Following the ECJ ruling, Germany now needs to reform its TAC system. This is proving to be a politically sensitive task: the German states, who fund local passenger rail, fear that they will no longer be able to so if prices go up. Under the existing pricing system, charges for local passenger rail are tied to funds given to states for the local rail operations.

The transport ministry is aiming for a renewed system by 2027: “Our goal is and remains to present a new track access charge system by the timetable change in 2027”, minister Schnieder said earlier.

That timeline does not satisfy the rail freight sector. These companies are hoping for short-term clarity for their own financial planning. Without knowing what’s coming, such planning becomes guesswork. If they plan ahead with a price that’s too high, they could lose customers. If they calculate with a price that is too low, they might have to compensate for additional costs later, writes German publication DVZ.

Full-cost or marginal-cost?

Lastly, there is the question of the TAC model. Currently, Germany charges infrastructure usage fees on the basis of the full-cost principle. The rail freight industry has spoken out in favour of a marginal-cost pricing system, where companies pay only for the infrastructure costs added by an additional train and a possible efficiency markup. A study by INFRAS, commissioned by rail freight association Die Güterbahnen, has shown that this could reduce TACs by 54% for freight operations.

The marginal-cost system is the standard pricing model in Europe. However, the German transport minister has expressed concerns that its implementation in Germany would lead to a major financing shortage for the railways.

Die Güterbahnen claims otherwise: “Contrary to repeated claims by the Federal Ministry of Transport, such a switch would not create a funding gap, and therefore there would be no additional burden on the federal budget if three existing federal funding streams were consolidated simultaneously”, the association wrote.

Supposedly, the eight billion missing euros are already provided for indirectly. The German government provinces retroactive TAC subsidies, the local public transport funds and planned maintenance subsidies.

“Track charges based on marginal costs lead to more traffic and thus higher revenues. The current full-cost system, on the other hand, stifles traffic and makes the network operator sluggish. The figures show: The alleged funding gap is a political scare tactic – nothing more”, Die Güterbahnen’s Managing Director Peter Westenberger commented earlier.

Even though the legal changes were approved over a month ago, DB InfraGO tried to stop the new legal limitations to TAC increases. DB InfraGO attempted to push for higher price increases and even bypass parliament, according to rail freight association Die Güterbahnen. That did not succeed – TACs only grew by 6% on Sunday 14 December.

The new kilometre charge for a standard freight train will be 3.93 euros. That is by no means a financial improvement, especially considering that Germany cut the budget for TAC subsidies by 10 million euros for a total of 265 million euros. Companies will pay more and get less compensation for it.

Opportunities and risks in 2026

However, there is a chance that German rail freight can reach close to a net-zero change later in 2026. The law amendment in question stipulates that a subsidy review will take place in spring, which could lead to an increase in TAC subsidies. The increase would be financed through repayments from DB InfraGO to the government, because the infrastructure manager failed to properly implement a restructuring programme. If those repayments turn out high enough, it could offset the 6% TAC increase.

Uncertainty about the new charges lasted up until the last moment. Next year may be no different, with a new battle on TACs on the horizon. DB InfraGO wants them to grow to 5.40 euros per driven kilometre, an increase of almost 40%. Furthermore, Die Güterbahnen explains, a pending European Court of Justice decision on preferential TAC policy for local passenger rail may also change the context for 2027.

“Rail freight cannot rely on parliament standing up to DB InfraGO every year”, comments policy officer at Die Güterbahnen Oliver Smock. “The German track access charge system has spiraled out of control in recent years and would continue to lead to explosive increases. Long-term reliability and prices acceptable in the competitive transport sector can only be achieved with a genuine track access charge reform.”

It’s not the operators’ fault

The issue is that rail freight in Romania has decreased 12% between 2024 and 2023, with the trend continuing this year, according to Frasinoi. This decrease, he argued, is likely to be reflected in the intermodal sector as well, hence the loss of the TAC subsidy scheme. This approach, however, assumes that the drop in volumes is mostly the fault of the operators, as they are being punished by losing the discount.

On the other hand, Frasinoi claims that the issue lies with CFR. The main issues are “a network suffocated by speed restrictions, rehabilitation works started and not completed for years, and ‘quick wins’ interventions that have dramatically reduced capacity and doubled transit times.” For example, he explained that intermodal traffic along routes where there were no infrastructure works that would generate significant capacity restrictions, intermodal volumes increased by 20% for some operators.

The plan is the following: The German government wants to reduce infrastructure manager DB InfraGO’s maximum return on equity by three percentage points. Because of how the German TAC system works, that would limit how much profit DB InfraGO can legally make on their track access charge income.

Now, explains German private rail freight association Die Güterbahnen, DB InfraGO is entitled to a maximum profit margin of 5.2%. Reducing that by three points would lower that number to 2%, which would limit next year’s TAC costs for rail operators in Germany.

Still a 16% increase

“Limit” is the key word here. Such a step “is far from sufficient to stabilise track access charges”, explains Die Güterbahnen. “On the contrary – they would rise again by up to 16%, following the 16.2% increase last year.”

The rail freight association laments the ever-growing and unpredictable “rail toll”, whereas the road sector has remained stable and predictable for several years. “Imagine buying a car today – but not finding out what it actually costs until six months from now”, rail policy offer Oliver Smock said. “That’s exactly how the current track pricing system works – and it’s unsustainable for companies.”

Die Güterbahnen calls for DB InfraGO’s return on equity to be set at 0%, “thus completely foregoing any return on investment.” That would reduce the cost burden for rail freight by around a billion euros, according to the association.

Race against time

The hope is that the German parliament will succeed in revising and passing the law ahead of the timetable change on 14 December, so that rail freight can immediately benefit. “In the medium term, the federal government must initiate the fundamental reform of the track access pricing system announced in the coalition agreement – ​​with stable prices, genuine efficiency incentives, and a consistent focus on the common good.”

The association concerns stem from the fact that TAC in Germany will be 16.2 per cent higher, the largest price increase ever for the country. The rise in track access charges is due to the decision to bump DB’s “equity by 10.5 billion euros in 2025,” VPI explained. “The result would be, among other things, lower utilisation of wagon fleets and workshops – and thus an existential threat to these companies”, the association said.

The association’s Managing Director Peter Westenberger says: “The 2016 TAC system is collapsing right before our eyes. One price shock after another. Instead of the usual two per cent annual TAC increase, the common good-oriented DB InfraGO wants an average hike of 6 per cent in 2025 and 20 per cent in 2026.”

Loans and equity injections instead of subsidies

In early August, Die Güterbahnen warned that the German government’s intentions to reduce the federal budget deficit would be destructive for the rail sector. As part of the plans, Deutsche Bahn would no longer get construction cost subsidies. Rather, it would have to rely on loans and equity injections. Both of those options would inevitably lead to growing track access charges, said Die Güterbahnen.

Private rolling stock industry association VPI concurs. “Anyone who seriously wants to shift traffic to rail must not do one thing: Equity injections instead of construction cost subsidies. The latest traffic light coalition 2025 budget proposes exactly that”, the association says.

As part of the German pricing system from 2016, DB InfraGO has the right to a profit margin based on its equity. The federal government now plans to replace subsidies with equity injections. In turn, the profit margin that the company is entitled to will grow, which leads to higher track access charges.

Both VPI and Die Güterbahnen are calling for a reform of the German TAC system. A lawsuit was launched by market parties earlier this year to force a reform of the system.

The German government has decided to prolong TAC subsidies until at least 2028, but the exact amount of the future subsidies remains unclear. As track access charges will grow substantially, rail freight association Die Güterbahnen is hoping for subsidies to grow accordingly.

“For the upcoming 2025 federal budget, we are calling for track access charge subsidies to be raised to 350 million euros per year again, as was the case before 2024. However, if the price increases come as they are currently threatening, even 350 million euros would only be a drop in the ocean”, a spokesperson of Die Güterbahnen says.

A surprise subsidy cut

Track access charges in Germany stand to grow by 16 per cent in 2024 and may even grow by 50 per cent by 2026. It is a major financial burden on the German rail freight sector. To make matters worse, the sector got an unwelcome surprise as the German government decided to reduce TAC subsidies from 350 million euros to 179 million euros for 2024.

“The decision to cut the amount for 2024 to just 179 million euros came as a surprise to us and it was only raised by another 50 million euros under great pressure from us”, explains the spokesperson of Die Güterbahnen. For 2024, rail freight thus secured 229 million euros in TAC subsidies.

Ideally no TAC subsidies at all

Ideally, however, TAC subsidies would not be necessary at all, according to Die Güterbahnen. “Our basic principle is that the track access charge system should function in such a way that state subsidies are not necessary in the first place”, the association explains.

“We are committed to changing the track access charge system asap. It is not sustainable to keep an obviously poorly functioning system running and then to keep adjusting it with subsidies. However, as a reform of the track access charge system will take time, we see no alternative but to raise the track access charge subsidy to at least 350 million euros again in 2025.”

It is unclear how large the subsidies will be from 2025 onwards. The exact amount remains a subject of budget negotiations. What is known, however, is that TACs will grow by 16,2 per cent in late 2024 and into 2025. By 2026, TACs could increase by 50 per cent, according to German rail freight association Die Güterbahnen. Against that background, the rail freight sector is surely hoping for subsidies to grow accordingly.

“The federal government is keeping a close eye on the development of track access charges and their impact on rail freight transport”, according to Michael Theurer, the German parliamentary state secretary for transport. “Despite limited financial resources, we are therefore continuing to work towards adequate track access charge funding in this segment and are making around 229 million euros available for 2024.”

Also read:

• German rail companies start lawsuit after planned 16,2% TAC increase
• TAC increases across Europe might kill rail freight operators
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To try and fix this issue, the French Transport Regulatory Authority suggested that an increment in TAC should be conditional on achieving minimum thresholds of service quality. “​​As part of the revision of the performance contract, AFRA is currently working to include in it a few performance indicators adapted to freight”, Garcin-Berson added.

A more problematic situation for passenger operators?

If for rail freight the problem is not the amount to be paid, but rather the quality of service. The sector is already exempt from paying TAC surcharges, and the costs of use are somewhat covered by the state, as already mentioned. On the other hand, rail passenger operators are facing TAC increases that might lead to significant rises in ticket prices.

Régions de France, the institutions grouping the French regions, stated that the TAC increases proposed represent “a serious danger in terms of sustainability for the purchasing power of rail users as well as for regional finances”. The regions are saying that they might not be able to financially cover the proposed gradual increase in TAC, estimated at 8 per cent per year over the next three years.

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• French road-rail traffic up 18% in Q1 2024, but only because 2023 was bad
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For that reason, charges for the transport of goods on the Kazakh railway network need to be higher, according to Sklyar. The current system is said to be out of balance: “It is very difficult to find a balance, it is obvious that industry is the most important thing for us. Transport, with all due respect, may they not get offended, is a service.”

Covering KTZ’s debt

Tariffs on the Kazakh railway network have doubled over the past eight years, yet KTZ has not been performing well financially. Last year, the company made a loss of 329 billion Kazakh tenge (675 million euros), even with a fourfold revenue increase and three price hikes in 2023 throughout the year. The company’s debt currently amounts to nearly 6 billion euros, which KTZ earlier this year referred to as the primary reason for price hikes.

In March, businesses and parliamentarians protested KTZ’s intention to further increase charges on the rail network, citing concerns about the country’s competitiveness. Minister Roman Sklyar cancelled a planned rail tariff increase for mining products, but KTZ returned with a request for a general 20,3 per cent tariff hike in April.

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• Kazakh Xi’an terminal boosts Middle Corridor traffic by 70%
• Fuel, electricity and labour costs behind new KTZ cargo fee hikes
• Kazakhstan to introduce AI and build 5 border hubs by 2030