Decarbonizing Freight Transportation Using Carbon Offsets
by Catherine Dame and Abdelrahman Hefny
July 28, 2020
Originally published in Supply Chain Management Review
Freight transportation contributes significantly to global carbon emissions, and economic growth and global trade are expected to drive a doubling in freight-related emissions in the next 30 years. More than 90% of the transportation industry operates on fossil fuels, and nearly all heavy-duty freight trucks use diesel fuel. Meanwhile, uptake of low-carbon transportation freight technologies, such as electric fleets, has been slow. Most green freight technologies at this point are costly and require substantial charging infrastructure before they can be widely adopted.
Although freight transportation has been identified as one of the sectors most difficult to decarbonize, many logistics- and transportation-related companies are making ambitious carbon-neutrality commitments. Many of these organizations, such as Shell, Etsy, DHL, and FedEx, are turning to offsets to mitigate their carbon emissions and meet their emissions goals.
Researchers at the MIT Center for Transportation & Logistics explored the feasibility of using carbon offsets to reduce freight emissions in developing countries.
Can carbon offsets serve as a funding lever?
Carbon offsets are a carbon mitigation tool where an organization purchases a certificate that compensates for emissions the organization has generated. The offset certificate funds the reduction of carbon dioxide emissions elsewhere. The most commonly purchased carbon offsets are renewable energy and forestation projects. Although transportation is an emissions-intensive function, transportation-related offset projects represent less than 1% of the voluntary offset market.
Small-scale freight operators in developing countries often employ older, high-emissions vehicles that lack technologies like particulate filters. These antiquated trucks contribute disproportionately to freight emissions. Our analysis investigates whether carbon offsets could serve as a funding source to incentivize fleet renewal programs, where freight operators are paid to decommission high-emissions vehicles and utilize greener options. This program would allow logistics companies to purchase transport-related offset projects, aligning with their own emissions-generating activities.
What would an offset program look like?
Can carbon offsets be leveraged to fund investments in fleet decommissioning programs to decarbonize freight transportation? If so, how much would it cost to offset one ton of CO2? How will the program be implemented to ensure its sustainability? These are some of the issues investigated by the research team.
An analysis of current corporate sustainability commitments from logistics organizations, the carbon offset market, and total transportation emissions suggests a potential market size in the hundreds of millions of dollars, with a potential annual offset impact of 100+ million metric tons of CO2. Frameworks such as the Global Logistics Emissions Council (GLEC) Framework were utilized to develop a tool that identifies emissions avoidance based on decommissioning various vehicle types. Best practices and insights from past fleet-renewal programs were analyzed to develop an implementation framework spanning program design, operations considerations, public policy complements, stakeholder management, and balancing demand and supply costs.
The amount of carbon traded in the voluntary carbon offset market has grown nearly eightfold since 2005, and increasing corporate sustainability commitments will likely drive further investment in this arena. This growth creates an environment ripe for innovative programs to drive emission reduction. The research team hopes that their findings will generate interest in the advancement of such programs to drive significant impact in global carbon emissions reduction and to decarbonize freight transportation.
Research information
The SCM research project Decarbonizing Road Freight Transportation with Carbon Offsets is authored by Catherine Dame and Abdelrahman Hefny, and supervised by Dr. Alexis Bateman (hickmana@mit.edu), Director, MIT Sustainable Supply Chains; and Suzanne Greene (greene@mit.edu), Program Manager, MIT Sustainable Supply Chains, MIT CTL. For more information on the research, please contact the project supervisors.
Every year, around 80 students in the MIT Center for Transportation & Logistics’ (MIT CTL) Master of Supply Chain Management (SCM) program complete approximately 45 one-year research projects. The students are early-career business professionals from multiple countries, with two to 10 years of experience in the industry. Most of the research projects are chosen, sponsored by, and carried out in collaboration with multinational corporations. Joint teams that include MIT SCM students and MIT CTL faculty work on real-world problems. In this series, we summarize a selection of the latest SCM research.
