1 Developing a Green Freight Strategy – First StepsSudhir Gota Consultant / Advisor ADB/GIZ Sustainable Freight Training, ADB Transport Forum 2016 16th September 2016 Manila

2 Achieving Green Freight in Asia?1. Visioning Green Freight Develop Vision with Stakeholders 2. Assess Current Scenario Typology of green freight development Current barriers Freight data Develop Targets 3. Identify & Implement Green Freight Measures Identify suitable measures Priority Projects Implementation Monitoring Evaluation Framework Measurement Target Data & KPI 4. Green Freight Program Define clear objectives, scope & plan of action Financial mechanisms Recognition Program

3 Developing a Green Freight Strategymeasure and report environmental impacts of freight transport environmental commitment/ green freight vision set targets reducing these impacts identify green freight initiatives devise green freight implementation plan and schedule estimate environmental and cost impacts of these initiatives exploit / monitor benefits

4 Economic Development & FreightImprovements to transport infrastructure – mainly road New patterns of consumption Industrialisation Centralisation Wider sourcing New industrial / warehousing development not rail-connected Change in commodity mix Increased length of haul Lower density / higher value products Increased freight transport intensity: ratio of tonne-km to output Stronger just-in-time pressures Decline in rail freight Growth in output Poorer utilisation of vehicle capacity Much more freight being moved By less green mode In less full vehicles Greater environmental degradation Higher externalities per unit of freight moved

5 Levels of Environmental InterventionLogistics System Design & Supply Chain Structure Choice of Mode Vehicle Routing and Scheduling Vehicle Loading Driving Vehicle Maintenance VehicleTechnology Alternative Fuels vehicle + equipment manufacturers energy suppliers logistic service providers individual shippers supply chain partners national governments freight corridor management

6 FRAMEWORKS

7 Sustainable Freight Transport Framework – Avoid-Shift-ImproveReduce or avoid need for freight movement Shift freight to greener transport modes Improve energy the efficiency of freight transport

8 emissions per vehicle-kmSupply Chain Structure & Logistics System Design Choice of Mode Vehicle Routing and Scheduling Vehicle Loading Driving Vehicle Maintenance VehicleTechnology Alternative Fuels total vehicle-kms total emissions emissions per vehicle-km

9 Sustainable Freight Transport Framework – Activity-Structure-Intensity-Fuel (ASIF)The “ASIF” framework, is an acronym for “activity,” “mode share,” “intensity,” and “fuel mix.” This framework shifted the transport discussion from top-down statistics to a more transparent system of calculating emissions, thus establishing the business case for low-carbon transport in Asia. In this framework, emissions (G) in the transport sector are dependent on the level of travel activity (A) in passenger kilometers (or ton-km for freight) across all modes; the mode share (S); the fuel intensity of each mode (I) in liters per passenger-km (or ton-km for freight); and the carbon content of the fuel or emission factor (F), in grams of carbon or pollutant per liter of fuel consumed. A & S Activity and Mode Share – It describes how much and how people travel and is measured in terms of passenger –km and disaggregated by mode type including NMT. Passenger kms are calculated using number of vehicles, the distances travelled, and the occupancy on the vehicles.  I The fuel intensity of mode is generally measured in energy units per passenger-km i.e. liters of fuel per passenger-km or in megajoules (MJ) per pass-km. It depends on the vehicle fuel intensity and occupancy and is dependent on driving behaviour, vehicle engine technology, weight, aerodynamic design and congestion on the road. F Carbon content of fuel i.e. F is Carbon-equivalent content of fuel-mix used to produce a unit of energy by mode or in simpler terms amount of carbon released per unit of energy consumed. The savings in emissions is accounted for by converting fuel and thus it is desirable to use life cycle assessment to measure the “F” factor.  By creating transparency through ASIF structure the analyst can see the interactions among the various components as they can sometimes work at cross-purpose. For example, increasing the fuel efficiency of vehicles can lead to additional travel or switching to a fuel which provides better fuel efficiency can have high carbon content etc. Source: Schipper et al, 1998

10 Green Freight Transport Frameworksupply chain structure modal split vehicle utilisation energy efficiency emission intensity Relative importance of these factors varies with the level of economic development Source: McKinnon, 2010

11 MEASUREMENT

12 GHG Emissions from Freight SectorMeasurement of Freight Carbon Emissions (Public sector) Green Freight Energy consumption (MJ by fuel type) Fuel carbon content (CO2/MJ) × top-down method GHG Emissions from Freight Sector A Activity / Transport demand (VKT) S Structure of modes (VKT by mode) I Energy intensity (MJ/km) F Fuel carbon content (CO2/MJ) × × × National institutions and stakeholders Avoid trips or reduce the distances travelled Shift to low carbon modes Improve vehicle fuel economy and fuel quality Local institutions and stakeholders Source – Based on Low Carbon Transport Handbook

13 Measurement of Freight Carbon Emissions- Tools ~ 80 tools applicable for freight sector ~ 50% free ~ Project, Policy, Infrastructure, Program, Fleet, Organisation, Supply Chain

14 What standard do you adopt for measuring emissions?Greenhouse Gas Protocol Clean Cargo Working Group World Economic Forum Consignment-level reporting US Smartway Green Freight Europe China Green Freight Initiative CEN Green Freight Asia EcoTransIT NTM geography / supply chain transport mode industry / commodity level of disaggregation draw out the main principles for carbon footprinting and identify the features that are aligned and those that are not. The base methodologies each agree upon the basic principle of identifying the amount of fuel needed to carry out a certain amount of work, then using emission factors to understand the GHG emissions that arise from that fuel use. National schemes Industry-specific schemes Aiming to harmonise emission measurement and reporting

15 Boundaries around the Carbon Calculation?Organisational Geographical Functional Hierarchical

16 Product Level Accounting?Supply Chain Process Map for Shampoo Supply Chain Carbon Audit for 8 shampoo products cost £250,000 Carbon Trust methodology Source: Boots

17 Product Level Accounting?20% decrease in emissions across the product’s life cycle

18 Emission Reporting ? absolute value relative valueemission-intensity index Total level of emissions emissions 3.5 kg / tonne delivered tonnes delivered Choice of denominator / normaliser ? Typical denominators in the logistics sector Tonne-kms, Vehicle-kms, Pallets or cases delivered, TEUs , TEU-kms, Jobs

19 Measuring Environmental Impacts10-stage procedure for Micro (company) or Macro assessment Review international environmental reporting standards and obligations Decide on the range of environmental impacts to be measured Decide at what level to measure these impacts (Boundary) Consider basing the assessment on one of the standard methodologies Decide how frequently the assessment should be made Review available data Where necessary, undertake additional data collection & where possible, undertake data ‘triangulation’ Obtain the relevant emission factors from internal or external sources (e.g gNOx per truck-km) Analyse the environmental data Report the results & monitor trends through time and outlining data limitations

20 Calculating the Environmental Costs of Freight Transportto model the trade-offs between economic, social and environmental objectives using a common metric to conduct cost-benefit analyses of measures that reduce the environmental impact of freight transport to assess by how much taxes on freight transport would have to rise to recover the cost of the environmental damage it causes to calculate a financial rate of return on investments made to improve the environmental performance of freight transport to estimate by how much greener transport modes should be subsidised for environmental reasons A strong case can made for monetary valuations of environmental impacts It is, nevertheless, a difficult, complex and controversial process

21 SETTING TARGET

22 Setting Emission Targets - NDC

23 Setting Emission Targets - NDC“Freight is currently relatively neglected across INDCs” – SLoCaT (2016) In NDCs 44% identify passenger transport but only 14% identify freight

24 Avoid-Shift-Improve - NDCs% of NDCs specifying particular green freight measures

25 Indonesia Emission Target (Developing Country)2020 without international support -26% ( %) with international support -41% (2030) Sector allocations Forestry + Peat Agriculture Power - energy Transport Waste Industry Sectors Emission Share (%) Emission Reduction Target share (%) 26% 41% Forestry & Peatland 62.93 87.84 87.38 Agriculture 4.47 1.05 0.93 Energy & Transportation 20.60 4.71 Industry 2.71 0.13 0.42 Waste 9.29 6.27 6.56

26 Freight Sector Contribution?In 80% of studies, freight sector did not even contribute its equivalent share of emissions to the total mitigation.

27 National Mode Share TargetsVietnam’s Inland waterways targets a market share increase of 25% by 2020 Laos - Inland waterways targets 30% of transport volume in 2020. Korea - 20% volume by rail by 2020 Argentina - increase rail freight share from 2% to 20% by 2020 India - rail freight increase from 35% at 2005 to 50% by 2020 Japan - Rail & coastal shipping to increase from 39.6% (2000) to 50% (2010) Bangladesh – 30% for rail & coastal shipping by 2014 Brazil - Increase rail and waterways mode share from 25 to 35% (Rail) and 13 to 29% (Waterways) by 2025

28 Setting Targets – Private Sector

29 Reasons for Establishing an Environmental Improvement TargetSetting Targets Reasons for Establishing an Environmental Improvement Target Sets clear goal for the organisation Motivates management and staff Provides a benchmark against which improvements can be measured Demonstrates organisation’s commitment to greening the transport operation May yield some marketing / political benefit Differences between corporate green freight targets and other business targets Alignment with external industry and government targets Visibility – declaring targets for Corporate Social Responsibility (CSR) and marketing reasons

30 Setting Targets Bottom-up approach Top-down approachImposition of corporate environmental targets Often based on targets set by government, trade bodies or competitors Bottom-up approach Top-down approach Analysis of potential environmental improvement and methods of achieving it – against business- as-usual trend Problems with the Top-Down Approach to Targeting 1. Not based on an analysis of the potential savings – lacking credibility 2. Often fails to recognise differences between companies and sectors: 3. Ignores wide inter-functional and inter-sectoral differences in the potential for and cost-effectiveness of environmental improvement

31 Setting Targets Bottom-up or Top-down Absolute or IntensityVarying scope Differing time-scales Degree of reliance on carbon offsetting Differing start and end dates frustrates the comparison of targets Tendency to choose earlier base year to include past emission reducing initiatives Long term targets lack credibility – need interim targets Should try to align dates with government and industry-level targeting

32 Japan’s Logistics CO2 TargetSAVINGS 25% below 1990 levels by 2020  Oil Crisis  Japan’s Kyoto Protocol target was 6% reduction compared to the 1990 level by In March 2010, the Cabinet of Japan approved its new CO2 emission target, promising to reduce emissions by 25% by 2020 compared to the 1990 level. The Japanese government has generally viewed energy efficiency as a high priority since the oil shocks of the 1970s, which revealed the vulnerability of the economy to energy supply disruptions. In more recent years, energy efficiency has been promoted as an important mechanism to achieve CO2 emissions reductions to address global warming. In the transportation sector, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) has been primarily responsible for developing efficiency policies in coordination with the Ministry of Economy, Trade, and Industry (METI) and the Ministry of the Environment. In transport sector, they have considered multiple actions to limit the growth of transport emissions – fuel economy standards, eco driving, traffic management strategies, public transport and Logistics. Passenger cars and freight trucks constitute 85% of energy consumption in transport sector and hence they have been priority areas for energy efficiency policies. Govt - From 225 MT in 2013 to 163 MT by 2030 Freight Private Sector- Reduction of energy consumption intensity by an annual average of at least 1% Mandatory reporting ( Green Logistics Partnership)

33 Private Sector Emission TargetCompany Targets Indicator Casio a 22% reduction per unit of domestic sales in fiscal 2013 compared to fiscal 2006 CO2/Sales Toyota Reduce emissions per freight unit by 14% by 2020 from 2006 using logistics CO2/ tonkm Komatsu 8% reduction in CO2 per Cargo Weight in 2015 with 2011 CO2/Weight Sharp CO2 emissions per shipping volume by 1% or greater/year CO2/ Volume Omron Global net sales to CO2 emissions improvement by 30% by 2020 (2010 baseline) Sales/CO2 Emissions Sagawa Express Reduction of gross CO2 emission by 6% (compared to fiscal year 2002) before FY 2012 Gross CO2 Emissions 109 g/tonkm by 2020 which they already reached by 5 years 2006 – 127.2 2011 – 107.7 2012 – 106.7 2013 – 106.6 2014 – 109.6 Toyota (g CO2/tonkm)

34 UK Logistics Carbon Reduction SchemeIndustry-level Target-setting for Logistics Carbon Reduction Conform to targets set by industry trade-body confers credibility helps build industry momentum for decarbonisation encourages more consistent, responsible approach ‘outsources’ the target-setting exercise UK Logistics Carbon Reduction Scheme Currently, 120 companies with 84,000 vehicles (15% of HGVs) The flexibility of the scheme enables members to submit fuel data and at least one normaliser (vehicle km, turnover, Full Time Equivalent employees (FTE)) as a minimum Logistics Efficiency Indicators 1 Fuel efficiency Improvements in vehicle fuel consumption (mpg) through use of better driving techniques, aerodynamic styling, engine performance etc 2 Payload maximisation The use of available load-space or capacity in vehicles. Fuller vehicles mean fewer journeys to move a given volume of goods 3 Empty running The propor tion of journeys run empty and potentially available to carry goods for another par ty, saving their journey 4 Carbon intensity of fuels The carbon intensity of fuel used to move goods, using fuels such as natural gas, biofuels and electricity which reduce carbon emissions for the same power input 5 Modal split The volume of freight moved by lower carbon modes of transpor t such as rail and water Target reduction of 8% in carbon intensity of freight transport Endorsed by the UK Government

35 6 Principles of Target Setting for Green Freight TransportTargets should be based on a bottom-up analysis of the potential for and cost of cutting emissions over particular time-frames. Where possible, targets should apply to the whole logistics operation in recognition of the environmental trade-offs that exist between logistical activities. Targets can be expressed in terms of emission intensity with transport output measures (e.g. tonne-kms) used as the normalisers. Where the target period is greater than 3-4 years, ‘bridging’ targets should be set for intervening years to show the trajectory for environmental improvement. The scope of the environmental improvement and related target should be made explicit, delimiting the relevant organisational, geographical, functional and hierarchical boundaries. Where appropriate, a company should join an industry-wide green freight scheme and conform to the targets that it sets.

36 Freight Data & KPI’s How much freight is being moved?Where is the freight going and where it is coming from? What is the relative use of different transport modes? What is the quality of freight infrastructure How efficiently is freight being transported? How does freight transport performance compare among neighboring countries/cities/competitor companies? Silver Bullet vs Analysis Paralysis Harmonize Partnership to avoid double counting Improve Capacity Multi-year program

37 EXAMPLE

38 Northern Corridor in East AfricaNorth-South Northern Central Nacala Maputo Beira Trans-Cunene Namibe Malanje Trans-Caprivi Lobito-Benguela Dar es Salaam Trans-Kalahari Ethiopia - Djibouti

39 Green Freight StrategyThe Northern Corridor Vision is to be a seamless, economic, smart and green transport corridor Setting the objectives Engaging stakeholders Below are draft short term targets for the period 2016 baseline to 2021: Improved fuel economy (litres per tonkm) for trucks by at least 5% by 2021 (reduction); Reduction in Particulate Matter(PM), black carbon emissions and Oxides of nitrogen (NOX) grams per tonkm by at least 10% by 2021; Reduction of CO2 emission intensity grams per tonkm by 10% by 2021; Reduction of road accident fatality by 10% per million truck kilometer Compiling the necessary data Measurement The ultimate goal of the Northern Corridor Green Freight Programme is to reduce fuel consumption and emissions by: Raising awareness on pollutant impacts and mitigation strategies such as improved quality of fuel, vehicles and infrastructure; Advocating for shift of traffic to more sustainable freight transport systems and modes; Streamlining transport activities by actions such as optimizing routes, consolidating loads and reducing empty runs; Identifying areas of action and overcoming barriers by enhancing capacity and mobilizing support; Improving scientific understanding of climate pollutant impacts and mitigation strategies and promoting best practices and showcasing successful efforts. Devising realistic targets Identifying / evaluating initiatives possible criteria Feasibility Required level of investment Cost effectiveness Ease of implementation Time-scales Likely stakeholder support Possible co-benefits Skill requirements

40 © Alan McKinnon / Sudhir GotaThank you! © Alan McKinnon / Sudhir Gota