international logistics and climate change

7/31/2019 International Logistics and Climate Change

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RMIT UniversityInternational Logistics

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Family name Given name Student number Student signature Date

Ninan Hamish s3171304 31-10-2012

Thi Hein Le s309483631-10-2012

Shah Rohit Dayal s331780531-10-2012

Jose Sunny s334103331-10-2012

Yuan Yachun s319512331-10-2012


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Implications of International Logistics on

Climate Change and Sustainability


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Abstract

This paper concentrates on the role of freight and transportation systems, which has been playing an

increasing role in globalization. As we know today that the world has shrunk due to Globalization has

reduced the distances around world as better freight systems have changed the necessities of thepopulation. A decade ago Duncan and Youngquist (1999) had expressed concerns over long-term

damage to the planet done by the logistics industry. Transport and logistics is one of the complex

factors that has been most researched for its effects on our environment and the role it plays in climate

change. This paper reports a study of pollutant impacts from cargo transport sources on the

environment. Our goal is to identify trends that have negatively influenced transport sector

sustainability i.e., fundamental changes in demand for transporting goods and suggest areas that

require informed decision making to reduce the impact of this sector on the environment with a

particular emphasis on the impact of climate change on logistics infrastructure that would have a

bearing on how the industry reacts to the climate change phenomenon. We have also discussed about

strategic policies adopted to reduce the affects of transportation on the environment. We haveconcluded with challenges and suggestions that could increase sustainability of this sector by

providing information of their influence on future environmental outcomes.


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Contents

Abstract ............................................................................................................................................ 3

Climate Change and Global Warming................................................................................................. 5

How Logistics affects Climate ............................................................................................................ 5

How Climate Change Impacts Logistics Infrastructure ........................................................................ 6

The Environmental Effects of Freight Modes ..................................................................................... 7

Shipping ........................................................................................................................................ 8

Airfreight ....................................................................................................................................... 8

Land freight or Trucking ................................................................................................................. 9

Railways ........................................................................................................................................ 9

Pipelines ........................................................................................................................................ 9

Policies and Regulations .................................................................................................................. 10

Sustainability in International Logistics and other Solutions ............................................................. 11

Macro Domain ............................................................................................................................. 12

Vehicle technologies ................................................................................................................ 12

High-speed rail......................................................................................................................... 12

Alternative Fuels ...................................................................................................................... 12

Micro Domain .............................................................................................................................. 13

Conclusion ....................................................................................................................................... 13

Reference ........................................................................................................................................ 14

Appendix ......................................................................................................................................... 15

Journal Articles Review ............................................................................................................... 15


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Climate Change and Global Warming

The Green Trends Survey has identified Climate Change as the most serious issue facing the

world at this point (Figure 1).Al Gore through his documentary The inconvenient Truth has

presented the stark reality of climate change and its effects on global warming leading to

changes in our environment. He has discussed the consequences of climate change which

could result in melting of ice sheet in Greenland that could increase the sea level by upto20

which would have disastrous consequences. Global warming could lead to droughts, floods,

climate extremes and hence leading to threatening theexistence of several animal species

(Gian-Reto, 2002). IPCC (2007) through their research on continents for over 50 years,

concluded that global warming was due to increased Green House Gas (GHG) concentrations.

Considering the world economic growth of 2.5%, the world would emit more than hundred

million tons of CO2.

Figure 1: Rankings of the problems in the world (McKinnon, 2010)

How Logistics affects Climate

Logistics accounts for approximately 9% of global GDP and this share is higher indeveloping countries due to infrastructure constraints. This in turn is a significant driver ofwealth creation, employment generation and economic growth (Logistics Today,2010).According to Intergovernmental Panel on Climate Change (IPCC 2007), the logisticsindustry accounts for 13.1% of GHG emissions around the world (Figure 2). The logisticsindustry is accountable for approximately 2.8 m metric tons of GHG emissions annuallywhich represent 5.5 % of total GHG emissions (The World Economic Forum, 2009). Asshown in figure 4, road transport accounts for 60% of CO2-equivalent emissions with 1,500megatons. In terms of emissions per ton kilometre, air transport is most carbon intensivemode while rail and ocean are most carbon efficient. In future, the logistics sector is expectedto grow at a rapid pace thus increasing the energy consumption and further escalating the

GHG emissions.


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Due to increased consciousness about climate change and governments proactive regulations,

in future the success of business would be linked to its sustainable logistics practices. Forinstance, Deutsche Post DHL have aimed to reduce its carbon emissions by 30% by 2020which would also lead to reduction in operating costs by implementing improvedtechnologies or other specialised market ready solutions.

Figure 2: GHG Emissions in different sectors (IPCC, 2007)

How Climate Change Impacts Logistics Infrastructure

Climate change can impact logistics infrastructure physically and economically. Climatechange will increase the temperature which in turn would lead to, intense and longerheatwaves, increased intensity and frequency of rainfall which could lead to flooding,increased sea levels and salt water invasion in the coastal area leading to disruption in theinfrastructure. If we consider Australia according to department of climate change and energyefficiency (DCCEE) Australia has 1,200 to 1,500 km of rail lines which are at potential risk

of inundation. There are risks of seawater encroaching land area (prediction of 2100) whichcan cause damages of around $4.9-$6.4 billion (value replaced with year 2008). In the sameway, shoreline recession and inundation can affect 26,000-33,000 km of road infrastructurewhich has the potential to cause damage of around $46-$60 billion (value replaced with year2008). The report also identified the risk of cascade failure, which is the risk of failure ofone sector that could lead to failure of other sectors (DCCEE, 2011).

In Australia, 6% of greenhouse emissions are aggregated from the freight industry. TheAustralian Government is committed to reduce national emission of 5% below 2000 level by2020;The main approaches used by the government is implementing policies like carbon taxwhich was rolled out in July, 2012. These policies aimed at reducing environmental impacts,

have indirectly impacted the economics of freight. This factor has potential of changing theinternal dynamics of land freight network and also impacts different freight modes.


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Therefore to minimise climate change impacts on logistics, the transport industry needs to

reduce carbon emissions, which can be managed by logistics carbon management system

(Figure 3: Logistics carbon management).

Figure 3: Logistics Carbon Management (Wang, 2012)

Logistics industry is in a fix as they are forced to trade-off between cost, service levelsandemission and therefore need to choose warehouse type, shipment size, fuel option andtransportation mode very cautiously. To implement the management system, carbonassessment need to be done by using complex technology specifications as prescribed bytechnology standards such as IPCC Guidelines for National GHG Inventories and GHGProtocol emissions from transport or mobile source. Thereafter, it can be implemented byspecified complex decision trees provided by the system (Wang, 2012).

The Environmental Effects of Freight Modes

Freight modes like shipping, Air, Trucking, Pipeline, Rail and other intermodal freight have

varying environmental effects. That range from Pollution (Water, Air, and Noise), accidents,

and habitat fragmentation etc. Moreover certain aspects are normally completely ignored as

they do not have a direct impact on climate that we can measure for example disposal of

dredged materials or introduction of foreign species caused mainly by shipping. Now let us


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take a brief look at the main causes of pollution by different modes of transport (Duncan,

1999).

Shipping

Shipping mainly threatens inland waterways and oceans. Water pollution is the main concern

with shipping industry polluting water by discharging operating oil and ballast water into the

water. There are instances of dumping non-biodegradable solid wastes in ocean. Accidental

spills which are less common are again a major source of water pollution ships carrying

dangerous cargo like oil and chemicals can severely affect the local environment. Even

though ships are not a major source of air pollution they are still powered by ICE and run on

cheaper heavy oil which releases a lot of toxins into the air. The maintenance and operations

of inland terminals are another source of pollution even though they are not directly linked to

ships (Duncan, 1999).

AirfreightPresently cargo accounts for low volumes in airfreight. But the scenario is rapidly changing

as companies are adopting new methodologies like Just in Time (JIT) to make their supply

chains more responsive and agile. As we can see from figure 5 airfreight causes maximum

emissions of CO2 Kg/ton-km (WEF, 2009).

Figure 5: Carbon Intensity of various transport modes (WEF, 2009)

They mainly effect the environment in three significant ways. Low altitude emissions which

include nitrogen oxides, hydrocarbons etc. cause smog. High altitude flights emit

significantly high amounts of GHG emissions further these emissions are more potent in the

upper atmosphere. The third main problem is Airports are normally located in City areas that

pollute noise and is a major nuisance for the people who live in the vicinity (Duncan, 1999

and WEF, 2009).


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Land freight or Trucking

The impact of trucking has received a lot of attention. As we can see from figure 4 that trucksare the major contributor of GHG. And their share is increasing as they are the most

convenient transport mode. The effects of trucking on congestion is major cities is also well

documented. Trucks also cause a significant amount of amount of noise pollution (Duncan,

1999 & WEF, 2009).

Figure 4: GHG emissions in different Logistics modes (WEF, 2009)

Railways

Railways are normally known to be less damaging to the environment around it compared to

Road and Air. Modern trains are powered by electricity or by diesel fired an electric

generator which then uses electricity hence there is a substantial reduction in pollution. The

noise pollution is also comparatively lower than trucking (Duncan, 1999).

Pipelines

They are primarily used to transport Natural gas and oil they pollute the least among all forms

of transport. But accidents pose significant risks. They also cause some air pollution as the


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goods moving through the pipelines are either compressed or pumped emit pollutants into the

atmosphere (Duncan, 1999).

Policies and Regulations

In order to achieve long term environmental sustainability for international logistics,

governments around the world and organisations have placed policies and regulations in

place. Regulations and policies have been divided into three categories: Traditional

regulatory instruments, Economic instruments and Infrastructure instruments as delineated

in Figure 5. Individually they represent the stages for the international logistics

environmental sustainability improvement. By having these policies in place , the aims are to

reduce Green House Gas emissions, encourage alternative fuel research and adaption,

research technologies for environmentally friendly solutions (McKinnon, Kreie, 2010).

Figure 5: Various Policy instruments to improve GHG Emissions in Transport (McKinnon, Kreie, 2010)

There have been policies implemented to reduce GHG emissions during logistics operations;

they are the Traditional regulatory instruments. Policies and standards such as emission, fuel

efficiency, vehicle access restrictions, lower emission zones and speed limits are

implemented in nearly every country .However they are not unified standards or policies thatare applicable in every country .The current norm is that developed countries have much

better traditional regulatory instruments, and developing countries are adopting these policies

and standards at a much slower pace than their developed counterparts (McKinnon, Kreie,

2010). Shanghai is a clear case of the traditional regulatory instruments, through the past few

decades; Shanghai has become the economic capital of China supporting a populous of 200

million people. International logistic operations demand increases exponentially every year.

But government introduced strict traditional regulatory instruments to reduce the GHG

emissions only a few years back due to the continuous decline in air quality due to increase in

pollutants. Therefore, traditional regulatory instruments are the fundamental to achieve

environmental sustainability for international logistics operations (Tu, 2010).


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The second category of policies and regulations are the Economic instruments. This category

closely related to current economic trends, environmental requirements, and can be adjusted

according to the needs by the governments (Hodgkinson, 2011). The Economic instruments

can be divided into Push and Pull policies; the Push polic ies are emission trading,

carbon taxes, vehicle taxation and road charges. In recent years, especially in developedcountries Economic instruments have been perfected. These policies and regulations are

adding additional expenses for companies that require logistics operations (Tu, 2010). As the

result companies often seek alternative solutions for logistics operations to reduce expenses,

in a way Push companies to contribute for environmental sustainability. Ideally, the funds

collected from the Economic instruments are used to fund for R&D on environmental

friendly technology and Green investment incentives, hence the Pull strategy. However

there is not enough real financial support for environment friendly R&D. (McKinnon, Kreie,

2010). Main cause is the current economic down turn which has led governments to

prioritise use of funds, but in the near future this would be implemented (Hodgkinson, 2011).

Infrastructure instruments are the last policyin the standards category. Different to the two

categories above, this category is mainly implemented by a non-profit, government

recognised organisation, the World Ports Climate Initiative (WPCI). This organisation

involves fifty five key ports in the world, and was established in year 2008; their main aim is

to replace current port equipment, and encourage using renewable energy for international

logistics operations. Since establishment, four stages for infrastructure improvement have

been established. Firstly assess the present condition of the ports, their emission levels and

efficiency. Secondly, to commence improvement of equipment used by ports and replacing

traditional energy with renewable energy sources .Third function is optimisation. i.e.,

increasing the use of environmentally sustainable equipment and use of renewable energy for

port operations. Then the ultimate goal is to neutralise all GHG emissions occurring during

logistics operations at ports. The Infrastructure instruments cost are high and takes time to

implement, but it is something that is worth working on. For example, the first project WPCI

took on board is the Port of Japan. Theiraim was to replace equipment improve the port

infrastructure to combat the potential increase in sea level and storms caused by climate

change. This operation is estimated to cost more than 1 billion Euros and is estimated to be

complete by the year 2058 (Hodgkinson, 2011).

Sustainability in International Logistics and other Solutions

Modern logistics solutions are not often environmentally friendly. Global companies are

progressing towards building a more competitive environment. In order to increase

operational effectiveness, firms are focusing on lower costs and shorter lead times, which

usually have an impact on environmental issues (Aronsson & Brodin, 2006).Here we exploresolutions and strategies to achieve environmental improvements based on macro and micro


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levels. Aronsson & Brodin (2006) suggest that the macro domain issues can be tackled or

improved through actions taken by the government or legislative authorities while the micro

domain concerns mainly with actions taken by individual companies.

Macro Domain

It has been long known that the transport sector is one of the main causes of environmental

pollution. Governments have taken initiatives such as introduction of environmentally

friendly fuels. Measures and initiatives taken so far have been good, but cannot keep pace

with the growing transport volumes (Aronsson and Brodin, 2006). Governments and

legislative bodies should, rather look for longer term strategies in ensuring a sustainable

macro environment.

Vehicle technologies

Most vehicles today are equipped with internal combustion engines (ICE). GHG emissions

are emitted mainly from the combustion of carbon contained in fuels. The emission of these

harmful gases can be reduced in vehicles by improving the drive-train efficiency that would

lower energy consumption in vehicles, by reducing the amount of energy vehicles need, and

by using alternative drive-trains. Improving technologies in vehicles is a step forward to

being sustainable, but relies more on government pressure and the capabilities of the

automobile industries. It is also a solution that can be effective in short term.

High-speed rail

High-speed rail will put land transportation of goods in direct competition with air transport.

This mode of transport will allow for speeds from 250-400 km/h, making this mode better

than air transport in terms of time savings, extra capacity, and reduced externalities. Theauthor also mentions that it is 2-3 times more efficient in energy consumption than airfreight.

Alternative Fuels

Alternative fuels have the ability to lower harmful gas emissions. Natural gas, for example

emits 20% lower CO2 per MJ fuel compared to gasoline because it contains more hydrogen.

The author also states that conversion of natural gas to synthetic fuels, e.g. Synthetic Diesel is

a form of very clean fuel that lowers emissions of harmful gases. Renewable fuels from

biomass and waste offer a balanced carbon cycle in comparison to fossil fuels while having a

positive impact on GHG emissions. This form of fuel does however have strong barriers that

prevent them from being mass produced, like higher costs, compatibility with other fuels, andlimited availability of technology. Renewable fuels however show hidden costs and

undesirable impacts on the environment and population due to its large scale production.

Hydrogen is advantageous in the sense that it can be produced from a variety of energy

resources such as, fossil fuels and other renewable sources, i.e. wind, solar-thermal and tidal

energies. Hydrogen does not emit any harmful gas when used in fuel cells. From a long term

perspective, the only incentive for firms to progress to economical investments in alternative

fuels would be due to the rise of oil prices as many alternative fuels are just not cost-effective

for firms to invest in at this point in time (Uherek et al, 2010).


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Micro Domain

On a micro level, companies need to rethink where their facilities are located in terms of

travel time or transport mode, whom they cooperate with within partnerships or the supply

chain, what technology is being utilized and the overall logistics structure. Aronsson &

Brodin state that environmentally friendly logistics structures are defined by factors such as

fewer movements, shorter travelling distances, lesser handling, and more direct shipping

routes. They offer two physical methods as solutions to structures in logistics; standardization

and consolidation.

Standardization involves two levels in the physical system; transportation vehicles and load

carriers. A load carrier that is able to fit a train system and a ship makes full use of vehicle

capacity while making the loading and handling of equipment of a standardized nature. This

ultimately reduces costs and delivery times. The concept also decreases the total volume ofcarriers in the system as any carrier coming back can be used for the next load.

Consolidation involves increasing the size of warehouses, centralizing distribution, a

reduction in the number of warehouses while changing the location of these warehouses. The

number of deliveries could be significantly minimized in certain cases when companies work

more actively with vehicle routing. Although this leads to increased lead times, such changes

contribute to increased fill rates of vehicles, minimizing total distance travelled and its fuel

consumption (Aronsson & Brodin, 2006).

Conclusion

In a nutshell, climate change has been identified as one of the most serious problems theworld is facing today according to the Green Trends Survey (Beckmann, 2010). Theincreasing demand for sustainability and lower emissions in the logistics industry is now seeneverywhere and is becoming a key criterion for end consumers, business customers and thegovernment. This report, serves as a frontline contributor in calling attention to howcompanies' actions impact the environment and the communities in which they operate. Thereport also recognizes that the logistics industry is a major source of GHG emissions,especially the transport sector. In long term policies will secure the environmental

sustainability for international logistics operations. The incentives for environmental friendlylogistics technologies will improve the efficiency of international logistics operations andreduce GHG emissions. However, the policies do come with substantial cost, and can takedecades to implement (McKinnon, Kreie, 2010).

Just as logistics which is a driver of globalization and a major contributor to the worldeconomy, the logistics industry needs to create an ecologically-sustainable, low-carbonenvironment which is seen as creating long-term business value. In other words, economicgrowth and environmental protection should be embraced by firms as the two parallel valuesinstead of a contradiction.


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Reference

Aronsson, H, Brodin, M., 2006, The environmental impact of changing logistics structures,The International Journal of Logistics Management, Vol 17, Iss 3, pp 394-415

An Inconvenient truth documentary by Al Gore, 2006

Beckmann, C et al. 2010, Delivering Tomorrow: Towards Sustainable Logistics, Deutsche

Post, HG, Germany- Company Report

Duncan, R.C., Youngquist, W., 1999, Encircling the peak of world oilproduction,NaturalResources Research,8, 219232.

GHG emissions from transport or mobile sources: GHG Protocol Initiative, 2009.

Hodgkinson D, 2011 "Ports, climate change and the virtues of anticipation", Transportand

Logistics Insights

IPCC, "2006 IPCC Guidelines for National Greenhouse Gas Inventories," 2006.

IPCC, "Climate Change 2007: Synthesis Report," 2007.

McKinnon A., 2010, Green Logistics: The Carbon Agenda, Electronic Scientific Journal of

Logistics, Vol.6, Issue 3, No.1

McKinnon A, Kreie A, 2010, "Adaptive Logistics: Preparing Logistical Systems for Climate

ChangeLogistics Research Centre, Heriot-Watt University, Edinburgh, UK

National Land Freight Strategy Discussion Paper 2011:Submission of the Department ofClimate Change & Energy Efficiency (DCCEE)

Tu S, 2010, "Investigation on the Strategy of the Development of Low-Carbon Logistics in

China in Low-Carbon Economy" School of Business Administration, Jiangxi University of

Finance and Economics

W. Gian-Reto, P. Eric, C. Peter et aI., "Ecological responses to recent climate change,"Nature, vol. 416, pp. 389-395, 2002

Wang, X. Ding, H. Wang, W. Zhang, L. &Xue, Y. (2012), A Review of Carbon EmissionManagement from the Perspective of Logistics Industry, BAO & SCM/Logistics Research,China


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Appendix

Journal Articles Review

JOURNAL ARTICLE THEME METHODOL

OGY

KEY FINDING

The environmentalimpact of changinglogistics structures

Improvement inenvironment bystructural changes oflogistics system.

Journal Articles,Reports andtheir study

The paper various logisticalrestructuring measures such aslogistical standardisation, IS/ITsolutions (Visibility supportsystem & understanding offlexible warehousing andtransportation) and different

types of consolidation toimprove the environment.

Adaptive Logistics:Preparing LogisticalSystems for ClimateChange

Study of logisticalsystem adaptioncapability to improveclimate

Journal Articles,Discussionswith logisticsprofessionalsandbrainstormingsessions.

The paper presents thechallenges of conductionresearch in the area ofLogistics and ClimateChange due to uncertainty ofclimate change and variabilityin geographical impact. Itsuggests five themes in the areaof adaptive logistics that needsto be focused which can be

divided into three categoriessuch as a) Effects of mitigationmeasures on logistics , b)Responses to indirectenvironmental impacts and c)Responses to directenvironmental impacts

Investigation on theStrategy of theDevelopment of Low-Carbon Logistics inChina in Low-CarbonEconomy

Development of low-carbon logistics forsustainable growth inChina

Journal Articles,Reports andtheir study

The study suggests that for theconcept of low-carbon logisticsto be feasible in China, majorchanges has to be made inlogistics system, eg-Design oflogistics system and supplychain, Emphasis On controllingand promoting carbonemission, Introduction offavourable policies, Recyclingof used logistics facilities, etc,

A Review of CarbonEmission Managementfrom the Perspective ofLogistics Industry

Optimization oflogistics carbonemission

Journal articles,Reports andtheir study

The paper addresses carbonemission management system,carbon footprint evaluationframework and low carbontechnologies which may be

important for enterprises. Itsuggests the implementation of


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optimised carbon emissionmanagement system; the paperdiscusses the case of IBM andfurther suggests that furtherresearch needs to be done forevaluating carbon emissions atkey stages of logisticsactivities.

Ecological responses torecent climate change

Trend of climatechange (speciallyglobal warming) inthe environment

Journal articles The article concurs that thereare already observable change(temperature) in the climate.There are considerableadaptations taken, to keep upwith considerably low averagerate of change in the climate.There is definite concern abouthow to deal bigger climate

change in future, which mayhave bigger impact on socio-economic and ecologicalconsequences.

Transport impacts onatmosphere andclimate: Land transport

Impact of landtransport on climateand atmosphere

Journal Articles,reports and theirown study

The study suggests that non-carbon emissions wouldstagnate and reduce in future.However, the future forreduction of carbon andhalocarbons emissions ispredicted to rise. Land transportwould further increase hence it

is of prime importance to haveimproved vehicle which wouldreduces the emissions in the air.Bio-fuel would not be able tocope with rising transportrequirement and thus it isimportance to further researchand innovate in the area of low-carbon fuels.

Transport and climatechange

Role of transport inClimate change andthe mitigation &sustainabilitymeasures

Journal Articles The study suggests findingabout how behavioural andtechnological change couldreduce GHG emissions andcombustion of fossil fuels fromthe transport industry. It alsofocuses on how policies wouldhelp in emission reduction.

Green Logistics: TheCarbon Agenda

Framework forcarbon reductionfrom the logisticalactivities

Journals,Governmentaland otherinstitutionsreports

It presents framework for GHGemissions by altering freighttransport parameters. Itdiscuses how decarbonisationprocess will help companies tocut down their costs which will

make them economical andenvironmental friendly. It also


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presents the view that in fewcases, it is important for carbonemissions from logistics sectorto rise to eventually reduce thecarbon emissions from all theother different sectors. Lastly,if all the sectors implement theframework to reduce the carbonemissions, the carbon footprintfor logistics would increasehowever that would be foroverall good.

international logistics and climate change

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