For the Commission, rail is a key sector: You are the centre piece of our decarbonisation strategy. We want to see more people travelling by train and more companies choosing to move their goods by rail.  I have faith in the sector, I fully support you: but I am relying on you to keep your side of the bargain” – Violeta Bulc, Commissioner of Transport, addressing the industry at the Innotrans Conference, September 2016.

The European Union has long promoted rail as a means to reduce the impact of transport on climate change. The EU has invested a lot of time and money into their goal of shifting more freight from trucks onto trains (a goal often referred to as “modal shift”). It’s important to know what’s been done in order to better understand what is still needed.

The history of Europe can be seen in the railway systems of the 28 Member State of the EU. Each country with a railway system has its own national infrastructure, its ‘own’ railway company, and its own legislation covering how and when such infrastructure can be used. For example, the width of tracks is not the same across Europe, and even when the track width is the same, a change of locomotive is sometimes required when crossing borders. The network was not built with the intention of being interoperable or forming part of a single European market. The EU has made continuous attempts to change this; restructuring the market to make it more legally harmonious and removing bottlenecks to international rail freight. This is no small task and has come at great cost for little returns so far: rail freight’s market share has remained flat since the early 1990s.

Between 2001 and 2016 there have been four major EU legislative initiatives (known as ‘railway packages’) that aim to revitalise and improve the performance of rail. These packages have opened up the railway market to competition, supported collaboration between infrastructure managers across national borders, and standardised some technology/safety requirements to make crossing borders less burdensome.

In 2001 the first such railway package promoted collaboration between national infrastructure managers in order to improve international rail freight. It also split all major state rail monopolies in two, with an “infrastructure manager” on the one hand and a “railway operator” on the other. A European Railway Agency was set up in 2004 with the task of ensuring that the European market becomes more interoperable in terms of technology used.

The second package opened up rail freight to competition in 2007 with the intention of injecting some life into the market with the expectation that new operators would attract new business. A further initiative for freight came in 2010 with the EU producing a new vision for international rail freight in a regulation establishing Rail Freight Corridors. Nine key routes for rail freight were identified and then better collaboration was supported in order for freight to move faster, construction works to be coordinated, and logistic complexity stripped back for the customer. This was complemented by defining a management structure for each corridor. There’s insufficient data available from the corridors to know whether they’re performing well and it’s still early days in terms of their establishment – all nine corridors have only been operational as of November 2015. However, the average speed on border crossings for the first corridor is now at 50 km/h (average speeds on international routes can often be as low as 18 km/h). This provides a sign that they are a concept worth building upon at EU level.

Rail currently only transports 18% of inland freight in Europe (“inland freight” excludes freight delivered by sea shipping and airplane). The European Commission’s ‘white paper’ in 2011 called for 30% of all freight over 300 km to be transported by rail (or barge) by 2030, and 50% of such freight to be on cleaner modes of transport by 2050. The targets of 30% and 50% aren’t binding, merely communicating the Commission’s ambition for rail.

Little progress has been made. The market realities and the political goals aren’t aligned. And road has increased its tonne kilometres over the past 20 years while rail has seen no aggregate growth. This is mainly due to road’s ability to provide door-to-door services, to be at the customer’s beck and call, and that it essentially requires no planning in terms of access to infrastructure. Furthermore, the fuel tax rebates and access to free road infrastructure make road aggressively cheap in comparison to rail. Road often wins on cost, user-friendliness, reliability, and speed. It loses in terms of climate performance but this, unfortunately, persuades few companies to rely more on trains.

Management of rail infrastructure is in the hands of national infrastructure managers. EU rules regulate how track access charges are defined. These charges are a means of tolling trains per km travelled. National authorities often charge freight trains more than passenger trains, and sometimes disproportionately so. Furthermore, passenger trains get track priority, which leaves freight to wait in line. These two market realities make rail expensive and unreliable. Both practices are legal under EU law. The German government has decided to subsidise track access charges for 2018 with the intention of assessing the impact on rail freight demand. All eyes are on Germany to see if this extreme measure impacts freight volumes.

The EU had intended to unbundle infrastructure managers and railway operators in the fourth railway package. This would have meant that a holding company, such as Deutsche Bahn in Germany or SNCF in France, would not have been able to have both the infrastructure manager and the train operator within their ownership. This proposition was opposed aggressively by many industry lobbyists and EU member states. In the end, both businesses can remain under the ownership of a holding company but new laws are in place to ensure that unfavourable treatment does not exist (in order to ensure fair competition for new rail operators). This task is left to railway regulators at national level.

There is a significant lack of EU oversight when it comes to respecting European railway law at national level. The day-to-day surveillance of compliance with EU law is left to the national regulators. There is some uncertainty as to whether such regulators have the resources to adequately ensure adherence to EU law. For example, the regulator in Germany, Bundesnetzagentur, also regulates electricity, gas, telecommunications, and postal services. In France, it took the authorities a long time to punish SNCF for a blatantly anti-competitive practice – SNCF was booking the slots that its competitors had reserved in order to hinder their business and maintain near-total market control. There is little communication between such national regulators though, which is a problem if we consider that 50% of rail freight is crossborder. A European body may be the best answer to such problems.

In addition to all of this policy, the EU invests billions of euro into railway infrastructure every year. About half of the EU budget that’s reserved for transport is earmarked for rail investment. Smarter investment is the topic of a ‘lesson’ covered on this website.

The above description of the EU’s history of policy regarding rail can seem complex at first glance but this is a sign of things to come. Rail is complex. The sector requires a myriad of changes in order to improve the competitive position of rail in modern freight transport. The EU has always had the right intentions for rail and understands the complexities of the sector. It will be interesting to see whether the political will remains for rail given the fact that the sector delivers a slow return on investment – and the road sector is improving in terms of environmental performance and the faster adoption of technological advances. There remains a case for rail. But it requires an understanding of how to make it happen and what it can really achieve.