Decarbonizing Logistics in Lower Income Countries
Most of the research on the decarbonization of logistics relates to the developed world. Forecasts suggest, however, that over the next few decades freight traffic and its related carbon emissions will grow much more rapidly in lower income, non-OECD countries. We need therefore to look more closely at their decarbonization challenges and possible lessons they can learn from more developed countries. I do this in a report for the World Bank, focusing mainly on non-urban freight movements within low and middle-income countries (LMICs).
The report adopts the 5-lever logistics decarbonisation framework, comprising demand management, a shift to lower carbon transport modes, improved utilization of freight capacity, increased energy efficiency and the switch from fossil to renewable energy. For each of these five levers, I examine recent trends in LMICs, potential carbon savings, implementation barriers and relevant public policy instruments.
A key question is whether LMICs are destined to follow the same logistics development path as pursued by European and North American countries, which generally leads to much greater carbon intensity. Alternative pathways could help LMICs avoid locking into highly centralised, time-sensitive, road-dependent logistics systems, thereby easing future decarbonisation pressures.
In this brief summary of the report, I review the application of the five levers to logistics within LMICs.
1. Moderating the growth in demand for freight transport
Historically there has been a close correlation between freight traffic growth and economic development. LMIC governments are therefore reluctant to restrain freight movement and thus risk jeopardizing much-needed economic growth. Improvements to transport infrastructure which accompany this growth promote the centralisation of production and storage operations and expansion of market areas, spatial processes that generally make logistics more carbon intensive. Several land-use planning measures, such as clustering logistical activities in ‘freight villages’, promoting localised break-bulk operations and encouraging the development of factories and warehouses in rail-connected locations, can help to mitigate the effect of these processes on carbon emissions.
2. Increasing the proportion of freight moved by lower carbon transport modes
In African, Latin American and South Asian countries the proportion moved by rail has dropped from 90% in the 1950s to under 30% today and in some countries, less than 10%. As the carbon intensity of moving goods by rail is, on average, 3-4 times lower than transporting them by road, this is a trend that should be reversed. Past efforts by governments in European and Asian countries to redress the road-rail imbalance have largely failed. Taking account of this experience, the report recommends making modal shift policies more holistic in distorting the freight market and fuel taxation in favor of rail; more targeted by sector, commodity and corridor, recognizing that not all segments of the market are contestable; and multi-faceted in deploying a broad range of public policy instruments – fiscal, regulatory, infrastructural and advisory.
3. Optimising the utilization of freight carrying capacity:
The aim here is to maximize the loading of vehicles within legal limits and to curb the overloading of vehicles, a practice that is much more widespread in LMICs than in more developed countries and carries a significant carbon penalty. Available evidence suggests that the percentage of truck-kms run empty is also higher in LMICs, though a lack of macro-level utilization statistics makes such international comparisons difficult. Eleven causes of vehicle under-utilization are identified and their relevance to LMICs assessed. The reasons for the over-loading problem are also analysed. A combination of processes and policies, including digitalization, supply chain collaboration, relaxation of truck size and weight limits and tougher enforcement of over-loading regulation, are strongly advocated as means of making vehicle loading more carbon-efficient.
4. Improving the energy efficiency of freight vehicles
Available evidence suggests that energy consumption per truck-km and per tonne-km is much higher in LMICs than in North America and Europe. This is attributable mainly to fleets being older and less well-maintained, poorer road infrastructure, under-skilling of drivers, diesel fuel subsidies and under-capitalisation of the freight sector. According to the International Energy Agency, 70% of new truck sales in 2022 were in countries with legal fuel-economy / CO2 standards for new vehicles. A large proportion of freight vehicles in LMICs are imported second-hand after being operated in the US, Europe and Japan for 5-6 years or more. This delays the international diffusion of energy-saving technologies. In the meantime, driver training, improved maintenance, retrofitting of existing vehicles with fuel-saving devices and re-scheduling deliveries to off-peak periods, among other things, can substantially cut energy use and emissions.
5. Switching logistics from fossil fuel to renewable energy
In the short-to-medium term, the energy transition for trucks will be to biofuels, though the supply of environmentally sustainable varieties of these fuels is very limited in most LMICs. In the longer term, truck fleets worldwide will be decarbonised mainly by batteries recharged with low carbon electricity. This transition is likely to take much longer in LMICs because of the initial concentration of e-truck sales in the Global North, LMIC’s heavy reliance on imports of used trucks, the under-capitalisation of their haulage businesses and the slower development of their charging infrastructure. The decarbonisation of grid electricity in many of these countries will also be slower, though those in the tropics have good potential to ‘micro-generate’ renewable electricity using solar panels on the roofs of warehouses to charge batteries and power intra-logistics operations.
Overall, the World Bank report shows how LMICs can accelerate the pace of logistics decarbonization through the application of a broad range of public and private initiatives.
It can be download for free.