Brazil Green Freight Transport Report World Bank NLTA: Mainstreaming Green Trucks in Brazil

Transcription

1 Brazil Green Freight Transport Report World Bank NLTA: Mainstreaming Green Trucks in Brazil 1. Introduction 1. The World Bank initiated in FY11 a Non-Lending Technical Assistance (NLTA) with the Brazilian Government and key partners in the road freight sector entitled Mainstreaming Green Trucks in Brazil. This NLTA report was conceived as Phase 1 of a multi-phase effort with the ultimate goal of supporting the systematic promotion of energy-efficiency and emissions reduction from freight transport. This will be accomplished in part by assessing technologies and practices to enhance the performance of trucks. As such, this report builds on the findings and recommendations of the World Bank s 2010 Logistics Report for Brazil 1 and 2010 Low Carbon Study for Brazil The present work serves as a progress report on Phase 1 of the NLTA and as a concept note for Phase 2, which is being funded for FY12. Specifically, the focus of this report is to: Provide an update on the design and implementation of strategic pilot tests that are underway; Assess the range of initiatives active in Brazil aimed at reducing the energy intensity and environmental impact of freight transport; Identify building blocks towards a comprehensive Green Freight strategy in Brazil; and Identify an operational strategy for the Bank in this sector by leveraging existing activities. 1.1 Freight Transport: Fast Growth and High Emissions 3. The freight sector is a critical and large part of the Brazilian economy. Freight is not only an essential and integral element of a modern industrialized economy, it is also an important source of employment, entrepreneurship and innovation. Data suggest that freight accounted for about 6.5 percent of Brazil s GDP in The Annual IBGE (Brazilian Institute of Geography and Statistics) Survey of Service Sector estimated that the transport industry generated US$100 billion in net operating revenue in Data from the National Surface Transport Regulatory Agency (ANTT) estimates that trucking comprises more than 574,000 businesses, among them nearly half million independent owner-operators, 87 thousand companies and 256 cooperatives. 4. Freight demand is expected to continue growing in the medium term. Freight demand is closely linked to economic growth and the sector has seen significant expansion related to the economic growth in recent years. Annex 1 provides an overview of the sector and the recent growth. Figure 1.1, showing the growth in the size of the new-truck market in Brazil, is illustrative in this context. All indications are that this growth will continue. The National Transport Logistics Plan for Brazil (PNLT, 2007) projects that total freight in net tonkilometers to grow from 886 billion in 2005 to 1,607 billion in 2023 an annual growth rate of over 3.3 percent. 1 World Bank, How to Decrease Freight Logistics Costs in Brazil, World Bank, Brazil Low Carbon Country Case Study, 2010 and Transport Technical Annex,

2 Figure 1.1 Production and Sales of New Trucks in Brazil 180, , , , ,000 80,000 60,000 40,000 20, Total Production Domestic Sales Domestic Sales of Imported Vehicles Exports Source: Anfavea, Trucking is the largest segment of the freight sector and is likely to remain so. About 61 percent of all freight ton-kilometers in Brazil is carried by trucks, as shown in Figure 1.2. However, the share of freight value on trucks is much higher as most high-value and time-sensitive cargo is carried on trucks. Expectations are that this will continue to remain the case. Even in the best of circumstances and in countries with very developed rail and inland waterway systems (such as the US and China), trucks will continue to carry a large share of freight particularly for high-value goods and most short and medium-distance trips. The PNLT, which calls for significant investments to promote non-road transport, still projects that road freight tons and ton-kms will increase in absolute terms in the coming decade. Market expectations are similar. According to data from Fenabrave (The National Federation of Distribution of Motorized Vehicles), 157,633 new trucks were licensed in 2010, a 44 percent increase over Now Brazil is already the fifth largest country globally in terms of sales of heavy-duty vehicles and it continues at a rapid pace of growth in the truck segment. Fenabrave forecasts that this growth will continue in 2011; projecting that the truck market will expand 15.2 percent with an expected volume of 181,593 new units licensed. Figure 1.2: Freight market share by mode (in millions of ton-km) Water 108, % Pipeline 33, % Air 3, % Rail 164, % Road 485, % Source: ANTT (2006) 2

3 6. Consequently, freight sector carbon emissions are large and rising rapidly. The transport sector was responsible for roughly 30 percent of all energy consumed and CO2 emissions in Brazil in 2007, with roadbased modes contributing more than 90 percent of this amount. 3 Freight transport from all modes represents roughly 41 percent of transport s total fuel use, primarily diesel. Freight transport is also one of the fastest growing sectors in terms of energy consumption and emissions in Brazil. The Brazil Low-Carbon Study projects CO2 emissions for all transport modes under business as usual to continue to increase at 2.3 percent per year, with a significant contribution from trucks. The projected growth of emissions from the road sector reveals a similar trend, with heavy trucks outpacing the growth in any other category of road vehicles, reaching 33 percent of the total in 2020 as shown in Figure 1.3. With a proper accounting of black carbon impacts, it is likely that role of trucks on climate change will appear to be only more severe 4. Figure 1.3: Projection of CO2 Emissions by Category of Vehicle Years Source: Institute for Energy and Environment (IEMA), published by Brazilian Ministry of Environment, 1º inventário Nacional de Emissões Atmosféricas Por Veículos Automotores Rodoviários, January Green Freight: A Convergence of Agendas 7. Supporting global climate objectives requires a focus on fuel-use in the sector. There is global interest in addressing the rapidly rising carbon emissions from freight transport. Fundamentally, the carbon intensity of the freight sector can be reduced through three broad strategies (i) facilitating/promoting a shift of freight to more fuel efficient modes; (ii) increasing the fuel efficiency of the existing modes; and (iii) reducing unnecessary vehicle kilometers traveled without constraining economic growth. With respect to a shift towards lower carbon emitting modes, trucking is the most carbon-intensive freight mode and the goal would be to support the development of an integrated multi-modal transport sector to facilitate a mode shift away from trucks. With respect to reducing the fuel-intensity of freight modes and the efficiency of the logistics system, again trucks are critical. They not only carry the majority of the freight, but owing to the distributed and fragmented nature of trucking, account for the vast majority of all freight vehicles and vehicle-kilometers 3 This is based on the 2008 National Energy Balance (Brazilian Ministry of Mines and Energy). The road transport sector has a larger share of total energy consumption and CO2 emissions than most countries because of the energy production matrix emphasizing hydroelectric power. 4 Black carbon is the name given to soot extremely fine particulate matter (< PM2.5) which have been found to have significant global warming potential. It is formed through an incomplete combustion of fossil fuels, biofuels, and biomass, and is critical for both human health and climate change. The emissions come from a wide range of sources, including energy consumption, diesel-powered vehicles, industrial processes and construction activities. There is little information available about black carbon in Brazil and its global impact. This is an area that requires further research and analysis. 3

4 (with the exception of air transport). In this context, the challenge is to identify and deploy strategies that reduce fuel-use in the trucking sector. 8. For freight, there is a strong convergence between the low-carbon, environmental and cost-efficiency agendas. The imperative to reduce the carbon footprint of Brazil s freight sector is important in itself. However, the objectives highlighted above are closely related to business, local, and national economic and environmental exigencies. In particular: a. An integrated multi-modal transport system which facilitates a shift from trucking is also an important objective for efficiency and road safety. When available and competitive, modes such as rail and waterway can often be significantly more cost-effective than trucking. In certain contexts, trucks can also account for a disproportionate share of serious road accidents that cause injuries, fatalities and congestion. For these reasons and independent of carbon concerns, there is considerable pressure in Brazil to develop a multi-modal system in order to reduce logistics costs and improve competitiveness. Consequently, the PNLT calls for massive investments in the road, rail, waterway, pipeline and air networks and services to improve cost efficiency while promoting a shift away from road-based modes. b. The trucking industry has a strong incentive to improve fuel-economy for economic reasons. Not only is enhancing fuel-efficiency in the trucking sector critical to reduce the sector s carbon footprint, it is also critical for profitability and economic performance. Fuel is typically the largest component of truck operating costs. A survey of transport companies and experts in Brazil concluded that fuel represents 40 to 50 percent of operating costs in Brazilian trucking excluding depreciation and capital costs (see Figure 1.4). While this figure can vary widely depending on road conditions and type of cargo, this is not out of line with international experience. For comparison, fuel can be as much as 60 percent of operating costs in China (World Bank and CAI-Asia, 2010) and as low as percent in the developed countries depending in part on the fuel tax structure, labor costs and other taxes and fees (OECD, 2011) 5. In the US, it is estimated to be 36 percent on average, still the largest single cost item (TRB, 2010) 6. In other words, there is also a strong, compelling business case for focusing on fuel-use in this sector which is particularly sensitive to energy costs and has thin profit margins. Figure 1.4: Brazilian Trucking Industry: Approximate Breakdown of Operating Costs (excluding capital costs) Insurance~ 20% Tolls, ~10% Fuel, >40% Wages, ~30% 9. There is also a broader convergence with the local/urban pollution agenda. A more fuel-efficient trucking sector also provides significant local air quality benefits. There is a direct co-relation between fuel-use and local pollutants emitted. Thus, a decrease in fuel-intensity of the trucking sector is strongly related to a reduction in the amount local pollutants, key among them are fine particulate matter (PM), and oxides of nitrogen (NOx), both which have adverse public health impacts. Conversely, many actions taken to clean diesel fuel by reducing sulfur levels may also have synergistic impacts on fleet fuel efficiency. 5 OECD (2011), Moving Freight with Better Trucks: Improving Safety, Productivity and Sustainability. 6 Transportation Research Board (TRB, 2010), Technologies and Approaches to Reducing the Fuel Consumption of Mediumand Heavy-Duty Vehicles. 4

5 1.3 Role of This Report 10. This report focuses on near-term opportunities to green Brazil s freight system. The primary focus of this work is on opportunities to reduce the carbon-intensity of the sector, though as noted there are significant concomitant benefits relating to local environmental performance, efficiency and safety of the logistics system, and profitability in the trucking sector. Given the convergence between global and local agendas discussed above, it is not unexpected that many initiatives that have the potential to reduce the carbon intensity of Brazil s trucking sector are being considered for a different reason, including by various levels of government to enhance efficiency, safety, local pollution abatement, and by truckers to enhance profitability. 11. A comprehensive review of initiatives with the potential to improve the carbon profile is undertaken with a specific focus on the possibilities to improve the fuel-efficiency of the in-use fleet. To that end, the report reviews the range of technological and management opportunities to enhance the performance of the existing fleet and identifies opportunities to increase visibility and awareness of particularly promising solutions. As part of this work, two separate pilot tests of options that have the potential to improve the fuel-efficiency of in-use fleets have been initiated in Brazil. 12. The structure of this report. The remainder of this report is organized into four sections. Section 2 is an assessment of the current state and trends for the Brazilian truck fleet and the near-term opportunities for improvement with a focus on three key strategies: vehicle technologies, drivers, and management and maintenance. This assessment is used to design strategic pilot tests as a key element of a mainstreaming strategy for Green Trucks in Brazil. Section 3 is a broader assessment of freight and logistics strategies and existing initiatives in Brazil used to suggest the building blocks for a more comprehensive Green Freight strategy in Section 4. Finally, Section 5 suggests an operational agenda for the World Bank going forward to capitalize on the potential to accelerate the "greening" of the road freight sector in Brazil. 13. The following annexes provide more detailed technical information on the following key topics and activities: Annex 1. Sector Overview Annex 2. Assessment of Green Truck Technologies Annex 3. Summary of Private Sector Initiatives in Brazil Annex 4. Pilot Test Design Protocol Annex 5. Partnerships and Acknowledgements 5

6 2. Assessment of Green Truck Initiatives 14. One of the objectives of the first phase of the NLTA was to identify promising vehicle technologies and good practices for the road freight sector that could be verified or tested. The approach included an extensive set of interviews, meetings, and workshops with experts and industry representatives and a review of literature about the state-of-practice and state-of-the-art in Brazil. The approach also included an analysis of the market structure in Brazil to highlight opportunities to accelerate the modernization of the fleet and sector. 15. This review found that roughly half of the current fleet constitutes trucks that would benefit from technologies and management practices to enhance fuel efficiency. The review also identified the state-ofthe-art with respect to technologies, behaviors and management practices with the potential to improve fuel efficiency of in-use fleets. Examples of high-performing firms in Brazil shippers and carriers that are already acting on these opportunities to save fuel costs, increase productivity, and reduce their carbon footprint were also identified. Still, the evidence suggests that despite paying for themselves in fuel savings, certain technologies and practices are not commonly used in Brazil today. Barriers relate to awareness, credibility, inadequate managerial focus, and in some cases financing. In response, the strategy was to raise awareness of low-hanging fruit (i.e. the most promising, cost-effective and credible fuel-saving options) using two pilot tests that have been commissioned as part of this NLTA to test the efficacy in real-world settings. Section 2.1 characterizes the Brazilian truck fleet and identifies key issues with each segment. Section 2.2 describes the universe of possibilities to enhance the fuel efficiency of in-use trucking fleets and provides examples of their successful application in Brazil. Section 2.3 describes the pilot tests undertaken as part of this study. 2.1 Brazilian Fleet Characteristics 16. The Brazilian National Registry of Road Freight Transporters (RNTRC) recorded a population of nearly 1.5 million trucks in All companies and persons (registered as a pessoa jurídica) that operate heavy-duty vehicles commercially for road freight transport by law must register with the RNTRC. The RNTRC also shows a very diverse sector in terms of the following characteristics (see Annex 1 for a more detailed overview of the Brazilian trucking sector): Ownership structure: Carriers range in size from individual owner-operators, to medium-sized cooperatives, to large professional trucking companies. The average trucking company has about 9 vehicles; the average cooperative has over 40 vehicles; and the vast majority of independent owneroperators own only one vehicle. In 2008, about 20 percent of the truck fleet is owned by large firms (with more than 100 vehicles). Operational model. There are operators that focus exclusively on urban markets and others that focus on long-distance markets. Organizationally, some shippers use in-house fleets, while most contract freight to outside carriers. There are more than 87,000 private companies actively operating trucks either as shippers or carriers in Brazil. Fleet age: The average age of the registered truck fleet in 2010 is over 13 years with the oldest trucks belonging to owner-operators. The average fleet age is about 8, 14 and 19 years for companies, cooperative and owner-operators, respectively. The age of the vehicle has an important implication on the type of engine and emissions control technology installed (see box 2.1). Type of vehicles: The fleet includes tractor-trailers, fixed bed, bulk goods, and special goods vehicles such as tankers. The tare weight of a simple fixed-bed truck can range from 8 to 29 tons and as high as 74 tons for specially-authorized tractor-trailer combinations. Geographical distribution: The vast majority of trucks are registered in the south and southeastern areas of the country where a majority of the economic activity is based, but may circulate throughout the country on urban and interurban roads of varying quality. 6

7 Box 2.1. Regulations controlling Engine and emissions control technologies Engine and emissions control technology in Brazil are regulated, as in most countries, with a focus on local air pollution impacts. The Brazilian standard is known as Proconve (National Program for Vehicle Air Pollution Control). The implementation schedule for Proconve is summarized in the table below. The phases of Proconve from P1 to P7 correspond to European heavy-duty vehicle standards from EURO 0 to 5 with a 3 to 5 year lag in the implementation schedule. Table. Implementation of Proconve for Heavy-Duty Vehicles in Brazil Implementation Comments on Technology improvements Phase Years Proconve Phase Urban buses % Proconve Phase 2 (EURO 0) % % Proconve Phase 3 (EURO 1) 1994 Urban buses Improvements in fuel injection systems and % combustion chambers % Proconve Phase 4 (EURO 2) Proconve Phase 5 (EURO 3) 1998 Urban buses % % 2004 Urban buses % % Turbocharged engines with intercooler. Mechanical injection pump with injection pressure up to 1000bar Engines with fuel injection and injection pressure up to 1500bar Proconve Phase 6 (EURO 4) % Advanced exhaust treatment systems Proconve Phase 7 (EURO 5) % Requires low-sulfur diesel Source: Author s compilation from ANFAVEA and Proconve (Ministry of Environment) websites 17. The distribution of trucks in operation by engine/emissions technology and type of ownership according to the 2009 RNTRC is shown in Figure 2.1. As illustrated, the Brazilian truck fleet can be characterized into three basic segments for the purpose of analyzing strategies to accelerate modernization as describe below. Figure 2.1: Number of Trucks by Proconve Phase and Type of Ownership 800, , , , , , , , Oldest Trucks 2, , , Typical Trucks in Operation 3. New licensed trucks Cooperatives Companies Owner-Operators 1, ,592 63,171 30,316 48,755 71,668 98, ,075 24, ,000 P1 and Older P2 (Euro 0) P3 (EURO 1) P4 (EURO 2) P5 (EURO 3) P6 (EURO 4) 606 Source: Compiled from RNTRC, 2009 available from ANTT 7

8 18. Segment 1 (Oldest Trucks in Operation): Trucks that predate or meet the oldest environmental standards (Proconve P0-P1, equivalent to Pre-EURO standards) are typically 20 years or older with antiquated or no engine and emissions control technologies. This segment represents roughly 48 percent of the fleet in operation or over 700,000 vehicles that are responsible for a disproportionate amount of fuel consumption and emissions. All else being equal, simply replacing a P1 truck (Pre-EURO) with a P3 truck (EURO 1) can improve fuel efficiency by more than 10 percent and reduce emissions of CO, HC, NOx and PM by 30 to 60 percent, as shown in Figure 2.2. These pollutants, particularly PM, have been shown to generate significant externalities in terms of incidents of lost productivity, pulmonary illness and related deaths. 7 Many of these oldest vehicles are being gradually retired by the more well-capitalized companies and, as a consequence, the average age of the Brazilian fleet has been decreasing in recent years (RNTRC, 2010). However, most of this segment is operated by owner-operators with significant financial constraints and who may keep these vehicles operating sub-optimally until failure. As such, most experts believe that the market retirement rate could be accelerated with the right incentives. No national scrappage program currently exists in Brazil, but industry associations are promoting the idea as described further in later in this report. Figure 2.2: Reduced Emissions from Proconve Implementation Emissions 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -82% -75% -69% -83% CO HC NOx Particulate Proconve F2 (1993) Euro 0 Proconve F3 (1994) Euro 1 Proconve F4 (1998) Euro 2 Proconve F5 (2004) Euro 3 Source: Author s compilation from ANFAVEA and Proconve (Ministry of Environment) websites 19. Segment 2 (Typical Trucks in Operation). This segment represents about 42 percent of the fleet in current operation, mostly between 5 and 15 years old, and corresponding to Proconve P2 to P5 standards (equivalent to EURO 0-3). Most ton-kms in Brazil are carried by trucks in this segment, 40% of which are owned by independent owner-operators. These trucks have a significant resale value or useful life remaining and it is likely to be cost-effective to invest in retrofit or upgrade technologies to improve fuel efficiency. Average trucks in operation can exhibit energy losses from a variety of sources. Figure 2.3 and Box 2.2 define and quantify the typical energy losses for trucks in operation. Recent reports conclude that there is significant potential for near-term fuel efficiency improvements (above 10 percent) for average trucks in many countries through modest upgrades to engines, cab and trailer aerodynamics, drivetrains, tires and on-board auxiliary systems. 8 Experts and industry representatives agree that similar opportunities exist in Brazil but need to be demonstrated. 7 For example, a study by the USP School of Medicine estimated 15,000 premature deaths were avoided from 1996 to 2005 from environmental control regulations of all vehicles in the Greater São Paulo Region. 8 OECD (2011), Moving Freight with Better Trucks: Improving Safety, Productivity and Sustainability. 8

9 Figure 2.3: Factors involved in Vehicle Fuel Consumption Source: Netz Engenharia Automotiva presentation, World Bank-FAT Workshop on Freight in São Paulo, June Box 2.2: Energy Losses for Typical Trucks in Operation A recent analysis quantified energy losses on a typical truck in both urban and interurban operations in the U.S. This analysis is also generally applicable to Brazil trucks to the extent that the operational cycles are similar. It shows the primary energy losses are from the engine, followed by aerodynamic losses and rolling resistance (TRB, 2010). 9 Engine Losses: Defined by the thermodynamic efficiency of the engine technology and influenced by environmental standards (Proconve), once a truck is produced and is in operation there are modest improvements to the engine that can be made to marginally increase efficiency. Aerodynamics: Air resistance depends on the drag coefficient, the cross-sectional area of the front of the truck, and the square of the velocity with which air passes over the truck. If the speed and dimensions of a truck are assumed to be fixed, the only parameter which can be improved is the drag coefficient. Rolling Resistance: This depends on the load and tire inflation pressure, and marginally with speed. Rolling resistance is generated not only by the tire, but by the texture and evenness of the road surface. Drivetrain and Auxiliaries: The gearbox, transmission, and auxiliary equipment take up to 15% of the total available power. In addition to driving the wheels, power from the engine cylinders is used for many requisite auxiliary loads. Auxiliaries include the engine alternator, air compressor, air conditioning compressor, hydraulic fluid pump, engine oil pump, fuel pump, and accessory loads. 9 Transportation Research Board, Technologies and Approaches to Reducing the Fuel Consumption of Medium- and Heavy- Duty Vehicles,

10 20. Segment 3 (New Trucks). Fuel efficiency for new heavy-duty vehicles has historically improved at a rate of around 1 percent per year in OECD countries. 10 Fuel consumption for new trucks in Europe and North America has decreased over the past 30 years from about 50 liters/100 km to liters/100 km, while the engine power has doubled from about 180 kw to 360 kw (OECD, 2011). Although Proconve 5 is the environmental standard still in effect currently, most new truck sold in Brazil since 2009 meet Proconve 6 (EURO 4 equivalent). Proconve 7 (EURO 5 equivalent) is to be implemented in 2012 and will require low-sulfur diesel (below 50 parts per million). Considering the significant lag in implementation of Proconve in relation to equivalent standards in developed countries, this turnover improvement has not yet been fully realized in Brazil. 21. Therefore, accelerating the turnover of the Brazilian fleet with newer trucks can itself improve the average fleet fuel efficiency and emissions performance of the sector by virtue of the engine and related technologies. The key issue is how to accelerate this process in a fleet that is owned by a mix of companies, cooperatives, and owner-operators with widely varying capacity in terms of capital, performance and operational knowhow. The average prices of the best selling new trucks in Brazil are presented in Annex Another key question is how to accelerate the penetration of the latest technologies in new vehicle purchases. The engines of modern trucks sold in Brazil have relatively high thermodynamic efficiency, but it may be possible to decrease fuel consumption further by incentivizing the latest technologies, reducing aerodynamic drag, reducing rolling resistance, and improving the efficiency of auxiliary systems. Therefore, after-treatment modifications or upgrades may still be cost effective to improve fuel efficiency of new trucks. The United States has successfully used a partnership with manufacturers and technology vendors to move the fuel efficiency frontier of new trucks as described in box 2.3. Another important consideration is the proper maintenance and operational management of the fleet to maximize the potential of newer trucks, which is further described in the following sections. 10 This trend is likely continue though there has been a temporary drop-off in response to mandated NOx and PM emission controls involving technologies that increase fuel consumption slightly. 10

11 Box 2.3. U.S. 21st Century Truck Partnership In the late 1990s, the U.S. government defined ambitious goals for new trucks in five critical areas to reduce fuel usage and emissions while increasing heavy vehicle safety. The Partnership supported millions of dollars in research, development and demonstration that enabled the achievement of most of the following goals by 2012 with commercially-viable products and systems for new trucks: Engine Systems: combination of prototype fuel, engine, and emissions after-treatment equipment to improve energy efficiency by 20% and displace petroleum fuels by 5% by Heavy-Duty Hybrid-electric propulsion: demonstrate a vehicle that achieves a 60% improvement in fuel economy on a representative urban driving cycle while meeting regulated emissions levels and durability parameters. Reducing parasitic losses (which account for 40% of the total fuel energy used to move a heavy-duty vehicle) by up to 50% by focusing on aerodynamic drag resistance, rolling resistance, drivetrain losses, lightweight material and manufacturing processes, and auxiliary load losses. The following targets were established: 20% reduction in aerodynamic drag by designing and deploying boat tailings, collapsible roof lines, side and underbody skirts, tractor-trailer interfaces, and deflectors resulting in theoretical fuel savings of about 10%. 40% reduction in rolling resistance or approximately a 15% improvement in fuel efficiency by introducing breakthroughs in material dissipation properties, tire construction, and wear and traction optimization are needed to improve rolling resistance. Lightweight wheels can give additional payload benefits. 30% reduction in the remaining driveline losses, which would yield 1.5% fuel savings. Automated manual transmissions with gears are standard today and replacing former unsynchronized transmissions. 50% reduction in the energy required by auxiliaries to yield fuel savings of 1-2%. Electrification of most components would reduce consumption by eliminating the energy losses from mechanical power (belts), and could be powered from energy recovery systems, solar cells or other zero emission sources. Idle Reduction: reduce fuel usage and emissions from idling heavy vehicles by more than 85% by demonstrating auxiliary power unit (APU) technologies, onboard and truck-stop (stationary) electrification technologies. Safety: Contribute to reducing truck related fatalities by 50% and truck related injuries by 20% through the development and implementation of technologies in crash/rollover protection, braking, visibility enhancement and safety of tires. Source: Author s compilation from U.S. Department of Energy website 2.2 Assessment of Technologies and Practices 23. A primary focus of this work was to identify near-term opportunities to enhance the fuel-efficiency of Brazil s in-use truck fleet. Towards that end, an extensive review of potential technologies, behaviors and management practices was undertaken. To ensure relevance to the Brazilian context, technologies and good practices already successfully in use within Brazil were prioritized. The assessment covers three key areas: (1) Vehicle Technologies, (2) Driver and Operations, and (3) Management and Maintenance. Vehicle Technologies 24. A wide array of energy-efficiency technologies have been tested and proven internationally. Table 2.1 summarizes the fuel reduction potential by type of technology. Annex 2 provides details such as specifications and performance of each. The technologies include engine standards, aerodynamic fairings, low rolling resistance tires and auxiliary power units to reduce engine idling. Intelligent vehicle technologies refer to logistics and management practices described in the following sections. 11

12 Table 2.1: Fuel Reduction Potential for Heavy-Duty Vehicle in Operation in the U.S. Technology Type % Fuel Reduction Potential Aerodynamics 3 to 15 Auxiliary Loads 1 to 2.5 Rolling resistance 4.5 to 9 Vehicle mass (weight reduction) 2 to 5 Idling reduction 5 to 9 Intelligent Vehicle Technologies 8 to 15 Source: TRB (2010) as cited in CAI-Asia (2010) Challenges and Opportunities for an Environmentally Sustainable Road Freight Sector In Asia, available at Figure 2.4 summarizes the potential for a range of technologies identified for a typical tractor and trailer in the US context, which can sum to well over percent fuel savings at an investment cost that is a small fraction of the value of the truck and generally has a payback period of 2 years or less. Figure 2.4. Range of Possible Fuel Saving Technologies and Costs in US Context Source: Cascade Sierra Solutions and U.S. EPA SmartWay Program 26. As box 2.4 illustrates, not only have these technologies been extensively deployed and evaluated internationally, innovative forward-looking companies are already testing and using them in Brazil. Box 2.4 also illustrates an important relationship that can help the mainstreaming of fuel-efficiency technologies: the relationship between those who demand freight services (shippers) and those who provide them (carriers). The most innovative shippers are not only investing in the latest technologies for their own fleet, but are also extending deployment to their carriers by way of service agreements that include environmental performance expectations. Discussions with trucking associations and industry experts in Brazil suggest that the top performing Brazilian truck carriers in terms of energy efficiency are already implementing a suite of fuel-saving technologies. However, these are usually the biggest, most professional carriers. The vast majority of carriers are not fully aware of these opportunities and often just have not focused on these marginal efficiency gains. 12

13 Box 2.4: Example of Initiatives by a Shipper Walmart is an example of a large shipper considered an industry leader based on its global corporate social responsibility and sustainability policy that includes reducing fuel consumption and emissions from its operations. In 2005, Walmart initiated a program in the U.S. with a stated goal of doubling the fuel economy of its 7,200-tractor private carrier fleet from 6.5 mpg to 13 mpg by Collaborating with truck suppliers, evaluated components (as pictured) included a lower trailer height to reduce aerodynamic drag, a trailer drop belly (to recover internal volume except over the tractor axles), an aerodynamic tractor with matching lower roof fairing and cab extenders, trailer skirts, a rigid boat tail, and an auxiliary power unit (for idle management). Walmart reported a 12 percent improvement in fuel economy with this first-generation package of components and design alterations using standardized test procedure. Note that some loss of cargo capacity results from Walmart s changes, and the new trailer height is not compatible with existing loading docks. Components being evaluated in subsequent generations include a hybrid diesel-electric system and auto-deploying trailer skirts. (TRB, 2010) In Brazil, Walmart has also leveraged its worldwide network to also bring successful strategies to their operations. Starting in 2008, Walmart Brazil analyzed their entire supply chain and identified 31 potential initiatives to improve fuel efficiency. As with most large shippers, the majority of the freight is carried by thirdparty service providers, so they made agreements with these carriers to also implement the most promising strategies including: Advanced deflectors (nosecones, lateral deflectors, and skirts) Service level agreements to reduce average age of the fleet and empty backhauls (using drop-and-hook) Operational management using telemetry The combination of all of the initiatives in Brazil was expected to yield a 12% improvement in fuel efficiency once fully implemented. There are also plans to pilot electric urban delivery and CNG vehicles in Brazil. Source: Walmart website and interviews with Walmart Logistics Managers Driver Operator 27. International experience shows that most factors that influence vehicle fuel consumption are under some level of control by the driver including speed, acceleration, braking, shifting technique, idling, and tire pressure (Cascade Sierra Solutions, 2011). For this reason, there is growing international focus on driver training and behavior to improve operating fuel efficiency under the banner of Eco-driving (see box 2.5). Box 2.5: Eco-Driving The OECD reports that eco-driving behaviors and techniques can be used by drivers to optimize the fuel economy of their vehicle and has significant potential to deliver fuel savings and CO2 reductions quickly and cost effectively. Based on recent assessment, eco-driving techniques can bring an immediate 10% reduction in fuel consumption and CO2 emissions. Training is an essential success factor for eco-driving. Immediately after training, average fuel economy improvements of 5 to 15 percent were recorded for cars, busses and trucks. The best results for individual drivers showed percent improvements in fuel economy under test conditions. Over the mid-term (<3 years), average fuel savings of around 5% have been shown in cases where there is no support beyond the initial training, and with continuous feedback this can be improved to about 10%. There is little evidence available regarding the long-term impacts (>3 years) of eco-driving training, but a few studies have been conducted on companies with truck and bus fleets that provided one-off training with no follow-up incentive programs, recording a 2-3% residual improvement in fuel consumption. Source: OECD,

14 28. A large test and recent study in Brazil was conducted by a consulting firm on the effects of training and the benchmarking of driver performance over time (Box 2.6). The results of this test show the significant potential of this strategy. In addition, most of the best performing companies in Brazil combine the training and benchmarking with incentive systems whereby the driver shares in the fuel saving. Box 2.6: Brazilian Benchmarking Test of Drivers Shows Reduction of Fuel Consumption The Brazilian consulting firm Netz Engenharia Automotiva published a study on a recent test performed using a fleet of 105 drivers and vehicles from 14 carriers based in the southeast of Brazil. A driver training program was delivered and a continuous improvement process was deployed based on the definition, management and control of driver performance indicators through follow-on training and telemetry systems that track all operating parameters of a vehicle in operation. The results of the test in the Figure below show a remarkable reduction in fuel consumption of over 4 percent every 6 months and a cumulative improvement of over 13 percent over 18 months. Three basic tactics were used by the drivers and monitored over a period of 18 months, including regular performance meetings to reinforce the training: Increasing the operating time in the engine s economic zone Avoiding excessive rotations of the engine Minimize unnecessary idling and braking Beginning 6 months 12 months 18 months Reduction of fuel consumption km/liters % reduction with respect to previous period 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Source: Netz presentation at World Bank-FAT Workshop on Freight in São Paulo, June Original study: Netz Engenharia Automotiva (2007), Aprendizagem: Um estudo da contribuição da capacitação de motoristas de caminhão para a redução dos custos operacionais da frota. 31. At the same time, the availability of skilled drivers is a major issue in Brazil. Even the largest companies with the newest fleets and best trained drivers in the country report concern about the scarcity of technical capacity and human resources to structure training programs, to monitor control systems, to do fleet management, to evaluate performance and other activities. All the companies contacted affirmed that investments in training are a priority for the sector. Several companies mentioned that often new vehicles cannot be operated because of a lack of qualified drivers. In Brazil, there are initiatives to improve the knowledge of truck drivers, such as a mobile training program conducted by CNT/SEST/SENAT to teach good practices to truck drivers regarding mechanics and eco-driving. The scale and reach of such training programs are still considered relatively small considering the need and potential. 14

15 Management and Maintenance 32. The fuel consumption of trucks is not only determined by the technical efficiency of the vehicle and the skill of the driver, but also to maintenance practices, operational patterns and flow conditions on the transport network. Each stop increases the fuel consumption of heavy vehicles, and five stops on a trip of 10 km is enough to double the fuel consumption of a forty-ton articulated truck compared to travelling the same distance at a constant speed (OECD, 2011). Similarly, the performance of a poorly maintained truck, however new, can vary greatly. It is estimated that insufficient tire pressure increases fuel consumption in Brazil by an average 5-7%. 11 This is more an issue of maintenance and tire management than of technologies as roughly 30 percent of the Brazilian fleet utilizes an automatic tire pressure monitoring and inflation system known as Rodo-Ar. However, air leakage and poor calibration of such mechanical systems can significantly limit their benefit. 33. Other ways for enhancing fuel efficiency through better management includes: improved logistics and routing through advanced software systems, revised truck specifications for operators that choose to order lower horsepower vehicles (downsizing for fuel economy benefits); and in some cases imposing speed controls. Annex 3 provides an overview of private sector initiatives in Brazil to reduce fuel consumption. 34. The potential of converting truck operators from average performers to good performers is very significant, but depends largely on a management and maintenance system. The result of continuous improvement of fleet performance through management and maintenance practices is exemplified in Box 2.7 in the case of Jamef, a high-performing carrier company in Brazil s larger cities. Box 2. : Using Management Practices to Drive Fuel Efficiency in Brazil. Jamef is a Less-than-Truckload (LTL) carrier with 800 trucks in Brazil operating mostly on time-sensitive urban deliveries. The average age of the fleet is 2.5 years. Over the years, the company has implemented state-of-theart maintenance, training, management systems including 100 percent real time tracking of fleet and an array of other systems pictured below. As a result of all the initiatives, the company reported that fuel consumption improved 4.5 percent in the past 12 months and another 2.5 percent in the previous 12 months. More than half comes from management of the performance of the vehicles and drivers. Source: Jamef presentation at World Bank-FAT Workshop on Freight in São Paulo, June Netz presentation at World Bank-FAT Workshop on Freight in São Paulo, June

16 2.3 Pilot Tests 35. A key question for this analysis was to understand and address barriers to widespread deployment of fuel saving technologies and practices that had proved to work in practical contexts, particularly those that were already in use (albeit limited use) in Brazil. Discussions with trucking associations and industry experts suggested that the key barriers were a combination of awareness, credibility, adequate managerial attention, and in some cases financing. In this context, industry associations such as NTC have offered to partner with the World Bank to disseminate and promote any technologies they could certify to enhance fuel efficiency in a cost effective manner. 36. To that end, one focus of this work was to identify the potential of independently-evaluated pilot tests to provide credibility and mainstream the deployment of innovative fuel-efficiency retrofit technologies and good practices in a learning-by-doing mode. Another focus of this work was to build a constituency and partnerships to implement pilot tests in Brazil. Potential near-term technologies and practices for the test were identified using the following criteria: Certified or in common use internationally, but not yet in common use in Brazil; Easily and credibly tested using predefined protocols; Already available in Brazil or not needing significant changes in the industrial supply chain. 37. The goal of this unusual operational element to the NLTA was two-fold: Operationally, to provide evidence of the efficacy of the tested technologies; Strategically, to explore the value to the sector in Brazil of credible performance information on such technologies whose deployment has external societal benefits. Designing the Tests 38. Table 2.2 provides an overview of the technologies and practices assessed for the pilot test. The approach was to identify the key knowledge gaps and work with partners to design strategic tests to address some of these gaps. State-of-practice reflects technologies and practices that are already appropriately used by a significant share of the fleet, typically more than 20%. Many of these strategies are beginning to be implemented by the average performing operators and have certainly been exploited by the top performers were appropriate. On the other hand, state-of-the-art refers to recent technologies or practices that are being introduced in new vehicles and by some of the most advanced operators. Annex 2 provides details, specifications and photographs of the technologies assessed. 39. The criteria for selecting the technologies and practices for the tests in Brazil included: Robustness: proven elsewhere and possible to measure with a credible test Cost: low-cost solutions with available partners Applicability: low penetration but wide applicability 40. While the World Bank does not and will not endorse any specific technologies or solutions, we have agreements with partners and suppliers of certain types of technologies which are being pilot tested to demonstrate their potential in the Brazilian context. Independent partners and consultants of the World Bank will be evaluating and validating the results and lessons of these tests for the purpose of disseminating the information publicly. 16

17 Table 2.2 Overview of Technologies and Practices in Brazil Strategy State-of-practice State-of-the-art Potential Fuel Savings Aerodynamics Rolling Resistance Rolling Resistance Rolling Resistance Weight Reduction Auxiliary Load and Idling Reduction Drivetrain and Propulsion Exhaust After- Treatment Roof fairing (overthe-cabin deflectors) Black tires (conventional) Side extenders (lateral deflectors) Chassis fairing Green tires (low rolling resistance) Regular width tires Wide-base tire (super single) Mechanical tire inflation system (Rodo-Ar) Steel materials such as wheels Open bed truck where appropriate Electronic tire inflation system Tire balancing spheres Light-weight materials such as aluminum wheels Climatizer Air conditioning with Auxiliary Power Unit (APU) Manual transmission Standard catalytic systems (Proconve) Driver Basic operator training Maintenance Corrective maintenance programs Operational Management Analog or digital tachograph Speed control Synchronized automatic transmission Hybrid diesel-electric, CNG/Diesel, all electric (small trucks) Diesel particulate filters On-board diagnostic systems Eco-driving training Driver incentive schemes Preventative maintenance supported by On-board Diagnostic System Telemetry and performance benchmarking Source: Authors compilation from survey of experts and industry representatives Medium to High Medium Low to Medium Medium Low to Medium Low Medium Low (but reduces pollution) Medium to High Medium to High Medium to High Likely barriers to stateof-the-art strategy Low familiarity, applicability limited to highway operations Low familiarity and only recently available in Brazil Limited applicability (adequate pavement is needed) High investment cost, Low familiarity Investment cost and questions of durability Lack of availability; Auxiliary loads are minimal because heat and AC not common High investment cost; Only available for new vehicles High investment cost; Fuel quality requirements Low familiarity or lack of availability High investment cost High investment cost; difficult to test 41. The selected technologies and practices for the tests were green tire (low-rolling resistance), aerodynamic deflectors for the tractor including roof fairing and gap reducers, and eco-driving training, as described and picture in Figure 2.5. These technologies and practices represent strategies with low penetration because of a lack of familiarity but with high applicability and partners available to support the pilot. Details of the test design and protocol are provided in Annex The technologies and practices being tested represent a near-term fuel-efficiency package that can be implemented on an average truck for less than US$4,000. It is estimated that this basic package could be 17

18 appropriate for at least 250,000 trucks in Brazil, but this will also be confirmed by the tests and further analysis. Figure 2.5. Technologies and Practices Being Tested Green Tires, such as these provided by Michelin, experience lower rolling resistance due to their sidewall construction and material compound. Deflectors to reduce aerodynamic drag, including roof fairing and lateral gap reducers provided by Barril Fibras. Eco-driving training delivered by CNT/SEST/SENAT, the most well-known training program in Brazil (including a hands-on module using a mobile truck unit like the one pictured), and verified by World Bank consultants. Implementing the Tests 43. Two long-duration controlled tests have been designed and initiated as summarized in box 2.3. The selection of the fleets, to the extent possible, was made to be representative of the average condition of vehicles in that kind of operation. Data collection is being provided by Ecofrotas, which has a system to monitor fuel consumption and kilometers traveled used by dozens of companies with thousands of vehicles in Brazil. The test design and protocol was supported by a World Bank consultant (Cascade Sierra Solutions) with extensive experience conducting similar tests in the US with the EPA and in China with the World Bank. Support for the evaluation and validation of the results will also be provided through a partnership with NTC (Brazilian National Association of Freight Transport and Logistics Companies) and an engagement with the Institute of Technological Research of São Paulo (IPT). The dissemination of the results will leverage partnerships with the major industry associations (NTC and CNT) which conduct regular driver training seminars and meetings throughout the country. Non-governmental organizations such as IEMA (Brazilian Institute for Energy and Environment) will also provide comments and have agreed to assist with the dissemination of results to government and industry. 18

19 Box 2.3: Green Truck Pilot Tests in Brazil Test 1: Rio Vermelho Fleet in Anapolis, GO Interurban trucking company, which is representative of the market segment Installation of new green tires and aerodynamic deflectors on 2 vehicles; and new conventional tires on 2 vehicles on August 1, 2011 Controlled and monitored 3-month test of 4 vehicles initiated on August 4, 2011: Vehicle models, age, servicing, loads Same drivers with same vehicles Test 2: VIC Fleet in Contagem, MG Urban delivery trucks which are representative (age and performance) of the market segment 2-days of eco-driving training with a focus on the driver s role in efficient and safe operations and supplemented by materials from international experience Controlled 3-month test of 2 test vehicles and 2 control vehicles: Vehicle models, age, servicing, routes Same drivers with same vehicles, same basic experience Training was delivered on July 12-13, 2011 and test initiated on July 25, 2011 Analysis includes 9 months of pre-test operational data and 3 months of monitored test data Source: Authors; as detailed in Annex 4: Pilot Test Design and Protocol. Preliminary Cost-Benefit Analysis 44. A preliminary analysis was made on the cost-effeteness of a basic Green Truck package that includes the technologies and training delivered as part of the tests. The expected fuel savings is a conservative hypothesis that will be confirmed by the tests. The preliminary results show a payback period for the basic package of 1.1 years (see Table 2.4). Extrapolating this result for the estimated fleet of trucks that may benefit from such a package (250,000 vehicles) yields a total CO2 reduction per year of more than 1.2 million tons. This information, once confirmed by the pilot tests and further analysis of the potential in the fleet, could be used to inform the low-carbon scenarios being developed under the National Climate Change Plan for Brazil. Table 2.4 Preliminary Cost-Effectiveness of Basic Green Truck Package Being Tested Number of trucks One 250,000 Assumptions/Comments Investment cost (US$) for Basic Package $ 3,162 $ 711,428,571 Fleet of 250,000 assumes a 10% cost reduction for pooled purchases of equipment. 1. Green tires $ 262 $ 58,928,571 US$5,500 per average truck, but only consider 5% incremental costs over standard tires if done within regular maintenance schedule. 2. Deflectors $ 2,500 $ 562,500,000 US$2500 per average truck, including delivery and installation. 3. Training $ 400 $ 90,000,000 US$400 assumes one-time training over 2 days to one or more drivers of the truck including drivers time. Expected fuel savings Green tires = 1% These are conservative estimates based on past Deflectors = 3% experience to be confirmed with current pilot test in real Training = 1% operating conditions. Total daily consumption (L) ,875,000 Average truck travel assumed 450 km/day (250 days/year) and fuel consumption assumed 2.4 km/l Total fuel savings (L/yr) 1, ,750,000 CO2 savings (tons/year) ,251,563 CO2 = 2.67kg CO2/liter diesel NOx savings (kg/year) ,781,250 NOx = 9.34 g/liter diesel PM savings (kg/year) ,875,000 PM = 0.40 g/liter diesel Fuel cost savings/yr $ 2,869 $ 717,187,500 Diesel average cost is assumed US$ 1.53/L Payback period in years

20 3. Assessment of Other Green Freight Initiatives 45. In Brazil there are a number of limited initiatives with a focus on improving the environmental performance or fuel efficiency of the freight sector. These initiatives involve different levels of government and private sector, have a variety of goals ranging from economic development to addressing local concerns related to noise, congestion and pollution and global pollution, and have differing scopes and impact. Overall, these initiatives create an excellent set of building blocks for a comprehensive green freight strategy. They include: A number of areas primarily driven by government including development and maintenance of a multimodal infrastructure; road system regulation and vehicle taxation regimes; and initiatives taken by local government. Technological innovation in the development of new kinds of truck technologies and fuels; Issues related to the management of trucking operations including logistics; and a cooperative measures taken by industry associations to improve management and maintenance practices; and Truck financing programs. 3.1 Infrastructure 46. Infrastructure influences the environmental performance of the freight system in at least three important dimensions. First, the availability of cost-effective and convenient alternatives can help to divert traffic off trucks onto more energy efficient modes such as rail and inland waterways. Second, the quality of road infrastructure has important implications on truck speeds and consequently on energy efficiency. Finally, construction of infrastructure is in itself an energy intensive activity and the appropriate use of materials and construction methods can have a significant impact on energy use during infrastructure development. All of these three dimensions of the infrastructure green freight relationship are examined below. 47. Availability of cost-effective and practical alternatives. An integrated multi-modal transport system is the cornerstone of any green freight strategy. On one hand, trucks offer a remarkable amount of flexibility, doorto-door speed, and transparency for shippers. Thus for many kinds of cargo, particularly high-value or timesensitive cargo, trucks may always play an important role. However, much can be done to support the development of alternatives modes rail, pipelines, inland and coastal shipping in the context of freight movements in Brazil. In a market environment, these alternatives modes will be most competitive in the case of long-haul trips and for lower-value bulk products such as agricultural and mining commodities. There is also a strong alignment between economic and environmental performance since these modes are more economical than trucking and, in general, market-driven shifts from road to alternative modes also reflect a reduction of overall logistics cost in the economy. For example, beyond a certain trip distance (typically 1000 km), long haul will be more cost efficient on rail than on trucks. The World Bank is currently supporting or scoping studies to better understand such characteristics in Brazil, including the life cycle cost and fuel efficiency of freight modes while controlling for such variables as the nature of the cargo, length and pattern of haul, propulsion technology (diesel versus electric), and energy production matrix (hydro power versus others). 48. Given this convergence of interest, development of multi-modal infrastructure has increasingly become a national priority. Box 3.1 summarizes some notable international experience in this regard. 20