Achieving Green Freight in Asia

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Achieving Green Freight in Asia Sophie PUNTE and Yan PENG Abstract Road freight is the Cinderella of the transport sector because of policy, technological and financial barriers which result in intense fuel use and increased emissions. This paper describes how a small trucks pilot project in Guangzhou led to a larger freight project in Guangdong and paved the way for designing a national freight programme in China. These initiatives on greening the freight and logistics sector are expected to be replicated in other Asian countries with strong support from private sector, as it is in their interest that common policies and integrated programmes are established. Introduction The efficient movement of goods and services contributes significantly to the economic growth of countries. As the Asian economy continues to grow at a rapid pace, an increase in freight activity is also expected. It is estimated that by the year 2050, medium and heavy freight trucks worldwide will consume 1,240 billion litres of fuel (gasoline equivalent), 138% more than 2000 levels. The global share of trucks operating within Asian countries is expected to increase from 19% in 2000 to 34% in 2050. In China, more than 24 billion tonnes of freight were transported in 2010, twice as much as in the United States, with an annual growth rate of 14% in freight turnover. The high percentage of empty hauls combined with systemic overloading of trucks is common and results in economic loss, higher fuel use and emissions, and safety issues. Trucks are a main cause of greenhouse gases and air pollutants. For example, 4% of Chinese vehicles are trucks but they are responsible for 57% of particulate emissions from transport. The potential for savings is huge; fuel costs can be 60% of truck operating costs in Asia, making it an even more attractive area for cost reductions than in the US, where driver wages are the largest cost component. The high percentage of empty hauls combined with systemic overloading of trucks is common and results in economic loss, higher fuel use and emissions, and safety issues. Whether it is the introduction of cleaner fuels, fuel economy standards, tax incentives or investments in infrastructure to improve transport, the freight sector is seldom given attention and often ignored. People either drive cars or ride the bus and so trucks are not in the public eye. Within cities, trucks are often allowed along specific corridors only at night, as a way to reduce traffic congestion during the day. Freight is clearly the Cinderella of the transport sector. 52 JOURNEYS November 2011

Barriers to a Sustainable Road Freight Sector Some of the main challenges that Asian countries must overcome to effectively address sustainability issues of the freight and logistics sector are policies and institutional arrangements, characteristic of the freight sector, technologies and financing mechanisms. Policies that deal with the environmental performance of trucks and the trucking industry are often lacking or limited, and poorly enforced. Freight is seldom included in the design and planning of urban transport systems and in policy development, resulting in ad hoc measures to accommodate urban freight. The wide range of government agencies with a stake in freight also makes it difficult to assess and formulate policies to develop the sector more sustainably. The trucking sector in China is highly fragmented with almost 90% of trucks owned by individual drivers and only 0.1% belongs to companies with more than one hundred trucks. This makes it difficult for government agencies to reach them with information and policies on, for example, new technologies. Freight is seldom included in the design and planning of urban transport systems and in policy development, resulting in ad hoc measures to accommodate urban freight. Furthermore, the adoption of cleaner technologies is vital for developing Asia as many trucks are old and poorly maintained. Driver training and technologies can render significant fuel savings, which is important in developing Asian countries where the fuel costs are the largest component of a truck s operational costs. Widespread technology adoption becomes challenging due to limited availability, fragmented suppliers network, and scarce case studies for Asia. Financing green technologies is hampered by high investment costs (despite potential large savings and short payback periods), the reluctance of banks and financiers to lend money to trucks drivers and small companies, and the lack of experience of ESCOs (energy service companies) with trucking fleets. Financiers often do not know how to appraise financing of technologies for trucks and policymakers have minimal experience in applying economic instruments to the trucking sector. Local, national and regional initiatives are needed to green freight and logistics in Asia. Financiers often do not know how to appraise financing of technologies for trucks and policymakers have minimal experience in applying economic instruments to the trucking sector. Piloting Green Trucks and Freight Logistics in China It all started with a truck pilot project in Guangzhou, a key transportation hub and capital of Guangdong Province, China (CAI- Asia and World Bank 2010). The pilot project started in 2009 and analysed the truck sector through research and a survey, developed JOURNEYS November 2011 53

and tested training materials for truck fuel efficiency and carried out a technology pilot. It was a collaborative effort between the Guangzhou transport and environment agencies, three trucking companies, Clean Air Initiative for Asian Cities (CAI-Asia), U.S. Environment Protection Agency (US EPA), U.S.- based Cascade Sierra Solutions (CSS) and the World Bank. CAI-Asia tested tyre and aerodynamics technologies on ten long-haul and short-haul trucks of private companies, and garbage trucks (CAI-Asia and World Bank 2010). Technologies were selected based on successes achieved in the United States under the US EPA SmartWay programme. Fuel and emissions savings for garbage trucks equipped with low rolling resistance tyres and a tyre pressure monitoring system (Figure 1) were about 18%. This figure is much higher than the savings seen in the United States, most likely because aside from reducing friction with the road, the new tyres also made the truck more stable, thus reducing fuel use. Fuel savings of long distance trucks was about 6.6%. This was less than expected because the trucks in the pilot travelled at lower speeds than the 75 km/hour needed for aerodynamics technologies to significantly reduce drag and fuel use. Still, the savings are high enough for companies to be interested in these technologies. To complement the technology pilot, truck drivers and truck fleet managers from the pilot companies participated in a training course on how to reduce truck fuel use. The course covered truck specifications, technologies, route planning, maintenance and inspection, and driving behaviour. The importance of driver training was highlighted as the difference in fuel efficiency between the best and worst Figure 1: Low rolling resistance tyres and pressure monitoring systems Single-wide tyres or Dual low rolling resistance tyres reduce rolling resistance Gap fairing reduces the tractor-trailer gap Aluminium wheels reduce weight Skirts reduce wind underneath the trailer Automatic tyre pressure monitoring systems keep tyre pressure more constant Nosecones reduce turbulence 54 JOURNEYS November 2011

driver in the US can be as high as 35%. A 10-minute video of the technology pilot (CAI-Asia and World Bank 2010) and driver s training materials are available in both English and Chinese. The survey involving 1,040 truck drivers and 43 companies revealed that maintenance practices are poor as most drivers only use a hammer to check tyre pressure and 14% check pressure less than once per week (CAI-Asia and World Bank 2010). The importance of driver training was highlighted as the difference in fuel efficiency between the best and worst driver in the US can be as high as 35%. The pilot showed that Guangdong s 825,000 heavy duty trucks have the potential to reduce diesel use by 3.8 million hectolitre, CO 2 emissions by 8 million tonnes. To help design the project, CAI-Asia, US EPA and CSS hosted 19 government officials from Guangdong Province in June 2010 to visit truck fleets, the California Air Resources Board and several non-governmental organisations in California and Washington State. A visit to Europe in August 2011 gave insights into innovative freight logistics practices in Finland, Sweden and Switzerland (Figure 2). Figure 2: A visit to Europe to benchmark freight logistics practices in Finland, Sweden and Switzerland The pilot showed that Guangdong s 825,000 heavy duty trucks have the potential to reduce diesel use by 3.8 million hectolitre, CO 2 emissions by 8 million tonnes and particulate matter (including black carbon) by 1.2 million tonnes each year through proper management and technologies. This helped convince Guangdong authorities to start a three-year USD $14 million Green Trucks Demonstration Project (CAI-Asia and World Bank 2010) cofinanced by GEF and covering the whole Guangdong Province. Launched at an International Green Freight Fair in October 2011, this new project will install new technology on Guangdong trucks and explore technology financing options. The project will also investigate ways to optimise freight logistics and address fuel wastage from the estimated 40% empty hauls of trucks. Establishing a Green Freight China Program The Guangzhou and Guangdong pilot became a springboard to establishing a national green freight programme. With Energy Foundation support, CAI-Asia designed a Green Freight China Program with five components: Clean Technologies, Freight Logistics, Financing Mechanisms, Knowledge & Capacity, and Partnerships between government and the private sector (CAI-Asia and World Bank 2010). Its design is based on the US SmartWay Partnership programme, and comes at the right time for China. Energy efficiency is a JOURNEYS November 2011 55

Figure 3: Delegates at the 1st Green Freight China Seminar in May, 2011. key factor in making the freight sector in China more competitive, stated Mr. Xu Yahua, Deputy Director-General, Road Transportation Department, Ministry of Transport. The Guangzhou and Guangdong pilot became a springboard to establishing a national green freight programme. who can organise the labour capacity to move freight in China will be the winners commented Schneider Logistics, pointing to the highly-fragmented truck sector. CAI-Asia will further develop the programme design with stronger collaboration among local, national and regional stakeholders from the freight sector. At the 1st Green Freight China Seminar last May 2011 (Figure 3), over ninety Chinese government officials, private sector and civil society representatives discussed how to advance green freight in China and several organisations committed to collaborate on policy research and pilot studies. The Seminar was organised by CAI-Asia with support from the Road Transportation Department of the Ministry of Transport, the Vehicle Emission Control Center of the Ministry of Environment Protection, Energy Foundation, US EPA, World Bank and CSS. Companies such as C.H. Robinsons, Schneider Logistics, Xin Bang Logistics and GITI Tires shared their experiences in introducing clean technologies and logistics solutions. Those Expanding Efforts to Asia Green freight efforts in other Asian countries are also gaining traction. This is a welcome development, since tackling the barriers to a sustainable road freight sector would certainly require a common framework across Asia, especially with the freight movement going beyond international borders....tackling the barriers to a sustainable road freight sector would certainly require a common framework across Asia, especially with the freight movement going beyond international borders. Improved freight transport efficiency is one of the sustainable transport goals under the 56 JOURNEYS November 2011

Bangkok 2020 Declaration signed by 15 Asian countries in August 2010 during the Fifth Environmentally Sustainable Transport Forum. A report highlighting the strategies and best practices for green freight in Asia will be released as a briefing paper for policy makers from transport and environment ministries during the Sixth Environmentally Sustainable Transport Forum to be held in Delhi, India in December 2011. Interest in pilots and programmes on freight and logistics management has also sparked. The Society of Indian Automobile Manufacturers (SIAM), together with CAI-Asia, will hold a Green Freight India Seminar in January 2012 to engage truck manufacturers and government officials on establishing a programme design for improving fuel efficiency and reducing emissions from freight. Likewise, low carbon projects to reduce emissions from freight are also being implemented along the economic corridor of Thailand, Laos and Vietnam, also known as the Greater Mekong Sub-region....low carbon projects to reduce emissions from freight are also being implemented along the economic corridor of Thailand, Laos and Vietnam, also known as the Greater Mekong Sub-region. Private sector support is pivotal to make these initiatives work. In the process of developing the Green Freight China Program design, CAI- Asia has brought together shippers, carriers and logistic service providers operating in China to discuss the role of the private sector in emissions reductions from freight and logistics. A follow-up meeting will be held before end of 2011, supported by Logistics Institute - Asia Pacific and the Deutsche Post DHL. It will initiate the establishment of an informal partnership of private sector and other collaborating organisations to advance green freight programmes in China and other countries in Asia. Improving freight logistics would involve integration of truck companies, as well as, logistics centres. To facilitate this, CAI-Asia established a dedicated Green Freight website, www.greenfreightandlogistics.org. The goal is to improve access to information on policies and programmes, technologies and logistics, contacts and data relevant to the freight sector, especially for developing countries. Conclusion The China experience has shown that there is an untapped opportunity to reduce fuel use and emissions from the fuel-intensive freight and logistics operations. As proven by the green freight pilot project in Guangzhou, truck performance can be improved through technologies and drivers training to realise fuel savings and emissions reduction. City level and regional level projects for the freight sector can be successful and sustained if an integrated policy is in place nationally. This programmatic approach will only work if supported by stakeholders especially carriers, shippers, logistics providers and the government. JOURNEYS November 2011 57

Acknowledgement The authors want to thank Energy Foundation, World Bank, US EPA, Cascade Sierra Solutions, DHL, SSCCAP and Chinese government authorities for their support to advancing green freight in China and Asia. We would also like to acknowledge Bert Fabian, Sudhir Gota, Alvin Mejia, Su Song, Mingming Liu, and Parthaa Bosu from CAI-Asia for their role in green freight research and project implementation. Notes 1. More information on the global share of trucks and their worldwide fuel consumption can be found in (WBCSD and IEA 2004). 2. The full copy of the technology pilot report can be found at http://cleanairinitiative.org/portal/greentruckspilot 3. The viewing of the video may be accessed at http:// cleanairinitiative.org/portal/knowledgebase/videos/gree ntruckspilotprojectinguangzhou%28video%29 4. More information on Guangdong GEF Green Freight Demonstration Project can be found at http:// cleanairinitiative.org/portal/guangdonggef 5. More information on Development of Green Freight China Program can be found at http://cleanairinitiative. org/portal/projects/greenfreightchinaprogram. 6. In order to highlight the issue of freight to senior decision makers in Asia, CAI-Asia prepared a background paper on the Challenges and Opportunities for an Environmentally Sustainable Road Freight Sector in Asia for the United Nations Centre for Regional Development s Fifth Environmentally Sustainable Transport Forum held in Bangkok, Thailand on 23-25 Aug 2010 (see http://cleanairinitiative.org/portal/ node/6340). 7. Challenges and Opportunities for an Environmentally Sustainable Road Freight Sector in Asia. 2010. Background paper prepared by Sophie Punte, Bert Fabian, Sudhir Gota and Alvin Mejia for the 5th Regional Environmentally Sustainable Transport Forum in Asia. References CAI-Asia and World Bank. 2010. Green Trucks Pilot Project in Guangzhou: Final Report. http://cleanairinitiative. org/portal/greentruckspilot World Business Council on Sustainable Development (WBCSD) and the International Energy Agency (IEA). 2004. Sustainable Mobility Project. http://www. wbcsd.org/includes/gettarget.asp?type=p&id=mtq0 58 JOURNEYS November 2011

Sophie Punte is Executive Director with the Clean Air Initiative Asia (CAI-Asia) in Manila, which promotes reductions in air pollution and greenhouse gas emissions in all sectors, including trucks and freight. She leads the work on green freight in China together with the CAI- Asia China office. For four years she worked at the United Nations in Bangkok to lead a UNEP energy efficiency and climate change project for Asian industry in nine countries. Prior to joining the UN, Sophie was senior manager with audit and advisory firm KPMG in Australia and The Netherlands, a policy analyst with the New Zealand Environment Ministry and an environmental scientist with an engineering firm. She holds a Master of Science (Biology) and a Master of Environmental Management from the Netherlands. Yan Peng has been the China Representative of Clean Air Initiative Asia (CAI-Asia) in China since 2005. Prior to joining CAI-Asia she worked with the UK Department for International Development (DFID) and consulting firm ERM in China. She has a Master of Law degree from Peking University and studied at the Johns Hopkins University-Nanjing University Center for Chinese and American Studies, and the University of Toronto, Canada. Her areas of specialty are environment public policy, social impact assessments. Yan leads CAI-Asia s China Network of 13 cities and the annual Air Quality Management city workshop held together with the Ministry of Environmental Protection. She also leads CAI-Asia s work in China to improve energy efficiency and reduce greenhouse gas and air pollutant emissions from freight and logistics. JOURNEYS November 2011 59