Audit: Rail Baltic feasibility questionable

A recent audit of European megaprojects by the European Court of Auditors finds that Estonia, Latvia and Lithuania do not have enough people for the Rail Baltic project to be feasible. Photo: Rail Baltic Estonia

A recent audit of European megaprojects by the European Court of Auditors finds that Estonia, Latvia and Lithuania do not have enough people for the Rail Baltic project to be feasible.

ECA member Oscar Henrics said he doubts Rail Baltic’s goods and passenger volumes are economically sound. The auditor said that the line’s forecast annual 4.6 million passengers fall well short of the 9 million passengers considered the breakeven point for such megaprojects.

“There are 3.6 million people living up to 60 minutes away from Rail Baltic stops, which is the lowest figure for projects of this magnitude. It is a major risk in terms of the project’s feasibility,” Henrics said.

Latvians four years behind

With the inclusion of the section of the Rail Baltic railroad between the Lithuanian border and Warsaw, the number of people living inside an hour’s commute from Rail Baltic stops grows to 8.3 million people – still short of the estimated breakeven point. In summary, the project’s economic sustainability remains questionable for the European Court of Auditors.

The ECA also points out that the project has become much more expensive over time. The initial cost of the project was put at €4.648 billion. The latest forecast talks of €7 billion, up 51 percent of €2.352 billion from the initial estimate.

So far, the European Union has allocated €789 million for the project of which €80 million has been paid out.

The European Court of Auditors notes that Estonia, Latvia and Lithuania have not decided how to manage railway infrastructure after its completion, even though the project’s implementing decision required an agreement by June 30, 2019. The Baltics also do not have an agreement in place for sharing Rail Baltic revenue.

The ECA believes Rail Baltic could be completed before 2030, even though Latvia is four years behind on the project. Estonia’s southern neighbors took too long to start project activities, while land transfers take a long time due to the red tape involved. The auditors warn that the project dragging on could jeopardize EU funding.

Rail Baltic’s economic feasibility depends on how it manages to utilize its cargo and passenger transport potential. A cost-benefit analysis from 2017 suggests goods transport volume of nearly 15 million tons in 2030 and up to 25 million tons by 2055. Roughly one-third of it is believed to be Baltic volume, a third from Finland and a third from transit traffic.

ECA recommendations

“Based on current maritime transport volumes in the Baltic region, we find that a maximum of 30 million tons of goods could be diverted to the railroad annually. Goods are currently not moved between Estonia, Latvia and Lithuania on the railroad on the north-south axis and for that to change, rail transport needs to be able to compete with road and maritime transport. This requires effective links and corresponding measures, such as road taxes, to achieve more equal conditions for different modes of transport,” the European audit office finds.

The ECA also finds that a functional railroad management model is needed one part of which would be marketing activity to popularize rail traffic.

The auditors highlight as positive the fact that Rail Baltic was the only one of the eight megaprojects it audited that will probably comply with TEN-T requirements in full by 2030.

The ECA audited European Commission participation in eight major infrastructure projects’ planning, implementation and supervision, including the Rail Baltic railroad, Lyon-Torino cross-border rail link, the Brenner Base Tunnel between Austria and Italy, Fehmarn Belt Fixed Link between Denmark and Germany, Basque Y high-speed rail link in France, Seine-Nord Europe Canal in France and Belgium, the A1 highway in Romania and the E59 railroad in Poland.