The joint venture RB Rail AS, which is responsible for the centralized coordination of the project and the certification of the railway line in all three Baltic states, has carried out a high-level, principles-based fiscal analysis. It reflects the actual costs of Rail Baltica for Estonia, Latvia, and Lithuania, taking into account tax returns during the construction period. The analysis is based on the latest project cost estimates, as well as on the findings of studies by the Bank of Latvia (2026) and the Estonian research centre CentAR (2023) on the impact of the Rail Baltica project on national economies during construction.
The main conclusion, based on a conservative estimate, is that from every euro invested in Rail Baltica construction, 19 to 21 cents return to the state budget in taxes, namely in the form of value added tax (VAT), personal income tax, and state social insurance contributions. In reality, the return may be even higher, as the calculation does not include employee spending in the local economy.
The analysis models three financing scenarios
In the conservative scenario, if the Rail Baltica project were to receive only 1.5 times the amount of CEF funding secured so far from the next EU multiannual budget, and all remaining costs were covered by the states from their own budgets, the final costs would amount to approximately 22% for Estonia, 21% for Latvia, and 36% for Lithuania of the total project costs.
In the mixed scenario, which is considered the most likely, project implementation would take place not only using CEF funding – all three countries plan to attract additional resources from other sources in order to reduce the burden on taxpayers and state budgets. Estonia, for example, would use funds from the EU Recovery Facility and revenues from emissions trading. Latvia could potentially use a public-private partnership model for the implementation of a specific section of the route. Meanwhile, Lithuania would evaluate a combination of several funding sources. If these solutions were implemented, the actual national contributions, or net costs, during the construction period could decrease to approximately 7% for Estonia, 4% for Latvia, and 13% for Lithuania of the total project costs.
In the optimistic scenario, if the EU were to cover 85% of the total project costs, as originally planned, all three countries could achieve a net benefit, as direct tax revenues would exceed national contributions during the construction period. This means that, maintaining the originally planned financing split (15% for the Baltic states and 85% for the EU), Estonia, Latvia, and Lithuania would not only avoid financing construction from their own resources but would even gain additional revenue for their state budgets. However, such a scenario is unlikely, as not all costs are considered eligible within EU fund project frameworks.
It is estimated that tax returns across all three countries could be similar – approximately 19–21 cents per euro. The main factor influencing final costs would be the financing structure: the greater the share of costs covered by EU funds, private partners, or other external financing sources, the lower the burden on the state budget during construction.
“Rail Baltica is a project of three countries, and it also requires a three-country perspective on project financing mechanisms. This analysis, although based on assumptions, provides that – with a unified methodology and comparable results confirming that the project is fiscally viable under all three scenarios,” said Marko Kivila, Chairman of the Management Board of RB Rail AS. “Net costs are the amount that a state actually has to cover from its own budget after deducting EU and other funding sources, as well as the recovered taxes from investments made during construction. All three countries now have a common and well-founded set of facts for further discussions.”
“The estimates of this analysis are important because they show that project implementation is not only ‘gigantic’ costs and a burden on the budget without any return, but in the optimistic scenario provides an immediate return and an increase in budget revenues. Such a shared understanding is essential for discussions both on the next multiannual financial framework and on how each country uses the financing instruments available to it,” said Matīss Paegle, Chairman of the Supervisory Board of RB Rail AS. “Taking tax returns into account, the project financing corresponds to or only slightly exceeds the originally estimated 15% burden against the 85% EU contribution.”
What the analysis includes and does not include
The analysis covers only the construction phase of the project and compares each country’s contributions with projected tax revenues under three financing scenarios. It does not include railway operation and maintenance costs, nor the procurement of rolling stock.
In the case of Latvia, the use of a public-private partnership (PPP) model for a specific section of the route is considered as one of the scenarios. The analysis includes the tax benefits associated with this solution during construction, but does not calculate subsequent payments to the private partner during the operational period. It is important to note that, according to Latvian legislation, such a model is permissible only if it is more economically advantageous than traditional public procurement, thereby ensuring the protection of state interests.
The Rail Baltica cost-benefit analysis (2024) provided estimates of the project’s long-term benefits: faster and more environmentally friendly transport, closer trade links, and economic growth in the Baltic region. This analysis, in turn, seeks to highlight the project’s economic return already during the construction phase – an aspect that has so far been less explored.
How the data were calculated
Total construction costs were divided into 12 work categories, including earthworks, track construction, signalling, electrification, station construction, and others. Each category was analysed separately, taking into account its impact on the local economy. Tax parameters are based on legislation, as well as calculations of the share of VAT that returns to the state budget. For validation of the results, the main reference sources used were studies by the Bank of Latvia (2026) and CentAR (2024) on the economic impact of the Rail Baltica project during construction.
About Rail Baltica
Rail Baltica is one of the largest high-speed rail projects in Europe and is part of the Trans-European Transport Network. It aims to improve connectivity, strengthen regional security and support economic growth in the Baltic states. The new railway will link Estonia, Latvia and Lithuania with Poland and, indirectly, with Finland, as well as with the broader European rail network.
Rail Baltica will be fully electrified with a standard gauge of 1435 mm and it will be equipped with ERTMS (European Rail Traffic Management System). It has been designed to meet European standards. With a design speed of 249 km/h, Rail Baltica will reduce travel times between the Baltic states and major European cities by more than half. It will serve as a modern infrastructure for passenger, freight and military mobility, promoting accessibility and facilitating business, tourism and cultural exchange. Rail Baltica will help establish the Baltics as a key link in European trade and cooperation.
For further information:
Signe Nīgale
Head of Communication and International Relations Department
RB Rail AS
Phone number: +371 29116146
Email: signe.nigale@railbaltica.org