Global freight shunning the climate sunlight

Hapag Lloyd container ship on the Elbe River, Germany. (Keystone/imageBROKER/Ingeborg Knol)

As the calls to accelerate climate action pile up, freight operators are increasingly under pressure to do their part and become more sustainable. But the transition is set to be a difficult one as the sector grapples with unprecedented global challenges.

After recovering from global trade disruptions triggered by Covid-19, logistics businesses have more recently been forced to adapt to the effects of the war in Ukraine. Route access suddenly halted, truck drivers stuck in conflict zones,  and airspace and port bans for Russian vessels due to sanctions have become their new reality.

But as the International Federation of Freight Forwarders Associations (Fiata) gathered in Geneva this week with nearly 200 of its members, one of the main priorities its management has set for the coming year is making the sector more sustainable.

“We are sensitive to the importance of decarbonisation,” Stéphane Graber, Fiata’s director, told journalists at a press conference last week. “In order to decarbonise, it will need the whole supply chain. It is not just airline carriers or shipping lines. We will need to talk about this with bulk shippers, commodity trading companies and freight forwarders.”

It is estimated that freight shipping contributes to eight per cent of global greenhouse gas emissions. The lion’s share of freight is transported by sea – the least polluting of all modes of transportation along with rail as per unit of freight– representing 90 per cent of all freight transportation, with air, train and road transport accounting for the remaining 10 per cent.

Fossil fuels, such as crude oil and liquified natural gas, make up roughly forty per cent of freight transported by ship, with other bulk commodities accounting for 50 per cent and containers only around 10 per cent of maritime shipments.

On Monday, the Intergovernmental Panel on Climate Change (IPCC) published its much-awaited synthesis report, warning of “irreversible changes” to the environment unless an immediate shift away from fossil fuels takes place.

Following its release, United Nations secretary general António Guterres said climate action was needed “on all fronts – everything, everywhere, all at once”, He said shipping and aviation, as well as other sectors needed to align with net-zero goals by 2050.

Market dynamics vs regulation

Air and sea transport were late to arrive to global discussions on climate action. Since the signing of the Paris agreement on climate change, the International Maritime Organization (IMO) and the International Civil Aviation Organization (ICAO) have waffled on setting targets in line with the UN treaty’s goal to keep temperatures from rising above 1.5°C. It is estimated that their climate goals align with a 3°C temperature rise, which scientists say would be catastrophic for the planet.

Sofia Aiche, a project officer at FIATA, admitted that the transport sector still had a long way to go to achieve net-zero, due to constraints in technology. She said what was needed was cross-the-board regulations.

“Freight forwarding is a business,” she told Geneva Solutions. “If freight forwarders have a client who is asking for the cheapest way to move their goods from point A to point B, they probably don’t care about sustainability or the fuel that is going to be used for the transport. All the client cares about is the price. The forwarder meanwhile cannot say ‘no’ to a client.”

Clarksons, a shipping services provider and Fiata member, calculated that the maritime industry would have to invest $3 trillion to eliminate its emissions through new ships and alternative fuel production over the next decades. Liquified natural gas, liquified biogas, ethanol, methanol and ammonia are some of the cleaner marine fuel alternatives, which may come with their own risks in usage as well as issues of adaptability for conventional engines.

Aiche said that while the European Union has already made steps in setting rules on emissions reduction in freight transport, other regions would need to join the climate bandwagon. “The shift will happen when all continents are on the same page. But if the regulations do not come from above, the sector may move to something more sustainable, but it may take longer,” she said.

Aiche said that FIATA has been working toward devising a tool for freight forwarders to calculate emissions and be able to offset them. Compensating for emissions by removing them elsewhere is more common in air transport than in maritime freight, but she said the tool that the organisation has been working on with Geneva commodities trading firm Mercuria would eventually make it easier for freight forwarders to consider offsets throughout the transport supply chain.

Low-hanging fruit

Environmentalists meanwhile say transporters should first look more closely at cleaner options to move goods around. Lucy Gilliam, senior policy officer on shipping at Seas at Risk, a Paris-based NGO, told Geneva Solutions that given the “bottom of the barrel” combustibles used in maritime transport, the sector should for example consider cleaner fuels, wind-propelled retro-fits and navigating at slower speeds ahead of ships arriving in port.

In 2018, the IMO decided to cut emissions in shipping by 50 per cent by 2050 below 2008 levels. The decision came two years after an IMO regulation to cut the content of sulphur – responsible for thousands of premature deaths annually and asthma  – in fuels.

“A hierarchy of change needs to happen, said Gilliam, noting that the legitimacy of long-distance trade also needed to be questioned. “We don’t want to be offsetting. There is plenty of low-hanging fruit to offset emissions in supply chains and in shipping.”

Like other critics of carbon offsets, Gilliam said greenwashing by businesses is common amid a lack of transparency and good governance of projects.

But within the sector, a lack of cleaner fuels and technologies may have left hands tied. Jens Roemer, chair of the sea working group at Fiata told journalists in Geneva: “You need massive investments in the ports to provide the (cleaner) fuel, and for research and development on ships. Right now there is no solution.”

Fiata’s Graber pointed out that it is a question of “who will pay for this transition”.

Ditching paper

Meanwhile, Fiata has also been supporting efforts to digitalise freight forwarding information across borders, which is still often processed by paper. “We believe it can accelerate the movement of goods instead of being stuck for days in customs,” said Graber.

Discrepancies sometimes appear in shipments as they cross borders between exporting and importing countries. He said challenges prevail in working on multimodal digitalisation, with freight forwarders working in various forms of transport for the delivery of goods. A single shipment could be transferred on land, via road and train transport, before being shipped by sea, and then by road again to reach its destination.

Each mode of transport currently has its own documents and requirements, though those used in rail transport are less compatible with other shipment forms. Currently, a single digital multimodal document for freight does not exist.

In addition to substantial cost savings, a more fluid transport would also “lessen the environmental impact” of shipments, Graber added.

Environmental challenges were nonetheless pushing the sector to operate in a multimodal manner to find the most sustainable solutions for moving freight, the Fiata director said.

“The world will have to use the best transport mode for the distance where it is most appropriate environmentally. If it is a train, we will use a train corridor to transport the goods. Tomorrow there will be an arbitrage to deliver through the best mode of transport, he said.”

But for Gilliam, the pace of change is still not where it should be. Increasing transparency through the digitalisation of emissions data and better industry awareness could accelerate this.

She said: “The access to emissions data will offer clients the choice of how to move freight around. “It would give people the option to say, ‘I want to go on this cleaner ship and invest in ships that are using alternative propulsion technologies because I care about the emission in the supply chain”. For now, that is quite hard.”