The promises of European Rail in the face of Climate and Financial Challenges

Rail transport is presented within the European Union as a major lever in the decarbonisation of transport. It is indeed one mode of transport which is not heavily dependent on fossil fuels, and which is characterised by increasing returns. In terms of greenhouse gas emissions and pollutants, but also in terms of accidents, space consumption and negative effects on biodiversity, it is the most environmentally friendly mode of transport. However, despite these obvious advantages for passengers and freight, the development of European rail transport faces the equivalent of the glass ceiling.

This report, led by Yves Crozet with the support of Paolo Beria, Heike Link and Thierry Vanelslander, identifies several challenges and highlights important gaps between the ambitions Europe has for its rail sector and the policies and financing required to meet them. On this basis, the report presents policy recommendations and ideas for new forms of financing, drawing from national case studies on Belgium, France, Germany, and Italy.

Key takeaways and recommendations of the report:

• In terms of modal sharing, we must be wary of the principle of substitution, which suggests that each additional passenger or ton on the rail would be a passenger or ton less on the road. Transport is not a closed world where the gains of some are the losses of others.
• Rail transport should escape the logic of rationing, but it comes up against another scarcity, that of public funds. Rail is in fact increasingly dependent on public funding, both for infrastructure and for operations. Productivity gains are needed to avoid diminishing returns of public spending on rail.
• To develop, rail transport therefore needs new financial resources, which can only come marginally from customers (passengers or goods). To guarantee sustainable revenue, public resources must be permanently allocated to it.
• In all European countries, there are fuel taxes, which represent more than 200 billion euros in the EU. The earmarking of this tax resource varies from one country to another, but part of it could benefit rail transport.
• In the decades to come, road will remain the main vector of transport. As it will also remain a major CO₂ emitter, its use must be regulated more strictly. Road pricing is necessary to reduce the demand and to obtain resources, part of which could be used for rail.

The report was presented and discussed at the CERRE “The Promises of European Rail in the Face of Climate and Financial Challenges” event on 6 June 2023.