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PA IN THE MEDIA

Remove freight traffic charges to reduce carbon dioxide emissions

Read the article in Swedish

To accelerate action on climate change and help a hard-pressed industry, freight traffic tolls need to be removed, suggests Johan Warenlöv, railway expert at PA Consulting.

COVID-19 has hit railway hard as an industry. For example, the number of travellers has decreased dramatically as a result of the Swedish Public Health Agency's guidelines for dealing with the spread of infection.

Before the pandemic, there was a pronounced focus on climate change and reducing emissions for the entire transport sector, which is estimated to account for just over 30 per cent of Sweden's emissions. One of the measures to reduce emissions from the transport sector, is to move freight transport from the road to the railway.

Sweden's goal is to reduce emissions for domestic transport by 70 per cent by 2030 and to completely eliminate greenhouse gas emissions by 2045. In addition, the EU has a stated goal of increasing the share of rail transport to 30 per cent by 2030. A functioning rail freight market is a prerequisite for achieving these goals.

According to the Swedish Transport Agency, the freight market is growing, especially for road transport. Despite a growing market, for a long time, the players in the railway market have failed to make a profit. Something that in the long run risks knocking out the ability for the railway industry to be an alternative to freight transport, despite the fact that it is the most environmentally friendly choice for freight and it should therefore be in the national interest to preserve it.

It should be mentioned that the state is already taking action. A concrete example is Green Cargo, one of the dominant players in freight transport, which recently received a capital injection from its owner, the Swedish state, of SEK 1.4 billion to achieve its long-term goals.

But that is not enough in the long run. To help the industry get back on its feet, the role of the railway as an attractive choice for freight transport needs to be strengthened.

Increased punctuality is one of several ways it can do this. Abolishing track charges within the framework of existing legislation is another way forward. This may, for example, involve introducing additional compensation or payment of special environmental premiums to freight companies to cover the cost of track fees.

If the track charges are lifted, it should also be clarified that the industry's current business rules continue to apply. These are, for example, quality fees in the event of delays and cancelled departures caused by freight companies.

Removing track fees in particular has the following benefits:

· The state encourages climate-friendly transport and is realistic in its climate goals. While it can be perceived as distorting competition to the detriment of road and sea transport but the goal is to encourage more environmentally friendly alternatives and to achieve Sweden's stated climate goals. The railway also has additional other costs to meet in comparison with, for example, road transport.

· The market is strengthened. Obstacles to the industry becoming more competitive and taking market share from road transport are eliminated. Freight players are given more freedom of movement to develop innovative transport solutions to attract new customers, as well as to work on punctuality and customer satisfaction.

· The cost is limited. The Swedish Transport Administration receives a total of just over SEK 2 billion in track charges today, of which freight traffic accounts for just over SEK 700 million, which is therefore the cost of the measure.

Furthermore, the regulations for capacity allocation need to be modernised in a way that benefits rail freight companies. Today, applications for capacity need to be made over a year in advance. In addition, there is the opportunity to apply for ad hoc capacity that arise on an ongoing basis.

Today's regulations need to be changed to better reflect the capacity needs that exist and increase competition with, for example, road transport. A change in capacity allocation is also underway within the framework of the European initiative TTR - Time Tabling Redesign. The goal is, among other things, to create an attractive and flexible capacity allocation for freight traffic.

But this type of change takes time, at best we will not see the effects until 2025.

The railway will continue to play a significant role in our society after COVID-19. The need for climate-smart transport, of both goods and passengers, will come back into  focus once the situation has stabilised. And of course we should be able to choose climate-smart transport for goods and goods in the same way as today we choose a supplier of electricity and leisure travel.

If we make it easier for the railway companies to be profitable and more flexible, we will create a stronger incentive to run environmentally friendly transport on the railway.

Freight traffic needs to take a larger share of track capacity - for the sake of the climate.

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Contact the author

PA Consulting Group in Sweden

Maria Gustavsson

Maria Gustavsson

Transformation and financial services expert

Per Blom

Per Blom

Implementation, Government and public services expert

Joacim Sundell

Joacim Sundell

Country Head, Transport and public sector expert

Oskar Almén

Oskar Almén

Energy and utilities expert

Peter Wardell

Peter Wardell

Digital, IT-strategy and sourcing expert

Lan-Ling Fredell

Lan-Ling Fredell

Fintech and Innovation Expert

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