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What North American freight rail can learn from Europe

European regulations call for swifter integration of advanced rail technologies

A freight train in Europe. (Photo: Shutterstock/John Keenan)

The European Union has an ambitious goal to increase rail’s share in freight transportation to 30% by 2030 in order to reduce greenhouse gas emissions. To do this, the Europeans are seeking to integrate technological advances and develop inland port infrastructure that would support more freight rail volumes. 

As the Europeans undergo these efforts, the North American freight rail system will have lots of opportunities to learn from their European counterparts, according to two partners with global consultancy firm McKinsey. 

In Europe and North America, the trucking industry has been exploring both battery technology and autonomous vehicles and electric vehicles (EVs). But “Europeans seem to be a little further ahead, both in terms of regulation as well as technology adoption, on some of the EV components,” Chicago-based McKinsey partner Dilip Bhattacharjee told FreightWaves. 

The Europeans may try to adopt battery technology components for the rails ahead of their North American peers because the regulatory framework there will allow for quicker adoption, according to Bhattacharjee. 

“The European railroads are much more likely, because of the structure of the industry [and] because of the regulation there, to move faster than North America,” Bhattacharjee said. “There’s a lot that our railroads should watch and learn for how those trends play out.”

Europeans could deploy autonomous rail technology ahead of the North Americans. Like the North American railways, the European railways will need to compete against autonomous trucks, particularly on the intermodal side, Bhattacharjee said.

“The average length of haul in Europe is already lower than the average length of haul in the U.S., [and so] the imperative to find the competitive response will naturally be higher in Europe than in North America,” Bhattacharjee said. 

Europe is ahead of North America when it comes to using digital signaling systems because the European rail system is heavily used by passenger rail, according to Düsseldorf, Germany-based McKinsey senior expert Anselm Ott.

“North America made a big step forward with positive train control [PTC], but I think they’re still a bit lagging behind Europe,” where the current discussions are looking at digital signaling systems for the next 20 years, Ott said. PTC and digital signaling systems are technologies aimed at making rail transportation safer.

Europe is also working on digital automatic coupling, which would enable better control of the train and allow for full data transparency on what’s happening with every freight car. Should the implementation of this technology be adopted in the next five to 10 years in Europe, the North American railways could copy or adapt similar practices, Ott said. 

Similar but different

As European and North American freight rail systems integrate more technological sophistication into their networks, both locations are grappling with similar market dynamics. 

Both places are serving populations where consumer demand is growing, and as a result, the supply chains are evolving to serve consumer demand. That means not only are the railways grappling with competition from LTL service providers, they’re also seeking to develop inland ports to serve intermodal rail service.

“One area where we should expect to see a similar response in North America, just like the Europeans have done, is finding more ways to have intermodal inland ports because the more we can have intermodal inland ports, that makes rail more competitive,” Bhattacharjee said.

Meanwhile, Europeans are seeking to replicate the productivity of North American intermodal trains, which can carry up to 200 intermodal containers, he added. 

The European Union also seeks to double freight rail’s modal share to 30% by 2030 as part of broader efforts to reduce CO2 emissions in the transport sector as well as reduce congestion on the roads.

To reach this target for 2030, European freight rail volumes would have to grow by around 6% per ear in ton-kilometers, or “seven times faster than road transport,” according to a January report by McKinsey on the European freight rail network.

The report suggests focusing freight rail efforts on major transportation flows, such as between Spain and Central and Northern Europe, as well as on connection points to key global trade ports. The report also suggests focusing on industries that could shift to rail and replace declining volumes for coal and steel. 

While the equipment involved in European freight rail is the same as equipment used in North America — the locomotives, the underlying technology, the hardware and the software — European freight rail operates very differently from North American freight rail.

In Europe, state-owned companies operate freight railways, while in North America, the railways are private companies. 

Another key difference is that anyone who has a valid rail license can run a train, and so some rail systems, such as the German rail system, can function like a toll or motorway where rail companies pay a toll to use the rail system, Ott said. 

“A business can’t just start a company and run freight trains on the lines of the BNSF or the Union Pacific. And that’s one of the main differences. In Europe, I can do this,” Ott said.

Furthermore, Europe’s rail system is predominantly used by passenger rail, and as a result, freight trains run on networks with more frequent and shorter headways.

“Markets like India, Egypt, Europe are largely passenger rail markets, where freight is almost secondary and has to be slotted in,” Bhattacharjee said.

European freight train lengths are also much shorter. Container trains also are single-stacked and not double-stacked like the North American trains.

“Because the supply chains in each of those markets have evolved differently, the actual regulatory environment, as well as the industry structure, has naturally evolved into very different operating models,” Bhattacharjee said. 

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.