POLICY
Europe’s economic future requires smart, sustainable and fully interconnected transport, energy and digital networks. They are a necessary condition for the completion of the European single market. They will also help meet the EU’s sustainable growth objectives outlined in the Europe 2020 Strategy and the EU’s ambitious “20-20-20” objectives in the area of energy and climate policy16.
While the market is expected to play a major role in delivering the required infrastructures through appropriate investment and pricing mechanisms, without proper public intervention (including from the EU budget) some investments in infrastructure will not take place or will be delayed far beyond the 2020 deadline.
In the energy sector, in 2010 the Commission defined priority corridors for the transport of electricity (four), gas (three) and oil. It is estimated that about €200 billion of investment is needed for gas pipelines and power grids by 2020. €100 billion of this total investment should be delivered by the market unaided, whereas the other €100 billion will require public action to source and leverage the necessary private capital.
In the transport sector, infrastructure has to be planned in a way that maximises positive impact on economic growth and minimises negative impact on the environment. Transport infrastructure has developed unevenly in the eastern and western parts of the EU, which need to be brought together. Europe needs a pan European ‘core network’ with corridors, carrying freight and passenger traffic with high efficiency and low emissions, making extensive use of existing infrastructure, completing missing links and alleviating bottlenecks and using more efficient services in multimodal combinations. This core network will be supported by the Connecting Europe facility and complemented by a comprehensive network of national infrastructures (which can be supported by the EU’s structural funds). The core network will be established using a pan European planning methodology. Beyond maintenance of existing assets, the comprehensive network would be based on the current TEN-T and encompass existing and planned infrastructure in Member States. The cost of EU infrastructure development to match the demand for transport has been estimated at over €1.5 trillion for 2010-2030. The completion of the TEN-T network requires about €500 billion by 2020, of which €250 billion would be for the removal of the main bottlenecks.
Digital networks, both physical and service-based, are key enablers for smart growth. As part of the Digital Agenda, every European should have access to basic broadband by 2013 and fast and ultra fast broadband by 2020. In September 2010, the Commission outlined the steps it and Member States can take to help trigger the €180 to €270 billion of investment required to bring fast broadband to all households by 2020. Focused public intervention is necessary to stimulate private investment where the market case is weak. As Europe modernises, common architectures for digital services will support increasingly mobile citizens, enable the emergence of the digital single market, stimulate growth of cross-border services, and to reduce transactions costs for enterprises, in particular SMEs in search of growth opportunities beyond their home markets.

INSTRUMENTS
Within the heading regrouping all actions supporting economic, social and territorial cohesion, the Commission is proposing to create a Connecting Europe Facility to promote the completion of the “transport core network”, the “energy priority corridors” and the digital infrastructure that the EU needs for its future sustainable competitiveness. It will support infrastructures with a European and Single Market dimension, targeting EU support on priority networks that must be implemented by 2020 and where European action is most warranted. Given the increasing complexity of networks, the effective co-ordination which will minimise the costs for all citizens can only be achieved at the European level.
Furthermore, the task is to build an environment conducive to private investment and develop instruments that will be attractive vehicles for specialised infrastructure investors. Member States and the European Union must set the conditions to stimulate private investment and must also step-up their own efforts despite, and because of the current financial difficulties facing all public authorities. To be most effective, such vehicles need to be multi-sector and multi-country to maximise diversification and thereby reduce risk. This can only be achieved at the European level and on the basis of well-defined corridors and targeted areas of investment. Attracting savings to long term, growth enhancing investments will stimulate the economy, create jobs, boost consumption and support the goals agreed by all as part of the Europe 2020 strategy.
The Connecting Europe Facility will support pan European projects where a coordinated and optimised approach will reduce the collective costs or address the issue of uneven returns. Furthermore, through the joint establishment of financial instruments, it will provide tools for attracting private sector funds from both within and beyond the EU. Project financing will thereby complement and enhance the use of EU funds. The ‘Connecting Europe’ facility will also exploit synergies in hard infrastructure (for example by realising jointly large transport and energy cross-border links) and by deploying smart information technologies in transport and energy infrastructure.

IMPLEMENTATION
The Infrastructures Facility will have a single fund of €40 billion for the period 2014-2020. Inside this amount, specific funding will be allocated for the energy, transport and digital networks. The Facility will be centrally managed by the Commission with the support of an executive agency (such as the current TEN-T Executive agency) and financial intermediaries. The actual technical implementation of projects on the ground (e.g. procurement and tendering) will be done by the project promoters. The Facility will be complemented by an additional €10 billion ring fenced for related transport infrastructures investments inside the Cohesion Fund.
Depending on the sectors, the geographical location and the type of projects, different co-financing rates will apply, balancing both the need to maximise leverage and to significantly accelerate the project’s implementation. Maximum rates of co-financing will be modulated based on a cost-benefit analysis of each project, availability of budget resources and the need to maximise the leverage of EU funding. For the three sectors, the impact of the applicable co-financing rate heavily depends on the economic/development status of the concerned countries17. As regards energy specifically, the European Economic Recovery Plan (EERP) has also demonstrated that a higher co-financing rate was necessary to trigger projects increasing security of supply18.
The Connecting Europe Facility will combine market based instruments and EU direct support in order to optimise the impact of financing. The high leverage effects of innovative financial instruments (e.g. which could be as high as up to 1:25 for project bonds) and the successful absorption of direct EU support (as experienced in the EERP or TEN-T programme) will contribute significantly to mitigating risks and to facilitating access to capital for the huge investment needs.
Key priority network needs covering all of Europe have been identified by the Commission in the revised TEN-T guidelines (to be adopted in September 2011), in the Energy Infrastructure package (COM(2010) 677) endorsed by the European Council on 4 February 2011 and in the Digital Agenda for Europe (COM (2010) 245) respectively.
A proposed list of the links to be funded is presented in annex.
PROPOSED BUDGET ALLOCATION FOR 2014-2020
All figures in constant 2011 prices
Connecting Europe Facility €40 bn
of which
•Energy €9.1 bn
•Transport €21.7 bn
•ICT/Digital €9.2 bn
Amounts earmarked in Cohesion Fund for transport infrastructures €10 bn
Total €50 bn

16) 20% reduction in greenhouse gas emissions, 20% share of renewable energy in EU final energy consumption and 20% improvement in energy efficiency by 2020.
17) For transport projects, the co-financing rates will vary across modes depending on the availability of project financing. Higher co-financing rates will be envisaged for cross-border projects. In convergence regions, the co-financing rates will be based on the co-financing rates for investments provided under the new regulations for the Cohesion and Structural Funds.
18) Based on the experience with the European Economic Recovery Programme, it is estimated that typically up to 30% of co-financing may be necessary to trigger the final investment decision and bring the difficult cross-border projects on track. In case a project is not commercially viable but aims at increasing security of supply or ending isolation of some Member States, the required rate of co-financing could even be higher (up to 80%).