Carriers and forwarders say sustainable supply-chain goals are faltering at the procurement stage
To assist shippers in reducing their ecological impact, freight companies are expanding their selection of environmentally friendly options, including low-carbon fuels for planes and ships, as well as electric trucks. However, despite these efforts, shipping executives worry about their clients’ potential reluctance to adopt these alternatives due to their higher costs. The cost of implementing greener alternatives, such as zero-emission vehicles, can more than double the transportation expenses.
Discussions about sustainability sometimes stumble when they reach procurement departments, where proposals to use eco-friendly aviation and marine biofuels for transportation are carefully scrutinized. Eco-friendly fuel proposals are sometimes rejected in favor of less expensive but more environmentally damaging alternatives.
As sustainable alternatives to conventional freight transportation begin to move into actual operations, the transportation and logistics industry is facing a growing division between its environmental aspirations and its ability to put those aspirations into action. This gap is becoming increasingly apparent, underscoring a critical challenge facing the industry.
Many organizations in the transportation industry feel pressure to make significant investments in new fuels, infrastructure, and equipment in order to reduce carbon emissions, which can be quite costly. In fact, the maritime industry alone is expected to spend around $3 trillion over the next few decades to eliminate emissions, according to Clarksons, a shipping services provider.
Presently, there is a lack of agreement among industry stakeholders on how to finance the essential modifications. A recent study by Boston Consulting Group revealed that approximately 82% of companies are open to paying more for sustainable shipping options. However, the extra cost they are willing to bear is insufficient to cover the expenses necessary for a substantial decrease in emissions.
Hilldrup is one such company investing in sustainability initiatives. “All of our corporate clients now and in the future want to partner with a company that is eco-friendly and good corporate citizens,” says Robert Gallucci, GMS, senior vice president of client engagement.
“It’s very costly to buy electric and biofuel trucks,” Gallucci says. “Not to mention maintaining these trucks. Most transportation companies will have to find a way to cover the cost of the investment.”
Industry experts report that electric trucks are approximately three times more expensive than conventional trucks and can be particularly costly in regions of Europe where electricity prices are high. Additionally, the use of marine and aviation biofuels comes at a significantly higher cost than traditional fuels.
It is possible that the sluggish progress in curbing emissions can be attributed in part to the shortage of alternative fuels and environmentally friendly modes of transportation, including planes, ships, and trucks. Nevertheless, companies are still looking to boost their investment in sustainable practices. The extent of these advancements will rely heavily on whether or not customers are willing to pay extra for eco-friendly shipping methods.
Numerous freight and logistics companies have emphasized the necessity for greater governmental support to foster the requisite investments needed to improve the availability of sustainable transportation alternatives. Additionally, governments worldwide are enacting regulations to manage and augment green freight initiatives.
California has announced plans to gradually eliminate the use of diesel trucks at its ports, with the aim of exclusively using hydrogen- and battery-electric trucks by 2035. Meanwhile, the Biden administration has proposed more stringent emissions standards for heavy-duty trucks.
On government mandates, Hilldrup says, “When the government gets involved and issues federal mandates that require transportation companies to have eco-friendly trucks and equipment to operate, then we may see a tariff charge to help offset the cost.”
As you can see, regulators are exploring ways to encourage sustainable practices in the shipping industry. For instance, the European Union is planning to introduce a carbon-emission tax on ships that dock at its ports beginning next year.
EU Introduces New Targets for Near-Zero Emissions in Trucks and Coaches by 2040
New targets have been set in the EU to reduce pollution in road transport, which is responsible for a fifth of the bloc’s greenhouse gas emissions. As part of these targets, trucks, and buses will be required to reduce their emissions to almost zero by 2040.
In February, the European Commission introduced more stringent CO2 limits for heavy goods vehicles, mandating that new trucks reduce emissions by 90% by 2040 and all new city buses have zero emissions by 2030. The objective is to align the transportation sector with the European Union’s target of achieving zero net greenhouse gas emissions by 2050, as well as to decrease demand for imported fossil fuels.
According to the commission’s proposal, manufacturers would be required to reduce the average CO2 emissions of new trucks sold by 90% compared to 2019 levels from 2040. Although some EU countries, which must negotiate the final law with the European Parliament, have expressed that zero emissions by 2040 is too soon for manufacturers, the 90% target falls short of the zero-emissions objective sought by countries such as the Netherlands.
Frans Timmermans, the EU’s climate policy chief, stated that the bloc did not recommend a 100% emissions cut because of uncertainty regarding when zero-emission technologies would be accessible for all trucks, including those operating in challenging driving conditions such as mountainous terrain.
Is a Sustainable Future Possible for the Freight Industry?
Hilldrup’s Gallucci says that while currently he does not believe that clients are willing to pay additional fees for biofuels or electric vehicles, “it may happen in the future that transportation service providers have to build in a fee to cover the expenses.”
Many in the industry are anticipating a future where clients are willing to pay higher prices for sustainable shipping methods. They recognize that consumers are placing a greater emphasis on sustainability. Europe’s seven major truck manufacturers have made a commitment to cease the sale of vehicles that generate emissions by 2040. But reaching green freight goals is not always easy.
Among the problems to solve is the assertion that decarbonizing large trucks are more challenging than passenger cars because heavy loads and long distances make battery-powered engines less practical for larger vehicles.
Policymakers are also facing a challenge in setting targets for the freight industry, as excessively strict targets could negatively impact the supply chain for goods and services. Many freight companies are small or medium-sized businesses that may not have the financial resources to easily upgrade their vehicles.
The world is slowly working toward using freight transport with no emissions. Consumers are becoming more aware of environmental issues, and businesses are making a commitment to being eco-friendly. All these factors are propelling the industry toward zero-emission freight transport.