VTG AG’s proposals to reinforce rail freight transport and promote sustainable, reliable and safe transportation on the rails.
The next legislative term – from 2021 through 2025 – will be critical if the German federal government is to reach its climate targets. During the four years ahead, the conditions needed to overcome the Covid-19 crisis and meet climate policy targets must be put firmly in place. Freight transport can play a substantial part in this: Its massive but as yet largely untapped potential to mitigate climate change can be put to good use only if rail’s role as a medium of freight transport is systematically reinforced.
The pandemic has also shown how important resilient global flows of goods are to keep industry, society and the economy reliably supplied with what they need. When borders were closed and trucks stood idle, rail freight wagons continued to criss-cross Europe, reaching their destinations efficiently and in a climate-friendly manner. Looking ahead to the coming legislative term, these are just some of many reasons why a rigorously pro-rail policy is essential. VTG has five key proposals to underpin the new government’s regulatory policies:
- Rail currently accounts for only 7.6 percent of all domestic freight transport in Germany, compared to a roughly 79 percent figure for road haulage – despite the fact that rail freight transport is safer, more reliable and greener than transportation by road. To remedy this imbalance, it is vital to invest in and improve the country’s rail infrastructure, enlarge terminals and expand railway sidings. It is also imperative to restructure the cost of freight transport. Introducing the CO2 price provided an initial positive incentive. If that is all that happens, however, it will not be enough. One complementary approach could be to further reduce track prices as a permanent measure. Another could be to exempt rail freight from what is known as the “EEG levy” pursuant to the Renewable Energy Act.
- Rail freight can realize its full potential only if all freight transport providers operate within a framework of healthy competition. Subsidies for individual companies must be avoided to prevent monopoly situations from arising and unfair advantages from accruing to individual players. Innovation and progress can thrive only where the best ideas are not stifled by unfair constraints. Fair conditions for all market players are fundamental to successful and effective competition, both in Germany and in the international arena. Only under such conditions can financially attractive and environmentally friendly rail freight be established as a serious competitor to road haulage – and to international rail freight players. The German government should therefore focus on investing in the rail infrastructure, digital innovations and technological innovations that are of equal benefit to all rail freight players. The objective should be to promote and reinforce rail by improving the prevailing conditions rather than creating obstacles through ineffective subsidy policies.
- As a source of energy, hydrogen will play a pivotal role in the emerging transformation of both transportation and energy. It is therefore reasonable to expect vigorous demand for “green” hydrogen. According to the government’s “National Hydrogen Strategy”, large volumes of this hydrogen will have to be imported. Although the debate about production and areas of application is already in full swing, no robust concept for the future transportation of “green” hydrogen has yet been tabled. That has to change, and quickly so, because this is another area in which rail freight has a large part to play. The basic technology to safely carry hydrogen by rail already exists. Moving it by rail is a more sustainable option than doing so by road and more flexible than transportation via gas distribution grids. The problem is that developing and provisioning suitable tank cars, transshipment facilities and infrastructure requires heavy investment and is only cost-effective to a limited extent during the market launch phase. When implementing the “National Hydrogen Strategy”, large-scale transportation requirements and the benefits of rail freight transport must be factored in to place both planning and investment on a secure footing. Government funding programs for the heavy initial capital expenditure would be one good way to approach this topic.
- Digitalization is a game changer in virtually every aspect of the economy. Rail freight too stands to benefit from more extensive digitalization. Equipped with telematic technology, digital freight wagons are already transmitting valuable data in real time to optimize goods transport and make the world’s supply chains more efficient and more sustainable. Looking ahead, establishing connectivity across all modes of transport can help make intermodal traffic – smart links between rail, road and waterways – more attractive to logistical companies and shipping agents alike. To this end, a pan-European roadmap to digitalize rail freight is needed – a roadmap that intelligently brings together all the different planned and existing digital initiatives in order to harmonize them. That will benefit the climate and ease the burden on road infrastructures. In view of these goals, it is of crucial importance to systematically support innovative approaches to the digitalization of freight transport. Accordingly, Germany’s new government must openly declare its backing for intermodal transport.
- Long-range investment incentives are necessary if rail freight is to assert itself as a safe and sustainable transport solution. This in turn presupposes intelligent and forward-looking financial and fiscal policy conditions that, above all, take account of the follow-up and second-round effects that can stand in the way of funding for rail as a mode of freight transport. Such effects include the design of the Foreign Tax Act, asset taxes and taxonomy regulations, for example. Especially with a view to a complete redesign of the system of taxes and levies to promote sustainability, it is important to factor in their impact on rail. On no account must it become more difficult to invest in climate-friendly technologies such as rail freight. On the contrary, more powerful positive incentives are needed. To this end, the design of financial and fiscal policy conditions that promote investment must be rethought holistically in light of targeted goals to mitigate climate change. Only then can counterproductive measures be identified and ruled out from an early stage.
The whole industry needs to get moving
At VTG, the digital mindset is ingrained in our DNA. We see ourselves as problem-solvers – and not just for our customers. That explains why we are glad to be part of the Digital Automatic Coupling for Europe consortium. Instead of screwing couplings together by hand like in the days of horses and carts, type-4 DACs combine the vastly overdue automation of coupling with the digitalization of rail freight. Armed with this technology, Europe can transform a competitive disadvantage into a leading edge. That is important, because it will take efficient and competitive rail freight to both mitigate climate change and handle growing transport volumes.