Towards a common market for rail services: the next steps Symposium Competition & Regulation in the Rail Sector Berlin, 28 January 2010 Dr. Johannes Ludewig Executive Director of the Community of European Railway and Infrastructure Companies (CER) 1 CER
No clear connection between rail liberalisation and growth rates Rail Liberalisation Index -78,4% -18,7% -11,5% No data 17,0% -39,1% 12,8% 19,6% 8,6% 1,0% -30,1% 28,1% 119,2% 87,6% 99,6% 16,6% -20,5% -27,9% -12,0% 28,3% 61,9% -10,3% Growth in Rail Freight volume since 1995 53,7% 98,3% 62,6% 19,9% 132,9% Source: Rail Liberalisation Index 2007 (IBM 2008) Energy and Transport in Figures 2009 2 CER
Snapshot: SWEDEN, an example of best implementation of White Paper principles, leading to rail growth. Passenger: +16% (EU15: +9%) Freight: +21% (EU15: +17%) Passenger: 9% (EU15: +7%) Freight: 36% (EU15: +15%) Passenger: 6% Freight: 26% SE: 85k /track-km/yr EU15: 186k /track-km/yr * Source: RMMS 2009, European Commission * Source: RMMS 2009, European Commission Pass: 0,50 /tr-k EU15: 1.95train-km Freight: 0,48 /tr-k EU15: 2,09 /train-km * Source: ITF 2008, OECD Market opening, started in 1995, developed in freight Intense investments in infrastructure in the 1990 s Lowest access charges in Europe, going up in freight SWEDEN: an example of RIGHT White Paper implementation - low access charges & high investments in infrastructure, starting in 1990, - attracting new entrants into the market since 1995 (1): Public financing = Infrastructure investments + PSO compensation (annual average per track-km); (2) Access charges: estimate based on average between 2005 and 2008 3 CER
Snapshot: ROMANIA, an example that market opening / competition ALONE is not leading very far. Passenger: -13% (EU25: +8%) Freight: -7% (EU25: +18%) Passenger: 9% (EU10: +7%) Freight: 19% (EU10: +28%) Passenger: 1% Freight: 34% RO: 0.03k /track-km/yr EU25: 116k /track-km/yr * Source: RMMS 2009, European Commission * Source: RMMS 2009, European Commission Pass: 2,49 /tr-k EU25: 2.09train-km Freight: 3,87 /tr-k EU25: 3,60 /train-km * Source: ITF 2008, OECD Market opening for freight in 2001 Lowest investment level in infrastructure in Europe Access charges ABOVE EU average AND going up!!! ROMANIA: With high access charges and no investment in infrastructure, market opening was destructive, driving block train prices down and undermining the already limited ability of the rail system to finance itself. Rail modal share dropped! (1): Public financing = Infrastructure investments + PSO compensation (annual average per track-km); (2) Access charges: estimate based on average between 2005 and 2008 4 CER
Competition and separation alone will not miraculously increase railway market share 90% Example: freight transport market share development in Romania since introduction of competition/separation Rail Road IWW Pipeline 80% 70% 77% Separation Competition 70% 60% 50% 40% 30% 20% 18% 10% 14% 0% 1980 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: ETIF 2009 5 CER
Snapshot: POLAND, implementing the First Railway Package will not be sufficient Passenger: +6% (EU25: +8%) Freight: +4% (EU25: +18%) Passenger: 7% (EU10: +7%) Freight: 26% (EU10: +28%) Passenger: 10% Freight: 20% PL: 4k /track-km/yr EU25: 116k /track-km/yr * Source: RMMS 2009, European Commission * Source: RMMS 2009, European Commission Pass: 1,27 /tr-k EU25: 2.09train-km Freight: 5,18 /tr-k EU25: 3,60 /train-km * Source: ITF 2008, OECD One of the highest penetrations of new entrants in Europe Railway financing is extremely low in Poland Access charges for freight are extremely high. POLAND: In spite of a good penetration of new entrants, rail performance remains fragile in Poland. Rail modal share is dropping. Infrastructure charges for freight are too high compared to road. And rail financing is one of the lowest in Europe. (1): Public financing = Infrastructure investments + PSO compensation (annual average per track-km); (2) Access charges: estimate based on average between 2005 and 2008 6 CER
Snapshot: BELGIUM, good performance in the context of high rail financing. Passenger: +20% (EU15: +9%) Freight: +13% (EU15: +17%) Passenger: 7% (EU15: +7%) Freight: 14% (EU15: +15%) Passenger: 0% Freight: 5% BE: 432k /track-km/yr EU15: 186k /track-km/yr * Source: RMMS 2009, European Commission * Source: RMMS 2009, European Commission Pass: 3,08 /tr-k EU15: 1.95train-km Freight: 1,87 /tr-k EU15: 2,09 /train-km * Source: ITF 2008, OECD Competition starting in freight. 3rd-highest intensity of rail financing in Europe Access charges for passenger trains are high. BELGIUM: In spite of low penetration of new entrants, moderate infrastructure charges in freight and high rail financing have allowed freight to grow. Passenger traffic grew as well in spite of high infrastructure charges (for EU15 standard). (1): Public financing = Infrastructure investments + PSO compensation (annual average per track-km); (2) Access charges: estimate based on average between 2005 and 2008 7 CER
Snapshot: GERMANY, an example of successful White Paper implementation Passenger: +12%* (EU15: +9%) Freight: +41%* (EU15: +17%) Passenger: 8%* (EU15: +7%) Freight: 22%* (EU15: +15%) Passenger: 7%* Freight: 19%* DE: 134k /track-km/yr* EU15: 186k /track-km/yr* * Source: RMMS 2009, European Commission * Source: RMMS 2009, European Commission Pass: 3,75 /tr-k* EU15: 1.95train-km Freight: 2,47 /tr-k* EU15: 2,09 /train-km * Source: ITF 2008, OECD Market opening, started in 1995, developed most in freight Rail financing is good for EU15 standards Access charges in Germany are high for EU15 standards GERMANY: Market opening has been combined with a sustained level of rail financing (including cancellation of historic debt). LKW Maut may re-establish level playing field? (1): Public financing = Infrastructure investments + PSO compensation (annual average per track-km); (2) Access charges: estimate based on average between 2005 and 2008 8 CER
Successful functioning of the railway system Government Public Sphere MACs - Multi Annual Contracts Infrastructure Investments Railway System Infrastructure Rail Regulator Rail Access/ Access charges Road Access/ Access charges Market Sphere PSO Contracts Operator 1 Operator 2,3,, Customers Integrated company Full separation 9 CER
Elements of key importance to the rail system were foreseen in the Commission White Paper of 2001 - Decoupling transport growth from GDP growth - Market opening (competition on a level playing-field) - Modal shift (stabilisation of rail s market share within the EU on the 1998 level; for CEECs, 35% of freight) - Financing (PSO: Public Service Contracts, MAC: multi-annual infrastructure contracts) - User-pays-principle (infrastructure access charging based on usage and wear-caused) - Internalization of external costs/ Polluter-pays-principle (emission trading system, Eurovignette directive) - Rail infrastructure development (interoperability: TSIs, ERTMS, cross acceptance, dedicated freight corridors, principle of at least 50% of infrastructure development funding to be spent on rail) - Passenger rights 10 CER
How did the White Paper translate into reality? Freight market share target not met EU15 and EU10 Rail Freight Market Share 60% EU15 EU10 50% 24.5% EU10 rail freight market share in 2010 instead of the 35% target of White Paper 40% 35% Target 30% 29.7% 24.5% 20% 14.9% 16% Reality 10% No significant market share increase realised in EU 15 0% 1970 1980 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: ETIF 2007/2008, Eurostat, CER own calculation 11 CER
Next steps: Recast of the First Railway Package codification of the First Railway Package amending the content of the texts Commission talks about cleaning up ; small changes? changes would apparently touch upon: financing of infrastructure and multi annual contracts (MACs) track access charges and in particular noise related track access charges rail related services transparency of network statements role of Regulatory Bodies 12 CER
Impact of the recast on the rail system: main points Financing of infrastructure and of MACs: an issue at the heart of business! Necessity to implement the First Railway Package Article 6 of Directive 2001/14 provides for the balancing of accounts : this must be made operational in practice! CER understands this issue is addressed in the infringement procedures launched by the European Commission Rail access charges: a big problem, especially in the CEECs Comparison with road access charges: problem of the Eurovignette directive Financing of PSO contracts: a question of survival of many operators in particular in the CEECs New PSO Regulation: services ordered by public authorities must be adequately paid and this must be properly monitored 13 CER
Impact of the recast on competition Impact on rail related services Rail related services: a business activity which must remain governed by business rules access to essential facilities must be granted/ other non-essential facilities remain in the hands of business over-regulation could prevent the development of innovation Importance to retain financial incentives to develop the business The Dutch experience: CER essay by Aad Veenman, former CEO of NS Over-regulation kills business and competition! The role of Regulatory Bodies is important to secure that anti-competitive behaviours are limited However, this should not open the door to mingling in business activities 14 CER
Conclusions The White Paper approach was comprehensive and remains valid it took into account the complex reality of the railway system Infrastructure charges are not only a financial instrument, they have to take into account competition between different modes of transport Therefore, the internalisation of external costs is of key importance not only for intermodal competition, but also for higher self financing of the transport sector (recent Commission communication on the Future of Transport) Investments must reflect political priorities of the transport system Decarbonisation and modal shift 15 CER
Thank you for your attention! Johannes Ludewig CER Executive Director Tel: +32 2 213 08 71 Email: johannes.ludewig@cer.be For further information, visit our website: www.cer.be 16 CER