In December 2015 at the COP21 Paris Climate Conference 194 countries agreed to restrict the increase in average global temperature between 1850 and 2100 to ‘well below 2o C’. It is now generally accepted that if we are to keep within this limit, between 70% and 80% of the known reserves of fossil fuel will have to stay in the ground and remain unexploited. In 2016, the G7 nations agreed to phase out the burning of fossil fuels by 2100. Sweden plans to do this by 2040. As renewable energy, and in many countries nuclear power, replaces the use of fossil fuel, the amounts of oil, coal and gas being transported are likely to drop sharply. How big an impact is this likely to have on the global freight market?
According to UNCTAD, in 2016 roughly 4.2bn tons of coal, oil and gas were moved internationally by sea. In tonnage terms, this represented 41% of international maritime trade. In 2013, coal accounted for 38% of the all the tonne-kms moved by rail worldwide. In 2014, roughly a fifth of the total revenue of US railroads came from coal. So the loss of fossil fuel traffic will deprive freight operators, particularly in the rail and maritime sectors, of much of their current business. This is something that I explore in my new book entitled ‘Decarbonizing Logistics’.
For rail, this has wider public policy implications because central to many governments decarbonisation plans for transport is a big increase in rail’s share of the freight market. The erosion of fossil fuel traffic is going to make this very difficult to achieve. In the UK, for example, tonne-kms of coal traffic moved by rail dropped by 82% between 2013/14 and 2016/17 reflecting a dramatic contraction of coal’s share of the UK’s electrical energy mix from 39% 2012 to 9% in 2016. By 2025 at the latest no coal will be used in the generation of the Britain’s electricity. Partly as a result of the loss of coal traffic, rail’s share of the UK freight market has been falling in recent years.
In the short to medium term, many countries will also be substituting foreign-sourced oil and coal with locally-produced gas, much of it, as in the US, hydraulically fracked. This switch to gas, seen by some as a lower carbon ‘bridging fuel’, also has the potential to cut the deep-sea movement of coal and oil, though countries with large coal reserves may export some of the coal displaced by fracked gas from their domestic markets.
The decline in fossil fuel movements will be partly offset by the growth of other traffic flows associated with the transformation of the energy sector. Three flows in particular are worth noting.
First, switching electricity generation to renewables is proving to be a relatively transport-intensive operation requiring the movement of vast amounts of material, much of it sourced over long distances as the supply chains for wind turbines, solar panels and batteries are essentially global. For example, a 3-megawatt (MW) turbine needs an average of around 1,100 tonnes of concrete in its base and 280 tonnes of steel. Creating this alternative energy infrastructure over the next few decades will require a lot of transport at different geographical scales. Once in place, however, its subsequent transport demands will be minimal because it will be powered predominantly by the wind, the sun, ocean currents and, in the case of hydro-electric power, gravity.
Second, transport operators may be able to substitute biomass and biofuels for the diminishing flows of fossil fuel. The UK government’s 2016 railfreight strategy document cites a ‘central constrained forecast’ of 7.1m tonnes of biomass moving on the rail network by 2030 – a significant amount of traffic but well short of the 50m tonnes of coal moved by rail as recently as 2012/13. At a global scale, increasing quantities of palm oil, sourced from countries such as Indonesia and Malaysia, are being shipped to Europe to produce biofuel for blending with diesel in the tanks of cars and trucks. The EU has recently announced, however, that palm oil must be phased out as a road transport fuel by 2030 undermining the prospects for long term trade in this commodity.
Third, the installation of carbon capture and storage (CCS) on the remaining fossil fuel plants will generate substantial volumes of CO2 that will need to be transported, in gaseous or liquidised form, to locations where it can be safely buried in underground cavities. Although this technology is proving more difficult and costly to operationalise and commercialise than previously thought it still features prominently in future decarbonisation strategies for the energy sector. One 2oC pathway charted by the International Energy Agency shows CCS being responsible for 12% of the reduction in GHG emissions from this sector by 2050. This would entail the capture, movement and storage of around 94 Gtonnes (i.e. billion tonnes) of CO2 by 2050. The logistics of CCS has still to be fully researched though it will involve the combined use of pipelines, tanker vessels, rail and even trucks. It will be similar to the movement of liquid natural gas (LNG) and compressed natural gas (CNG), an activity in which we have long experience and huge capacity much of which will become available as LNG and CNG are abandoned as energy sources.
It is not known to what extent these alternative energy-related traffic flows will compensate for the steep decline in fossil fuel movements. It is clear, however, that for logistics businesses heavily committed to energy sector, global decarbonisation will involve substantial re-orientation of the business, the reconfiguring of supply chains, the acquisition of new competences and investment in new equipment, facilities and systems. Given the urgency with which we have to deal with climate change, these businesses should be giving serious thought to the implications for them of the various trends outlined in this short article.
Alan McKinnon is Professor of Logistics, Kuehne Logistics University, Hamburg. His new book: Decarbonizing Logistics – Distributing goods in a low carbon world is out now, published by Kogan Page, priced £39.99. For more information go to www.koganpage.com