Transportation companies, logistics providers, conscious consumers, and green-leaning businesses are all looking for ways to make shipping more sustainable. Whether you’re talking about moving goods, materials, or supplies as freight or getting small parcels in the hands of consumers, green logistics is a hot topic right now.
In some ways, supply chain optimization is built for sustainability. Creating efficiencies can also lead to things like emissions savings. However, in some cases, the sustainable solution isn’t always the cheapest one. To offer just one example, some companies are feeling the pinch when it comes to using more expensive biofuels to power the planes and boats that move freight.
In other words, as sustainable logistics continues to rise in popularity, questions still remain: What are the real costs behind green transportation? And are companies—and consumers—willing to pay them?
Who’s Willing to Pay More?
Insights from Recent Studies
What Are the Real Costs of Green Transportation Solutions?
As companies shift toward sustainable transportation and freight solutions, they’re also looking at shifts in their P&L. Green transportation costs present themselves in a number of ways, including the following:
Bigger Upfront Investments
Electric semis, trucks, and vans are gaining popularity as zero-emission vehicles. However, there are no two ways about it: buying a new electric truck is significantly more expensive than a diesel one. Figures from Fleet Equipment Magazine suggest that an electric Tier 4 electric yard truck could cost more than two times a diesel one, when you take into account the charging and infrastructure costs.
$120,000
Estimated cost of a new tier 4 diesel yard truck
$270,000
Estimated cost of an electric yard truck including charging and infrastructure costs.
Additionally, some companies are looking to renewable resources like solar power to assist in charging their electric fleet. In those cases, there are additional costs associated with solar panels and batteries to store power—another upfront investment.
As an alternative to electric, some are looking to hydrogen-powered vehicles for more sustainable solutions. When the city of Montpellier, France ran the numbers on this technology, they concluded that 50 hydrogen buses would cost them six times more than electric buses, due largely to the cost of producing, storing, and distributing.
6x
Estimated cost for Montpellier, France’s new hydrogen bus fleet,
as compared to an electric fleet.
Ultimately, the city canceled its order. They couldn’t justify the premium cost. However, they plan to place an order for an electric fleet, at a cost that felt much more justifiable to city leaders.
Higher Operating Expenses
For some sustainable solutions, the challenges come not in the investment phase but in the operation. Electric fleets are often touted for their lower maintenance costs. However, electricity is costly in certain parts of the world, notably in Europe, where electricity prices have soared in some countries. In other words, operating an electric fleet comes with costs that vary regionally.
Where air freight is concerned, sustainable aviation fuel remains more expensive than jet fuel. The average production cost of biofuels is double or triple the cost of fossil fuels, a cost that the International Energy Agency calls a “key barrier to their wider use.”
The Regulatory Costs of Not Being Green
On the flipside, companies may face costs for ignoring sustainability initiatives. The Ports of Los Angeles and Long Beach are leading the way with the Clean Trucks Program, which charges fees to incentivize the change-over to zero-emissions vehicles.
Under the program, operators pay a fee of $10 per TEU and $20 for containers longer than 20 feet. Zero-emissions trucks are permanently exempt, and low-nitrogen-oxide trucks are temporarily exempt through 2027 at the Port of Los Angeles and at least 2031 at the Port of Long Beach.
$10
Rate for diesel drayage at the Ports
of LA and Long Beach.
$0
Fees for drayage by zero-emissions vehicles.
As more jurisdictions adopt legislation incentivizing sustainable trucking solutions, it might end up costing operators more to stick with fossil fuel.
Considering the Total Social Costs
Finally, some are urging policymakers, financial institutions, and those with a vested interest in global infrastructure to take a broader look at the real “costs” of the low-carbon solution versus the current, high-carbon pathway.
A study from the World Resources Institute projected that a global infrastructure investment aimed at creating a 2°C average global temperature increase would ultimately cost $300 billion less than the business-as-usual higher-carbon pathway projected to cause a 4°C average global temperature increase. In other words, a proactive investment now in sustainable global infrastructure would ultimately save all stakeholders money in the long run.
Plus, if you take into account the societal costs from congestion, air quality, and urban sprawl that would occur in the 4°C scenario, the cost savings are even more dramatic. Read the full report to get a sense of the broader conversation surrounding the future of investments in sustainable infrastructure and transportation solutions.
Evaluating the Cost of Green Freight Solutions
While some short-term costs associated with sustainable logistics are clear, the long-term implications remain murky. On one hand, the Wall Street Journal projects a $3 trillion dollar cost to the shipping industry to eliminate emissions. On the other hand, another study finds that running ships on hydrogen would only add a projected cost of eight cents to a pair of Nikes.
Additionally, as newer technology advances, costs will drop. Take, for example, a recent study from the National Renewable Energy Laboratory (NREL) showing that zero-emission vehicles could reach “total-cost-of-driving parity with conventional diesel vehicles by 2035 for all medium- and heavy-duty vehicle classes.” In other words, many of the upfront costs that are giving companies pause will diminish with time and technological advances.
Ultimately, your company’s P&L will tell the story for your organization.
If you’re considering ways to make your supply chain more sustainable, we’d be happy to help you uncover new efficiencies with the potential to save you money and lighten your carbon footprint. Just reach out to one of our Approved experts for a complimentary consultation to get started.
Get a Free Quote
