THE European Commission (EC) has approved a grant scheme introduced by the German government to support rail freight operators handling single wagonload traffic, which it says will help the sector to remain competitive and maintain the environmental performance of rail.

The German government is making a total of €1.7bn available under the five-year scheme running until 2029, in the form of direct grants. The maximum annual grant budget is €320m.

The scheme is intended to meet part of the high operating costs of single wagonload traffic, where individual wagons or groups of wagons from different customers are marshalled together to form one train.

It also covers group movements where block trains of up to 15 wagons keep the same composition from origin to destination over a maximum distance of 300km.

The EC notes that both these types of freight transport struggle to achieve economic viability. Single wagonload entails high costs due to its complex and multi-stage nature resulting from the need to shunt wagons, while short block trains do not benefit from economies of scale due to their lower number of wagons and the short distances they travel.

Assessing the scheme under European Union (EU) state aid rules, the EC found that it is beneficial for the environment and transport, as it supports rail freight services that are less polluting than road while reducing road congestion.

The EC says the scheme is necessary and appropriate to achieving its objective of supporting and maintaining modal shift from road to rail freight services with high operating costs. The scheme is also proportionate and limited to the minimum necessary, with grant aid being below the maximum thresholds set out in the EC’s 2008 Guidelines on State Aid for Railway Undertakings.

The aid is limited to reducing the competitive disadvantages faced by rail freight when compared with road. The EC therefore concludes that the German grant scheme will not have undue negative effects on competition and trade in the EU.

“This €1.7bn scheme will enable Germany to support important segments of rail freight transport, which is a more environmental-friendly mode of freight transport compared to road,” says Ms Margrethe Vestager, EC executive vice-president in charge of competition policy.

“It will help Germany meet its Green Deal objectives, while reducing the burden of rising costs for transport operators, to the benefit of freight customers.”