Market regulations

Summary

Driver description
Interactions with the Economy Domain
Interactions within the Social Domain
Interactions with the Environment Domain
Interactions with the Technology Domain
Impacts on Mobility and Transport

Driver description

The influence and the role of market structures on future transport development is analysed through the relative importance of rules and regulation on (more or less) market liberalisation.  The interactions with the various socio-economic domains and finally on mobility and transport are developed according to socio-economic scenarios ranging from lower level of regulation (i.e. liberalised markets) to stricter rules and regulation (regulated markets).

The sources of the scenarios are drawn basically from the following studies:

  • TRANSvisions, Report on Transport Scenarios with a 20 and 40 Year Horizon, (DG TREN, 2009)
  • CPB “Four Scenarios for Europe” study (CPB, 2003).

The two studies have developed the following scenarios, for which the table below summarises the respective types of market regulation envisaged.

Scenario

Market regulation

Characteristics

Hyper-mobility or Induced mobility scenario/Global Economy

Low

Strong market liberalisation

Decoupled mobility scenario /Strong Europe

Medium

Market regulation and international co-operation

Reduced mobility scenario/Regional Communities

High

National and regional market fragmentation

 

Interactions within the Economy Domain

GDP trends

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “International integration and market-oriented domestic policies stimulate labour productivity which grows by 2.1% per year up to 2020 and by 2.0 thereafter. GDP grows rapidly due to significant employment growth. After 2020, growth falls somewhat since GDP growth levels off.” ( Ref: CO_5048)
  • Decoupled mobility scenario (strong co-operation and market regulation). “Annual GDP growth, equal to the sum of productivity and employment growth, thus falls from 3.0% between 2005 and 2020 to 2.7% between 2005 and 2030, and to 2.4% between 2005 and 2050.” (Ref:CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “GDP hardly grows after 2020, with a growth rate near to zero (0.4%) substantially smaller than the 2.2% that Europe experienced in the recent past.” (Ref:CO_5048)
  • “GDP growth in Regional Communities is less than a quarter of that in Global Economy: 0.6% versus 2.4%.” (Ref: CO_1010)
  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “European countries find a new balance between private and public responsibility. Institutions are increasingly based on private initiatives and market-based solutions. Economic integration becomes broader, however, as countries find it in their mutual interest. The European Union finds relatively easy to enlarge further eastwards.” (Ref:CO_5048)
  • Decoupled mobility scenario (strong co-operation and market regulation). “The EU opens its borders further eastwards. Turkey becomes an EU member and, although Ukraine and Russia do not become full members, they become more integrated with Europe.” (Ref:CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “Poor member states from the Central and Eastern European countries are unable to absorb funds because they cannot comply with the complex and demanding administrative procedures set by the EU. Moreover, a large part of the cohesion budget is transferred to richer member states that are unwilling to give up their share.” (Ref:CO_5048)
  • “Economic integration boost trade in Global Economy and Strong Europe. World exports increase by 5½% and 4½%.” (Ref: CO_1010)
  • “Governments must ensure their policies do not actively work against achieving cleaner, more seamless transport by 2030. (...) Poorly aligned fiscal and regulatory instruments create uncertainty in the private sector regarding investments in greener and seamless transport.” (Ref: CO_0284)

Foreign trade, globalisation

  • “The growing integration of national economies into the world’s trading system over the post-war period was driven not only by trade liberalisation but also by falling transportation and communication costs, rising income levels, higher productivity growth rates in tradable compared with non-tradable, and more recently by an ICT-enabled acceleration in the international division of labour linked with the development of increasingly global production systems. All these developments have led to a sharp increase in overall trade flows, underpinned by an expansion in both intra-industry flows and in a range of internationally tradable services” (Ref: CO_5048)
  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “Until 2020, world trade shows an increase of about 6% per year. After 2020, growth falls somewhat since GDP growth levels off. In 2000, almost 54% of all exports by EU countries have destinations within the European countries. Slightly more than 18% is shipped to non-OECD countries (mainly to Asia) while the remaining 28% flows more or less equally to the United States, the rest of the OECD and the Eastern part of Europe (the Central and Eastern European countries, Russia and Turkey).The direction of trade changes drastically in the future scenario. Asia will become a much more important trading partner for Europe during the coming decades, also due to the consistent growth of Asian economies (and primarily China and India). In 2040, about 60% of all European exports have a destination outside Europe, compared with less than 50% in 2000.” (Ref: CO_5048)
  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “The share of services in the economy grows, and the EU maintains its comparative advantage in chemicals and minerals and business services, while the current comparative advantage in agriculture and food – somewhat artificially due to the Common Agriculture Policy – disappears. In contrast, the export pattern of EU becomes more specialised in trade and transport services.” (Ref: CO_5048)
  • Decoupled mobility scenario (strong co-operation and market regulation). “The integration of goods and services markets leads to large trade volumes and changing trade patterns. World exports increase by 4.8% per year until 2020, and by 4.1% thereafter. The larger in the period before 2020 is due to higher GDP growth and trade-liberalisation policies during that period.” (Ref: CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “A general reduction of international trade must be stressed. Many mature European industries are protected from outside competition through trade barriers. This holds in particular for agriculture, which is protected by the Common Agricultural Policy, but also for network industries. The scenario assumes also regional trade liberalisation between the Americas from 2015. In this situation, there will be only small changes in the trade patterns. The share of exports to non-OECD regions increases from 18% in 2000 to nearly 23% in 2040. This comes at the expense of trade with the rest of the OECD. The share of intra-EU trade remains stable because of the elimination of non-tariff barriers between the EU15 countries (the core EU group).” (Ref: CO_5048)
  • Strong Europe and Global Economy scenarios “Market liberalisation and global trade liberalisation are successfully pursued and leads to a reduction in tariffs and non-tariff barriers in 2005 and 2015.” (Ref: CO_1010)

Intensified competition for scarce resources

Market regulation and related strategies are tools designed to stimulate efficiency where competition is not possible, or not suitable to achieve social aims.  Regulatory strategies might be particularly useful when resources are scarce, since competition usually leads to a reduction of costs and therefore to demand of resources.

Fiscal policy

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “Reforms in the labour market, income taxation and social security encourage labour force participation. This applies particularly to elderly workers. Their incentives to participate increase because of reforms in early retirement provisions, tougher eligibility criteria in social security and an increase in retirement age. As ageing tends otherwise to reduce the supply of capital savings fall after 2020 by around 4% points. This is less than in the other scenarios, however because governments increase national savings by prudent government budgetary policies an early reforms in pensions towards individualised defined-contribution schemes.” (Ref: CO_5048)
  • Decoupled mobility scenario (strong co-operation and market regulation). “Savings decline, especially after 2020. This is because the growing retired population dissaves and policies to increase savings cannot fully compensate for this. Indeed, in some European countries, national savings are stimulated by redirecting pension systems toward more funding and/or by sustained surpluses on the government budget.” (Ref: CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “Increasing expenditure on old-age benefits and publicly provided health care pushes European public sectors to their boundaries. Inefficient and large public sectors render sustainable public finance problematic.” (Ref: CO_5048)

Interactions with the Social Domain

Migration flows

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “The EU follows a selective immigration policy by allowing each year a fixed number of immigrants, which ensures that immigrants are high-skilled and they easily enter the European labour market.” (Ref: CO_5048)
  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “Personal services (e.g. home elderly care) continue to be increasingly provided in the richer EU countries by low-skilled immigrants from less well-off European countries or poorer countries outside Europe.” (Ref: CO_5048)
  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “Immigration is facilitated by the reformed, flexible European labour markets, which can easily absorb new workers” (Ref: CO_5048)
  • Decoupled mobility scenario (strong co-operation and market regulation). “Labour mobility is encouraged by the removal of institutional barriers to migration. (Immigration policy is coordinated by the European Union. With a focus on international cooperation and solidarity with other regions, European immigration rules become less strict and immigration flows increase. The reformed, more flexible labour markets are able to integrate the majority of immigrants in European societies” (Ref: CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “Migration is restricted within the European Union. Only a limited number of immigrants from the Central and Eastern European countries move towards the core of Europe.” (Ref: CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “The labour force participation rate falls from 46.7% of the population in 2000 to 40.2% in 2040 and beyond. Apart from ageing, this is the result of the adverse incentive effects of fairly generous social security systems and labour-market regulations” (Ref: CO_5048)

Urbanisation

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “While a significant number of, mainly younger, people thrive on the buzz of living in the urban hubs, tele-presencing and ever more powerful miniature communication devices are increasingly allowing the more affluent to move to the outskirts of towns or to rural areas, accelerating the trend toward urban sprawl” (Ref: CO_5048)
  • Decoupled mobility scenario (strong co-operation and market regulation). “Population, housing density and employment in big cities are rising faster than before. Cities are more compact, widening the range of local opportunities and activities that are accessible without using the car.” (Ref: CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “Large cities start to decline.” (Ref: CO_5048)

Planning

  • “The introduction of a correct pricing system will help in better factoring transport costs into location decisions; even so, however, there is a risk that transport costs are not properly taken into account by planners and that the availability of cheap transport solutions is taken for granted.” (Ref: CO_0015)

Change of lifestyle and values

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “Government regulations to ensure uniformity in supply (e.g. in pensions, housing and so on), are relaxed so as to meet more diversity in lifestyles. Governments remain responsible for the production of pure public goods (basic education, defence, police, justice), but also use the regulatory powers to ensure effective competition on markets” (Ref: CO_5048)
  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “As it concerns the prevailing people lifestyle, in the Hyper-mobility highly connected world, life and work are intense, and the boundary between them is blurred. Some thrive on the buzz of activity that results, but early burn-out is common and stress is a way of life for the vast majority of the EU population” (Ref: CO_5048)
  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “Toward the year 2050, intelligent positioning systems, encryption technology, real-time telepresencing and a shift towards a low-carbon economy have boosted the economy and accelerated consumerism that shows few signs of abating.” (Ref:CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “ Self-help communities have started to emerge everywhere, in the urban and rural environment, to react to the staggering economy and the increasing inflation, which makes individualistic consumerist attitudes unaffordable for an increasing share of people. Local food production and services have increased.” (Ref:CO_5048)

Interactions with the Environment Domain

Climate change impacts

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “Europe’s waste footprint is still far large than Europe is.” (Ref: CO_5048)
  • Decoupled mobility scenario (strong co-operation and market regulation). “A global climate change mitigation policy aiming at reducing the GHG emissions by about 57% in 2050 compared to 2005 levels (corresponding to a atmospheric concentration of about 450 ppm of CO2-eq) caused a reduction of about 0,1% of the indicated annual GDP growth.” (Ref: CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “Carbon emissions have contracted, mostly, simply because far less energy is used than in the later 20th century.” (Ref: CO_5048)

GHG mitigation

  • “Various incentive and pricing schemes can be designed to reduce GHG travel. Road pricing for city centres or highway congestion can moderate traffic and reduce GHG intensive travel. Parking policies, such as park and ride near transit facilities and parking cash-out programmes by employers, encourage higher occupancy travel modes. Incentives by workplaces to promote telecommuting and carpooling can also help mitigate peak time congestion travel. Vehicle pricing in conjunction with improved transit service programmes, such as bus rapid transit, attracts travellers to higher occupancy and thus lower GHG modes.” (Ref: CO_0148)
  • “The political dilemma is to put in place the right economic incentives and regulatory measures that encourage efficient, cost effective transport services for all users. In the environmental debate, the price signal is very important but is not the sole element available to policymakers. Reducing regulations that make it difficult to either implement or simply test new schemes is essential.” (Ref: CO_0284)

Energy availability, production and consumption

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “The vision for the whole Europe is that, by 2050, non-fossil energy sources (excluding nuclear) will account for more than 35% of the total energy supply, with biomass, wind and solar energy taking leading roles.” (Ref: CO_5048)
  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “About half of the EU member States will support the use of nuclear energy. Coal with CO2 capture will be applied on a large scale for the production of both electricity and hydrogen. The hydrogen will be used in the transport sector.” (Ref: CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “Small self powered communities have emerged, especially in the countryside, using wind, water and solar power.” (Ref: CO_5048)

Scarce resources of raw materials

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “Ever increasing consumption of goods and high-impact services means that society’s waste footprint is growing inexorably and unsustainably.” (Ref: CO_5048)
  • Decoupled mobility scenario (strong co-operation and market regulation). “The concept of “zero-waste” society has been fully implemented in 2050, as even the notion of “waste” almost disappeared from the vocabulary. Instead, everything either gets recycled as a raw material for another production processes or returned.” (Ref: CO_5048)
  • “Resource pricing has a large role to play in managing demand for food, water and energy. Prices are kept artificially low by government subsidies or other regulation in many countries, thereby increasing demand. However, even if they were allowed to rise through market mechanisms, prices would not account for many of the negative externalities created by water, food and energy consumption. Both the cost of local impacts (such as the long-run social and environmental costs of resource exploitation) and global impacts (such as contribution to climate change through carbon emissions) should ideally be included in resource pricing. Without accurate pricing to reflect the full cost of resource use, it is likely that unsustainable decisions regarding resource use will continue.” (Ref: CO_0024)

Interactions with the Technology Domain

Technology development in general and innovation diffusion

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “The negotiations in the WTO lead to a successful liberalisation of global trade, including intellectual property and services.” (Ref: CO_5048)
  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “A rapid institutional reform in these countries and a catching up of technology take place. Indeed, a surge of foreign direct investment flows into the Eastern regions of Europe.” (Ref: CO_5048)
  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “As it concerns the development of specific IT and transport technologies, the foundations of hyper-mobility were laid down starting from 2009 with the development of a range of intelligent miniature devices able to connect consumers directly, and continuously, to national area wireless networks.” (Ref: CO_5048)
  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “The lack of international competition in combination with extensive public intervention hurts economic efficiency and hinders development and diffusion of new technologies.” (Ref: CO_5048)
  • “The Global Economy scenario reflects an efficient functioning of markets, both nationally and internationally, which brings static efficiency gains but also dynamic technology gains. In Regional Communities lack of international competition in combination with extensive public intervention hurts economic efficiency and hinders development and diffusion of new technologies.” (Ref: CO_1010)

Advanced Driving Devices

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “In the field of drivers assistance, governments and local authorities worked with car manufacturers to integrate disparate vehicle management systems (on-board driver assistance, automated driving) designed to even out traffic flows and reduce congestion Information systems.” (Ref: CO_5048)

Traffic management systems

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “The development of GPS technologies, driver assistance supported by the interoperable Galileo and GPS systems helped to curb the number of road accidents.” (Ref: CO_5048)
  • “The competitively of railways for international passenger and freight traffic is still hampered to a large extent by lack of interoperability, i.e. different signalling and electrification systems in different countries, and for some countries, different track gauges. Thus, a second major plank of EU policy is to increase the interoperability of networks and control systems to improve efficiency. This involves directives and research into harmonising infrastructure, signalling, telecommunications and data transmission, as well as operational procedures.” (Ref: CO_0254)

Renewable energy production

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “In 2050 the “hydrogen economy” has become a reality. The combination of increased nuclear capacity and the development of renewables had reduced dependence on carbon-based fuels, which however remain the larger share of energy sources.” (Ref: CO_5048)

Energy efficiency

  • Hyper-mobility or Induced mobility scenario (strong market liberalization). “As it concerns the future development of vehicle technologies, in the hyper-mobility scenario, starting from a relatively modest level, a steadily increasing proportion of motive power has been supplied electrically. A growing proportion of engines has been equipped with electric starter/generator systems (hybrid vehicles), thereby improving emissions and fuel consumption.” (Ref: CO_5048)

Impacts on Mobility and Transport

Rail transport regulation

  • “One of the key EU policies affecting rail traffic management has been opening of the rail market, involving the separation of rail infrastructure and train operations at national level and allowing new operators to provide passenger and freight services. This opening of networks has largely been achieved for rail freight services, whereas open access passenger services only exist in certain Member States so far, although public service contract awards to private train operators for passenger network operation are more common. This market opening has increased demands on rail network management, with the need to allocate and manage train slots to different operators, while at the same time ensuring maximum safety and reliability of passenger and freight services.” (Ref: CO_0254)

Impacts of transport demand (long distance)

  • “Decoupled mobility scenario (strong co-operation and market regulation). “In the transport sector, a significant decrease of transport demand can be observed and bothfor international and national transport as well as for passenger and freight transport, with technology substituting for mobility (through e-commerce and e-work).” (Ref: CO_5048)

Impacts of transport demand (short distance)

  • “There is an increase in the demand for short-distance local mobility, both for work and for leisure. This is, however, primarily met through non-motorised transport. Non-motorised transport as well as shared modes of transport are explicitly supported through policy, i.e. tax-breaks, company transport plans, as well as RTD and ICT. Social inclusion as well as punctuality and reliability rather than speed are high on the transport policy agenda.” (Ref: CO_5048)

Impacts on frequency and average distance

  • Reduced mobility scenario (European market fragmented in a number of trade blocks). “Transport is slow: energy efficiency matters far more than speed. Economic production and development as well as transport are re-organised according to ecological principles supporting strong sustainability – in general and with regard to transport – and new forms of social organisation with less work, more leisure, strong voluntary sector and “togetherness” in consumption (e.g. co-housing, car-sharing, etc.) emerge.” (Ref: CO_5048)

Impacts on transport intensity

  • “The more the globalisation process deepens, and the more intensive the effects of globalisation, the more transport-intensive the given economy will become. The growth of freight transport intensity certainly increases the ’environmental bad‘, i.e. the load on the environment; consequently, we have to detach the negative effects resulting from increase of transport performances.” (Ref: CO_5055)

Impacts on the use of private means of transport

  • As people aspire to sustainable living, purchasing patterns would reflect ecological sensitivity, consumerism would abate and travel patterns would shift toward mass transport (Ref: CO_1010)

Impacts on air transport

  • “Opening of the markets saw the rise of low-cost, low-service operators. The future may see something different – hybrid companies that operate services for all parts of the market.(...) Low cost airlines have arisen even without complete liberalisation and have quickly transformed into hybrids with the addition of long haul operations. Such changes have a profound effect on airports, as hubs require very different facilities from other airports. Changing airline business models will dictate future airport development.” (Ref: CO_0284)

Development of infrastructures and technologies

  • “It is evident that without strong government regulation, putting public interest and common good before individual concerns, transport markets will tend to develop along the lines of business as usual and little progress will be made in developing infrastructure and technologies to reduce the negative impacts of transport.” (Ref: CO_0159)