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The scheme, laid down in a Danish law of 1998, aims at partly compensating the railways for the unpaid costs of road haulage and thereby creating more equitable conditions of competition between these modes. It comes around the same time as the introduction of infrastructure charges rail companies have to pay for the use of the Danish railway infrastructure.

The underlying objective of the policy is to try and shift the transport of goods from road to rail. Since this is potentially distortive to competition the Commission examined the proposed subsidy scheme to ensure that it is compatible with EU rules.

The Commission says the Danish scheme is in keeping with its policy of trying to encourage a better distribution of goods across all traffic modes through pricing policies that attempt to charge fairly and efficiently for the costs of transport use in all modes. In this case, the subsidy for rail partly compensates for the additional external costs in terms of pollution damage repair, etc. that would be necessary if the same goods were transported by road.

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