Railway: The Most Environmentally Friendly Transport System

• The transport sector, accounting for more than half of global oil demand, is responsible for about 25% of world’s CO2 emissions
• In 2017, rail accounted for 9% of global passenger transport activity, but only 2% of transport related CO2 emissions.
  • The rest of transport-related CO2 emissions were 77% from road vehicles, 13% from aviation, and 11% from shipping.
• Rail is today the cleanest mode of transport, thanks to its very high level of electrification.
  • 86% of passenger rail transport and 50% of freight rail transport is electricity-powered.
• To move a step further, incumbents are switching power sources to renewable energy.
  • In the Netherlands, for example, passenger trains are primarily powered by wind.
  • In Switzerland and Sweden trains are powered at 100% on hydropower.
  • In California, the San Francisco’s Bay Area Rapid Transit System  (BART) recently agreed to derive at least 50% of its wholesale electric  portfolio from renewable sources and at least 90% of it from low- and  zero-carbon sources by 2025.
• Road congestion, as well as having a negative impact on the environment, has a major negative impact on competitiveness.
  • The European commission estimates that road congestion costs around €130bn annually.
  • Railways, can be a very appealing congestion-busting solution.

• OC&C estimates a 3.4% passenger CAGR from 2017 to 2022 in the top 5 European passenger rail markets
  • Growth is driven by government investments and deregulation.
• In its base case scenario, the International energy Agency (IEA) expects global investments in the building, operating and maintenance of networks to represent $475bn of annual expenditures between 2018 and 2050.
  • Around $315bn will be spent annually on rail infrastructure.
    • During 2010-2015, the average annual investment in rail infrastructure was $200bn.
• According to UIC, ECA and OC&C analysis, European rail investment planned until 2033 totals a cumulative >$400bn.
  • The U.K. is expected to be at the forefront with $183bn.
  • The total length of EU high-speed rail is expected to hit 21’000km by 2030, more than trebling from 2011 levels.
• The European Commission is renewing the 'Connecting Europe Facility', with a budget of €42.3bn to support investments in the European infrastructure networks
  • This is part of the next long-term EU budget 2021-2027.
  • Transport is the main beneficiary with €30.6bn.
    • Ahead of energy (€8.7bn) and digital (€3bn)

Catalysts:

• Politics: Several recent developments, such as the establishment of the Fourth Railway Package’s technical pillar and of the S2R Joint Undertaking, support the creation of a Single European Rail Area (SERA).
  • These schemes are already leading to an increase in the quality and choice of services available, more responsiveness to customer needs, and greater economies of scale.
• Diesel bans: In Europe a number of countries has come out with plans for banning diesel, which should boost demand not only for electrification but also for hydrogen trains.
• Behavioral change: The reduction in travel times may induce new habits, with distances of 200 km and more in everyday commuting becoming acceptable.
   

Risks:

• Digitalization will create new challenges, particularly in maintaining the security and integrity of cyber-systems.
• There are indications in some countries that commuting may be decreasing, reflecting the growth in home-working or reductions in the length of the working week.
• High-speed trains require high infrastructure construction costs - delays and cancellations may be likely given the complexity and the political nature of such projects.