Breaking down Europe’s ambitious targets for rail

DOUBLING high-speed rail traffic by 2030 and trebling it by 2050 were stand-out commitments in the European Union’s (EU) Sustainable and Smart Mobility Strategy announced in December. The EU is also seeking to make all scheduled collective journeys of less than 500km carbon neutral by 2030 as it pursues its Green Deal agenda, offering a potential boon for rail as the most sustainable transport mode.

The transformation for European passenger rail traffic is equivalent to a 32% increase over 2015 when 26 European railway networks were responsible for a combined 448 billion passenger-km, with high-speed traffic accounting for around a quarter of this figure.

The EU has set ambitious targets for modal shift before. Most recently the European Commission’s (EC) 2011 White Paper on Transport called for 50% of all medium-distance passenger journeys of 300km or more to use rail by 2050.

However, progress towards these targets has lagged. According to the EC, passenger trains accounted for 7.8% of all inland passenger transport in the EU-27 in 2018. Cars accounted for 82.9%, and buses and trolleybuses 9.4%. A report by Europe’s Independent Regulators’ Group-Rail released last month shows passenger rail operators from 31 European countries recorded a combined 497 billion passenger-km in 2019, equivalent to a 2.6% annual growth rate between 2015 and 2019, before the Covid-19 pandemic decimated traffic in March 2020.

Of course, the challenges confronting the rail sector to deliver this increase are significant. It is not simply a case of introducing more trains. Crossing borders remains a major problem due to interoperability issues and the availability of suitable infrastructure. Indeed, with just 7% of all European rail journeys cross-border in 2018, delivery of the Single European Rail Area is as much an aspiration now as it was in 2011 even after a decade of significant investment by member states and the EU.

“If after 10 years we have not done the work and made suitable progress, the sector will lose its reputation and credibility.”

Maurizio Castelletti

Yet with the climate emergency upping the sense of urgency among policy makers, and the Green Deal calling for a sharp reduction in transport emissions, which account for 27% of the continent’s total and rising, the pressure is now really on rail to finally deliver significant progress.

In response to the Sustainable and Smart Mobility Strategy, the commission is working on an action plan for European passenger rail. This will include the launch of 15 pilot cross-border services between various city pairs to test different operating models that could boost cross-border rail transport and promote modal shift.

Mr Maurizio Castelletti, head of unit for the Single European Rail Area at Directorate General Mobility and Transport (DG-Move) at the EC, says DG-Move is currently working with the consultants Steer to study demand for cross-border transport across all modes. This will identify where rail could conceivably increase its market share and inform development of the pilots. The full report is expected to be issued in July and Castelletti says a call for proposals for the first pilots is expected by the end of the year with the goal of launching these in the first half of 2022.

“When we have identified a connection based on demand, we will have to see if the rail infrastructure is able to deliver with the same journey times and at the same frequency,” Castelletti says. “Passengers make choices based on journey times, frequencies and the cost of the ticket. We will estimate the number of passengers which may potentially be attracted by a rail service.”

Although firm plans are yet to be defined, Castelletti says Amsterdam - Berlin is an example of such a corridor which has potential to grow traffic but is not currently adequately served by a time-competitive cross-border rail service. “If we can reduce the journey time by a couple of hours, it will be really attractive,” he says.

Castelletti says there are six barriers to the provision of these services:

• the availability of rolling stock
• Ticketing
• the capacity/train path allocation process
• discrepancies in track access charges in different member states
• lack of Public Service Obligation (PSO) contracts for cross-border services, and
• technical barriers.

The technical barriers relate to specific national rules, including language difficulties, which can discourage the development of a cross-border offer, as well as shortfalls in physical infrastructure.

The Trans-European Transport Network (TEN-T), which is split over nine corridors, is the basis for the future interoperable network. Six big ticket projects - the Lyon-Turin link, Rail Baltica, the Fehmarn Belt fixed link, connecting the Basque Y with the French high-speed network, Poland’s E59 rail line, and the Brenner Base Tunnel - are set to address key cross-border infrastructure deficiencies on the core network. Both the strategy and the 2013 TEN-T directive pledge to complete this network by 2030 and the comprehensive network by 2050.

The EC is set to launch a recast of the TEN-T Directive by the end of the year following an extensive consultation process. Mr Alberto Mazzola, executive director of the Community of European Railways and Infrastructure Companies (CER), says this is one of the most important items of upcoming legislation for CER and its members.

Mazzola says CER would like to see completion of current projects and the installation of ETCS on the core network by 2030. He says this requires completion at 10-times the rate seen in the last 20 years. Beyond 2030, he says CER would like to see a high-speed network that connects all continental European capitals and major cities. Yet financing projects to complete such a network, let alone the core TEN-T by the 2030 deadline, remains a major challenge.

The latest Connecting Europe Facility (CEF), which was provisionally agreed by the European Council and European Parliament in March, includes €25.8bn to co-fund transport projects in EU member states from 2021-2027, the long-term EU budget period. Rail is set to account for the bulk of these funds as it did in the 2016-2021 version. The EU touted the role of CEF in supporting the continent’s green and digital transition during its announcement of the programme. Transport commissioner, Ms Adina Valean, described it as “central to completing the TEN-T” network.

However, this level of funding is a drop in the ocean compared with what is required.

“The cooperative agreements are a noose around the neck of further development of cross-border rail.”

Nick Brooks

A European Court of Auditors (ECA) report published in June 2020 focused on eight megaprojects deemed essential for completion of the TEN-T, including the six big ticket rail projects. Of the €41.679bn total cost of the rail projects, the EU has pledged to cover just €6.14bn, and at the time of the audit had allocated €2.284bn. In addition, a TEN-T progress report published in August 2020 found that ERTMS trackside installation was only complete on 11% of the network at the end of 2017. The report notes that with ambitious rollout schemes announced since the end of 2017, notably in Germany, this figure is likely to improve in its next edition.

Nevertheless, many more billions of euros are required to reach anything approaching a full rollout. According to a report by Mr Matthias Ruete, the EC’s ERTMS coordinator, published in May 2020, €8.813bn is required for ERTMS trackside deployment on the core network by 2030 following a €2.125bn spend between 2015 and 2020. However, if associated infrastructure upgrades identified by infrastructure managers are considered, this figure ranges from €27.41bn as a conservative estimate to a staggering €41.115bn. Onboard retrofitting of rolling stock is expected to cost another €4.774bn.

With the latest CEF allocation in line with the previous scheme, the emphasis remains on member states to fund the bulk of the projects, raising concerns of whether network completion is feasible. Another ECA report published in 2018 concluded that EC policy at that time was inadequate to meet the 2011 White Paper objective of tripling the length of the high-speed network by 2030, which it said was unlikely to be achieved.

This report studied 5000km of high-speed projects on 10 lines and four border crossings completed in six member states between 2000 and 2017. It found that EU funding accounted for just 11% of the total construction costs of these projects. The six states received 83.5% of the total EU funding for high-speed rail capital costs during the period. A further €4.4bn was allocated for ERTMS installations on high-speed lines.

The report shows that CEF is not the only source of EU funding. Directly managed investment schemes including CEF provided €9.1bn, or 38% of the €23.7bn allocated to the six member states. Shared management funding mechanisms through the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) were responsible for the remaining €14.6bn. In addition, the European Infrastructure Bank (EIB) provided loans worth €29.7bn to support high-speed line construction.

With the provisional CEF budget set, Mazzola is urging governments to proactively seek and secure funding from all available sources. This includes the latest rounds of ERDF and CF, which together at €284bn, have the potential to provide far more funds to support rail than CEF. Crucially, €672.5bn of grants and loans available through the Covid-19 Recovery and Resilience Facility could be another importance source of funding for rail projects with several countries already allocating funds towards rail.

Mazzola says that with member states seemingly intent to follow EC recommendations to back sustainable mobility projects to reduce transport emissions and meet the objectives of the Sustainable and Smart Mobility Strategy, rail is better placed than ever to benefit. “We are confident that there will be more means than in the past,” he says.

Castelletti says DG Move’s analysis shows that rail holds a prominent position in plans for the Recovery and Resilience Facility. However, getting member states to align priority projects with the EC’s objective to boost cross-border connections, which Castelletti says have the greatest potential for growth, is a big challenge.

The ECA report notes that the lack of legal tools at the EC’s disposal means its power to enforce the completion of the TEN-T is limited. As a result, existing high-speed network infrastructure is piecemeal, tending to emphasise point-to-point domestic connections: Paris - Lyon, Madrid - Barcelona, and Milan - Rome are some of the most successful high-speed corridors, which have all but ended air traffic on these routes. But they are comparable in distance with Amsterdam - Berlin, Vienna - Munich, and Lisbon - Madrid where air continues to thrive.

Domestic projects are easier to justify to voters than cross-border schemes where the benefits are shared with other member states. However, Castelletti feels the action plan could ultimately spur the adoption of a European masterplan for infrastructure. Such a plan would align member states’ respective transport strategies and highlight the importance and potential of boosting cross-border rail connections. He says this would help member states to see the bigger picture of a truly transcontinental rail network that offers meaningful decarbonisation of transport.

“In relation to TEN-T, it will be essential for member states not only to have a strategy for rail, but to ensure that these strategies work together,” Castelletti says. “The optimum for one state is not necessarily the best for Europe, and if these investments are not coordinated in terms of characteristics and timing, they will result in bottlenecks. Take Switzerland, they have built two beautiful tunnels, but if there is insufficient capacity at the border with Italy, there is a problem for international traffic.

“This is of course very ambitious. We can define priorities, but we cannot decide how a member state spends its money. They are very, very keen to decide their own priorities. But in my view they should take a European perspective when making decisions. They might then see that some investments only make sense if they are done so in a coordinated and synchronised manner.”

TEE 2.0

A possible shift in thinking by member states to a network-wide approach is found in the growing momentum behind the revival of the Trans-Europe Express (TEE). German transport minister, Mr Andreas Scheuer, presented the idea for TEE 2.0 in September. And on May 18, transport ministers from several member states signed a letter of intent to develop the network.

TEE 2.0 foresees the development of services that connect at least three EU member states or two member states over at least 600km. TEE 2.0 trains will operate at least 160km/h on a substantial part of the route or more than 100km/h on the entire route and the latest agreement foresees the development of a regular interval timetable for the network. Four overnight routes agreed by Austrian Federal Railways (ÖBB), German Rail (DB), Swiss Federal Railways (SBB), and French National Railways (SNCF) are the first proposed TEE 2.0 services. Another letter of intent issued in March identified nearly 40 existing and possible cross-border connections.

The Platform on International Rail Passenger Transport (IRP) is working to address the challenges facing the possible revival of TEE. Formed in response to a June 4 2020 declaration of European ministers on international rail transport, the group is preparing an integrated report, which will push for the development of a European agenda for international passenger services. The report will be sent to ministers this month and will focus on four specific areas: customer experience and digitalisation; a network of international passenger services; EU Green Deal: infrastructure bottlenecks and interoperability issues; and the regulatory framework.

In parallel, a mirror group consisting of representatives from rail operators, infrastructure managers, passenger and consumer organisations, travel agents and third-party ticket vendors is working to develop common positions with IRP on related issues. The EC is also cooperating with IRP although Castelletti says not all of what is proposed is palatable to its objectives.

Instead it is hoped that the pilot projects in the EC’s action plan present the preferred operation model for a future cross-border rail network. It could also make a compelling case for government purse holders to back infrastructure projects that enhance cross-border travel and reduce transport emissions.

Castelletti says among the strategies under consideration for the pilots is standardised and reduced track access charges across borders. These could be a carrot to encourage operators to introduce new services that are commercially viable; Castelletti says that part of the reason France is a difficult market to enter is the €15 per-km track access charge for the high-speed network. This compares with €5 in Italy and €10 in Germany. Castelletti says such an agreement could be in place for two years, and if successful, could become permanent.

Although the pandemic has disrupted the rollout of the Fourth Railway Package (FRP) market pillar to introduce competitive open-access services, boosting competition is a key objective for the EC as the main enabler of additional and more attractive services. CER also backs the FRP’s objectives, according to Mazzola. Italy is regularly held up as an example of where competition between incumbent Trenitalia and NTV-Italo has resulted in an increase in the overall market share, in that case by 108% since 2012. It is hoped on track competition in Spain, which commenced last month with the launch of SNCF’s Ouigo low-cost service, will produce similar results.

However, Mr Nick Brooks, director general of the Association of New Rail Entrants (AllRail), says it was only after Italian high-speed track access charges were reduced in 2014 following intense lobbying by Italo, which was struggling to make ends meet at that time two years after its launch, that traffic really took off, resulting in an increase in overall revenue for infrastructure manager Italian Rail Network (RFI).

The TEE 2.0 letter of intent includes a pledge for transport ministries to identify operators potentially interested in running such a network. Brooks says AllRail is part of the mirror group to IRP and he hopes that its private members will have the opportunity to participate. “A lot of our members desperately want to go across borders because it’s such an untapped market,” Brooks says.

To do so effectively, AllRail is calling for reductions in the cost of entering the market. This includes reducing track access charges, improving access to rolling stock including providing fair and comparable access to finance for the purchase of new trains with state-owned operators, and the cost of distribution and sales.

Brooks also wants to avoid a situation where public servants are regulating supply and demand. He says two success stories of European long-distance transport - aviation and long-distance bus - are run on an open-access and commercially driven basis. This also means eliminating what he deems as “unjustified” public service obligation (PSO) contracts where government money is offered to run trains where it is not strictly necessary.

“The classic one and an absolutely complete and utter waste of money is Vienna - Budapest,” Brooks says. “Look at how many buses and flights do that route, and then MAV demands a directly awarded PSO. They want to keep it even though European legislation says quite clearly that open-access is the default. We could be saving this money and spending it on improvements to infrastructure instead.”

“So far we have seen the aid go towards aviation much more than other modes. This is a contradiction to the discussion we have been having about the Green Deal and modal shift to rail.”

Alberto Mazzola

In addition, Brooks favours the end of cooperation contracts between operators for cross-border services. He questions whether these are necessary and favours a situation where all companies are free to compete against rather than cooperate with each other on cross-border services. He argues that this will promote greater innovation and avoid excessive bureaucracy, making the trains more cost-effective to operate. “The cooperative agreements are a noose around the neck of the further development of cross-border rail,” Brooks says.

The EC is expected to publish revised interpretative guidelines on the application of the land PSO-regulation, which will include the issue of cross-border passenger rail services, later this year.

Castelletti also confirmed that work is underway to address the rolling stock challenge. He says DG-Move is working with the European Investment Bank to see if it is possible to create pools of rolling stock accessible to all prospective operators. “We would like a market similar to aviation where you can easily start a business solely by leasing aircraft,” he says, adding that such a scenario is more feasible if interoperability is improved through the universal rollout of ETCS.

Brooks says he favours such a scenario led by the private rolling stock leasing companies, backed by state guarantees, which reduces the higher perceived risk of supporting the smaller private operators.

In addition, Castelletti shares Brooks’ sentiment that access to infrastructure for cross-border services needs to improve due to the current preference for domestic services. He says possessions for track maintenance should also be coordinated across borders in order to minimise disruptions. Castelletti adds that ticketing reform, which ends predatory pricing and optimises the offer for passengers by allowing fair and equal access, is another priority and progress is expected in this area.

Further work is also needed to address the imbalance between rail and other modes, which is an objective of the Sustainable and Smart Mobility Strategy and a priority for the EC.

Castelletti expects a phasing out of the so-called European vignette on time-based user charges for road in favour of a polluter pays model, which will include distance charging for heavy duty vehicles. The EC is also set to encourage member states to adopt policies that charge for excessive noise, congestion and CO₂ emissions. And while Mazzola is dubious that can be achieved given that such discussions have been “taking place for 30 years,” Castelletti says he believes meaningful progress is imminent due to the need to address the transport emissions challenge.

“I believe that this argument of the level playing field will disappear in the next 10 years or so because it will become less relevant,” he says.

To measure progress and to ensure the targets do not slip as they have done before, Mazzola favours an annual progress report, which could serve to fine-tune the strategy to give rail the best chance of meeting its goals.

Indeed, with so much work to do, time really is of the essence. Castelletti says there is a sense of urgency for rail to deliver and there is reasonable momentum. “But it will not last forever,” he says. “It’s the last call. And in the European Year of Rail we are saying we have 10 years to make rail the backbone of sustainable mobility. If after 10 years we have not done the work and made suitable progress, the sector will lose its reputation and credibility.”

The Covid paradox

Discussions over modal shift and boosting passenger rail fall within the context of a global pandemic that has decimated European rail traffic over the past 15 months. In the CER’s latest Covid Impact Tracker, the results of which were released on May 5, revenues continued to stagnate at a 51% loss in the first quarter of 2021 compared with November 2019.

Mazzola says CER members lost a combined €26bn, or 40% of revenues in 2020. Many railway companies now find themselves in a very difficult situation as they erode their capital to cover their losses, hindering their ability to invest in new rolling stock and services. Rail is also receiving significantly less financial support than aviation, a situation Mazzola wants to see reversed.

“What we are pleading is that at the end of the crisis, we should make railways stronger than other modes,” Mazzola says. “So far we have seen the aid go towards aviation much more than other modes. This is a contradiction to the discussion we have been having about the Green Deal and modal shift to rail.”

Rail’s recovery and the return of passengers is also complicated by Europe’s relatively slow Covid vaccination rollout and continuing restrictions on travel.

However, the climate challenge is not going away. Demand for travel will return and to reduce emissions at the rate required passengers must have access to a sustainable mode of transport that is effective, competitive and affordable. If they are serious about cutting carbon emissions, rather than backing other modes so they can catch up with rail, it really is time for the EC and the member states to step up and deliver the interoperable cross-border network they have been promising for over 20 years. The targets are in place. It is now time to realise them.