Market Overview

The Disconnect Between Carbon Reporting And The Freight Transportation Industry

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The Disconnect Between Carbon Reporting And The Freight Transportation Industry

There is a lack of understanding of the freight transportation sector by carbon reporting publications. This causes misinformation and is based off assumptions about the freight transportation sector that are outdated. 

Historically, the freight transportation sector was anything but transparent. In fact, FreightWaves developed SONAR as a way to provide data-driven industry information to allow participants to make decisions based on data, instead of the status quo and a hunch. However, carbon reporting publications are behind in this space. 

Using annual or even monthly data does not cover the emerging changes in the market, and the available data lags. Much of the government data relating to the freight market is also filled with noise from other vehicles that do not transport freight. 

There appears to be an assumption that if the macroeconomy is doing well so is the freight market, which is not the case. The first and second quarters were plagued with the Freight Recession this year. Without access to the data, many did not recognize that there was a decrease in freight volume (OTVI.USA) and attributed a decrease in diesel consumption to a change in fuel choices. 

SONAR: OTVI.USA

The accountability is also low. By the time carbon emissions data is released, as it relates to the transportation sector, there is little recall of the information within the story. There is a five-month lag from when the month is over to when emissions data is released. The FreightWaves' SONAR chart below showing distillate fuel oil carbon emissions for the transportation sector (DMACE.USA), which primarily consists of diesel, demonstrates that lag. 

SONAR: DMACE.USA

The understanding of freight markets is also key when the audience is making business decisions or proposing regulations based on the findings from these publications. The first half of 2019 saw a decrease in demand for diesel, but it was from a fall in freight volume. However, this gives the impression that transitioning to lower emissions fuels is easier and able to be internalized by carriers.

The ability to internalize costs of lowering emissions is not the case for most carriers. The costs to replace fleets of vehicles are high. Should vehicles convert to other fuel sources compatible to their current vehicles, they typically cost more than diesel. This is partially due to the supply constraints on alternative fuels, such as natural gas. 

Understanding the freight market is key to discussing carbon mitigation in the transportation sector. Misinformation leads to more pushback. Lower costs and convenience will drive transitions to alternative fuels. Larger carriers will likely lead the transition with the ability to internalize some of the costs, while changing the market by creating a shift in demand and prices. 

The goal should be to educate the audience about the effects of emissions on human health and the environment, as well as educate them about the practices and technology that can reduce emissions. Small steps and small changes in regulations can shift markets, but the assumption that most carriers can afford to replace their vehicle fleets with more expensive vehicles should be put to a stop.

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Posted-In: carbon emissions Freight Freightwaves LogisticsNews Global Markets General

 

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