On the Incentives to Shift to Low-Carbon Freight Transport

Abstract: The transport sector accounts for approximately 20% of EU-27 greenhouse gas (GHG) emissions, and 27% of U.S. GHG emissions. With the Kyoto Protocol, Sweden and several other nations have agreed to reduce these emissions. Often, solutions that involve consolidating freight and moving it to more carbon-efficient transport technologies are advocated as the most advantageous. For such initiatives the technology already exists, so change is only a matter of implementation. But when aggregate data is examined, very little change for the better is seen. This thesis explores why this may be the case, with the purpose being to increase the understanding of the incentives to shift to low-carbon freight transport. This is explored in a three-phase research structure where, first, macro-data is analyzed, after which theory is built using two multiple case studies, which serve as input to three mathematical modeling studies of different parts of the operator-service provider/forwarder-shipper chain of actors. By considering the chain of actors on the freight transport market as a service supply chain, the research in this thesis is able to use methods from, and make contributions to, the sustainable supply chain management literature as well as the literature on transport contracting. With this literature as the point of departure, the studies show that there is a matching problem associated with the implementation of low-carbon transports: with the currently used contracts it is usually not rational for the actors on the market to shift to low-carbon transports, even though the total cost on the market, on aggregate, may be reduced from shifting. Nevertheless, there are situations where shifting is rational for all actors. Creating such situations normally requires implementing long-term contracts. The models in this thesis show how such contracts can be designed. However, the models also show that situations where implementation is rational are very sensitive to changes in external parameters such as demand volatility, making implementation high risk in many cases. Another downside is that the environmental improvement is not always as large as one would expect due to inventory build-up and extra truck transports. For low-carbon transports to be implemented in large scale, their costs need to be more in line with conventional transports, and contracts that allocate risks and profits better need to be implemented. Not until these issues are better understood, and contracts and regulation implemented, can a large scale shift to low-carbon transports be expected.