Rail Economics, Policy and Regulation in Europe

Rail Economics, Policy and Regulation in Europe

Edited by Matthias Finger and Pierre Messulam

The European railway sector has undergone profound and predominantly institutional changes over the past 20 years, due to the initiatives of the European Commission. This book constitutes a first systematic assessment and account of the recent transformations of the industry along a series of critical yet contentious issues such as competition, unbundling, regulation, access charging, standards and interoperability, and public–private partnerships. It also covers the main railways sectors including passenger transport, high speed and freight.

Chapter 1: Rail economics and regulation

Matthias Finger and Pierre Messulam

Subjects: economics and finance, transport, politics and public policy, regulation and governance, urban and regional studies, transport


Even though some form of railway regulation already existed in the United States, starting with the Interstate Commission the US Congress established in 1887, economic railway regulation is basically a European creation of the past 20 years. Such economic regulation became necessary as a result of the European Commission’s decision in the early 1990s to de-regulate and (in parallel) to re-regulate the European railway sector. Rail de-regulation and re-regulation are part of a broader initiative of the European Commission’s aim for a single European market, also in infrastructure (Finger, 2011; Finger and Laperrouza, 2011). The main reasons that are generally given for railway de-regulation pertain to the poor performance of the European rail sector and its loss of modal share vis-à-vis the road (cars and trucks) (Nash, 2013). The key features of European railway de-regulation, which have already been addressed elsewhere (Laperrouza, 2011), are (1) the separation (to a certain extent) of the rail infrastructure from transport companies using this very infrastructure; (2) competition among the transport companies on this infrastructure (called competition for markets in open access such as freight since 2007, or competition for the market for regional or national services franchised through public service obligation contracts); (3) technical standardisation, which makes this type of competition possible due to low technical entry barriers; and (4) regulation and sector-specific railway regulators, which are generally regarded as being crucial to making such a partially liberalized European railway market happen.