Report says trucking industry must adapt to higher diesel, electricity, insurance and regulatory costs as a result of climate change
By Brad Gardner
A new report predicting diesel price increases of more than 17 cents under emissions trading says trucking operators must adapt to climate change now or risk economic ruin.
The Freight Transport and Climate Change: exposures and opportunities report claims industry emissions are growing rapidly, leading its authors to argue the indsutry is ill-prepared to cope in a carbon constrained world and it must take action now to rectify its greenhouse output.
The NSW-based Total Environment Centre (TEC), which compiled the report, has estimated the effect carbon pricing will have on diesel once the Rudd Government introduces its emissions trading scheme in 2010.
It claims diesel prices will rise by 5.8 cents per litre if carbon is $20 per tonne. According to the report, the price will rise 11.6 cents if carbon is $40, with a $60 price tag resulting in a 17.4 cents per litre hike.
“As government, the market, and the elements all respond to climate change, costs will rise and the profit margins of transport companies will be imposed upon,” the report says.
To offset this, the TEC says only “forward looking companies” equipped to develop initiatives to reduce emissions will thrive because customers will look to operators with the smallest carbon footprint.
“For unavoidable freight tasks it is foreseeable that contracts will begin to be awarded on the basis of the emissions intensity of prospective operators,” according to the report.
“Over the short term, the pursuit of emissions reductions will give individual logistics operators a competitive advantage over their competitors. Over the medium to long term the pursuit of emissions reductions will simply become a defensive strategy.”
Operators will also need to contend with greater insurance costs, with the report saying the likelihood of damage to property from climate change will increase.
“As the frequency and severity of extreme weather events increase, and insurers are forced to contend with greater uncertainty, insurance premiums will rise,” the report says.
Although operators are still coming to grips with the National Greenhouse and Energy Reporting (NGER) Act and the decision to include transport in emissions trading, the TEC expects the industry will be hit with further regulatory requirements because its emissions will continue to grow in line with the freight task.
This may include stricter fuel efficiency standards, mandated components for engines, taxes and road pricing charges.
While the price of diesel has dominated industry concerns, the report says operators are also exposed to increases in electricity costs, which will come once the Rudd Government introduces its carbon reduction scheme in 2010.
Although the rises will not be significant as diesel, the report estimates costs may vary from .26 cents per kWh to as high as 7.86 cents depending on the price of carbon and which jurisdiction the operator is based.
The report lists a number of recommendations—put out in early July just before Professor Ross Garnaut released his draft report into climate change—the industry can implement to reduce its emissions.
The TEC says operators need to maximise vehicle efficiency by matching the truck to the task, maintaining fleets and installing aero-dynamic features.
It also proposes optimal freight loading, reducing empty running and driver education initiatives.
Similar to other green groups, the TEC wants more freight on rail because the mode generates less emissions than road transport. But the organisation concedes trucks will still need to move freight in city centres.