How Will New Emissions Regs Impact the Freight Industry?

Categories: BCO/Shipper.

With the near certainty that Joe Biden will be the next U.S. president, eyes are turning toward carbon emissions regulations that will impact the freight industry.

Experts predict a focus on vehicle emissions, specifically tight standards for trucks and incentives to replace fossil-fuel powered vehicles with electric ones. There is also the possibility of federal regulations on emissions for retailers and shippers, with a focus on Scope 3 emissions that come from the supply chain.

While tighter standards are undoubtedly good for the planet, a new regulatory regime has the potential to shake up the shipping and logistics industry. As pressure from the federal government, large economies like California, and consumer demand increases, large companies will be looking for ways to cut emissions — and many will heavily scrutinize their supply chains.

The most likely scenario is that new regulations (and new spending and support from the public sector) will accelerate several sustainability trends that are already under way in the freight industry. 

Let’s take a look at some of those trends:

Finding alternate fuel sources for shipping

As electric truck technology improves, more companies will adopt ultra-efficient big rigs that can be powered by renewables such as wind and solar at charging stations.

International shipping is a whole different animal. Container ships aren’t easily converted to renewable sources due to the physical limitations of batteries — no battery pack currently in production can power a container ship across the Pacific. So instead the focus is on finding alternative fuel sources that can get ships from point A to point B while reducing carbon output.

There are now several contenders vying for that highly lucrative crown. Some front runners include:

  • Hydrogen - An emerging solution for replacing oil and gas in utilities, hydrogen fuel is also being introduced for passenger cars. It creates zero CO2 emissions and is widely available in the atmosphere. However, hydrogen fuel can only be stored in low temperatures or under high pressure.
  • Ammonia – An easier-to-transport alternative to hydrogen, ammonia is easy to produce and less volatile. However, it has lower power yield, and is also toxic for both humans and marine life.
  • Methanol – Already in use on some ships, this fuel is easy to store in non-pressurized tanks, and it can be cleanly produced. It is, however, quite expensive to produce in a fuel grade.
  • Nuclear – An old favorite, nuclear power creates no greenhouse emissions and can run a large vessel on the open water for 20 years or more without refueling. These days, more than 40% of U.S. Navy vessels run on a nuclear reactor. However, it does come with a well-earned bad reputation.

Another alternative that is growing in popularity is biofuel, which neutralizes emissions through large scale crop production.

Recently, DHL announced that they would focus on creating a marine biofuel program for their container ships. Biofuels are seen as a short-to-medium term replacement for fossil fuels in hard-to-power spaces like transoceanic shipping,

However, current biofuel production can’t sustain the shipping industry. In order to meet demand, biofuels would need to grow substantially.

Also, more than other alternatives, biofuel is highly susceptible to climate upheaval. A severe storm or long-term drought can impact crop production, even putting food and fuel production interests in competition with each other.

No more empty miles

According to FreightWaves, empty miles accounted for about 17% of greenhouse gas emissions in the U.S. in 2017. That alarming amount of waste is something many firms are looking to get under control.

Driving empty trucks to pick-up sites (a.k.a. deadheading) is a lose-lose-lose for the shipper, the trucking company, and the planet. That’s why full truckloads (FTLs) are among the biggest sustainability targets in logistics.

Thankfully, new technology solutions are emerging that will enable different shippers and trucking companies to coordinate and share loads to reduce their empty mileage. Increased visibility into empty-mile costs due to the increase in big data analysis by logistics companies is also helping push these initiatives forward.

Sustainability at the port

Port activity can account for huge amounts of emissions and localized pollution. So, it’s no surprise that many ports around the world have recently announced sustainability initiatives.

The Ports of Los Angeles and Long Beach have historically been a major regional polluter. Recently, the port system has announced lofty emissions targets aimed at shifting drayage and transportation methods to sustainable energy sources.

A key element in this action plan is the Clean Trucks Program, which aims to pressure shippers into adopting low-emissions vehicles by phasing out truck models older than 2014. Add in the new statewide electric trucking mandate and things are looking a lot greener at the port.

Producers and retailers get more aggressive

The majority of pressure on logistics companies isn’t coming from government regulation — it’s coming from retailers themselves. As consumers increasingly prioritize sustainability in their buying decisions and legal liability for climate damage becomes more of a risk, companies are driven to reduce their carbon footprint.

Of course, the supply chain makes up a substantial portion of total carbon emissions for a retailer like Walmart or Target. To get a leg up, many are pushing their logistics partners to hit rigorous emissions targets.

This push among the big players incentivizes shippers, 3PLs, and other supply chain companies to make changes that accelerate sustainability for everyone they partner with. It also puts smaller companies in a position where they need to compete on a new plane.

Thankfully, there are experts in the field that can help.

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