Kühne Logistics University is a private university. Its focus lies in the fields of Logistics and Leadership.
Climate change is receiving extensive news coverage these days. Scarcely a day passes without news of a major new discovery by climate scientists, an extreme weather event, an environmental protest or a new initiative to cut greenhouse gas (GHG) emissions. Some industries are regularly accused in the media of being climate-unfriendly; the fossil fuel industry obviously, but also livestock farming, aviation, fast fashion, etc. Logistics has so far avoided coming under this climate scrutiny. This is surprising as it represents around 10‑11 percent of global CO2 emissions, around 90 percent of which come from freight transport. According to the International Transport Forum/OECD, global CO2 emissions from the movement of freight could more than double by 2050 unless radical new policies and practices are adopted. So the decarbonisation of logistics really merits a bit more attention.
There may be several reasons for logistical activities not featuring more prominently in climate change discussions. In the first place, logistics, by which I mean the movement, storage and handling of materials, is highly diffuse and often not seen as an industry in its own right. For the vast majority of companies, though clearly not Trafigura, logistics is an ancillary activity that represents a relatively small share of their total carbon footprint. Their natural inclination is to concentrate decarbonisation efforts on the core activities from which most of their GHG emissions emanate.
A second reason may be that logistics emissions are perceived as being relatively difficult and expensive to mitigate. Logistics is, after all, very heavily dependent on fossil fuels, particularly liquid fuels that will be hard to replace with low-carbon electricity and sustainable biofuels. Logistics facilities like warehouses, ports and freight terminals drawing power from national electricity grids indirectly benefit from the decarbonisation of these grids and can supplement this with ‘micro-generated’ zero-carbon electricity from on-site wind turbines and solar panels. But collectively these fixed assets account for only around 10 percent of logistics’ carbon footprint. The real challenge lies in decarbonising the movement of freight, particularly by sea, air and long distance road haulage.
Another possible reason for logistics not yet coming under the climate change spotlight is the fundamental contribution that it makes to economic development and social well-being. There has traditionally been a very close relationship, at a national level, between economic growth and the growth of freight tonne-kms. Governments are therefore afraid that any attempts to curb freight traffic growth might have an adverse effect on the economy. Research has shown, however, that it is possible to decouple both GDP from freight tonne-kms and tonne-kms from carbon emissions in ways that are cost-effective, at least in the short to medium term. So it would be wrong to take the current and forecast amounts of freight traffic, and the related emissions, as a given and seek to exempt logistical activities from climate change mitigation efforts. In terms of decarbonisation, logistics as a sector must ‘pull its weight’.
This has already been recognised by, for example, the International Maritime Organization. In April 2018 this UN body committed to cutting CO2 emissions from international shipping by 50 percent by 2050 against a 2008 base-line. It is estimated that this will require a daunting 70 percent reduction in the carbon intensity of shipping by then. This presents a formidable challenge for a sector with assets that are typically replaced on
a 25-30 year cycle, with an addiction to cheap bunker fuel and with limited scope for a major switch to zero carbon energy sources. Nevertheless, a recent review of 150 maritime decarbonisation studies offers grounds for hope. It suggests that CO2 emissions from ships could be reduced by 39 percent by 2030 and 73 percent by 2050 relative to business-as-usual emission levels in those years.
The gradual phase-out of fossil fuel traffic, which according to UNCTAD represented just over 40 percent of all maritime trade in 2017, will also help to bring down these emissions.
The prospects of achieving low, or even zero, carbon freight movement by road and rail over the next few decades look much more promising. In some countries, the electrification of local delivery operations is already well underway and taking advantage of the diminishing carbon content of grid electricity. It used to be thought that battery power would be confined to small trucks and vans with a limited range and stop/start duty cycles. Now the powering of heavy, long haul trucks with lowcarbon electricity is considered a viable proposition. This is partly because of quantum improvements in battery technology but also because the electrification of highways and development of a new generation of trolley trucks has been shown to be a relatively costeffective option. Prototype fuel-cell trucks are also being trialled using electrolysed hydrogen as a lowcarbon
energy carrier. All three of these technologies will contribute to the decarbonisation of long-haul trucking though it is unclear in what proportions.
The railways are by far the most electrified freight transport mode with around half of all rail freight moved by electrically-hauled trains. This permits the direct transmission of low-carbon electricity into much of the rail network. The proportion of the network that is electrified has been steadily rising, except in North and South America where it is tiny and stable. In the US, locomotives powered by batteries and hydrogen fuel-cells are being trialled and may offer an alternative route to rail freight decarbonisation.
Worldwide, rail already has an average carbon intensity many times lower than that of trucking, which largely explains the strong desire of government policy-makers to shift as much freight as possible from road to rail. Analysis of the Nationally Determined Contribution (NDC) statements submitted by signatories to the 2015 Paris Climate Accord reveals that modal shift was by far the most frequently mentioned decarbonisation initiative for freight transport. In most countries, however, rail has actually been losing market share to road, despite government campaigns promoting a reversal of this trend. Historical experience suggests that using freight modal shift as a decarbonisation policy tool is going to prove much harder than many politicians think.
It is not only policy-makers that will have to change their mindsets on freight decarbonisation. Many logistics and supply chain managers will also need to alter their views on the subject. First, they need a greater sense of urgency. The Intergovernmental Panel on Climate Change in its highly influential report of October 2018 emphasised that global warming must be kept within a 1.5°C temperature rise between 1850 and 2100 and that this will entail a 50 percent reduction in CO2 emissions by 2030. Failure to achieve deep CO2 reductions by then will result in us exceeding the ‘carbon budget’ for 1.5°C and having to invest heavily in expensive and, in some cases, risky ‘negative emission’ schemes to remove much of the CO2 already in the atmosphere. So great is the risk of crossing climatic tipping points that the current generation of managers cannot leave tough decarbonisation decisions to the next.
Corporate views also need to change on targets, economics and priorities. Almost all the carbon reduction targets currently being declared for logistics are expressed in terms of carbon intensity – i.e. emissions relative to the level of activity. This is understandable as businesses are naturally reluctant to set targets that might constrain their future growth. However, governments – and the planet – require absolute reductions, preferably leading to net zero emissions by 2050. This will require a fundamental change in the way targets are defined and delivered. Carbon intensity targets will need to be aligned with efforts to keep total emissions within particular limits by specified dates, something that the Science Based Targets initiative (SBTi) is currently promoting. On economics, it is now widely accepted that many carbon-reducing measures also save money and so fall into the virtuous category of ‘low-hanging fruit’. Regrettably, harvesting all this fruit will not solve the problem. Keeping logistics-related emissions within 1.5°C, or even 2.0°C carbon budgets in the medium term and driving them down to net-zero by 2050 will require economic trade-offs and sacrifices. This in turn will demand a re-ordering of corporate priorities to make climate change mitigation one of the overriding goals of businesses in the coming decades.
Professor Alan McKinnon
Kuehne Logistics University, Hamburg