The effectiveness of EC policies to move freight from road to rail: Evidence from CEE grain markets

Abstract

The European Commission adopted in 1991 a policy of encouraging the substitution of motor carrier haulage of freight with rail and water carrier haulage, as part of its “green” agenda of reducing fuel consumption, emission of pollutants, carbon intensity, and road congestion. Regarding railway freight in particular, one policy tool that the Commission has emphasized for this purpose is the restructuring of the rail sectors of member countries through the creation of competition for the incumbents by new train-operating companies (TOC's) – seemingly a less obvious policy choice than alternatives such as Pigouvian taxation measures or infrastructure subsidies. This paper focuses on one important commodity group – grain – in three EC member states and one non-member state – Poland, the Czech Republic, Slovakia, and Ukraine – to examine what appear to be the binding constraints to increases in rail's share. Such constraints seem more closely related to shortages in infrastructure capacity than to a lack of competition among TOC's. Our findings suggest that a policy focused more directly on infrastructure investment – whether an increase in subsidies or alternative strategies for attracting private investment into infrastructure, including alternative reform models – will be required if the current constraints binding rail's share are to be relaxed.