What has changed in European rail: the highlights of the latest EU report
What is the state of rail in the EU, and what has changed in the past years? To this end, the European Commission publishes a yearly Rail Market Monitoring Report (RMMS), the 8th version of which came out recently. The length of the active railway network, spending on railway, competition and more: here’s what stands out in the numbers.
Overall, the report shows positive developments in 2019, before a significant change in traffic volumes in 2020 due to COVID-19 in the 27 EU countries. In the pre-pandemic period, rail traffic rose consistently, with volumes increasing by a yearly average of 3 per cent in both passenger and freight transport up until 2019. In 2020, passenger kilometres fell sharply by 46 per cent due to the measures linked to the COVID-19 pandemic, including the travel restriction. Preliminary data for 2021 show a gradual recovery for both passengers and rail freight volumes, according to the Commission.
As statistics are usually published with some delay, the report mostly uses figures from 2020, while the 7th rail monitoring report published last year used 2018 data. From the latest report, it remains prominently clear that the modal share of rail traffic, compared to other modes, keeps falling behind by miles. In 2020, it was just 5.5 per cent, even less than the 7.8 per cent recorded in 2018. 1.3 per cent of total passenger kilometres were made by tram and metro in 2020, compared to 1.7 per cent in 2018. The coronavirus pandemic also influenced this data. For rail freight, the total volumes transported grew, but the modal share of rail also dropped.
Read a full analysis of freight transport on sister publication RailFreight.com.
More spending in recent years
Next to passenger and goods volumes, the EU’s rail report gives a good insight in how much money is channeled into the railways. In general, the spending of governments on railways goes to two main categories: rail infrastructure, and on the operation side so-called PSO compensation. The European public service obligation (PSO) regulations set out conditions under which transport operators can be compensated or given exclusive rights to provide public transport services which are in the general interest, but would otherwise not be commercially viable.
Altogether, infrastructure expenditure and PSO compensation costs together amounted to 158 euros per EU inhabitant in 2020, which is a significant increase of 20.8 per cent compared to 2015. Whereas infrastructure expenditure increased by 5.9 per cent, PSO compensation saw the largest increase, by a whopping 51.9 per cent in the same period, according to the figures reported in the RMMS.
How the spending on rail is divided between the two differs greatly per EU country, as each member state has a different railway market, different levels of competition in that market and different levels of for example population density, and railway services which could be profitable without a PSO.
In general, the country that is by far spending the most on both infrastructure and PSO compensation per inhabitant is Luxembourg. It even made all public transport free for its citizens in 2020. The runner up in the EU is Austria, after which comes Norway, which the European Commission included in most of the graphs though it is not a member state. In some countries, much more money goes to rail infrastructure than to PSO compensation, such as Norway, Poland, Czech Republic, Sweden and Slovenia. Other countries have a much more equal spending, like in Luxembourg, Belgium and France. For few countries, the PSO compensation is the biggest expense, like in Hungary and Slovakia.
PSO compensation increased
PSO compensation remains a significant source of revenue for railway undertakings in a majority of Member States, says the report. In general, more rail passenger services are run under a public service obligation (PSO). In 2020 this was 66 per cent, compared to 60 per cent in 2018, in passenger-kilometres. The passenger-kilometre is calculated by multiplying the transported kilometres by the (average) number of passengers. Two persons travelling five kilometres on board a vehicle generate ten passenger-kilometres.
When it comes to PSOs, there are rail services that are tendered by public authorities and contracts which are directly awarded to incumbent, state-owned operators. The European Commission is in favour of increasing market opening on the rails, and with the Fourth Railway Package opened access to the commercial provision of rail domestic passenger services, starting with the 2021 timetable.
In countries such as Spain, this has resulted in two new operators being active on its high-speed lines, which led to lower ticket prices and more passengers. But also in Germany and Sweden, new entrant FlixTrain joined the railway network with competitive prices. However, overall in Europe, the picture remains “mixed” on market opening, says the EU report. In terms of competitors’ market share in the PSO passenger market, on average competitors had an 18.5 per cent market share in national PSO passenger markets in the EU in 2020.
Slowly more competition on the rails
The level of competitor’s market did increase slightly compared to 2015 (+ 1.9 percentage points). Competitors had the highest market shares of the PSO passenger market in Sweden (73 per cent) and Poland (50,6 per cent) in 2020. In Latvia and Spain, by contrast, only 0.1 per cent were in the hands of competitors. The high-speed rail services in Spain, where there is competition, are not based on PSOs.
The highest growth of competitors’ market shares – compared to 2015 – was reported by Sweden (+ 15 percentage points between 2015 and 2020), whereas a major decline was reported for the Netherlands (-10 percentage points). In relative terms, 92 per cent of all the EU competitive tendering occurred in the two Member States which liberalised their services early, namely 80 per cent in Germany and 12 per cent in Sweden. The 28 per cent share of competitively tendered services is comparatively low, as the value of this indicator was nearly 44 per cent in 2019, up from 40 per cent in 2015.
The European Commission introduced competitive tendering as the standard procedure for attributing public service contracts, with a transition period until December 2023. In the conclusion of the report, it is stressed that the Commission will be “closely monitoring the correct transposition and application of the Fourth Railway Package, to ensure it achieves its full potential in the medium term”. The Dutch government for example plans to directly award its main network concession to state-owned NS before the end of the year to circumvent the change in rules, even though the concession would start a year later, in 2025. The Commission already expressed concerns about this and the legality of it.
Investment in rail infrastructure
Zooming in to the money flowing to railway infrastructure, the overall spending of the EU Member States reported 40.65 billion euros of total funding for rail infrastructure in 2020. Of this amount, national budgets contributed the most to the total expenditure and investment by 69 per cent on average, whereas EU co-financing accounted for 8 per cent. Projects are for example supported through the Connecting Europe Facility (CEF) funding instrument and the Cohesion fund.
The remaining 23 per cent share of financing came from other sources including loans, equity financing and charges. Germany and France show a significant share of their own funds, whereas the highest share of EU funds was received by Poland. The infrastructure expenditure per kilometre of railway line increased, where this was 144 thousand euros per line-kilometre in 2015 on average across the EU countries, it amounted to 160 thousand in 2020. The highest spending per line-kilometre in 2020 was in Luxembourg (542 thousand) and the Netherlands (390 thousand), while the lowest amount was spent in Greece (5 thousand) and Bulgaria (51 thousand).
What the money for infrastructure is spent on also differs per country. While for all countries it mainly goes to conventional lines between 2015 and 2020, some countries have spent a significant amount on major station infrastructure, namely Germany, France, the Netherlands and the Czech Republic, each more than 200 million.
Though no data is available on its investments specifically, no doubt there is money invested in the electrification of tracks. The overall proportion varies a lot in the EU, from 3 per cent in Ireland to 91 per cent in Luxembourg. Since 2015 the network electrification rate in the EU has increased by 1.1 per cent in 2020. It should be noted that changes in the percentage of the electrified network may also result from changes in the length of the network. Though it is a low percentage, several EU countries have made great strides in electrifying tracks, such as Denmark and Belgium. Between 2018 and 2020, the share of total train-kilometres travelled by electricity-powered trains increased from 75 per cent to 81,6 per cent.
While the Commission’s report shows that there has been an increase in spending on rail per EU inhabitant, the question that hangs in the air is whether this really is the turning point when it comes to investing more in rail versus investing in roads. The modal share of rail is still low with 5.5 per cent in 2020. Perhaps not that surprisingly when roads benefitted from 66 per cent more of the EU countries’ (as well as Norway, Switzerland and the UK) budgets compared to railways between 1995 and 2018, as was found in a recent study by the Wuppertal Institut and T3 Transportation Think Tank, commissioned by Greenpeace.
In this same period, Europe’s motorways increased by more than 30,000 kilometres in length, a 60 per cent increase, while European rail lines shrank by 6.5 per cent, or 15,650 kilometres. In the interactive graph below, the total length of railway tracks in use in EU countries is visualised by RailTech using data from the 2022 statistical pocketbook of EU Mobility and Transport, and a reduction over the years can be clearly seen in some countries. The bulk of the reduction took place in Germany (-6,706 kilometres), Poland (-4,660 kilometres) and France (-4,125 kilometres), states the Greenpeace report. These three countries also still represent the longest total network lengths, followed by Spain.
As for high-speed rail however, the EU’s network grew in recent years. It reached 11,526 kilometres by the end of 2020, an increase of 26.4 per cent compared to the 9,169 kilometres of length by the end of 2019. As the amount of high-speed rail between 2018 and 2020 grew while the overall network in that time shrank slightly, it means regular railway lines must have decreased, most likely regional lines.
Over the last years, the majority of the EU funding budget for infrastructure went to roads, as was also analysed earlier by Investigate Europe. 62 billion euros were provided for the development of the EU’s rail networks between 2007 and 2020, whereas 82.5 billion went to roads and motorways. Over the whole period, only Austria, Belgium, Denmark and Luxembourg invested more in rail than road, while France invested an almost equal amount.
A large win in CO2 reduction could be achieved by shifting more traffic from road to rail, as rail contributes to just 0,4 of Europe’s transport emissions, while road traffic causes 76.7 per cent of transport emissions. The EU therefore calls rail a “key contributor” to the EU’s 2050 climate neutrality goal.
In some countries, a shift of priorities may have started to take place by channeling more funding to railways than to roads comparing the period 1995-2018 to 2018-2021. This was the case in Denmark, France, Italy, and Luxembourg, found the Greenpeace-commissioned report. All other countries still focus on roads in their budget allocation. It remains to be seen whether this shift will take place in more countries in the coming years.
Read the analysis of the previous EU Rail Market Monitoring Report here.