EUROPEAN COMMISSION Brussels, 12.10.2020 C(2020) 6899 final PUBLIC VERSION This document is made available for information purposes only. Subject: State Aid SA.57886 (2020/N) – Sweden Environmental compensation for rail freight transport Madam, 1. PROCEDURE (1) By electronic notification dated 1 July 2020, the Swedish authorities notified the Commission, in accordance with Article 108(3) of the Treaty on the Functioning of the European Union (TFEU)1, of their intention to prolong an aid scheme that was first approved by the Commission in 2018 (“the 2018 Decision”)2. On 16 July 2020 the Commission sent a request for information and received a reply from Sweden on 7 August 2020. The notification is registered under case number SA.57886. 2. DESCRIPTION OF THE MEASURE 2.1. Objective and beneficiaries (2) The objective of the measure is to strengthen the competitive position of rail and thereby encourage the transfer of freight transport from road to rail by supporting rail as the more environmentally friendly mode of transport. (3) The beneficiaries are natural or legal persons who have the right to operate or organise transport services on the Swedish rail network. 1 OJ L 138 of 30.04.2004 2 Commission Decision of 20.04.2018 in case SA.49749, OJ C 198, 08.06.2018, p. 1. Utrikesminister Ann Linde Utrikesdepartementet Arvfurstens palats Gustav Adolfs torg 1 SE -103 23 Stockholm Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111 (4) A detailed description of the objective and the beneficiaries of the aid is set out in recitals (3), (4) and (6) to (8) of the 2018 Decision. 2.2. Legal basis (5) The national legal basis for the aid is the ordinance on environmental compensation for rail freight transport to be adopted by the Government on the basis of Chapter 8, Section 7 of the Instrument of Government3. 2.3. Duration and budget of the prolonged scheme (6) The initial scheme was approved with a duration of two years until 31 December 2019. (7) The Swedish authorities indicate that, following an assessment of the initial scheme, the measure obtained the approval of the Swedish Transport Administration as an essential element in the consolidation of the modal shift from road to rail in the Swedish territory. With the present notification Sweden plans to provide financial support for an additional six months of operations from 1 July 2020 to 31 December 2020 with the possibility for operators to submit applications until 15 February 20214. According to the Swedish authorities, implementation of the proposed extension of the initial scheme will only start when the approval of the Commission has been obtained. (8) The initial scheme had allocated a maximum total budget of SEK 563 million (ca. EUR 56 million at the time of notification). For the prolonged scheme, the Swedish authorities have allocated a total budget of SEK 200 million (ca. EUR 19 million) for the duration of the notified prolongation. 2.4. Eligible costs and aid amount (9) The eligible costs correspond to the share of external costs that rail transport makes it possible to avoid compared with competing modes of transport. (10) Sweden has calculated the eligible costs based on the methodology presented in the Commission Handbook on the external costs of transport (“the Handbook”)5. Based on the Handbook, in the case of Sweden the eligible costs (i.e. the difference between external costs caused by rail and external costs by road) are EUR 17.57 per 1 000 tonne-kilometres, as shown in Table 1 below. Table 1: External costs of goods by road and rail, values for Sweden, price level 2016, EUR per 1 000 tkm (Source: European Commission. Handbook on the external costs of transport. Version 2019) 3 The Swedish Code of Statutes (Svensk författningsssamling), SFS number: 1974:152, reprinted 2003:593. 4 See recital 31 of the 2018 Decision. 5 European Commission. Handbook on the external costs of transport version 2019. Luxembourg: Publications Office of the European Union, January 2019, available at https://ec.europa.eu/transport/sites/transport/files/studies/internalisation-handbook-isbn-978-92-79- 96917-1.pdf. 2 Cost Road (HGV6 all roads) Rail (electricity and diesel) Accidents 7.12 0.21 Noise 2.77 4.15 Emissions (excl. 4.22 0.80 CO2) Climate cost (CO2) 6.74 0.16 Congestion 0.96 0 Well to Tank 1.75 0.15 (WtT) Habitat 4.37 4.88 Total 27.92 10.35 Difference compared with road (road minus rail) 17.57 (11) The Swedish authorities also submitted calculations that integrate the methodology recommended in the Handbook with updated Swedish national data (e.g. traffic situation, population, etc.) derived from a number of recent academic studies and reports prepared by the Swedish Transport Analysis Agency. Such calculations result in eligible costs amounting to EUR 26.80 per 1 000 tonne- kilometres, as shown in Table 2 below. Table 2: External costs of goods by road and rail, average urban and rural average, Sweden, 2019, EUR per 1 000 tkm (EUR 1 = SEK 10), based on Swedish data and calculations Cost Road (lorry with trailer) Rail (electricity and diesel) Accidents 1.28 0.15 Noise 1.59 0.68 Emissions (excl. 0.61 0.11 CO2) Climate cost (CO2) 25.18 0.92 Congestion - - Total 28.66 1.86 Difference compared with road (road minus rail) 26.80 (12) Further, the Swedish Transport Administration has estimated that the total cost of rail transport in Sweden is EUR 15 per 1 000 tonne-kilometres. Sweden intends to grant State aid for reducing external costs with the following maximum aid intensities: 30% of the total cost of rail transport and up to 50% of the eligible costs. (13) Accordingly, 30 % of the total cost of rail transport is EUR 4.50 per 1 000 tonne- kilometres. 50 % of eligible costs is EUR 8.79 per 1 000 tonne-kilometres based on the Handbook (see Table 1 above) and EUR 13.40 per 1 000 tonne-kilometres based on the amended Swedish calculations (see Table 2 above). 6 Heavy Goods Vehicle. 3 (14) According to Sweden, the total rail freight transport activity was 22 579 million tonne-kilometres in 2018 (equivalent to 11 290 million tonne-kilometres per half year). It follows that the planned budget for the six-month prolongation at issue, which is SEK 200 million (ca. EUR 19 million), allows scope for aid of up to SEK 17.7 (ca. EUR 1.77) per 1 000 tonne-kilometres. This represents 12% of the total costs of rail freight transport per 1 000 tonne-kilometres (EUR 15) and 10% (EUR 17.57 based on the Handbook) or 7% (EUR 26.80 based on Sweden’s revised calculations) of the eligible costs per 1 000 tonne-kilometres. (15) The method to calculate the aid is set out in detail in recitals (24) to (26) of the 2018 Decision and remains unchanged. 2.5. Further provisions (16) All further provisions set out in the 2018 Decision remain unaltered. In particular, the rules on cumulation as set out in recital (29) of the 2018 Decision, the procedure for the granting of the aid as set out in recitals (30) to (31) of the 2018 Decision, and the repayment mechanism as set out in in recitals (32) to (33) of the 2018 Decision will continue to apply. 3. ASSESSMENT OF THE MEASURE 3.1. Existence of aid (17) No modifications are introduced by the notified measure altering the Commission’s prior conclusion7 that the measure constitutes State aid within the meaning of Article 107(1) TFEU. 3.2. Lawfulness of the aid (18) By notifying the measure before implementing it, the Swedish authorities have fulfilled their obligations under Article 108(3) TFEU. 3.3. Compatibility of the aid (19) In the 2018 Decision, the Commission had assessed and approved the initial aid scheme on the basis of Article 93 TFEU and on the basis of Section 6 of the 8 Community guidelines on State aid for railway undertakings (“Railway Guidelines”), in particular its subsection 6.3 concerning aid for reducing external costs9. (20) Article 93 TFEU remains applicable as the legal basis for establishing the compatibility of aid for the coordination of freight transport. (21) As no material changes other than those indicated below have been introduced to the initial scheme10, the compatibility assessment of the notified prolongation will not depart from the initial assessment in the 2018 Decision11, on the basis of the 7 See in particular the reasoning under Section 3.1 of the 2018 Decision. 8 OJ C 184 of 22.7.2008, p. 13. 9 See in particular see Section 3.3.2 of the 2018 Decision. 10 See recitals (6) and (7) above. 11 See sections 3.3.1-3.3.5 of the 2018 Decision. 4 guidance on the application of Article 93 TFEU provided in Section 6 of the Railway Guidelines. (22) The Commission notes the following: - firstly, the existing scheme’s duration with the eligible costs and the corresponding budget appropriations is the only alteration concerned by the present decision12; and - secondly, the maximum aid intensities concerning the notified prolongation continue to stay well below the maximum aid intensities pursuant to point 107 of the Railway Guidelines. 3.4. Existence of external cost savings (23) According to point 103 of the Railway Guidelines, the eligible costs as regards aid for reducing external costs are the part of the external costs which rail transport makes it possible to avoid compared with competing transport modes. (24) Point 104 of the Railway Guidelines states that Member States may put in place a time-limited compensation scheme for the use of railway infrastructure “for the demonstrably unpaid environmental, accident and infrastructure costs of competing transport modes in so far as these costs exceed the equivalent costs of rail”.