Enabling Factors

Common barriers that influence the ability of stakeholders to develop and implement a sustainable freight strategy include:

Data limitation

Good data is critical to any work aimed at improving understanding of the freight transport sector and its performance, including its ability to meet the growing sustainability imperative. Without data-supported analysis, it is difficult to identify and prioritise effective and adequate sustainable freight transport measures. However, in developing countries, freight transport-related data is often not collected. When available, data is often limited in scope or outdated. The only data which is frequently collected relates to the sale of fuels. For example, in the case of road transport, only few countries have data and information about how far trucks travel, what commodities they carry, their weight and volume and how much fuel they consume (and hence how much carbon they emit) per kilometre of travel. No comprehensive data on freight transport is available to indicate the origin and destination of goods and performance of different modes. When used in isolation, i.e. without qualitative evaluation, data available to the public sector, often does not provide sufficient detail for a meaningful analysis of the freight transport sector. Privately maintained freight transport databases are often costly to acquire and analyse.

Fragmented industry

The freight transport industry is horizontally and vertically fragmented, across the private and the public sectors. In the case of road transport for example, more than 70% of freight transport operators in many countries own less than five trucks. In addition, freight transport integrates multiple levels of government and multiple agencies responsible for different modes.

Limited partnerships

There are limited public-private partnerships relating to the freight transport decision-making processes. Many public authorities often consider freight transport issues as a private rather than a public matter and that the optimisation of transportation is a business-driven interest, which does not need government intervention except in the case of a serious problem. However, many freight transport measures cannot be implemented in isolation by a single stakeholder. No single decision maker can transform the freight transport sector without adequate support from other stakeholders. There is a need for sustainable freight transport partnerships between the public and private sector.

Lack of penetration of technologies

Despite significant savings and short payback periods, the penetration of technologies, in particular technologies that promote fuel-efficiency and emission reduction remains insufficient due to the high investment costs and lack of awareness. Confidence in technologies among freight transport operators and government institutions is not always sufficient. Moreover, the reluctance of banks and financiers to lend money to freight transport service providers, especially the smaller players is also a problem. Financiers often do not know how to appraise the financing of technologies for freight transport and policymakers have minimal experience in applying economic instruments to the transport sector.

Limited awareness and capacity

One of the most comprehensive global reviews of policies that seek to promote emission reductions across developing countries, has established that while around half of all transport policies addressed specifically passenger transport, in contrast only 5% focused on freight transport. There are not many cities and countries in developing regions which have established sustainable freight transport policies due to insufficient awareness and lack of adequate capacity. While most decision makers and officials have advanced training in passenger transport, few have formal training in freight transport and do not fully understand the complexity of supply chains and their associated effects.

Weak legal and regulatory framework

Thus, no sustainable freight transport strategy, however brilliant, can be implemented successfully without the relevant enabling factors. In addition to stakeholder consultations, other critical enabling factors include:

1. Awareness Raising, Training and Capacity Building

It is important to incorporate training and capacity building mechanisms into relevant institutionalised For example, eco-driving training principles could be incorporated into the examination procedure for new drivers under the driving license certification procedure. In addition, peer to peer exchange programmes where participants can learn and share experiences is a simple yet invaluable mechanism to improve awareness and capacity building. Access to the exchange of information, expertise, success stories, good case studies and practices is critical to develop and mainstream adequate sustainable freight transport practices and policies. Private sector companies, including shippers and carriers need to be able to easily access information about technologies and logistics solutions. In addition, their suppliers, banks and financing institutions need information on the innovative financing mechanisms that already exist or that could potentially become available to them. Meanwhile, freight transport sector associations need to learn more about good practices in the field of using collaborative instruments.

2. Experimentation Projects and Technology

It is important to carry out experimentation/pilot/demonstration projects and studies to better understand the investment potential, economic and social impacts as well as the strengths and barriers to the implementation of technology-based solutions, in particular new technologies. Although these experiments concern only a minor fraction of freight transport flows through a corridor, city or country for example, they are not only very effective in convincing political leaders and policy makers of relevant possibilities but also in understanding changes in the behaviour of consumers and the private sector. For example, all the experiments promoted by the city of Paris have been widely advertised in the specialised as well as the local press. Until and unless stakeholders utilize trial and error approaches and test innovative solutions, radical improvement is impossible. The freight transport industry is currently experiencing a technological transformation. New ICT and fuel efficiency improvement technologies are applied, including as retrofits to optimise global supply chains. Technology can allow for better data collection and analytical capabilities that enable faster, cheaper and more accurate analysis of freight transport routes, travel times, and infrastructure capacity. Technological transformation can be achieved through a concerted effort involving relevant stakeholders, including companies, governments, and financial institutions.

3. Financing

Incentives with improved access to affordable finance, especially for SMEs increase the pace of diffusion of technical innovations that require significant upfront or capital investment. The problem seems to be more acute in developing countries where the interest rates could be as high as 15-25%.  Other challenges driving the lack of affordable finance are small business size, collateral requirements, documentation and financial literacy, and weak credit skills and poor business practice.  By improving the fuel efficiency of freight transport, exposure to increasing energy costs can be reduced.  This, in turn, can make business practices more sustainable and reduce future loan defaults.

Financing the construction, operation and maintenance of freight transport infrastructure involves different types of funding sources.  These include, among others, national and international sources, grants, cooperative agreements, loans, and revenue sources from both the public and the private sector.

The table below highlights the financing instruments which directly influence freight transport stakeholders (direct benefit instruments).  Indirect benefit instruments (e.g. advertising) charge stakeholders for indirect benefits stemming from the transport investment while direct benefit instruments such as fuel taxes directly charge freight transport stakeholders. Fuel taxes for example are effective across the three sustainability dimensions (economic, social and environmental).  Taking Stockholm as an example, it has been established that if the city had continued with business as usual and had not established “congestion charging”, the city’s air would have been 5 to 10% more polluted between 2006 and 2010.  In addition, young children would have suffered 45% more asthma attacks.

Table: Sustainable Freight Transport Instruments (based on Sustainable Urban Transport Financing from the Sidewalk to the Subway, the World Bank)

  Sustainable Freight Financing Instruments Stability Political Acceptability Administration Ease Impact Level of Application
Economic Efficiency Social Equity Environmental Impact Scale of Finance
General Benefit Transport Subsidies (low emission modes)               Local / Urban / National
Property Tax               Urban / National
Business Tax               Local / Urban / National
Loans and Grants               Local / Urban / National
Direct Benefit Instruments Parking Charges               Local / Urban
Road Pricing               Local
Congestion Charges               Local / Urban
Fuel Tax               Local / Urban / National
Vehicle Ownership Tax               Local / Urban / National
Mileage Based Taxation               Local / Urban / National
Vehicle Inspection Fee               National
Heavy Vehicle Fee               National
Indirect Benefit Advertising               Local
Employer Contribution               Local
Betterment Tax               Local
Tax Increment Financing (TIF)               Local
Special Assessment               Local
Transportation Utility Fee               Local
Development Impact Fees               Local
Negotiated Exactions (NE)               Local
Joint Development Mechanism               Local
Air rights sale               Local
Public-Private Partnerships               Local / Urban / National
Climate Finance Global Environment Facility               Urban / National
Clean Technology Fund               Urban / National
Clean Development Mechanism               Urban / National
Nationally Appropriate Mitigation Action               Urban / National
Climate Bonds               Urban / National
Partnership for Market Readiness               Urban / National
Green Climate Fund               Urban / National

 

Rating Description
  Low level of achievment by an instrument for each attribute
  Medium level of achievment by an instrument for each attribute
  High level of achievment by an instrument for each attribute

 

Traditionally, freight transport infrastructure projects were financed primarily through a combination of state funding streams such as taxes, fees and local funds based on "pay-as-you-go" principle i.e. projects are built in phases based on political priority and funding availability. However, the traditional approach of funding and financing is not suitable for scaling-up sustainable freight transport projects. Fundamental changes that take into consideration different funding and financing mechanisms and promote the use of innovative approaches are needed. Innovative finance encompasses a combination of techniques and specially designed mechanisms to supplement traditional financing sources and methods. Examples include leveraging additional funding from new sources of funding (e.g. climate finance, public-private partnerships), reforming transport prices and financial management, adopting new institutional arrangements, and using the “Polluter pays” principle.

Freight transport project investments must compete with investment requirements from other sectors including passenger transport and moving away a project from the “drawing board” is challenging. They do not compete well with non-freight projects because of the way public investments are evaluated. Raising the profile of freight transport projects in the urban, regional and national policy agenda, requires that the benefits of sustainable freight transport projects along all three dimensions of sustainable development be highlighted and that the support of external stakeholders be secured. The development of quantifiable co-benefits criteria (where benefits are evaluated across the economic, social and the environmental dimensions) can help projects aimed at enhancing the sustainability of the freight transport sector obtain a “fighting chance” to compete for funding with other proposed projects.

4. Harmonisation and Standardisation of Methods and Processes

Examples include harmonisation of carbon and air emissions accounting methods. There are sufficient tools and models available for estimating the carbon emissions and air pollutants from the freight transport sector. A recent global review of 150 transport emissions methodologies and models reveals that nearly 70% of methodologies are applicable to the freight transport sector. These can help quantify GHG emissions and air pollutants across different jurisdictions, boundaries and areas of activity (e.g. national, city, project, supply chain, etc.). However, there is a need to harmonise methodologies and emissions reporting for private sector companies such as the shippers as well as transport and logistic service providers. Many global shippers and service providers have established targets to improve efficiency and reduce carbon emissions. However, there is no standard process in place for the capture and calculation of emissions. Harmonisation of emission calculation methodology will help scale-up efforts to reduce emissions from the freight transport sector by ensuring that a uniform standard system for collecting, analysing and monitoring emissions from private sector freight transport operations is applied. The Global Logistics Emissions Council (GLEC), for example, provides a common, global platform for the industry to develop, apply and advocate a harmonised logistics emissions accounting system.

5. Institutional and Legal Set-Up

While implementing sustainable freight transport strategies, institutional, legal and regulatory barriers need to be addressed along with the support and participation of all key stakeholders. There is a need for a one-stop approach that provides a single window or point of reference for information that the freight transport industry requires to operate in different settings (e.g. corridor, urban area, region, etc.). This is also important for consultations supporting relevant policy- and regulatory-making processes. For example, national governments consider urban freight transport to be a local problem, which is to be addressed by local authorities. At the same time, local authorities consider urban freight transport to be a private sector problem given its link to the sector’s commercial operations. The private sector often considers urban freight transport to be an infrastructure and regulatory problem that needs to be addressed by the government and yet, has no clear idea of institutional mandates (see Illustration illustration below).

Institutional and Legal Set-Up: The Case of Urban Freight Transport


Illustration: Institutional and Legal Set-Up: The Case of Urban Freight Transport

A “Freight Mobility Office” (FMO) or a freight “point-of-contact” could be established to develop and disseminate public outreach materials. Such an office can act as the liaison between various freight transport-related initiatives and between different agencies and stakeholders. It can also help ensure that freight transport issues are addressed within the multiple relevant planning activities. In the case of road transport, a FMO or point-of-contact can support the enforcement of truck routes as well as the development and facilitation of transparent partnerships with stakeholders (e.g. for access and exchange of information, expertise, periodic sustainable freight transport training, documenting and sharing good and bad practice examples, etc.). Designating a point-of-contact or FMO helps to demonstrate a commitment to sustainable freight transport planning.