Reducing Carbon Emissions – A Strategy For The Logistics Industry

The Logistics Industry is a major contributor to our planets overall CO2 burden. Transport emissions (road, rail, marine and air transportation) accounted for 25% of global emissions in 2016. What is even more troubling, is that they are expected to grow at a rate that is faster than any other sector, creating a major challenge to efforts to reduce emissions in line with the Paris Agreement.

From my experiences within the industry, the quick go-to for reducing carbon emissions is technology, (new shiny solutions fast-tracked as the golden ticket to reduce emissions) yet process and planning are not readily used.

Logistics Emissions

Emissions from the transport sector are a major contributor to climate change, about 16% of annual emissions (including non-CO2 gases) and around a quarter of CO2 emissions from burning fossil fuels. In 2016, the transport sector surpassed the electric power industry as the single greatest U.S. emitter of CO2 for the first time.

Of all transportation modes, 70% of global transport emissions come from road vehicles, which accounted for 80% of the rise in emissions from 1970-2010. Emissions have also increased in other transport modes, such as international and coastal shipping and international aviation, domestic aviation, although COVID 19 pandemic has temporarily reduced emissions from this sector. 

Oil demand in the transport sector has increased by about 25%; transport remains extremely dependent on oil, and the sector accounted for about two-thirds of global oil consumption in 2015, with road transport alone accounting for half of oil consumption.

Phase 1 – New processes

The toolkit for solutions for the reduction in carbon emissions from logistics is often based on new technology and emerging green energy sources. Technology is a key component to a greener future, however, an often overlooked area is the adoption of new or more effective processes to help the reduction of fossil fuel usage within logistics. 

Distance is a key component in the amount of fuel consumed during a transport tasking. As simple as it seems, by moving logistics closer to a logistics client, less fuel is consumed. The trends of centralisation of distribution centres from the 1990s onwards has created an environment in which centralisation at all costs is now an industry mantra. 

In Australia and in particular Western Australia, centralisation has created a phenomenon of capital city logistics clusters and the behest of regional support centres. A lack of port infrastructure will usually result in inbound logistics goods steaming (from international sources) past the ultimate destination on liner service shipping for another 2-3 days emitting approximately 60 tonnes of Sulphur Oxide (SOx (full ship)) and additional CO2 produced via road transport moving the same cargo north again. Consolidation (cost efficiency) at the penalty of increased carbon emissions.   

Shipping in itself is not the problem here. Some 90% of world trade in tonnes is carried by ship and containers represent 70% of total maritime trade by value. Per kilometre, shipping is one of the lowest emitting freight transport options around; at 10-15 grams per tonne-kilometre, it is lower than rail (19-41g/tkm), trucking (51-91g/tkm) and aviation (673-867g/tkm). An economic choice for consolidated liner services as opposed to direct services to regional Ports. 

Speed is another determining factor in emissions quantities from logistics assets. This is particularly evident in the containership market where vessels are being built to carry upwards of 10,000 containers and sail at 25 knots, compared with speeds of 21-23 knots a few decades ago. Ships must overcome water resistance and CO2 emissions are particularly sensitive to ship speed, so a 5% increase in ship speed entails about a 15% increase in CO2 emissions.

Better ship design and engine technology improvements can contribute up to 30% efficiency for new builds. Much of the potential for maritime transport efficiency comes through operational changes to the existing fleet, which could deliver up to 20% fuel savings. The best option is reducing speed. Reducing speed either decreases effective ranges or delays service provision. Logistics end users may need to compromise service provision expectations for a slower speed of service and/or logistics service providers may need to move logistics infrastructure closer to the end-user adopting a decentralised model.

The greatest generator of emissions within the supply chain is road transport (see figure 1). It is within this mode that perhaps the greatest impact of process improvements can be made. Simple initiatives such as driver training and increasing cargo fills in trailers can have as much impact as new vehicle technology, but are often overlooked for the more shinny (expensive) technology improvements. Emissions can be reduced by up to 50% through process improvements alone (see Table 1).

The carbon trade-off

Interestingly distribution and warehousing network theory has generally replaced the fuel/cost analysis with carbon footprints analysis. There is an inverse relationship in both cost and carbon between different elements in a distribution network.

Increasing the number of warehouses in a distribution network reduces transportation costs and emissions, but raises the costs and emissions for warehousing and inventory management. An optimisation is required between the variables of cost, carbon or both, known as a carbon trade-off. 

The options available to use process improvements to reduce emissions are extensive and accessible if a pragmatic approach is applied.  

Phase 2 – Add technology

After process improvements have been adopted, technology should be leveraged to play its part in emissions reductions. Many existing and emerging technologies are available to logistics service providers to help in reducing emissions.

Electric vehicle technology has made its way to prime mover fleets and most of the major manufacturers have deployed an electric prototype and/or first edition units (Toyota-Project Portal, Freightliner-E-cascadia). Tesla has produced a prime mover that has a range of 800 km, and a payload of 36 tonnes (single configuration). These capabilities lend themselves to localised and regional haulage, complementing direct services to regional ports and not long-distance line haul networks we are accustomed to in Australia.  This is one example of technology complementing a process improvement with regional logistics nodes supported via direct shipping services to regional ports. 

Tesla primemover and trailer

New fleets of electric vehicles may not be within the realms of accessibility for all logistics service providers. Help is at hand through the provision of intermediate technologies such as those of Hytech power-a hydrogen retrofit system for diesel engines that can reduce emissions considerably (~20%), without the outlay of new prime mover fleets. 

The Australian resources sector is highly dependent on aviation assets due to the long distances from our large population centres and our operational mine sites and oil and gas assets. Offshore Oil and gas assets have an added dependency on helicopter assets for crew change and emergency support. Aviation assets produce 80 times more SOx than marine fleets and 10 times more SOx than road transportation. Although the days of the dark plumes of exhaust trailing a 707 in-flight are gone and much more modern and efficient engines are now available, one only has to look up during the COVID-19 pandemic to see how clear our skies are without the emissions from commercial aircraft.

Marine crew change is one way of dealing with issues related to aircraft emissions. A fast crew change vessel travelling at 60 knots emits a similar amount of CO2 per trip per passenger like a large offshore helo 310kgs/373 kgs, however by moving airports and airfields closer to offshore facilities, fast vessel payloads can be increased, speeds can be reduced to enable a journey time of 4-6 hours, dropping CO2 emissions significantly (see above).

Phase 3- Logistics sharing

Whilst logistics sharing through collaborative partnerships (4PL’s and LLP’s) are commonplace internationally (particularly in Europe), in Australia at an operator of business entity level, we rarely share logistics services or assets. Consolidation occurs through some logistics aspects such as freight logistics and warehousing. However, in general, we contract our own dedicated logistics resources to service our assets. Often a supply vessel may steam past a neighbouring production facility on its way to conduct a cargo run to another facility, only to have originated from the same port. The same practice will occur a few days later from the neighbour’s supply vessels. Often the carrying capacity of these vessels is only 30-40% utilised, by sharing these assets the vessels carrying capacity is better used and emissions are halved.

Logistics sharing is only possible when potential sharing partners agree on a set of binding principles that are rigid and have a long commitment window. One of the key agreements usually centres on logistics infrastructure locations. Alignment and the commencement of shared logistics services including land and marine cargo, aviation and marine crew change, warehousing and distribution will significantly reduce logistics emissions through higher utilisation of assets and reduced total movements. 

Mutual Hold Harmless or ‘knock for knock’ clauses in contracts are key enablers to the sharing of logistics assets and services. We still have a long way to go in the Australian market to enable real logistics sharing arrangements, such as aviation crew change with the sharing of seats in helicopters, as opposed to only sharing helicopter frames, or blended cargo on supply vessels or intermingled cargo on trucks or in a supply base. We should look to the successes of the SNS pool in the Netherlands for inspiration and a pathway for real logistics sharing. Logistics sharing is a very effective way for the reduction of carbon emissions within the supply chain, particularly during steady-state operational phases. 

Bringing it all together

The supply chain is a major contributor to global emissions. A structured approach is required to target emissions and provide a practical pathway for organisations to make significant (~50%) reductions.

Process improvements are often overlooked as potential contributors to these reductions at the behest of more shiny and interesting technology solutions. Technology needs to be seen as a partner to process and not the single answer. Table 1 demonstrates the power of process improvements available for transportation without the application of technology (above 50% reductions).

Real logistics sharing has long alluded the Australian resource sector as a means to reduce asset/capital costs, increase service levels and ultimately reduce carbon emissions. As a bonus, small carbon footprints make economic sense.  As an industry, we need to play our part in ensuring the health of our planet.