COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Council Regulation establishing the Shift2Rail Joint Undertaking
Date: 2013-12-16
Institutions: European Commission
Subjects: European Joint Undertaking, harmonisation of standards, innovation, rail transport, research and development, transport infrastructure













EUR-Lex - 52013SC0534 - EN











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52013SC0534

COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Council Regulation establishing the Shift2Rail Joint Undertaking /* SWD/2013/0534 final */









TABLE OF CONTENTS
1........... Introduction.................................................................................................................. 2
2........... Problem definition........................................................................................................ 3
2.1........ Key challenges in the EU rail
sector............................................................................. 3
2.2........ The main problems that require
action.......................................................................... 3
2.3........ Problem drivers............................................................................................................. 3
2.3.1..... Fragmentation of R&I efforts...................................................................................... 3
2.3.2..... Low leverage of EU rail R&D
investment................................................................... 4
2.3.3..... Limited and uncoordinated
participation of stakeholders along the rail value chain... 4
2.3.4..... High costs, risks and lead times
of R&I investments................................................... 4
2.4........ Most affected stakeholders and
needs assessment....................................................... 4
2.5........ Subsidiarity................................................................................................................... 4
2.5.1..... Legal basis.................................................................................................................... 4
2.5.2..... Necessity and EU added value.................................................................................... 5
3........... Objectives..................................................................................................................... 5
4........... Policy options............................................................................................................... 5
5........... Assessing the impacts................................................................................................... 6
5.1........ General approach to the
assessment of impacts............................................................ 6
5.2........ Summary of impacts..................................................................................................... 6
6........... Comparing the options.................................................................................................. 7
6.1.1..... Governance structure.................................................................................................... 8
6.1.2..... Budget.......................................................................................................................... 8
7........... Monitoring and evaluation............................................................................................ 8
COMMISSION
STAFF WORKING DOCUMENT
EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Accompanying the document
Proposal for a Council Regulation
establishing the Shift2Rail Joint Undertaking
1.           Introduction
This Executive Summary outlines the main
findings and conclusions of the Impact Assessment report accompanying the
Commission proposal for a Council Regulation establishing the Shift2Rail Joint
Undertaking under Horizon 2020 (H2020) for an EU coordinated approach to
research and innovation in the rail sector in support of the completion of the
Single European Railway Area (SERA).
The proposal follows the White Paper on a
Roadmap to a Single European Transport Area[1],
which stresses the need to create a SERA to achieve a more competitive and
resource-efficient European transport system and address major societal
challenges relating to rising traffic demand, congestion, energy supply and
climate change. The Commission Communication ‘Partnering in Research and
Innovation’ further highlights that public-private partnerships (PPPs) can help
to address such challenges and strengthen Europe’s competitive position.
2.           Problem
definition
2.1.        Key
challenges in the EU rail sector
Ambitious EU goals on climate change,
energy use and environmental protection mean the railway sector will be
required to take on a larger share of transport demand in the next decades. 
However, the European rail network still
finds it difficult to challenge the dominance of road transport. Despite large
public subsidies and significant investments in infrastructure and high technology
products, the modal share of rail freight has actually decreased in the past
decade, while the modal share of passenger rail has remained constant. 
Also, although the European rail supply
industry still leads at world level, it is increasingly challenged by overseas
suppliers, mainly in Asia, who are investing massively in R&I. 
The long-term competitive success of European
rail, vis-à-vis both other transport modes and foreign competitors, thus depends
on continuous product, service and process innovation, which, in turn, requires
large-scale and coordinated investments in R&I.
2.2.        The
main problems that require action
Innovation throughout the whole rail value
chain is a strategic enabler to complete the SERA and boost the competitiveness
of the rail sector. Yet, past R&I efforts in the rail sector at EU level
have not been sufficiently targeted towards the broader policy goal of
completing the SERA and the market uptake and impact of EU rail R&I
projects has been low and slow. 
2.3.        Problem
drivers
Four important drivers have been identified
which contribute to these problems.
2.3.1.     Fragmentation
of R&I efforts
Asides from the fragmentation of R&I
budgets across Member States, coordination of R&I efforts in the rail
sector is further constrained due to the following forms of fragmentation:
Fragmentation among railway ecosystems, with a patchwork of disparate regional and national systems,
networks and technical operating standards. The
industry has thus had to develop tailored vehicles, designed to meet the unique
constraints of relatively small national markets. This high
level of product customisation and lack of European
standardisation not only constitutes a barrier to the SERA, it also results in
increased production costs and low operational margins
that do not allow for significant investments into speculative
technology-oriented research and limit market uptake of innovations. 
Fragmentation among the subsystems of
the rail sector. Complex interactions between
subsystems (infrastructure, rolling stock and signalling equipment
manufacturers, railway undertakings and infrastructure managers) limit the
potential of improving one specific part of the system or of proposing
breakthrough solutions that have an impact on the whole system and that can be
deployed in the complete SERA.
Fragmentation along the innovation life
cycle. EU research efforts focus primarily on
pre-competitive innovation at low Technology Readiness Levels so that there are
few large-scale demonstration projects and a significant part of knowledge
generated by the European R&I projects never finds its way to the market.
2.3.2.     Low
leverage of EU rail R&D investment
The current set-up of EU rail R&I
limits the direct leverage of EU funding. In rail projects, the average share
of private funding was just 34%. Relatively low participation rates of private
companies in projects also mean that many projects target relatively low
technology levels, thereby limiting indirect leverage effects linked to
additional private investments after project completion.
2.3.3.     Limited
and uncoordinated participation of stakeholders along the rail value chain
The current "bottom-up" project
initiation approach to rail R&I does not allow for a comprehensive
programmatic approach and means individual projects are not necessarily aligned
together and with overall EU policy goals. The formation of ad-hoc consortia means
the whole value chain is not necessarily represented and hinders the continuous
collaboration of partners beyond single projects, resulting in reduced
confidence among partners. 
2.3.4.     High
costs, risks and lead times of R&I investments
Generic innovation risks are heightened in
the rail sector by:
·                        
Complex interactions between different rail
segments and the need for synchronicity between innovations.
·                        
Long product lifecycles, inhibiting the rapid
deployment of new rail technologies. 
·                        
Unequal distribution of innovation benefits
between stakeholders, reducing incentives to invest in new technologies.
·                        
Lack of synergies with other industrial sectors,
especially in emerging technologies.
2.4.        Most
affected stakeholders and needs assessment
The proposed initiative will affect all actors
in the rail sector, helping to boost their competitive
edge and reduce costs. Other industrial sectors,
including tiered suppliers and actors in economic subsectors that make use of
the goods and services provided by the rail sector, may also be affected.
By contributing to reduce infrastructure
and operating costs, the initiative will help to reduce the scale of subsidies
paid out by national governments. By retaining European leadership in the rail
sector, this will also help to create new high quality European jobs.
Passengers and freight service users will
be indirectly affected as reliability and quality of services are enhanced.
Improved competitiveness of the rail sector, combined with increased capacity,
will help it to take on an increased share of transport demand, thereby
contributing to reduce traffic congestion and CO2 emissions. Citizens'
health and wellbeing will also be positively affected thanks to reduced noise
pollution from rail.
2.5.        Subsidiarity
2.5.1.     Legal
basis
The EU's right to act in this area is set
out in Article 187 of the Treaty on the Functioning of the European Union,
which allows for the setting up of joint undertakings or any other structure
necessary for the efficient execution of Union research, technological
development and demonstration programmes.
2.5.2.     Necessity
and EU added value
Levels of rail R&I funding have
historically been low, with investments suffering from fragmentation and
inefficiencies, due to differences in national programmes. The pooling and
coordination of R&I efforts at EU level stands a better chance of success
given the transnational nature of the infrastructure and technologies to be
developed in support of the SERA, and the need to achieve a sufficient mass of
resources. Action at EU level will help to rationalise research programmes and
ensure interoperability of the systems developed. This standardisation will
open a wider market and promote competition. 
3.           Objectives 
The general objective is to better align EU
rail R&I efforts to support the completion of the SERA, while accelerating
the market take-up of innovative solutions, thereby increasing the
competitiveness of the EU rail sector, vis-à-vis both other transport modes and
foreign competitors. 
More specifically, the initiative will seek
to:
·                        
Foster focused, coordinated and long-term
investment in EU rail R&I;
·                        
Increase the leverage effect of EU rail R&I funding;

·                        
Establish sustained networks and knowledge
exchange between diverse stakeholders;
·                        
Mitigate risks linked to innovation;
·                        
Increase the operational performance and
cost-effectiveness of rail R&I.
4.           Policy
options
Since R&I activities supporting the
rail industry are foreseen under H2020, the options considered for implementing
rail R&I activities include:
·      the continuation of the Collaborative Research (CR) model
applicable under 7th Framework Programme while integrating H2020 improvements,
such as simplified monitoring arrangements and more emphasis on demonstration
(baseline option);
·      The establishment of a contractual PPP (cPPP), entailing a
flexible contractual agreement between the Commission and private partners to
work towards a common programme based on a roadmap drawn up by the latter,
using standard collaborative research and innovation projects. 
·      The establishment of an institutional PPP (iPPP), entailing
the creation of a dedicated administrative structure for coordinating
rail R&I, in the form of a Union body under Article 187 TFEU, thereby
providing a framework for public and private players to work together and take
joint decisions. 
·      The coordination of R&I activities by the European Railway
Agency (ERA), entailing a modification of the Agency's founding Regulation
to enable it to undertake R&I activities next to its role as a regulatory
authority.
5.           Assessing
the impacts 
5.1.        General
approach to the assessment of impacts
The analysis covers exclusively the impact
of the type of structure set up to implement rail R&I activities and
therefore focuses primarily on the following input
impacts:
·      Focus and coordination of research efforts 
·      Leverage of EU rail R&I funding 
·      Broad stakeholder participation and sustained networks 
·      Mitigation of innovation risks 
·      Operational performance and cost-effectiveness
5.2.        Summary
of impacts
Under CR, the changes foreseen under
H2020 will lead to simpler and more coherent participation rules, increasing
the accessibility and attractiveness of programmes, facilitating access to
specific expertise, and enabling successful applicants to get working faster.
There will be more emphasis on innovation and close-to-market activities and a
shift to bi-annual work programmes will enable enhanced continuity. However, projects financed are likely to remain at lower technology readiness
levels and the synchronicity and coherence of projects will
be hindered by individual calls. Ad-hoc project-level participation will limit
the possibility of involving the full value chain of stakeholders and of
building sustained networks of cooperation. The lack of
a clear intellectual property rights framework for multiple projects and the absence of firm industry commitment mean the leverage of EU
funds will remain similar to current levels. 
A cPPP would facilitate the setting
of clear objectives, a focus on a limited number of research sectors and coordination
across several research themes. The work programme would be aligned to industry
needs, containing detailed intellectual property rules, and including
demonstration activities, favourable to strong market uptake. However, given the bottom-up approach and the absence
of co-governance arrangements with the Commission,
R&I priorities would be less geared towards EU policy goals. Pre-determined industry commitments may ensure increased leverage
but this is not guaranteed as legal commitments are limited to single projects.
The system of individual calls could hinder the synchronicity of projects and
the involvement of actors from the full rail value chain. 
Under an iPPP, the coordination,
programming and execution of rail R&I activities would be the
responsibility of a single, dedicated administrative structure, ensuring more
continuity and less fragmentation of R&I efforts. The development of a
long-term strategy, in close cooperation with all market players, will ensure
that R&I projects support the competitiveness of the rail sector, while the
Commission's leading role will ensure the alignment of the R&I agenda with
SERA objectives. The stable nature of the iPPP, the clear definition of
intellectual property rules, and the firm commitment from the EU will give
confidence to public and private partners, thus stimulating higher investment
levels. Legally-binding commitments from industry to match EU funds will ensure
a direct leverage effect at least 30% higher than other options. As the
conditions for participation could be managed in a flexible and transparent
manner, the iPPP would be able to ensure broad stakeholder participation and a
targeted approach towards SMEs. 
Putting ERA in charge of R&I
coordination would ensure that the long-term strategy is in line with EU policy
goals, although it could overly restrict it to standardisation and
interoperability issues given ERA's core mandate and lack of commercial
expertise. The existence of a dedicated structure, with strong technical
expertise and established networks, would ensure strong leadership and
coordination. Nevertheless, given the absence of formal commitments from
industry the direct leverage effect is likely to be relatively low. More
importantly, the combination of ERA's role as a regulatory authority with a
role of R&I coordination and management could pose a severe conflict of
interest. Also, it is uncertain that ERA would have sufficient resources to
manage the substantial budget for rail R&I activities. 
In terms of cost-effectiveness, although an
iPPP would cost marginally more than other options overall, the fact that
industry commits to covering half of administrative costs, means operating an
iPPP is in fact 17% to 35% less costly for the Commission than other options.
6.           Comparing
the options
The following table summarises the
assessment of the different policy options. 
 Parameters || Baseline || cPPP || iPPP || ERA 
 Focus and coordination || Long-term strategy || = || + || + || + 
 Relevance to EU || = || = || + || = 
 Coordination || = || + || ++ || ++ 
 Leverage of EU rail R&I funding || Direct leverage (private co-funding) || 1.5 || =/+ 1.5 to 2 || ++ at least 2 || 1.5 
 Firm commitment || = || + || ++ || = 
 Broad participation and sustained networks || Representation of the full value chain || = || = || + || = 
 Sustained partnerships || = || + || ++ || = 
 Mitigation of innovation risks || Relevance to industry and Technological readiness levels || = || ++ || + || - 
 Intellectual property protection || = || + || ++ || - 
 Operational performance || Set-up time || No start-up delay || - 9-12 months || -- 2 years including legislative procedure || -- 3 years including legislative procedure 
 Success rates || 20% || + 20-30% || ++ 30-40% || = 20% 
 Average time-to-grant || 250 || + 210 || + 160-240 || = 250 
 Cost-effectiveness || Annual equivalent cost to Commission || EUR 4.7 million || + EUR 4.9 million || ++ EUR 3.2 million || ++/-- EUR 3.8 million 
 Economic, social and environmental outcomes || = || + || ++ || = 
Legend: =              :
baseline or equivalent to the baseline
+ to ++   : low to high improvement compared to the
baseline
- to - -     : low to high worsening compared to the
baseline
Based on the assessment and the results of
the public consultation, the iPPP option emerges as the most appropriate option
to achieve the stated objectives, despite the longer delays required to
establish its structure.
6.1.1.     Governance
structure
The following principles will be taken into
account when developing the governance structure of the future iPPP:
·                        
Strong link with EU policy: The EU should retain an important role in the iPPP to ensure
R&I activities are aligned to EU policy goals. 
·                        
Broad stakeholder participation: Membership should be open to all actors of the rail sector to
ensure a systems approach to innovation, integrating all components of the rail
value chain. 
·                        
Expertise:
Scientific and advisory bodies should be set up to provide relevant technical
expertise to the iPPP. Also, given its extensive expertise on interoperability
issues and integration of the railway system, ERA must be involved in the work
of the iPPP. 
6.1.2.     Budget
Current industry estimates of rail R&I
needs range from EUR 800 million to EUR 1 billion. The EU would cover 50% of
this cost, putting its contribution at around EUR 450 million, to come from the
H2020 budget. 
Industrial partners will contribute the
remaining 50%, through in cash and in kind contributions. They will also
contribute on a 50/50 basis to all administrative costs.
It is estimated that the future structure
would require roughly 20 full-time staff and that administrative costs would
account for roughly 3% of operational expenditure. 
7.           Monitoring
and evaluation
The future monitoring and evaluation system
will cover the legality and regularity of transactions carried out by the new
structure, as well as the performance of R&I activities to ensure that
these contribute to the strategic work programme. This includes:
·                        
Project level and work package monitoring and
reporting on a quarterly basis, based on a concise
set of reliable key performance indicators defined by
the Executive Director and validated by the Administrative Board.
·                        
Programme level monitoring and reporting, based on project and work package data, and including the
monitoring of the quality of deliverables against a set of satisfaction
criteria; the monitoring of project management to verify its overall quality
and the compliance with the strategic work programme. 
Evaluations of the implementation of the
Regulation, to be carried out by the Commission
every three years from the start of the activities of the iPPP and at least one
year before expiry term of the iPPP, aimed at assessing whether the partnership
in its current setup has been efficient and effective.
[1]               COM/2011/0144 final