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December 22, 2009

Rail must build on Copenhagen success

Written by 
THE 119 world leaders attending the United Nations’ COP15 climate change conference in Copenhagen last month had yet to make any pronouncements as this issue of IRJ went to press. However, as transport accounts for 23% of global CO2 emissions, it is sure to feature in the final declaration. Rail transport, being the only good boy, amongst the different modes, has done an excellent job in promoting rail as the only green mode, but the question is whether this momentum can be maintained.
 
As we report this month, the International Union of Railways (UIC) joined forces with the United Nations Environment Programme and the World Wildlife Fund to run a symbolic rail trip from Kyoto, Japan, via Russia and Brussels, to Copenhagen.
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The purpose of the journey was to witness some of the effects of climate change in Siberia, to promote rail's green credentials, and to take the UIC's Global Rail Position Paper - which advocates a major shift from air and road to rail - to the summit.

The Train to Copenhagen project was an excellent idea which hopefully will have done a lot to raise awareness of the role rail can play in tackling transport CO2 emissions. As German Rail's CEO Mr Rüdiger Grube points out, the rail industry must show that it is environmentally-friendly and repeat the message continuously. There now needs to be a concerted effort to keep the momentum going. The Train to Copenhagen is just a start on a long road to promote the environmental benefits of rail transport.

Even if the campaign can be maintained it will be for nought if rail fails to achieve a major increase in market share. Unfortunately, while there are pockets of excellence where rail is winning traffic from other modes, there are still too many areas where rail is failing to make an impact.

First let's look at the areas where rail is performing well. North American freight railways have been highly successful in winning traffic and making a profit, and now enjoy healthy market shares.

High-speed rail is an unfolding success story, and new services generally cause serious damage to competing airlines forcing them to make dramatic cuts to the number of flights they operate, or in some cases to withdraw from the market completely.

Good urban rail transport is also demonstrating its ability to get commuters to leave their cars at home and take the train or tram to work. The International Association of Public Transport (UITP) has set itself the goal of doubling public transport's market share by 2025, and some cities have even higher targets.

All too often it is rare to find rail succeeding in all sectors of the market in one country or region. Contrast rail's success in freight in North America with its virtual absence in regional and intercity passenger. President Obama's bold initiative to develop intercity passenger rail services is to be commended, but it will take an enormous effort and a huge long-term investment commitment for passenger rail to play a meaningful role.

In Europe, the reverse is true. Passenger rail is generally thriving with good levels of investment paying off in terms of winning new business. Even so, there are problems in Eastern Europe resulting from serious underinvestment, and in France where investment in regional services is patchy, and conventional long-distance services are in crisis.

However, European railfreight is not really making any significant impression on market share, and changes in the structure of the industry could jeopardise its future. Measures by the European Union designed to open the railfreight market to competition with the overall objective of driving up rail's market share were successful initially.

New private operators entered the market in many parts of Europe and introduced on-rail competition for the first time. The effect was generally positive for rail as a mode, with incumbents forced to improve the quality of their services, and customers given a real choice for the first time.

Unfortunately, a series of aggressive mergers and takeovers by the big state-owned national players has led to the demise of many private operators leaving the private sector with just 7% of the European railfreight market. If the trend continues, Europe will end up with a handful of state-owned operators competing with one another.

Lord Tony Berkeley, president of the European Rail Freight Association, believes no one player in a normally-functioning market should have a market share of more than 30%. "We won't get growth without competition, and the monopolisation of the industry that is now occurring will ultimately kill it," Berkeley says. His solution is wide-scale privatisation.

Ask any manager from a state-owned railway who his competitors are, and he will point to other modes. While this is certainly true, nothing concentrates the mind more than having a competitor on the next track who can potentially offer the same service but perhaps at a lower price or with a better quality.

Incumbent railways may benefit from swallowing up their competitors, but rail transport as a whole will lose out if it reverts to the monopolistic ways of the past and overall traffic and market share declines. Rail can only play a role in reducing CO2 emission if it wins traffic from other modes, and it can only do that by being vibrant and competitive.

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