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Evaluating and internalizing the environmental costs of logistics
... In the area of logistics, the transportation of products is a major source of CO 2 emissions. In the United Kingdom, for example, the transport sector is responsible for 23% of the country's total energy-related emissions (Piecyk et al., 2010b). The European Environment Agency (2007) estimates that transport in the EU contributes to about 21% of the total greenhouse gas emissions, with road transport being the main source of these shares. ...
... Further, it is in line with applicable law in the European Union, which allows EU member states to charge transporters for the social costs they cause, such as maintenance and replacement of infrastructure. CO 2 emissions are not yet covered, but could be added in the future (Piecyk, 2010b). Thus, our paper also gives an outlook on how such a regulation could impact the management of supply chains. ...
Purpose
– This paper studies a supply chain consisting of multiple suppliers and a single buyer. It considers the case where a set of heterogeneous trucks is used for transporting products, and develops a mathematical model that coordinates the supply chain. The purpose of this paper is to minimise the costs of producing and delivering a product as well as carbon emissions resulting from transportation. In addition, the authors analyse how imposing a tax on carbon emissions impacts the delivery of products from the suppliers to the buyer.
Design/methodology/approach
– It is assumed that heterogeneous vehicles are used for transporting products, which have different performance and cost attributes. A mathematical model that considers both operating costs and carbon emissions from transportation is developed. The impact of vehicle attributes on lot sizing and routing decisions is studied with the help of numerical examples and a sensitivity analysis.
Findings
– The analysis shows that considering carbon emissions in coordinating a supply chain leads to changes in the routing of vehicles. It is further shown that if carbon emissions lead to costs, routes are changed in such a way that vehicles travel long distances empty or with a low vehicle load to reduce fuel consumption and therewith emissions.
Research limitations/implications
– Several areas for future work are highlighted. The study of alternative supply chain structures, for example structures which include logistics service providers, or the investigation of different functional relationships between vehicle load and emission generation offer possibilities for extending the model.
Originality/value
– The paper is one of the first to study the use of heterogeneous vehicles in an inventory model of a supply chain, and one of the few supply chain inventory models that consider ecological aspects.
... The assessment raises questions about what amounts to charge, who to charge and what drives the cost underpinning a particular assessment. Bäckström (1999), Walter andStützel (2009), andPiecyk, McKinnon andAllen (2010), for instance, discuss the difficulties of connecting environmental impact to cost drivers. The remaining part of this section presents three ways of dealing with environmental impact assessments: nonallocation, life-cycle assessment, and cost-benefit analysis. ...
... The assessment raises questions about what amounts to charge, who to charge and what drives the cost underpinning a particular assessment. Bäckström (1999), Walter andStützel (2009), andPiecyk, McKinnon andAllen (2010), for instance, discuss the difficulties of connecting environmental impact to cost drivers. The remaining part of this section presents three ways of dealing with environmental impact assessments: nonallocation, life-cycle assessment, and cost-benefit analysis. ...
Researchers and society devote increasing interest to environmental impact assessments. The study here discusses and questions current assessment models by relating them to inter-organizational network analyses, and demonstrates that single entities as the basis for environmental impact assessments may not be in the best interests of society. Three case studies focusing on logistical solutions illustrate environmental effects on a single-entity and a network level. The paper concludes that considering environmental impacts on a single-entity level disregards indirect effects, which in turn has consequences for the environment. The paper points to the importance of identifying the appropriate level for analysis of environmental impacts since the single entity as the basis for assessments may undermine environmentally friendly intentions.
... where: e total greenhouse gas emissions of the delivery, expressed in kilogramme CO 2 equivalent per year (kg CO 2 e/year) f del annual diesel fuel use (with average biofuel blend in UK) expressed in litres per delivery per year CO 2 emissions and mileage reduction can be used as indicators for the reduction of other external costs such as air pollution, accident, congestion and noise. There is no exact conversion factor per mile/km available in UK for all these parameters, but air pollution and emissions tend to account for about 8-14% of total external costs of freight transport in the UK (Piecyk, McKinnon, & Allen, 2012). Therefore CO 2 costs would correspond to 1/7 of total external social costs. ...
... This is particularly true with the European Union countries, which was promoted by the European Commission (2001,2006). The commission emphasises to introduce a 'fair' and 'efficient' pricing system in the region (Piecyk et al., 2010). Recognising the importance of the EC and reflecting them in a costing and pricing system in transportation sector are deemed to have been agreed by consensus in the region. ...
... Some reports and studies have tried to assess the economic impact and pricing of these externalities in Europe, but their results have not been conclusive so far. In effect, there is a great divergence in the cost estimation of externalities [8]. According to Korzhenevych et al. [9], external costs of transportation activities account for about 8.5% of the GDP in regions such as the European Union. ...
Current logistics and transportation (L&T) systems include heterogeneous fleets consisting of common internal combustion engine vehicles as well as other types of vehicles using "green" technologies, e.g., plug-in hybrid electric vehicles and electric vehicles (EVs). However, the incorporation of EVs in L&T activities also raise some additional challenges from the strategic, planning, and operational perspectives. For instance, smart cities are required to provide recharge stations for electric-based vehicles, meaning that investment decisions need to be made about the number, location, and capacity of these stations. Similarly, the limited driving-range capabilities of EVs, which are restricted by the amount of electricity stored in their batteries, impose non-trivial additional constraints when designing efficient distribution routes. Accordingly, this paper identifies and reviews several open research challenges related to the introduction of EVs in L&T activities, including: (a) environmental-related issues; and (b) strategic, planning and operational issues associated with "standard" EVs and with hydrogen-based EVs. The paper also analyzes how the introduction of EVs in L&T systems generates new variants of the well-known Vehicle Routing Problem, one of the most studied optimization problems in the L&T field, and proposes the use of metaheuristics and simheuristics as the most efficient way to deal with these complex optimization problems.
... The costs of negative externalities should be internalized in a way so that they can be measured and controlled. Internalization means including the company's social costs in the company's private costs (Piecyk et al., 2010). In other words, externalities should be paid by companies that generate them; this may be realized by government, market or private organizations. ...
The planning of freight transportation activities creates benefits as well as costs. Among those costs, some of them, namely externalities, fall on other people/society that have no direct relevance to the operations of transportation. Such externalities are accrued expenses which should be addressed by actual pricing policies to enable an efficient and sustainable freight transportation system. This paper reviews externalities in quantitative terms, and then provides pricing studies of these costs per unit of freight transported along with the most recent estimations. The associated negative externalities are structured by transportation mode (road, rail, maritime, and air).
... where: e total greenhouse gas emissions of the delivery, expressed in kilogramme CO 2 equivalent per year (kg CO 2 e/year) f del annual diesel fuel use (with average biofuel blend in UK) expressed in litres per delivery per year CO 2 emissions and mileage reduction can be used as indicators for the reduction of other external costs such as air pollution, accident, congestion and noise. There is no exact conversion factor per mile/km available in UK for all these parameters, but air pollution and emissions tend to account for about 8-14% of total external costs of freight transport in the UK (Piecyk, McKinnon, & Allen, 2012). Therefore CO 2 costs would correspond to 1/7 of total external social costs. ...
... Hence, information on time-dependent travel speeds would be another interesting input factor for increasing the accuracy of the given results even though they are less relevant in timber transport, since it takes place in rural areas mainly (see e.g. Piecyk et al. 2010). ...
Efficient transport of timber for supplying industrial conversion and biomass power plants is a crucial factor for competitiveness in the forest industry. Throughout the recent years minimizing driving times has been the main focus of optimizations in this field. In addition to this aim the objective of reducing environmental impacts, represented by carbon dioxide equivalent (CO2e) emissions, is discussed. The underlying problem is formulated as a multi-depot vehicle routing problem with pickup and delivery and time windows (MDVRPPDTW) and a new iterative solution method is proposed. For the numerical studies, real-life data are used to generate test instances of different scales concerning the supply chain of biomass power plants. Small ones are taken to validate the optimality of the new approach. Medium and large test instances are solved with respect to minimizing driving times and fuel consumptions separately. This study shows that the selection of the objective of minimizing fuel consumption leads to a significant reduction of CO2e emissions compared to a minimization of driving times.
... It is, however, still possible to imagine a different, more convincing cost-benefit ratio under clearly changed framework conditions, especially if-in contrast to the pilot projects of the 1990s-external effects (reduced pollution, improved mobility, etc.) and opportunity costs (the equivalent of time lost by a large number of people and vehicles trapped in congested roads every day) were included in the list of arguments (cf. [12,13]). Even insufficient willingness to cooperate will no longer be an issue. ...
By 2050, 70 % of the world’s population, that is, about 6.3 billion people, will live in the world’s major urban areas. At the forefront of the urbanization trend, we see the development of so-called “megacities” which, by definition, have a population exceeding 10 million inhabitants. Traffic congestion is frequently reported to be a megacity’s most pressing infrastructural problem, even outranking issues related to power and water supply as well as health and safety. Freight traffic is one of the drivers of the infrastructure overload, and at the same time, it is one of its victims. The costs incurred as a result of traffic jams are higher in the congestion of major cities than anywhere else. On the other hand, cities in their most basic state do not have comprehensive logistics systems. The question addressed in this article is whether the concept of “city logistics,” which has experienced its first major boom in Germany and some of its neighboring countries, during the mid 1990s, can help to ease this problem—especially if—in contrast to the pilot projects of the 1990s—external effects (reduced pollution, improved mobility, etc.) and opportunity costs (the equivalent of time lost by a large number of people and vehicles trapped in congested roads every day) were included in the list of arguments.
Measures to promote economic sustainability pose specific problems as to how success can be assessed and monitored. The first subchapter provides an analysis of the specific difficulties associated with identifying and monitoring operational targets in relation to the three reference systems defined earlier. The first specific field of analysis sheds light on how technological advances in logistics are expected to contribute to a reduction of greenhouse gas emissions. Since innovations are by nature hard to predict, and given that the focus of this book is to investigate potential options for political and economic action, this chapter is more of an excursion and presents exemplary solutions without claiming to be exhaustive.
So far, we have shed light on sustainability in various, highly diverse fields of action (technology, economic policy and transportation policy, logistics in the narrower sense, corporate strategy) and developed a multitude of fieldspecific measures and/or potential contributions to the desired outcomes as well as feasibility requirements. In so doing, we have painted a multi-faceted picture of potential outsets and approaches for developing sustainable logistics, including aspects such as using energy-saving power units, changing the modal split, increasing recycling quotas or rediscovering buffers and stocks as a way to improve the utilization of the means of transport employed. What many of said approaches have in common is that they require us to turn our backs on established methods and procedures. Moreover, in order to put the required changes into practice, we will have to find another (more tolerant) way of handling time in its role as a shapeable target variable. Sustainability is inconvenient.
Bis zu diesem Punkt haben wir das Thema „Nachhaltigkeit“ mit Blick auf ganz unterschiedliche Handlungsfelder beleuchtet (Technologie, Wirtschafts- und Verkehrspolitik, Logistik i. e. S., Unternehmensstrategie), und wir haben dabei eine Vielzahl von handlungsfeldspezifischen Maßnahmen entwickelt bzw. im Hinblick auf mögliche Ergebnisbeiträge und Machbarkeitsvoraussetzungen diskutiert. Dabei ist ein sehr vielfältiges Bild von Ansatzpunkten für die Entwicklung einer nachhaltigen Logistik entstanden, das den Einsatz energiesparender Antriebsaggregate ebenso umfasst wie Änderungen des Modal Split, erhöhte Recyclingquoten oder die Wiederentdeckung von Puffern und Beständen als Mittel einer verbesserten Transportmittelauslastung. Gemeinsam ist vielen dieser Ansatzpunkte, dass sie eine Abkehr von derzeit noch üblichen Methoden und Vorgehensweisen bedingen und dass der notwendige Wandel einen anderen (etwas toleranteren) Umgang mit der Zeit als Zielgröße und Gestaltungsvariable bedingt. Nachhaltigkeit ist unbequem.
Urban goods distribution has gained in importance in recent years since its optimization not only has the potential to increase productivity and operational efficiency but also to achieve broader goals related to the reduction of externalities including congestion, accidents, noise, air pollution and CO2 emissions. The focus of this paper is to explore the costs and benefits related to freight trams and appraise, by means of a cost benefit analysis a hypothetical freight tram scheme in the centre of Barcelona, to identify the factors that critically influence the potential success or failure of such schemes and to examine through sensitivity testing ways of improving performance. Thus, this paper aims to enhance our understanding of the potential for freight trams to contribute to mitigating a range of transport externalities. Two freight tram scenarios were developed for detailed investigation: the first for retail deliveries and the second for domestic waste collection. Cost benefit analysis (CBA) was carried out based on the best available public domain information and with clearly specified assumptions. The waste tram scenario yields a high Net Present Value (NPV) and rapid return on investment due to the low set up costs and significant operating cost savings. On the other hand, in the initial specification, the retail delivery tram has a very negative NPV due to high initial investment costs and annual costs exceeding annual benefits. Sensitivity tests indicate that both the initial infrastructure costs and the costs and efficiency levels of the consolidation centres are critical to the performance of a freight tram.
Crucial to the analysis in this paper is the Coasian insight that external costs result from conflicting uses of scarce resources and that responsibility for these costs should not be attributed exclusively to polluters as required by the polluter pays principle (PPP). The paper argues that the PPP, unlike the cheapest cost avoider principle (CCAP), which requires resolving the conflicting use at the lowest possible costs, suffers from three partly related deficits that can cause avoidable welfare losses: First, fo-cusing on polluters as the only addressees of regulatory measures ignores the role of pollutees and government; second, the PPP is incapable of dealing with second-best problems that may arise from government as an additional investor, inefficient behavior of the pollutees or the existence of monopolies; third, the PPP provides insufficient guidance in case of multiple equilibria, corner solutions and administration costs. In addition , the paper discusses whether the shortcomings of the PPP can be compensated by advantages in terms of lower administration costs.
In spite of the strategic national and regional development importance of transportation infrastructures, road transportation is one of the major sources of externalities worldwide. Using data collected from 900 residents living in 14 rural towns near the roads crossing the Spanish Pyrenees, we model citizens’ willingness-to-pay (WTP) to reduce noise and air pollution. We collect the data adopting a contingent valuation method (CVM) design and we analyze the data employing a Zero-Inflated Ordered Probit (ZIOP) model, which allows us to account for an excessive number of zero observations. Our results are in contrast with previous studies’ results with regard to environmental attitudes and socio-economic profiles of residents. Our findings indicate that the stakeholders living near major roads have higher incentives to offset environmental costs. Also, younger, better educated, and more environmentally-aware citizens are willing to pay more to reduce externalities, as they are influenced by their values and environmentally friendly sub-culture, possibly fostered during the past 30 years of green movement worldwide campaigning.
Maßnahmen zur Förderung eines nachhaltigen Wirtschaftens werfen besondere Probleme der Erfolgskontrolle auf. In einem ersten Unterkapitel werden deshalb, bezogen auf die drei vorab definierten Referenzsysteme, die spezifischen Schwierigkeiten analysiert, die mit der Bestimmung operationaler Zielvorgaben sowie deren Überwachung in der Praxis verbunden sind. Das erste konkrete Analysefeld leuchtet den zu erwartenden Beitrag aus, den technologische Entwicklungen in der Logistik zu Reduzierung von Schadstoffemissionen leisten können. Da Innovationen naturgemäß nur begrenzt vorausgesagt werden können, und da der Fokus des Buches auf Handlungsoptionen in Politik und Wirtschaft liegt, hat dieses Kapitel eher den Charakter eines Exkurses mit beispielhaften Lösungen ohne Anspruch auf Vollständigkeit.
Differences in diesel fuel prices can significantly distort competition both between and within domestic road haulage markets. This is well illustrated by the case of the UK, where diesel fuel prices are by far the highest in the EU. The paper examines the effects of high and rising fuel prices on cabotage penetration in the UK road freight market and reviews a series of measures that have been proposed to 'level the playing field' between British and foreign hauliers. Within domestic haulage markets, carriers also vary in the extent to which they can recover fuel price increases from shippers. The paper reviews recent empirical evidence on this subject collected in the UK and outlines several methods of compensating hauliers for fuel price rises.
The 16 chapters are divided into 3 parts. Part 1 attempts a global perspective on transport planning, examining theories of transport development, urban transport, transport problems in London, energy options, regional and global income disparities and accident rates. Part 2 looks at transport practice, including policy formation, traffic forecasting, economic assessment procedures and public enquiries. Part 3 explores the subsconscious impulses behind progrowth transport planning, with discourses on distance, individualism and the divisive nature of high speed transport and communications. Urges the reader to consider whether increased mobility is really synonymous with progress. -after Author
This paper starts by reviewing the main components of social marginal costs and environmental costs in the context of transport, and it draws on the experience in Europe concerning the means by which these costs can be valued. That experience is then translated to the situation in Lithuania, where many of the same issues are now being debated. A multicriteria method is proposed to internalize these costs, both from the perspective of the state and of the carriers. Costs need to be raised substantially if the social and environmental factors are to be paid for by the transport users, and such action would bring Lithuania closer to the best practice currently in operation in the European Union.
This article examines the question of whether public utility commissions have the right to include the costs of environmental externalities in rate making, or whether such actions be left to elected officials. The author believes that state commissions have no such right.
The strong expansion of freight road transports throughout Europe is an important source of congestion and pollution, as well as a cause of many accidents. To solve this problem will require the conjunction of many different remedies. One element of solution would be the promotion and substitution of transportation modes with less negative effects. This paper is focused on this solution. It presents some results obtained from a detailed GIS modelling of the Belgian multimodal freight transport network inserted within the overall trans-European network. It outlines the results of a simulation of the flows over the Belgian network in 1995 which allows to estimate some of the costs of several external effects of freight transports: the costs of pollution, congestion, accidents, noise and road damages. This paper provides also the simulated impacts on modal choice of a marginal external cost internalisation, and an estimation of the corresponding external cost savings.
How much and how fast should the globe reduce greenhouse-gas emissions? How should nations balance the costs of the reductions against the damages and dangers of climate change? This question has been addressed by the recent "Stern Review on the Economics of Climate Change," which answers these questions clearly and unambiguously. We need urgent, sharp, and immediate reductions in greenhouse-gas emissions. An analysis of the "Stern Review" finds that these recommendations depend decisively on the assumption of a near-zero social discount rate. The Review's unambiguous conclusions about the need for extreme immediate action will not survive the substitution of discounting assumptions that are consistent with today's market place.
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