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140903 CERRE Railfreight Discussion Paper 41/52 Development of rail freight in Europe: What regulation can and cannot do CERRE Discussion Paper Professor Yves Crozet (University of Lyon) With contributions from: Professor Justus Haucap & Dr Beatrice Pagel (University of Düsseldorf) Professor Antonio Musso (University La Sapienza, Rome) Professor Eddy Vandevoorde & Professor Thierry Vanelslander (University of Antwerp) Dr Allan Woodburn (University of Westminster) 03 September 2014 140903_CERRE RailFreight_DiscussionPaper Centre on Regulation in Europe (CERRE)asbl Rue de l’Industrie 42 Box 16 - B-1040 Brussels - Belgium Ph: +32 (0)2 230 83 60 - Fax: +32 (0)2 23 0 83 70 –[email protected] – www.cerre.eu Table of Content About CERRE .................................................................................................................................... 3 About the authors ............................................................................................................................ 4 Discussion Paper .............................................................................................................................. 6 1. Introduction ......................................................................................................................... 6 2. Rail freight in Europe: questioning the EU’s goals ................................................................. 7 2.1 Rail freight in Europe: ambitions thwarted ................................................................... 7 2.2 Determining the relevant perimeter for rail freight in the context of intermodal competition ............................................................................................................................12 2.3 The competitive "solution" and the challenges of imperfect competition ....................17 3. Regulation issues: beyond the liberalisation process, what are possible policy options? ......20 3.1 Liberalisation and deregulation of rail freight in Europe: state of play .........................21 3.2 Critical issues of imperfect competition in the railway sector ......................................27 3.3 Regulatory issues in the rail freight sector: the next steps ...........................................32 4. Summarising the issues for discussion .................................................................................39 References ..................................................................................................................................... 41 140903_CERRE RailFreight_DiscussionPaper 2/52 About CERRE Providing top quality studies, training and dissemination activities, the Centre on Regulation in Europe (CERRE) promotes robust and consistent regulation in Europe’s network industries. CERRE’s members are regulatory authorities and operators in those industries as well as universities. CERRE’s added value is based on: • its original, multidisciplinary and cross-sector approach; • the widely acknowledged academic credentials and policy experience of its team and associated staff members; • its scientific independence and impartiality; • the relevance of its contributions to the policy and regulatory development process applicable to network industries and the markets for their services. CERRE's activities include contributions to the development of norms, standards and policy recommendations related to the regulation of service providers, to the specification of market rules and to improvements in the management of infrastructure in a changing political, economic, technological and social environment. CERRE’s work also aims at clarifying the respective roles of market operators, governments and regulatory authorities, as well as at strengthening the expertise of the latter, since in many member states, regulators are part of a relatively recent profession. This study within the framework of which this discussion paper has been prepared has received the financial support of a number of CERRE members. It has been completed under the supervision of Professor Chris Nash, Professor at the University of Leeds. As provided for in the association's by- laws, it has, however, been prepared in complete academic independence. The contents and opinions expressed in this discussion paper reflect only the authors’ views and in no way bind CERRE, the sponsors or any other members of CERRE (www.cerre.eu ). 140903_CERRE RailFreight_DiscussionPaper 3/52 About the authors Professor Yves Crozet is professor of economics at Lyon University ( Institute of Political Studies ) and member of the Laboratoire d’Economie des Transports (LET), which he headed from 1997 to 2007. In 2008, he became the head of the newly created Energy, Environment and Transport Observatory set up by the French government to assess the carbon content of different transport modes. He is also chairing the transport policy group of the French research and innovation programme in ground transport (PREDIT). Since 2010, he is also the Secretary General of the World Conference of the Transport Research Society. Professor Justus Haucap is a member and former Chairman of the German Monopolies Commission. He is also professor of Economics at the Heinrich Heine University of Düsseldorf and founding director of the Düsseldorf Institute for Competition Economics (DICE). He is also a member of the Board of Directors of CERRE. He holds degrees from the University of Saarland and the University of Michigan. Professor Antonio Musso is Professor of Transportation Systems Theory and Freight Transport Terminals and Plants Design at the Department of Hydraulics, Transportation and Roads (DITS) of the University of Rome “La Sapienza” (Italy). He is also the Head of the “Transportation Engineering” Program of the university. Furthermore, he is a member of the International Scientific Committee of the World Conference on Transport Research Society (WCTRS) and an independent Expert for the European Commission’s Evaluation of the 4 th , 5th, 6th and 7th Framework Programme of Research and Development. Professor Eddy Van de Voorde is Professor at the Faculty of Applied Economics of the University of Antwerp. His work deals with research in the field of modelling in the sector of freight transport. He is also a Visiting Professor at several Belgian and foreign universities. In July 1998, he acted as Vice- President of the 8th World Conference on Transport Research (8th WCTR). From 1995 to 2001, he was Vice-Chairman of the international scientific committee of the WCTRS. Next to this, he acted as Vice-Chairman of the International Association of Maritime Economists (IAME) and Chairman of the Benelux Interuniversitary Group of Transport Economists (BIVEC/GIBET). 140903_CERRE RailFreight_DiscussionPaper 4/52 Professor Thierry Vanelslander is the holder of the BNP Paribas Fortis chair on Transport, Logistics and Ports at the University of Antwerp. Until 2009, he was Director of the Research Centre on Commodity Flows hosted by the Department of Transport and Regional Economics. His research interests are in the field of maritime, land and air transport and logistics. Dr Allan Woodburn is Professor of Freight and Logistics in the Planning and Transport Department at the University of Westminster, and has been the Course Leader for the MSc Logistics and Supply Chain Management course since 2005. He was previously a Lecturer in the School of the Built Environment at Napier University, Edinburgh. He holds a PhD in Freight Transport and Logistics from Napier University in Edinburgh and a Master in Transport Studies from Cranfield University. 140903_CERRE RailFreight_DiscussionPaper 5/52 Discussion Paper 1. Introduction The development of rail freight is central to the European Union's transportation policy. 1 The EU obJective regarding rail freight development is mainly driven by energy-related and environmental concerns (e.g. improving road safety and reducing pollution, greenhouse gas emissions and other adverse environmental impacts of road freight transport). As it has been the case for road and air transport and for other network industries (e.g. energy and telecommunications), deregulation and market opening have been the main policy options chosen by the European Union to promote sustainable development in rail freight. The European Union’s focus on competition and market opening is paramount, as it is a pre-condition for enhanced efficiency in the rail sector in general, and in the freight sector in particular. However, progress in the area of competition and market opening has been uneven across member states. This might be seen as an explanation of the remaining low modal share of rail freight in Europe. The issue of how to develop rail freight is not usually addressed from the angle of regulation. CERRE has chosen to do so, not solely because regulation is one of its key concerns but also because identifying what regulation can or cannot do amounts to assessing both the obJectives of the EU (developing rail freight) and the means to achieve them (market opening). Based on national case studies from Belgium, France, Germany, Italy and the United Kingdom, this paper shows that measures to establish competition are slowly but profoundly transforming the landscape of European rail freight operators. The “competitive solution” proposed by the EU, already tried and tested in many network industries, leads to significant changes. But intramodal competition in itself is not sufficient. What matter is the organisational changes within railway companies and the state of inter modal
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