Research Collection Doctoral Thesis Market potential and value of sustainable freight transport chains Author(s): Fries, Nikolaus Publication Date: 2009 Permanent Link: https://doi.org/10.3929/ethz-a-006001850 Rights / License: In Copyright - Non-Commercial Use Permitted This page was generated automatically upon download from the ETH Zurich Research Collection. For more information please consult the Terms of use. ETH Library DISS ETH NO. 18685 MARKET POTENTIAL AND VALUE OF SUSTAINABLE FREIGHT TRANSPORT CHAINS A dissertation submitted to ETH ZURICH for the degree of Doctor of Sciences presented by HANS THOMSEN NIKOLAUS FRIES Diplom-Verkehrsingenieur, Technische Universität Dresden born 30th April, 1979 citizen of Germany accepted on the recommendation of Prof. Dr. Ulrich Weidmann, examiner Prof. Dr. Stefanie Hellweg, co-examiner Prof. Dr. Gerard C. de Jong, co-examiner 2009 Abstract The transport sector accounts for 31% of today’s total EU energy consumption and has become the largest emitter of greenhouse gases, which in 2005 was responsible for 27% of the EU’s total annual volume. Whilst today most manufacturing companies claim to consider environmental concerns in their management strategy (e.g. by introducing environmental management systems), logistics are often not included in this process. This is, because logistic processes are normally not visible to the customer and thus difficult to integrate into an environmental marketing strategy. Nevertheless, recent studies show a trend toward increasing shipper sensitivity to CO2-emissions in freight transport. Among logistics service providers (i.e. freight forwarders etc.) and politicians this issue is also being discussed. One idea is to provide the clients (i.e. the shippers) with standardised information on the environmental impacts of their shipments, for example in form of a labelling scheme on transport services. Since nowadays logistics service providers (LSP) normally have no reliable quantitative information on shippers’ perceived relevance of environmental criteria in freight transport, the first step towards such a label must be to quantify their demand for such services. If, as suggested by latest research results, there were insufficient willingness to pay higher prices, LSPs would have little motivation to invest in environmentally friendly transport solutions. This would also affect public policy related to improving freight transport environmental performance through the implementation of labelling schemes. Therefore, before deciding on the appropriateness of eco-labels in freight transport, shipper decision-making must be analyzed quantitatively to understand the perception of environmental information in this context. From this research gap the following research question was derived: What impact does information about transport’s environmental performance have on freight transport mode choice as compared to other demand factors, and what is the perceived value of higher environmental performance in comparison to other demand criteria? In order to analyse the potential revenue of eco-labelled transport services and the potential effectiveness of a freight transport eco-label, the following questions were additionally included in this project: What criteria can be used for measuring the environmental impact of transport chains? What are the expected prices of certified I transport chains compared to conventional solutions? Is the market segment of environmentally friendly transport services a field worth being expanded from a logistics service provider’s perspective? How great is the potential of a labelling scheme to contribute to the EU commission’s energy efficiency goals? First, a shipper Stated Preference survey was administered in Switzerland to estimate the willingness-to-pay for environmentally friendly transport. It includes Stated Choice experiments to test the shipper sensitivity of price and quality criteria (including environmental impact). In order to evaluate the potential for optimising existing transport chains in terms of their environmental impact, an environmental benchmark of selected freight transport chains from the survey was performed based on the principles of life-cycle assessment (LCA). These were then subjected to a price analysis to estimate the transport prices, which the transport service provider must calculate for the operation of environmentally friendly transport solutions as compared to the status-quo. A cost-benefit-analysis finally evaluated the price difference for the calculated change in environmental performance and answered the question whether shippers would realistically accept these price differences. The results from the shipper survey showed that a general willingness-to-pay (WTP) exists among Swiss shippers for reducing greenhouse-gas emissions in freight transport. The value lies in the region of 1.27 CHF per shipment for each percent-point decrease in environmental impact. Shippers of finished products, which are in direct contact with end- consumers, (namely firms in the manufactured goods and food/animal feed commodity sectors) show a higher sensitivity to environmental concerns (ca. 1.50 CHF/%-point per shipment) than the ones of raw materials and other lower value products (0 – 0.70 CHF/%-point per shipment). In other words, the higher the specific value of the cargo and the higher the position of a product in the value creation chain, the more a shipper can be expected to be willing to pay for a reduction of its freight transport’s greenhouse-gas (GHG) emissions. Furthermore, the results allow a ranking of the analysed demand criteria: on-time reliability is generally most relevant, followed by transport price, while GHG-emissions and transit time are at a comparable level. The use of LCA proved to be a suitable approach for measuring a shipment’s environmental impact. The applied “ReCiPe” method distinguishes between three impact categories: damage to human health (caused e.g. by greenhouse-gas-emissions), to ecosystems (i.e. pollution of soil and water), and resource consumption. The method was extended by impacts from traffic accidents to better comply with the particularities of (freight) transportation. In most cases, independent of sector and distance, road transport has the worst environmental performance across all three environmental impact categories, followed by intermodal transport and rail-only transport. The differences between road and intermodal transport depend mainly on the margin between actual transport distances of the two modes, i.e. in several cases the distance in intermodal transport is much longer than the direct route taken by the lorry. II Finally, logistics service providers cannot generally expect realising positive price margins from offering alternative transport modes as environmentally friendly transport options, because the differences in operational costs generally exceed the margins, which could possibly be compensated by shippers’ WTP. On the other hand the cost-benefit- analysis has revealed certain cases where a modal shift could provoke both, a cost reduction and a decrease in environmental impact. Therefore, environmentally more efficient solutions are not a priori uneconomical, but each transport should be analysed within the context of its specific constraints. Accordingly, the potential of an eco-label for freight transport services to support the use of environmentally friendly transport modes is low. When comparing different transport mode options for a certain shipment, price differences are mostly too large to be able to provoke a modal shift based on the label information (even when combining the label with a bonus-malus-system). The label could rather be a useful aid for comparing similar transport offers with more or less the same price but differences in environmental performance (e.g. due to the use of enhanced vehicle technology in road transport). III Zusammenfassung Der Transportsektor trägt derzeit 31% zum Gesamtenergieverbrauch in der EU bei und hat sich zum grössten Treibhausgas-Emittenten entwickelt (27% des EU-Gesamtvolu- mens im Jahr 2005). Auch wenn heutzutage die meisten verarbeitenden Betriebe angeben, Umweltaspekte in ihrer Managementstrategie mit zu berücksichtigen (z.B. in Form von Umweltmanagementsystemen), bleiben die Logistikprozesse häufig aussen vor. Der Hauptgrund dafür ist, dass diese meist unsichtbar für den Kunden sind und sich deshalb nur schwer in eine umweltfokussierte Marketingstrategie integrieren lassen. Dennoch er- kennen aktuelle Forschungsergebnisse einen Trend hin zu einer stärkeren Sensibilisierung der Verlader für die Bedeutung von CO2-Emissionen im Gütertransport. Auch bei Logistikdienstleistern und in der Politik wird diese Thematik diskutiert. Ein Ansatz wäre die Bereitstellung von standardisierten Informationen für Verlader über die Umweltbelastung ihrer Warentransporte, z.B. in Form eines Labels für Transportdienst- leistungen. Allerdings muss vor der Implementierung eines solchen Standards zunächst die verladerseitige Nachfrage für umweltfreundliche Transportdienstleistungen abge- schätzt werden, da die Logistikdienstleister heute in der Regel keine belastbaren quanti- tativen Angaben bezüglich der realisierbaren Erträge für solche Angebote haben. Falls, wie in der aktuellen Forschung postuliert, die Akzeptanz gegenüber Preiserhöhungen unzureichend wäre, hätten Logistikdienstleister nur ein geringes Interesse, in umwelt- freundliche Transportlösungen zu investieren. Dies hätte auch unmittelbare Auswirkun-