Analytics, Business in Europe, EU – Baltic States, Forum, Railways, Transport

InnoTrans 2012 is both a conference and exhibition (taking place in Berlin, 18 September 2012) where Siim Kallas, Vice-President and Commissioner for Transport took part with a speech devoted to Europe's railways issue, both internal and international. 

In 2010, the transport commissioner spoke at InnoTrans about the vision of a single European rail area where railways offer high-quality, safe and punctual services at competitive prices. At that time the idea was to create smooth functioning network, economically efficient, to make rail a more attractive choice and encourage people not to use private cars.

Two years later, the Commissioner acknowledged that the sector has achieved the recast of the first railway package, i.e. the very first legislative proposal that the Commission issued on transport policy. This is regarded as a very important step towards achieving that vision, which would change the way that the European rail market works. As the Commissioner said, the sector is at a junction and it provides signals for change.

The Commission will hold a conference on the future of EU rail policy in Brussels (September 24).

Need for changes

The EU railway package represents a review of EU rules on rail market access aimed to improve the financial architecture of the rail sector – by stimulating investment, improving market access conditions and reinforcing the role of national regulators.

At the same time, it is clear that much more has to be done if rail is to achieve its full potential. With goods transport, the nine international Rail Freight Corridors now being set up in Europe are an important opportunity for infrastructure managers to cooperate effectively, to create the conditions for high-quality rail freight services to run seamlessly and reliably across borders.

In some parts of Europe, rail has continued to grow despite the wider economic downturn; in others, particularly for freight, there is something close to a crisis.

It is time now to ask how we see the sector evolving and how we can achieve a single European rail market, said the Commissioner.

Reference: Press Release, SPEECH/12/612; 18 September 2012.  

Upgrade infrastructure

The Commissioner stressed the need in Europe for an efficient and innovative railway system, one with a larger role, both for freight and passengers. The EU is already putting a great deal of longer-term investment into rail as an essential element of the Trans-European Transport Network (TEN-T). The idea is to upgrade and expand infrastructure and build the missing links, particularly in cross-border services, for creating better connections in Europe. That will also help to connect the EU with neighboring countries such as Russia and Turkey, to build east-west corridors linking Europe across Siberia to the Far East.

Building infrastructure, however, will not be enough on its own; ultimately, this is about ensuring good quality service for customers, he argued.

Today, rail is a split and fragmented sector with diverging rules, standards and a history of protected national markets. These and other barriers make it difficult for newcomers to set up and compete with existing service providers.

Removing barriers to create more choice should lead to better quality – and that means punctuality, comfort and reliability. On certain important routes, for example, prices would come down with more competition.

to ensure that Europe's railways achieve their full potential will require reforms. We do not accept the rapid decline in rail's market share that can be seen in some Member States, and we need to reverse this trend.

As you know, in a few months' time the Commission will propose new legislation for EU railways dealing with interoperability and market access. We are still listening to all ideas from all sides and examining various options.

Key elements in new strategy

For rail to thrive there must be a genuine single market. This means it should be possible to build rolling stock to certain EU standards, and then certify it – just once – to run everywhere in the EU. This is a basic principle of the European single market, which celebrates its 20^th anniversary this autumn.

However, presently, the EU has a highly decentralised system, burdened by problems of interoperability coming from many different vehicle types. There are more than 11,000 different rules and standards in effect across the EU today, which hinders the development of a truly European rail area.

For example, to authorise a new locomotive to operate in a first country, would cost up to €6 million; a national recertification can cost up to €4 million. These procedures can take up to two years. “Why should expensive rolling stock be tied up in red tape for such a long time, puts the Commissioner a sort of a rhetoric question?

The EU needs to complete and apply, rapidly, the EU standards (TSIs), in order to move to a single European approval system. This will save money and give a more efficient service once the member states would improve the availability of rolling stock that can cross EU borders, and authorise vehicles and equipment to operate in several member states. It will, of course, take a great deal of technical work, added the Commissioner.

The solution, according to Commission, is to make the European Railway Agency into a 'one stop shop' that can, eventually, issue single European certificates for safety and authorisation. This would be a European 'passport' to allow rolling stock to move freely in all national rail networks, provided there is technical compatibility. The Agency would still depend heavily on national authorities to carry out much of the technical work.

Not only will this reduce costs significantly, it will also remove interoperability problems with the ERTMS management system that is so vital for ensuring rail safety and optimising performance in a seamless cross-border service. Today's complicated and costly approval procedures do not help to bring more competition into Europe's market for rail services, where one of the largest single barriers to creating a fully open market is access to rolling stock – particularly for newcomers wishing to enter the market. Without full and fair conditions for access, it is very difficult to have a flexible marketplace, added the Commissioner.

Competition in the sector

Another important issue is the domestic rail passenger market, where so far only a few countries are open to competition. As is well known, competition leads to improvements in service and efficiency; it encourages innovation and cost-efficiency. If there is no competition, there is no incentive to improve or change, particularly in the case of a monopoly or dominant operator.

Europe should have a railway market where operators have the right to provide domestic passenger services throughout the EU – instead of battling against barriers to access, network inefficiencies and market distortions.

Today, market access conditions are generally skewed in favour of the existing rail operators, particularly where they also control the railway infrastructure. Domestic passenger rail markets are still often closed to foreign and national competition, whereas rail freight markets have been fully opened to competition since 2007.

In short, there is no level playing field and no predictable business model for railway service providers to operate throughout the EU's rail network, added the Commissioner.

Since conditions are different across the EU-27, the best way forward is a mixture of open access and public service contracts – in other words, competition in the market and competition for the market; the challenge here will clearly be to strike the right balance between the two.

Market opening should also attract more private investment and generate more passengers. And that means a shift away from more polluting means of travel such as roads, onto cleaner alternatives like rail and waterways.

Offering better service

The aim of offering a better service can be achieved by encouraging newcomers to enter the sector and offer their own attractive and efficient rail operation to passengers, but also to those who are willing to try rail freight as an alternative to road.

Using public service contracts might be a good idea: these cover the vast majority of domestic passenger traffic in Europe – urban, suburban and regional services – and in a large number of member states and inter-city services as well. Under the EU law, these subsidised service contracts do not have to be awarded through open tendering.

Competitive tendering can create a strong incentive for rail to perform better. Experience in those member states which already use competitive tendering shows it will also save the taxpayer a significant amount of money and properly compensate railways for the services that they provide. They also ensure a healthy degree of innovation to improve the service offered to passengers. Hence, the Commission’s idea is to introduce mandatory tendering as a way to get more innovation and efficiency into Europe's railways.

The Commission will also define the scope and size of contracts, since national authorities now have a wide margin of discretion in identifying areas where public service obligations are imposed. And contract conditions need to stimulate enough competition so that there is an efficient transport service.

Sensitive issues

Unfortunately, the Commission does not have presently all the solutions to all the issues and problems of the transport sector. One of this e.g. is the sensitive question of the relationship between the infrastructure managers that run the network and the service operators that use it for transporting passengers or goods.

The EU-27 recognises that railways are a network; but this can only hold true if, along with proper opening of rail markets, services and infrastructure, areas such as integrated ticketing systems, passenger care and coordinated network operation are preserved and enhanced.

An important role of research and innovation for rail shall be emphasized too. EU railway manufacturers are world leaders in their market. Research and innovation are the basis for the competitive and attractive railway system of the future. So the European Commission is now considering options for further strengthening rail research in the context of the next research program.

Over more than last 10 years, the rail sector and the regulatory environment in which it operates have changed considerably. The European rail industry has made considerable efforts to improve its efficiency and put passengers and freight users at the heart of its development strategy.

The overriding aim of any EU changes is to increase rail's efficiency, punctuality and reliability. Only in this way the EU transport sector can unleash its true potential, and raise the quality of service so that rail becomes a real and attractive alternative. “That will be to the benefit of everyone: to the rail industry, to freight businesses, to all passengers”, concluded the Commissioner.