Potential of Economic Incentives to Reduce CO2 Emissionsf G d T tfrom Goods Transport

Professor Alan McKinnonHeriot-Watt University

EDINBURGH, UK

International Transport Forum LeipzigLeipzig

28th May 2008

Forecast Growth of Freight Transport Activity by Region 2000-2050

Source: World Business Council for Sustainable Development - Mobility 2030 report

CO emissions per tonne km also increasingCO2 emissions per tonne-km also increasing

Stabilisation Wedges

applied to freight transport operations

increased fuel efficiency

improved load consolidation

switch to lower carbon modes

ssio

ns

more localised sourcing

arbo

n em

isC

a

TimeTime

Adapted from Pacala and Socolow, 2004

Weight of goods

Decarbonisation Framework for Freight Transport (‘9-lever model’)

produced / consumed

Weight of goods transported by road

modal split

average handling factornumber of links

Similar analyses for other modes

supply chain structure

Road tonnes-lifted

Road tonne-kms

average length of haullength of links

vehicle carrying capacityby weight / volume

efficiency of vehicle routing

average load on laden trips

average % empty running

by weight / volume

vehicle utilisationon laden trips

level of backhaulageTotal vehicle-kms

distribution of vehicle-kms by vehicle size, weight and type

fuel efficiencyTraffic conditions timing of deliveries

level of backhaulage

other factors

carbon intensity of fuel

Fuel consumption

CO

deliveries

carbon intensity of fuelCO2

aggregate key parameter determinant

Freight Transport CO2 : Aspirational Scenarios for UK

B li 2004

Volume of freight movement (tonne-kms) + 7%

Baseline 2004

g ( )

Modal shares of tonne-kmsd 59 5 55 7%

Fuel efficiency:road: 59.5 → 55.7%rail: 8.6 → 10.4%water: 23.7 → 24.4%

Lorries +10%Vans + 5%Rail +10%

27% reduction in

CO2

Vehicle utilisationLorries + 10%Vans + 25%

Carbon intensity of fuelLorries -10%

Rail + 10%Water + 10%

Lorries -10%Vans -20%

Source: McKinnon / Commission for Integrated Transport 2007

Public Policy Levers on Key Freight Transport Variables

Government measureskey freight parameters

infrastructural investment in alternative modes

-land- use planning controlsSpatial structure of the supply chain

F i ht d l lit

modal transfer grants

-revenue-support for alternative modes

Freight modal split

Vehicle routing

road pricing

lorry routeing schemes

support for improved vehicle designVehicle utilisation

relaxation of vehicle size / weight regulations

promotion of road telematics

Exposure to congestion

F l ffi i

duty reductions for alternative fuels

regulations relating to vehicle emissions

relaxation of night delivery restrictionsFuel efficiency

CO2 intensity of energy sourceduty reductions for alternative fuels

Taxation policy and advice / exhortation affects all variables

Sensitivity of Truck Fuel Efficiency to Fuel Price Increases

average vehicle km/litre

Average fuel efficiency of trucks in the UK

1 05

1.1

1.15

0)

fuel duty escalatorrise in oil

prices an industry antogonised….

0.95

1

1.05

Inde

x (1

990=

100

0.85

0.9

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Source: UK Dept for Transport

Fuel Duty Escalator: 35% in diesel prices over 6 years

Market price rise since Sept 2007: 30% in diesel prices over 8 months

UK Government ‘Freight Best Practice’ ProgrammeUK Government Freight Best Practice Programme

www.freightbestpractice.org.uk

Cost-effectiveness of the UK Freight Best Practice Programme

6%20%1 vehicle

Used programmeAware of programmeFleet size

6%20%1 vehicle

Used programmeAware of programmeFleet size

24%49%15+ vehicles

9%24%2-14 vehicles

24%49%15+ vehicles

9%24%2-14 vehicles

9%24%All fleets

24%49%15 vehicles

9%24%All fleets

24%49%15 vehicles

Average fuel savings per fleet:

FBP users: £41,000

FBP cost 2004-6: £2m

Non-users: £12,000 Estimated CO2 savings: 240,000 tonnes

Cost per tonne of CO2 saved: £8

Source: Databuild / Dept for Transport

Economic Justification for Freight-related Carbon Abatement Measures

£ per tonne of CO2 saved0 10 20 30 40 50 60 70 80

European Emission Trading Scheme phase 2 £22

0 10 20 30 40 50 60 70 80

Measure 1

Measure 2Supplemented by other

environmental and economic benefitsMeasure 2

Measure 3

Measure 4

Measure 5

Measure 6

Measure 7

Stern social cost of carbon

£72 (2006)

UK government shadow price of carbon £26.50

Typical carbon offset

cost £15

freight-related

Reducing freight movement does not necessarily cut CO2 emissions

Life Cycle Analysis of Food Sourcing Options

Much food production is more energy efficient in New ZealandMuch food production is more energy efficient in New Zealand

New Zealand produce has lower carbon footprint than UK produce

kg of CO2 per tonne

0 1000 2000 3000 4000

Dairy produceI l d t t b

y p

Lamb

Includes transport by deep-sea container

18,000 kms

125 kg of CO per tonne

Apples

125 kg of CO2 per tonne

Onions New ZealandUK

Source: Saunders, Barber and Taylor, 2006

N d t l / CO t d ff b t t t i t d tNeed to analyse energy / CO2 trade-offs between transport, inventory and storage

ITT Flygt – manufacturer of submersible pumps and mixers

2 9 million2 2 millionTotal tonne-kms

2153 km1512 kmAverage length of haul

CentralisedDecentralised

2 9 million2 2 millionTotal tonne-kms

2153 km1512 kmAverage length of haul

CentralisedDecentralised

131.1 tonnes92.2 tonnesCO2 emissions

2.9 million2.2 millionTotal tonne-kms

131.1 tonnes92.2 tonnesCO2 emissions

2.9 million2.2 millionTotal tonne-kms

Source: Kohn 2005

Potential CO2 benefits from inventory centralisation:Lower inventory levels:Lower inventory levels:

less energy use in storage (heating, refrigeration, lighting etc.)

less wastage of productless wastage of product

Less warehouse space required:

less CO2 in construction, operation and maintenance2 p

Larger warehouses can be more energy efficient:

emit less CO2 per unit of throughput

Off-shoring of Manufacturing and the Upstream Supply Chain

Global redistribution of freight-related CO2 emissions

Off shoring of Manufacturing and the Upstream Supply Chain

retail distribution centremain assembly plant

component supplier

warehouseprocessing plant

Export of carbon-generating activities reducing UK’s ‘carbon footprint’

Embedded carbon in imported products

UK’s contribution to external GHG emissions

36% of total

Source: Helm, Smale and Phillips, 2007

Variations in CO2 Intensity by Freight Transport Mode

Assessing the carbon benefits of freight modal shift

Variations in CO2 Intensity by Freight Transport Mode

1600

1800

Assumptions about average load factors ?

1200

1400

e-km

Line-haul or door-to-door ?

Primary energy source of electricity ?

800

1000

gm p

er to

nne

Inclusion of infrastructure development / maintenance ?

Passenger / freight split (bellyhold air and ferries) ?

400

600

CO

2

Lack accurate modal cross-elasticity values

0

200

reigh

t

Vans

HGVs

rway

s

pping Rail

pelin

e

Airfre V HG

Inlan

d wate

rwCoa

stal s

hipp

Pipe

Source: McKinnon / Commission for Integrated Transport

Optimising environmental trade-offs in a low carbon economy

Longer and heavier vehicles Reduction in carbon intensity of road freight (CO2 gm / tkm)

Diversion of freight from

rail and water

Generation of additional freight

movement

Net change in CO2

CO2 versus other emissionsCO2 versus other emissions

Truck engineengine energy efficiency rating

Source: MAN AGMAN AG Sept 2007

Euro 6 standard for heavy duty vehicles will carry 2-3% CO2 penalty

Freight transport’s minor contribution to corporate carbon footprintsgm of CO2 per newspaper

182 gm

cocoapackaging Cadbury cocoa1% milk

1%

sugar10%

inhouse distribution4%

packaging2%

ySchweppes

CO2 emissions

Source: Carbon Trust

vegetable fat20% inhouse production

62%62%

http://www.cadburyschweppes.com/EN/EnvironmentSociety/Environment/Carbon_Footprint_CDM.htm

‘Every little counts…’

Conclusions

• Broad range of decarbonisation measures and incentives available

• Close correlation between CO2 and cost reductions

• On a life cycle basis, minimising freight movement need not minimise CO2

• Lack data on:

– relative cost effectiveness of carbon abatement measures in freight transport

– modal demand elasticities and cross-elasticities in the freight sectorg

• Economic incentives should be targeted on modal choice, vehicle utilisation and

fuel efficiency: limited financial leverage on logistics / supply chain structures andfuel efficiency: limited financial leverage on logistics / supply chain structures and

wider business trends

• Need to co-ordinate freight transport measures with wider decarbonisationNeed to co ordinate freight transport measures with wider decarbonisation

initiatives

Contact details

Logistics Research CentregHeriot-Watt University

EDINBURGH UK

A C M Ki @h kA.C.McKinnon@hw.ac.uk

http://www sml hw ac uk/logisticshttp://www.sml.hw.ac.uk/logistics

www.greenlogistics.org