ČD Cargo director: “A reverse modal shift would be imminent” with ETS-2

Image: ANP/CTK. Ondrej Deml

The EU’s Emissions Trading System 2 (ETS-2) could be a serious obstacle for the rail freight industry. It would be an additional financial burden but also hamper decarbonisation in transportation as a reverse modal shift could be “imminent”.

The EU’s new emissions trading system, ETS-2, could be a serious burden on the rail freight sector. According to Tomáš Tóth, chairman of the Board of Directors of ČD Cargo, the system could cause a reverse modal shift from rail to road.

ETS-2 would introduce an emissions trading system in which companies purchase emission allowances from 2027 onwards. Such a market mechanism is supposed to nudge companies to reduce their emissions and make environmentally-friendly alternatives more financially attractive.

While the rail sector is not mandatorily subject to the ETS-2 system, member states can decide to opt-in particular sectors. In the Netherlands, for example, the government does not exclude an opt-in for rail, saying it seeks to apply ETS-2 as broadly as possible.

Lacking technology for non-electrified lines

Tóth explains that the technology for electric freight traction without overhead electricity lines simply is not there yet, rendering the intended green incentive of emissions trading useless in many cases. “Battery and hydrogen locomotives are only available as prototypes in the form of light shunting locomotives. The technologies are not yet elaborated to such a degree that they could substitute existing diesel locomotives.” On freight routes without catenaries, using locomotives that do not run on diesel is simply not an option.

“The introduction of ETS-2 in railway transport would, therefore, only make it more expensive. Without the existence of adequate mainline locomotives of independent traction that will be able to use alternative propulsion, any motivating factor of emission allowances disappears”, Tóth says. ETS-2 would then simply amount to “mere taxation”.

A diesel freight locomotive in Czechia. Image: Shutterstock. © fotostepan.

Competitiveness versus road

In the end, the problem with applying ETS-2 to rail is the age-old problem of competitiveness vis-à-vis road transportation. ETS-2 will make rail transportation more expensive and likely cause more freight to find its way onto the road.

“Few people realise that freight railway transport is already burdened with emission allowances under ETS-1. We thus pay these allowances in the prices of electric energy, and our road competitors pay no similar fee until 2027”, Tóth explains. “Already now, the principal reason for the absence of a modal shift in the Czech Republic is the different price between rail and road transports.”

What should rail do?

Rail should pursue exemptions from ETS-2 where member states are likely to apply the system to rail, says Tóth. “Europe is talking about transport decarbonisation, necessary energy savings, modal shift, et cetera, and it will invoke an urgent change of the transport mix”, he says.

“In the market economy, however, the decisive factor is the price of the service provided, and here, we are already unable to compete with the road in many cases. With the ETS-2, it would already be almost impossible. More likely, a reverse modal shift would be imminent”, Tóth adds.

Moreover, as it is up to the member states to decide on the application of ETS-2 to rail, Tóth expresses his hope that all member states will opt for an ETS-2 exemption for rail freight. Otherwise, the competitiveness of rail will take a hit.

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ČD Cargo director: “A reverse modal shift would be imminent” with ETS-2 | RailFreight.com

ČD Cargo director: “A reverse modal shift would be imminent” with ETS-2

Image: ANP/CTK. Ondrej Deml

The EU’s Emissions Trading System 2 (ETS-2) could be a serious obstacle for the rail freight industry. It would be an additional financial burden but also hamper decarbonisation in transportation as a reverse modal shift could be “imminent”.

The EU’s new emissions trading system, ETS-2, could be a serious burden on the rail freight sector. According to Tomáš Tóth, chairman of the Board of Directors of ČD Cargo, the system could cause a reverse modal shift from rail to road.

ETS-2 would introduce an emissions trading system in which companies purchase emission allowances from 2027 onwards. Such a market mechanism is supposed to nudge companies to reduce their emissions and make environmentally-friendly alternatives more financially attractive.

While the rail sector is not mandatorily subject to the ETS-2 system, member states can decide to opt-in particular sectors. In the Netherlands, for example, the government does not exclude an opt-in for rail, saying it seeks to apply ETS-2 as broadly as possible.

Lacking technology for non-electrified lines

Tóth explains that the technology for electric freight traction without overhead electricity lines simply is not there yet, rendering the intended green incentive of emissions trading useless in many cases. “Battery and hydrogen locomotives are only available as prototypes in the form of light shunting locomotives. The technologies are not yet elaborated to such a degree that they could substitute existing diesel locomotives.” On freight routes without catenaries, using locomotives that do not run on diesel is simply not an option.

“The introduction of ETS-2 in railway transport would, therefore, only make it more expensive. Without the existence of adequate mainline locomotives of independent traction that will be able to use alternative propulsion, any motivating factor of emission allowances disappears”, Tóth says. ETS-2 would then simply amount to “mere taxation”.

A diesel freight locomotive in Czechia. Image: Shutterstock. © fotostepan.

Competitiveness versus road

In the end, the problem with applying ETS-2 to rail is the age-old problem of competitiveness vis-à-vis road transportation. ETS-2 will make rail transportation more expensive and likely cause more freight to find its way onto the road.

“Few people realise that freight railway transport is already burdened with emission allowances under ETS-1. We thus pay these allowances in the prices of electric energy, and our road competitors pay no similar fee until 2027”, Tóth explains. “Already now, the principal reason for the absence of a modal shift in the Czech Republic is the different price between rail and road transports.”

What should rail do?

Rail should pursue exemptions from ETS-2 where member states are likely to apply the system to rail, says Tóth. “Europe is talking about transport decarbonisation, necessary energy savings, modal shift, et cetera, and it will invoke an urgent change of the transport mix”, he says.

“In the market economy, however, the decisive factor is the price of the service provided, and here, we are already unable to compete with the road in many cases. With the ETS-2, it would already be almost impossible. More likely, a reverse modal shift would be imminent”, Tóth adds.

Moreover, as it is up to the member states to decide on the application of ETS-2 to rail, Tóth expresses his hope that all member states will opt for an ETS-2 exemption for rail freight. Otherwise, the competitiveness of rail will take a hit.

Also read:

You just read one of our premium articles free of charge

Want full access? Take advantage of our exclusive offer

See the offer

Author: Dennis van der Laan

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