The European Commission (EC) has approved a €1.7bn ($1.8bn) state aid package proposed by Germany to support the country’s rail freight industry with a five-year funding scheme. European state aid laws only allow such packages if they are targeted at growing key areas, such as the Green economy.

The scheme will see single and group wagon transport operators supported by the German Government to encourage the modal shift to rail and help the industry to remain competitive against road transport alternatives. 

Margrethe Vestager, executive vice-president of competition policy at the EC, said: “This €1.7 billion 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. 

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

According to the EC’s assessment, the funding is permitted under the EU law because it is beneficial to the environment and mobility, necessary to the objective of supporting the modal shift, and proportionate to the goals listed. 

The Commission said that as the aid is limited to reducing competitive disadvantages between rail freight and road transport, the funding would not have “undue negative effects on competition and trade in the EU.” 

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Under Germany’s scheme, a maximum of €320m will be provided to operators each year, with all single wagon loads operators eligible and wagon group transport operators eligible for journeys of no more than 300km and operated by short block trains with up to 15 wagons. 

The EC’s approval highlighted the fact that these operators can struggle with the high costs associated with switching between single wagons and a lack of economies of scale for smaller short block trains travelling over shorter distances. 

Approval for the state aid package continues the period of high investment into Germany’s rail infrastructure, following national rail operator DB’s unveiling of its €16.4bn infrastructure programme for 2024 and previous aid approved by the EU in 2024 and 2023.