubbing |

Short sea shipping | General/bulk | 0,004 | 0,009 | 0,007 | 0,000 | 0,004 | 0,004 |

Container ship | 0,005 | 0,000 | 0,003 | 0,003 |

Ro/Pax (<17kn) | 0,005 | 0,000 | 0,003 | 0,003 |

Ro/Pax (17–20kn) | 0,009 | 0,000 | 0,005 | 0,005 |

Ro/Pax (20–23kn) | 0,013 | 0,001 | 0,008 | 0,008 |

Ro/Pax (>23kn) | 0,020 | 0,001 | 0,011 | 0,011 |

[1] Source: EC/EACI data compiled by the Court.

[2] Source: 2003 call for proposals (OJ C 245, 11.10.2003, p. 52).

[3] Source: 2004 call for proposals (OJ C 255, 15.10.2004, p. 8).

[4] See 2011 call for proposals (OJ C 309, 21.10.2011, p. 12).

[5] The coefficients decrease further if low-sulphur fuel is used.

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