Decarbonising the freight supply chain

Marinus La Rooij (left) poses with Minister of Transport, Hon Michael Wood, at the Pathway launch of a fully-electric Fuso eCanter. Photos: Sustainability Business Council

TO MITIGATE THE EFFECTS OF CLIMATE CHANGE AND MEET OUR INTERNATIONAL COMMITMENTS FOR CLIMATE ACTION, NEW ZEALAND MUST ACHIEVE NET ZERO EMISSIONS BY 2050.

BY MARINUS LA ROOIJ

While this is challenging enough for most parts of the transport system, decarbonising the freight system has its own specific and significant challenges. As we embark on this work, we must be mindful that decarbonisation solutions for other parts of the transport system do not translate well into the freight system.

Freight volumes are growing and the system that supports it is complex

Our freight system is complex and expanding as the flow of goods increases to meet the needs of our growing population and economy. These are all the goods we buy and sell every day, their movement critical for our economic and social wellbeing. To give a sense of the scale, each year we move an estimated 280 million tonnes of freight or 30.6 billion tonne-kilometres of travel. Around 70 per cent of this freight is moved by road transport using around 800,000 vehicles that travel over 3 billion kilometres a year. That equates to around 50 tonnes of freight, and 600 kilometres of truck travel, for every New Zealander, every year. Our freight volumes are also forecast to increase 30 per cent by 2042. The whole system is underpinned by the internal combustion engine (ICE) using fossil fuels (predominantly diesel). The current system is cost effective (ignoring externalities), reliable and proven to deliver on the customer requirements at the heart of the system – having their freight delivered in full, on time and at low cost. But the use of ICE vehicles cannot continue as freight transport is a key contributor to New Zealand’s greenhouse gas emissions.

Freight is a major source of greenhouse gas emissions and growing

Current emissions from freight movements are around one third of the emissions generated by the wider transport system, which makes up around 47 per cent of New Zealand’s total carbon dioxide (CO2) emissions. The Climate Change Commission estimates that this equates to 4 million tonnes of emitted CO2 each year, which is forecast to grow to 5.5 million tonnes

annually by 2050 as freight-related travel grows. A massive migration to low carbon freight transport is possible – if carefully planned, staged, co-ordinated, and implemented over a 30-year period. The Sustainable Business Council (SBC) has developed such an initiative, looking at how we can develop a common industry pathway for decarbonising the national freight supply chain. The work was initiated by the SBC Freight Group, which is made up of thought-leaders from some of New Zealand’s largest freight companies – from cargo owners, logistics operators, ports, and haulers. Along with their expertise, what is valuable about this collaboration is that their experience and thinking extends across the supply chain – being comfortable in the multi-modal space. Freight Group members were working to decarbonise their own logistics, which prompted them to examine how the whole sector could move to low-carbon operations. With assistance from Sapere Research and DETA Consulting, the Freight Group developed an outline as to how this shift could take place – the Low Carbon Freight Pathway report.

We need a shared pathway for moving the sector to a low carbon supply chain

Released in April, the Pathway report sets out ambitious targets of halving emissions by 2030 and achieving net zero by 2050. The Pathway establishes three horizons of work seeking to Reduce, Replace and Eliminate the use of fossil fuels. Importantly these horizons operate concurrently, but with different levels of intensity over the 30-year period. Initial focus is on optimising existing fleet operations to reduce diesel use, with work started on developing viable bio-fuel alternatives to replace fossil fuels – requiring the ramping up of production and importing environmentally sustainable biofuels. E-fuels (synthetic fuels) may also be an option for parts of the system (notably aviation and shipping), however the economic viability and practicality of this will need to be explored and tested. While this all happens the third horizon begins, with the progressive development of infrastructure, vehicle specifications, and supply lines required to discontinue the use of internal combustion engines altogether. Trials and testing will be an important part of this eliminate horizon.

Managing down the cost of transition

A focus of the report is how to manage down the high transition costs. We still have the benefit of time (if we act now), with costs being able to be minimised by managing out the existing fleet over time, allowing vehicles to reach the end of their useful economic life. As vehicles age, work can start progressively replacing retired vehicles with lower emitting alternatives (likely battery electric for light trucks and hydrogen for heavy).

Providing industry with confidence and a high degree of certainty

Migrating the fleet to new vehicles will require testing and financial analysis to ensure the needs of the sector are met – notably capital and operational costs and reliability. Learning the lessons from these trials will be essential for the sector as it looks to make this big (and expensive) leap into what for them will be largely unknown technologies and new fleet practices. The uptake of high productivity motor vehicles (HPMVs, including 50MAX) provides valuable lessons here. For that transition, industry confidence needed to be cultivated, with government officials providing a highlevel of certainty that the considerable investment made in new vehicles would not leave vehicle owners with stranded white elephants. A highly engaged process between industry and Government was used to successfully develop specifications for new vehicles approved for operation. Something similar, but on a much larger scale, is needed now.

Lead infrastructure requirements

National and local power generation and distribution systems also need to be considered. Upfront support from Government will likely be required to provide confidence and create private sector demand. But there are many “chicken and egg” challenges. One of the main criticisms of hydrogen, for example, is the high loss of energy from when the fuel is created, through to use in a vehicle. However, hydrogen seems better suited to the range, refuelling and torque needed to haul heavy loads. This could be resolved through green hydrogen generation occurring off-peak and/ or from variable generation sources (such as wind), effectively making use of electricity that would otherwise neither be used or stored. All new technologies should be examined critically, noting that the continued status quo of fossil fuels is no longer a viable long-term option.

A new report by the Sustainable Business Council Freight Group, comprising nine members, states that decarbonising New Zealand’s freight system by 2050 is “ambitious but achievable”.

Importance of short-term actions

While longer-term planning and implementation for new vehicles is underway, we should look at what we can do now to shave off our fuel use and CO2 emissions. The single biggest, and in some ways easiest, solution is to lift the fuel efficiency of heavy vehicle drivers through training. Many firms have already had their people go through training with up to 20 per cent of diesel (and emissions) saved. Safe and efficient driver training also demonstrably reduces minor road crashes. More could be done to see this training become standard across the heavy vehicle fleet, noting that it is an upfront investment by trucking companies in time and money – often with the fuel savings passed on to their customers. We should look at financially rewarding drivers who undergo such training. After all, those drivers that are heavy on the gas will reduce the range of electric and hydrogen fuelled vehicles also.

Value and limitations of mode shift

There is also the opportunity for encouraging mode shift to rail and coastal shipping. This features heavily in the Government’s thinking and is accepted in the Pathway as an important part of the reduce horizon. However, the opportunities for mode shift are discrete and limited to certain commodities in some locations where the freight task is contestable. An overreliance on mode shift, in a way that slows the necessary transition work required on road transport, will make net zero by 2050 unachievable.

A detailed implementation programme is needed

Importantly, the SBC Pathway sees all the options to reduce CO2 emissions as complementary. All must also proceed, to make their contribution to the overall task – effectively “slicing up the mountain”. There will also likely be other opportunities not yet in the Pathway that could be added to the programme of work – such as the development of next generation HPMVs on some routes. The Pathway should therefore be used as the basis for developing an adaptive work programme – driven through collaboration between the freight sector and Government. With many decisionmakers across the freight sector, driven by commercial considerations and customer requirements, the approach to decarbonising freight will need to be quite different from other parts of the transport system. An industry accord, as part of an action-focused freight strategy, would be a great start. An accord would recognise the need for industry actions and the need for bespoke Government interventions that shape the transition, including incentives and disincentives. Without genuine Governmentindustry partnership and meaningful dialogue, there is the real risk that efforts will be uncoordinated and less successful. Government may also bring in measures that, despite good intentions, end up hampering industry or disrupting supply chains (with economic impacts). We also must address the risk that some in the private sector feel no compelling reason for change. But thanks to the SBC’s Pathway, we have a detailed plan to begin the implementation phase – a plan that goes further than anything currently available in New Zealand for the work that is required.

Let’s start now

The SBC Freight Group is committed to continuing the decarbonisation of their own businesses and has some exciting work underway and in delivery. However, they also appreciate that the whole sector must progressively reduce emissions to be ultimately successful. As more businesses join the Pathway, so will the costs come down as economy of scale are achieved – such as having the critical mass to attract sufficient vehicle imports into the country as demand for low carbon vehicles spike in the future. As many of the speakers at the launch emphasised, it is incumbent on all of us to move now from talk to action. Decarbonisation will not happen by itself, nor will we be rescued by some wonderous and easy technology that comes along at the right moment. With the limited and shrinking carbon budget available to us between today and 2050, now is the time to start the process to Reduce, Replace and Eliminate fossil fuels from our freight system. More information on the Pathway can be can be found on the SBC’s website: www.sbc. org.nz/insights/2021/low-carbon-freightpathway. Disclaimer: TSA Advisory is providing advisory services to support the advancement of the SBC’s Low Carbon Freight Pathway. However, the views in this article are the views of the author.

Executive Consultant – TSA Advisory Marinus La Rooij has over 20 years’ experience on transport and infrastructure matters, with a focus on freight (across road transport, rail, ports, coastal, international shipping, and aviation).