EIB financial support to sustainable urban mobility projects

According to the Treaty of the European Union, the EU has formal responsibility for Regional Policy but, in accordance with the subsidiarity principle, not for Urban Policy. Legislation on urban development therefore remains the responsibility of local administrations (towns, cities and regions).

The urban dimension is nevertheless incorpor – ated at EU level through the application of the Cohesion Policy including; the definition of a territorial agenda and the approval at Ministerial Level of guiding principles to promote sustainable urban development through an integrated approach and the creation of financial engineering tools. The European Investment Bank (EIB) supports and fosters this principle following the notion of the Leipzig Charter (2007), in order to make European cities better places to live and work in, by providing innovative and flexible financial instruments to both public and private actors investing in the urban sector.

For many years, the EIB has been a major player in the urban field, supporting projects on environmental and social cohesion grounds. It has also contributed to capital expenditure in urban areas in the context of municipal loans of different types, directed to either a specific sector (i.e. social housing) or a multiplicity of sectors (i.e. combining rehabilitation of heritage, public spaces and infrastructure), as well as mobility projects contributing to a reduction of CO2 emissions and thus combating Climate Change. Over the last five years, EIB urban lending in aggregate has grown to some €8 billion/year in 2009, of which €5.3 billion has been devoted to 22 urban public transport operations (including rolling stock). These amounts, which do not include some specific sectors (namely water and sewage, health and education, utilities and energy), are expected to grow significantly, in particular as new EU policies are implemented and local authority access to financing is enhanced (in particular in non-EU member states).

Urban mobility policy

In 2007, the European Commission produced a Green Paper on Urban Transport to tackle the increase in private traffic in urban areas, which has generated significantly negative social, economic and environmental externalities. These externalities are estimated to cause economic losses amounting to some €100 billion per year (1% of EU GDP). The Green Paper underlines the major role that technical innovation should play to address transport challenges. As explained in a recent communication, new technologies are to provide new and more comfortable services to passengers, increase safety and security, and reduce problematic environmental impacts. In this respect, ‘soft infrastructures’ can optimise the use of the network and improve safety, whilst innovative vehicle technology can lower emissions, reduce oil dependency and increase comfort. Following this Green Paper, the Commission presented in 2009 an Action Plan setting out the framework for EU initiatives in the area of urban mobility. It proposes 20 short- and medium-term practical actions to be launched by 2012. These actions are centred on six themes: promoting integrated policies; focusing on citizens; greening urban transport; strengthening funding; sharing experience and knowledge and optimising urban mobility.

It is thus of utmost importance to implement urban mobility plans designed to trigger a modal change from private cars to more sustainable modes. Available actions are usually oriented towards enhancing supply, quality, flexibility and punctuality of collective public transport. However, territorial and urban planning arises as a key tool to manage transport demand in metropolitan areas. In this sense, an integrated approach to spatial and urban development can constitute a basic instrument for facilitating the use of public transport, as well as for reserving exclusive lanes and areas for pedestrians and cyclists. Non-motorised transport has already proved successful in many European cities; however, further use of these modes should be popularised across Europe. To do so, municipalities should improve cycling networks, accessibility for pedestrians and their interchange with the public transport network.

Urban mobility planning

The EIB considers that an integrated urban mobility plan should fulfil the following characteristics:

• It has a medium/long-term view
• It is coherent and integrated with other planning tools, such as the integrated urban plan  It contains in a comprehensive manner all transport components
• There is an investment and implementation plan as well as a revision strategy.

According to the third above point, five main components should be properly and comprehensively included in such a plan:

• Public collective transport: extension of the transport network and improvement of the transport services to foster the modal shift from private to public collective transport, including construction of new infrastructures, acquisition of new rolling stock for the expansion and/or the substitution of the existing fleet, implementation of technological systems (signalling, telecommunications, ticketing, etc.)
• Street/road network: articulation with the public transport, hierarchy of the network and characteristics of the lanes, extension and redevelopment of the current network, establishment of green zones (pedestrian and restrictive access areas), promotion of multi-modality
• Parking: location and capacity of current and future parking lots, organisation of the parking regime on streets, application of fees, special facilities around public transport axes  Non-motorised transport: extension of bikelanes, inter-modality with public transport, pedestrian paths, enhancement of safety for cyclist and pedestrians
• Freight movement: organisation of freight distribution, regulation of timetables.

Urban mobility projects financed by the EIB EIB focus on urban mobility projects is summarised as follows:

Urban public transport

In the spirit of the above mentioned policy approach, the promotion of public transport is intensively supported by the Bank. Projects can be broadly separated into four groups: public transport infrastructure, mobile elements (rolling stock), roads/street and other urban traffic infrastructure and technologies.

Within the first category, the extension and construction of new metros and light rails, tramways and of other dedicated public transport facilities (such as bus rapid transit systems or high occupancy vehicles schemes), as well as the rehabilitation of public transport infrastructure, is eligible. Renovation/upgrading of rolling stock (trolleybuses, trams, metro trains, suburban rail vehicles) is eligible provided these investments are proven (by means of a longterm fleet evolution plan) to be more advantageous than the acquisition of new units.

Regarding other mobile elements, the acquisition of new assets will be preferably financed by the Bank, including specifically rolling stock for public transport under the recently created facility, with the Bank providing advantageous long-term financing to urban/interurban transport operators and other fleet owners (such as local administrations) replacing or expanding their bus fleets or other road vehicle fleets for other urban services (taxi fleets, car-leasing fleets, garbage collectors or cleaning trucks) with new vehicles outperforming existing environmental regulations.

Urban transport infrastructure

The rehabilitation and reshaping of streets, urban roads, tunnels and bridges, with special attention to safety and energy efficiency improvements (such as the use of LED technology in traffic management and street lighting) is a key component of urban renewal. The extension of the road/street network and the construction/rehabilitation of tunnels and bridges will be eligible only in convergence areas, unless environmentally justified. The construction of city bypasses and the realisation of specific infrastructure targeting road safety (such as roundabouts) or tunnels would also be possible in non-convergence areas, if environmental or road safety advantages justify the investment.

The Bank will actively promote the financing of systems and infrastructure to limit private traffic and stimulate more sustainable mobility and accessibility for pedestrians and cyclists. These schemes include the reorganisation and reconstruction of urban streets and spaces, cycle and pedestrian paths, the creation of bikesharing systems, the establishment of urban green zones (pedestrian and restrictive access areas), the implementation of demand management measures (such as area licensing, congestion charging and road pricing). Complementary interventions for sustainable mobility, (i.e. traffic management, information systems and other Intelligent Transport Systems), the promotion of car sharing and car pooling, the construction of high-occupancyvehicle lanes, the development of inter-modal and logistic centres and other investments for mobility management will continue to be eligible. Moreover, the Bank will participate in the financing of the construction of fuelling facilities for clean vehicles.

With regard to public car parking spaces (e.g. multi-storey car parks), in line with the Green Paper on Urban Transport, car parking spaces will be eligible if they encourage modal interchange to/from public transport (e.g. Park & Ride facilities) or when they are integrated in an urban parking policy with differentiated fees consistent with integrated mobility plans.

Energy efficiency and renewable energy in the urban environment

Within cities, EIB financing is also directed at investments supporting improved energy efficiency and developing renewable energy sources, notably in buildings and urban transport. The Bank supports investments within the following areas:

• Urban transport: to increase EE and integrate RE sources – e.g. high energy efficiency buses, including hybrid buses, electrical or lowcarbon propulsion systems; to facilitate the introduction of electric cars, and to introduce new more energy-efficient solutions to improve freight logistics in urban areas.
• Local infrastructure: to include smart grids and information technology infrastructure for energy efficiency, energy efficient urban equipment including street/traffic lights, inter-modal transport facilities, and refuelling infrastructure for alternative fuel vehicles.

Financing and supporting publicprivate partnership initiatives

Apart from providing conventional loans, the new Statute of the EIB annexed to the Lisbon Treaty allows the Bank to take equity participations more easily and to increase its value added by taking more risk. In the urban sector, an increase in the number of Project Finance (PF) and Public Private Partnership (PPP) operations is anticipated, affecting in particular urban public transport. PF transactions rely primarily on cash flows generated by the project for lending security. PPPs cover a broad spectrum of projects in which the private sector may be required to build, operate and finance assets providing public services. PPPs are characterised by long-term and complex contractual arrangements for risk transfer between the public and private sectors. PPP structures include classical Spanish and French public service concessions and the UK Private Finance Initiative model, as well as the creation of Special Purpose Vehicles for financing the acquisition of rolling stock under leasing structures.

A very common PPP structure is Design, Build, Finance and Operate for infrastructure projects, such as tunnels/bridges, public transport, schools, sewage treatment plants and hospitals. Within the context of this paper, the most common examples deal with the implementation and operation of underground and tramway systems. Apart from typical PPP advantages and drawbacks, this kind of project has the following particular characteristics:

• The public administration will have to fund some kind of deficit (usually 100% of infrastructure and x% of operation, depending on operator’s efficiency)
• Therefore, a ‘technical fee’ must be agreed and traffic risks must be shared between the public and private partners
• In order to facilitate tariff integration, the creation of a metropolitan public transport authority, if not yet existing, is frequently required.

In summary, the public authorities and the private concession-holder must have a clear grasp of the project scope, both in terms of it purpose (public service) and its duration (long-term).

Technical assistance activities

The EIB is also providing Technical Advisory Cooperation (TAC), notably in the context of the external mandates. The main objectives of a TAC action are:

• To ensure compliance with international standards and regulations
• To increase the promoter’s technical capacity or governance skills
• To carry out feasibility studies
• To ensure both a proper project implementation and a good quality in monitoring/reporting tasks
• To help local authorities in the definition of global policies.

A particular case of TAC results from a recently agreed facility (called European Local Energy Assistance, ELENA) with the European Commission which was signed in December 2009. In order to accelerate the implementation of investments for projects aiming at the increase in energy efficiency and use of renewable sources in the urban sector, specifically in buildings and transport, ELENA finances necessary project development services. ELENA will be funded by the European Commission through the Intelligent Energy-Europe II Programme. From the operations identified thus far, leverage between the grants coming from this facility and total investments of at least 150 is anticipated, which implies mobilisation of a minimum of €2 billion of investments.

In addition, the EIB and the European Commission, with other international financial institutions, provide TAC focused on:

• Helping the beneficiary countries (namely new members of the EU and Croatia) to prepare sound infrastructure projects for grant financing under Structural Funds  Helping local authorities to exploit financial engineering mechanisms to support more effectively investment in sustainable urban development
• Providing support for the preparation of bankable projects in different areas outside the EU (the Mediterranean, Eastern Partner Countries, Latin America, and the African, Caribbean and Pacific States).

In conclusion, the EIB is committed to partnership with all the stakeholders involved in sustainable urban mobility projects, whether PPP or more conventional undertakings. It makes sure that its wide experience and considerable financial resources are used in the best possible way to enhance the quality of life of Europe’s citizens.

About the Author

Mario Aymerich studied Civil Engineering and post-graduate/ doctorate studies in Transport & Urban Planning at the Polytechnic Universities of Catalunya and Madrid. He was a Public Servant at the Metropolitan Council and the Municipality of Barcelona between 1982 and 1988. Between 1988 and 1998 he was Engineering Executive in a private multi-national Intelligent Transport Systems leading company. He was a part-time professor at UPC and UPM (Transport Planning & Economics between 1983 and 1995). He is also an author of more than 40 technical articles and co-author of five books. Mr. Aymerich joined the EIB in January 1999 and has worked in multi-professional teams covering technical, environmental, economic and financial assessments of large-scale infrastructure projects in the transport and urban sectors (including both public, private and PPP financed schemes) in many different countries. In his current position he deals with particular interest on risk analysis concerning implementation of complex infrastructure projects (public transport, urban regeneration) and social dimension of urban investments (including social housing, integrated sustainable mobility and energy efficiency operations). He is also responsible for several technical assistance initiatives of the EIB in the urban field (ELENA, Medinas 2030).