1ICEA, 11 th April 2010 European transport policy – a railway perspective ICEA, 11 th May 2010...

1ICEA, 11th April 2010

European transport policy – a railway

perspective

ICEA, 11th May 2010

Jeremy Drew


Background


Growth in freight transport follows or even exceeds GDP – though passenger transport now decoupled from GDP

Source: European Commission, Energy and Traffic in Figures (2009)

Traffic volume and GDP – EU 27


Railways have small but significant share of European transport in both freight and passenger transport

Road RailSea/IW Air Other

Freight km 45.9%10.8

% 40.2% 0.1%

3.0% Pipeline

s

Passenger km

83.2% (74.8% private) 6.3% 0.6% 8.6%

1.4% Tram/ metro

• The decline in rail’s modal share reversed since about 2002

• However, rail is still losing modal share in some countries

• Rail is not meeting its potential anywhere

Modal shares (EU) 2008


Some EU railways receive considerable public sector support – but much is compensation for meeting state’s requirements In 2001, public sector contributions to EU15 railways €38.3

billion(1):– Compensation to operators for meeting public service

obligations - €11.8 billion. – Capital investment - €9.7 billion.– Infrastructure maintenance and operations - €8.7 billion.– Staff and pensions - €2.7 billion.– Debt service - €1.6 billion.– Restructuring - €1.0 billion.

Total public financing to railways in 2006 €46.5 billion(2):– For EU15 €44.3 billion – For EU12 €2.2 billion

Some railways - particularly in EU12 - do not even receive full compensation for their losses on services which the state obliges them to provide. (1) Source: NERA for Commission 2004

(2) Source: European Commission RMMS 2008


EU transport policy affecting railways


Commission’s planned new White Paper could lead to new legislation

European Commission (DGTREN) published Communication on “Sustainable Future for Transport” in June 2009

Consultation ended September 2009

Commission plans new Transport White Paper in December 2010

White Paper will set out transport policy for next 10 years


Achievements in railways since 2000

Communication asserts that the objectives of the 2001 White Paper largely met – in fact:

– Significant progress only in achieving rail liberalisation objectives

– Broader policy objectives only met to very limited extent

Decoupling of overall freight growth from GDP - not achieved

Increasing rail’s share of freight – fell in many countries

Efficient and fair pricing between modes - not achieved

Channeling revenue from charges to build infrastructure on competing modes, especially rail - not achieved


Three pillars of rail policy in 2000 White Paper- only one implemented

1

In the 2001 White Paper, the European railwaypolicy rested on 3 ‘pillars’

Market Opening Competition

Fair Competition between modes

Modern railInfrastructure

The original architecture of European transport and rail policy (as set out in the “2001 White Paper”)…

QUALITY PRODUCTIVITY EFFICIENCY

• Competition between rail providers is developing. BUT • without fair competition between modes and adequate infrastructure, intra-modal competition is having mixed results.

3

Nine years on: weak points of current European transport policy…

Market Opening

CompetitionFair Competition between modes Modern rail

Infrastructure

QUALITY

PRODUCTIVITY

EFFICIEN

CY

One “almost” straight “pillar” and

two neglected “pillars”!


Liberalisation should be part of a package of measures Liberalisation of rail markets key pillar of EU rail policy:

– All rail freight since 2006 – International passenger services since January 2010– Domestic passenger services soon?

As in other sectors liberalisation can improve efficiency and quality of rail

For liberalisation, need non-discriminatory access to:

– Infrastructure

– Other essential facilities and rail services

Need strong regulatory bodies to enforce this

BUT liberalisation must be part of a package to include:

– Fair competition between modes

– Adequate funding for infrastructure and public services


Freight: small revival in Western Europe - but decline continues in Central Europe Rail freight market share trend in EU27 and White

Paper target

Source:ETIF 2007/2008, Eurostat, CER own calculation

EU15 and EU10 Rail Freight Market Share

14.9%

16%

24.5%

29.7%

0%

10%

20%

30%

40%

50%

60%

1970 1980 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

EU15 EU10

35% target

24.5% EU10 rail freight market share in 2010 instead of the 35% target of White Paper.


Romania - Rail share of freight market (in tonne-km) has dropped to 18%

18%

77%

70%

14%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1980 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Rail Road IWW Pipeline


2009 Communication from Commission


Climate change bigger issue than in 2000 - but Communication does not adequately address this Communication recognises problem of

climate change But it does not consider radical solutions It relies too much on technological

solutions and sees standards as key driver of technological change

Role of prices in driving technological change is not recognised

Communication discusses “smart prices” (internalising external costs) - but inevitable need for price increases is not mentioned


Infrastructure financing and access charges Communication supports the need for greater infrastructure capacity and greater self-financing of investment

Greater self-financing is both inevitable and desirable

Higher rail infrastructure access charges could reduce rail market share unless there is:– greater differentiation in track access charges

based on segmented markets – difficult in practice

– higher access charges apply to all modes Communication silent on issue of public sector

funding of infrastructure


Internalisation of external costs

Communication supports internalisation of external costs – a long standing Commission policy - but:

– current legislation prevents charging for external costs of heavy goods vehicles

– rail is lowest emissions mode – yet perversely it is only mode for which charging for external costs allowed in EU legislation (Emissions Trading Scheme, rail specific legislation)

EU policy on internalisation is sound – but must be reflected in legislation and put into practice


Recast of First Railway Package


Recast of the First Railway Package

First Railway Package consisted of 3 directives for reforming railway sector

Likely to be adopted by Commission in July 2010 If domestic passenger liberalisation added, may take even

longer Will then take another 2 years to pass through Parliament

and Council of Ministers Will involve:

– codification of 3 directives in the First Railway Package

– amending the content of the text

– some detailed proposals being considered across a wide range of issues


Recast likely to have many elements

Recast elements?

Infra financing +

MACs

Rail Related Services

Network Statement

RegulatoryBody

Track access charges

RU/IM liability

NationalPass. Market

Opening?

Financial architecture


Rail related services

These include services provided by depots etc

Market for these services has evolved with increasingly open rail market:

– no longer provided mainly by infrastructure manager

– often provided by railway undertaking potentially to a competitor

Key issue of providing access to “essential facilities”

But important not to stifle commercial development


Regulatory bodies

Regulatory Bodies (RBs) needed to ensure non-discriminatory access

Commission considers RBs must:

– be vested with comparable competences and powers

– monitor competition in the market

– be able to independently and efficiently correct undesirable developments in the rail markets

– have budget to employ sufficient competent staff

– publish regular reports about their decisions creating transparency

But RBs must also:

– not impair functioning market processes by interfering in business (ex-post regulation)

– co-operate with competition authorities


Internalisation of external costs


But: external costs of transport for the society have also risen dramatically

Air Pollution Climate Change

Congestion Noise


+25%

Source: European Environment Agency, 2007

Development of Greenhouse Gas emissions of different sectors (1990 –

2010)

Development of Greenhouse Gas emissions in the transport sector

(1990 – 2010)

Transport is the only sector where CO2 emissions are still rising


Low prices for road transport have led to significant increase in traffic volume and thus CO2 emissions

Gfkm (Freight Transport activity)

Transport sector Greenhouse Gas Emissions

Source: European Commission, 2007

Road is perceived as the cheapest transport mode:

• Fuel prices largely stable (corrected for inflation)

• Productivity gains due to modern technology and logistics concepts

• Major costs are externalized to society

If prices are not adjusted, traffic volumes will continue to grow uncontrollably

Source: European Topic Centre for Air and Climate Change, 2008.


The current Eurovignette directive is being revisedCommission proposal (July 2008):

• Enables Member States to impose differentiated km based charges for external costs

• Limited to HGVs • Limited to congestion, air pollution and noise• Excludes CO2 emissions and accidents • Sets caps (maximum values) for charges• Extends scope to all roads rather than limiting

charges to TEN-Ts • Requires that revenue from charges be

earmarked for improving sustainability of transport


Source: Internalisation of External Costs on Transport, IWW Karlsruhe 2009

Internalisation of external costs will change modal split of freight – most for long distance traffic


Internal costs (€/lorry km)

(paid by users)

External costs (€/lorry km)

(paid by society)

Wages

Energy/Fuel

Rolling Stock

Administration

Other1)

TOTAL

Infrastructure

Air pollution

Climate change

Accidents

Congestion

Noise

Other2)

TOTAL

0,39

0,27

0,21

0,18

0,21

1,25

0,20

0

0,04

4

0,12

2

0,05

5

0,09

0

0,00

4

0,07

8

0,51

5

Source: Internalisation of External Costs on Transport, IWW Karlsruhe 2009

1) E. g. insurance, taxes, etc.2) E. g. land use, water and soil pollution, etc.

External costs need to be internalised following the “polluter pays” principle


EU institutions


Overview – main EU decision-making institutions


Points to note

• right of initiative• checking implementation

But• unaccountable • untransparent – not even detailed organigram of DGs available

EU institutions – European Commission

ca. 21,000 staffDG MOVE ca.1000 staff on transport


Points to note / challenges

• The main focus of the new treaty in terms of institutional reform aimed at the Council of Ministers (very vertical structure)• ever-changing make-up dependent on national governments politics• even less transparent than Commission

EU institutions – Council of Ministers

Council secretariat – ca. 2400 staff. 2 EU summits per year are held there as of 2004. Contains meeting facilities for Councils, working groups etc. Rail sector: Land Transport working group, once a week; Transport Attaches represent their national interest


Points to note

• MEPs work often depends on lobbyists due to the complexity and pressure of their work

EU institutions – European Parliament

1979: first Parliament elected by universal suffrage 2004: 732 elected members of 25 countries 2007: 785 MEPs from 27 countries

biggest elected Institution of the world steadily increasing influence on all EU activities including power

to block and amend initiatives Location in Strasbourg (officially) with administration in Luxembourg and day-to-day work in Brussels


BACK UP


Source: Externe Kostens des Verkehrs in Deutschland – INFRAS, March 2007

Average external costs for freight transport in Germany (2005)

Example: freight traffic in Germany – external costs of road four times as high as rail

Road Rail Air Inland Waterways

Accidents

Noise

Air pollution

Climate Change

Nature and Landscape

Up- and downstream processes

Additional costs in urban environments


Road does not cover its costs – government revenue hardly covers infrastructure cost

0

20

40

60

80

100

120

140

160

Fuel Taxes 33

Road tolls 16

Other Taxes 5

Infrastructure 51

Accidents 30

Congestion 24

Noise 18

Air pollution 16

CO2 Emissions 5

EU 27 – HGV Revenues and Costs in billion Euro

Total Revenue: 54

Total costs: 144

Source: Are Trucks taking their toll? (CE Delft, 2009)

?Price Gap

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