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15 This chapter explores the ways in which regulators, indus- try, not-for-profit organizations, and affected communities can collaborate so that initiatives to address supply chain air emissions are optimally designed for impact, balance, and practicality. The intent of such initiatives is to raise the âeffi- ciency frontierâ of supply chains, ensuring through enlightened cooperation that the benefits side of the benefit-cost equa- tion is favored. Collaboration can enable the environmental, social, and economic effects of decision making to be weighed, thereby ensuring optimal outcomes in decision making. Many of the agencies involved in supply chains and their regulation tend to be single-purpose, focusing on a particu- lar aspect only (e.g., emissions, air quality, cost, or transit time). As a result, actions and decision making by these individual entities do not always take into account the full range of supply chain sustainability impacts or the priorities of other agencies. In such circumstances, win-win solutions occur more by acci- dent than by intent. Due in part to their narrowly prescribed mandates, but also because of the complexity of supply chains, few agencies are able to fully appreciate the wider impacts of their actions on the supply chain as a whole. This chapter considers the benefits of an approach based on partnership and how this approach can enable win-win outcomes for all affected parties. The research examines different partnering approaches, the impacts each has had on outcomes, and some of the prerequisites for success. Voluntary approaches to reduce freight transportation emissions based on partnering between agencies may be more effective than regulations, which ⢠May involve a lengthy regulatory process and can take time to affect emissions (e.g., emissions standards generally pertain to new vehicles and engines rather than those in use); ⢠Can result in significant costs to the private sector, whereas win-win solutions focus on balancing costs and benefits; ⢠Only relate to certain aspects of the supply chain, with others being âoff limitsâ or outside the jurisdiction of the regulatory authority (e.g., regulation of railroad activities and of emissions standards in states outside of California); and ⢠May not always be possible to reach agreement upon, partic- ularly where multiple jurisdictions are involved (e.g., green- house gas [GHG] emissions from marine shipping). Nevertheless, regulation has a key role to play in the sus- tainable management of supply chain emissions. For example, regulations are appropriate to ensure protection of human health and the environment in situations where win-win outcomes are not attainable or where private-sector players are simply unable to reach agreement in their emissions reductions efforts. Where voluntary agreements to reduce emissions cannot be achieved, regulation can compel nec- essary changes in behavior. Regulation also can provide a level playing field whereby all private-sector participants in the supply chain are required to adhere to the same stan- dard, ensuring that individual companies are not placed at a competitive disadvantage by acting sustainably. Further, as explored in this chapter, there is some scope for win-win opportunities to be realized directly through the planning and regulatory processes, by actively engaging industry, environmental lobby groups, and communities in early and ongoing dialog to ensure more balanced and favorable outcomes. 2.1 Elements of the Win-Win and Partnership Approach Win-Win Opportunities Win-win solutions are those that address environmental, social, and economic imperatives, while enabling the realiza- tion of the objectives of the full range of stakeholders. In the context of supply chain air emissions, the reduction of GHGs presents the greatest opportunity for the achievement of such win-win outcomes. Because GHG emissions correlate directly with fuel consumption, which is a significant cost for carriers, C H A P T E R 2 Partnerships and Win-Win Opportunities
16 measures that focus on fuel efficiency can have beneficial outcomes for carriers, shippers, and regulators, as well as for society at large. In the case of GHG reduction, the benefits arising through win-win efforts are often broader than fuel cost savings alone. For example, the U.S. Environmental Protection Agencyâs (EPAâs) SmartWay Program benefits private participants through the verification of cleaner and greener cost-saving technologies, providing them with the financial support to access these technologies. The program also supplies tools by which emissions can be measured and a marketable accredita- tion, which is attractive to customers. These benefits are par- ticularly beneficial to small carriers who may lack the expertise and resources to adopt greener technologies or monitor their emissions on their own. Win-win outcomes tend to be harder to realize in respect to criteria air pollutant (CAP) emissions. This is largely because CAP emissions reductions tend to carry costs for the private sector (e.g., through the replacement or upgrade of vehicles and equipment) while conveying fewer direct and tangible benefits. In such cases, regulation is usually required in order to compel emissions reductions and to ensure the protection of human and environmental health. Consensus-Based Approach A critical aspect of win-win approaches is that they are consensus-based and developed through cooperation. The broader array of supply chain issues addressed by a consensus- based approach potentially leads to a wider distribution of benefits, reflective of the perspectives and needs of the range of interested and contributing parties. Further, when solutions are forged through mutual agreement and consensus, effec- tive implementation is more likely. The Port of Los Angeles (POLA) PierPASS Program, developed in consultation with the marine terminal operators (MTOs), succeeded because it allowed MTOs to control implementation, set a level playing field for participants, and enabled increased terminal operat- ing costs to be offset through traffic mitigation fees payable on eligible cargo, while enabling air emissions benefits to be realized through switching truck movements to the off-peak period. In contrast, its predecessor, the Port Gate Appoint- ment System (introduced via Assembly Bill 2650) was less well matched to operations, and ensuring compliance proved challenging (Giuliano and OâBrien, 2008). Increasingly, government, business, and communities understand the importance of working together to achieve improved sustainability outcomes. The experience of the Port of Los Angeles in the period leading up to the development of the Clean Air Action Plan in 2006 is a stark reminder of the pitfalls of not treating the community as a partner: the ensu- ing community action and litigation stalled the portâs plans for major cargo terminal projects for 5 years. For business, the capacity for innovation itself often depends on factors outside of the individual enterprise. Private compa- nies are recognizing that working with stakeholders improves their innovation capacity. In fact, the ability to innovate typi- cally depends on a complex network of interactions with various external agencies. Government also has a role to play in facilitating this innovation by providing access to infra- structure, technology, and financing. Research indicates that nations that facilitate these industry-government linkages are more likely to have economies that flourish than those that do not (Hargroves, 2005). 2.2 Challenges and Trade-Offs Although we refer to win-win, there are, inevitably, some trade-offs in the distribution of where benefits accrue: across environmental, social, and economic impacts; among various stakeholders (public-sector agencies, affected communities, and private companies); and between localized and global GHG impacts. Balancing Environmental, Social, and Economic Costs and Benefits Emissions reduction efforts (particularly in relation to CAP emissions) may convey increased economic costs that typically manifest in higher private-sector costs of doing business and/ or increased call for public-sector infrastructure investment (e.g., to alleviate congestion). In air quality nonattainment areas where air pollution levels persistently exceed National Ambient Air Quality Standards (NAAQS), air emissions and public health are critical considerations in public-sector decision making and can override other considerations. The costs of nonattain- ment are high for both the public sector (e.g., development of complex models and monitoring, development of state implementation plans, or loss of access to federal trans- portation funding as a result of the nonattainment desig- nation), and the private sector (e.g., alteration of business operation and installation of pollution control equipment). Although efforts to reduce CAP emissions add to business costs, often with limited or no financial return, the risks and disadvantages of inaction also may be significant. Where the need for significant emissions reduction is urgent in order to meet NAAQS or GHG reduction targets, when collective action on the part of the private sector is required, and if the financial returns of independent action for the private sector are not evident, then regulatory measures are likely to be warranted.
17 A challenge for public policymakers and decisionmakers is the achievement of the optimum balance between ben- efits and costs across the spectrum of economic, societal, and environmental impacts of their air emissions reduction efforts and, where possible, to assist in offsetting costs to industry where they occur. When developing regulations, public agencies should carefully evaluate the impacts so that the environmental and societal benefits generated outweigh the economic costs, such that no one sector or geography is disproportionately affected. Although regulatory impact assessment [RIA] is a requirement of the federal process, with a similar approach required in California, it is not always undertaken elsewhere. Balancing Costs and Benefits Between the Public and Private Sectors Who bears the costs for reducing air emissions from freight- related sources is a critical consideration. A recent U.S. Gov- ernment Accountability Office (GAO) report recognizes that the U.S. transportation industry generally is not paying the true full costs of goods movement, and contends that external costs (including accidents and pollution) are not fully cap- tured in freight costs (GAO, 2011). These costs are substantial and are often carried by the communities living adjacent to transportation corridors and facilities, as well as by the taxpaying public. For example, EPA estimates pollution from diesel engines is responsible for 20,000 premature deaths annually as well as for asthma, lung cancer, low birth weight, and cardio- vascular illness. Further, the California Air Resources Board (CARB) estimates that the health costs from freight-related air pollution in 2005 in California alone amounted to more than $19.5 billion (Denning, 2010). The GAO report concludes that these unpriced costs are borne by general taxpayers rather than by the consumers of goods (GAO, 2011). Many private companies have indicated a willingness to assume responsibility for reducing their air emissions (this is explored further in Chapter 5). The challenge for the public sector is to provide a framework that facilitates the private sector in its efforts to reduce supply chain air emissions that, at the same time, enables economic prosperity and avoids creating imbalances in the marketplace. This typically means rebalancing the distribution of any costs associated with emissions reductions so that the costs are passed on to the consumers of goods, rather than being borne by taxpayers, individual companies choosing to âdo the right thing,â or communities living beside freight transportation corridors or intermodal facilities. Regulation to level the playing field (thereby requiring that all carriers incur such costs) allows carriers to pass the costs of emissions reduction on to ship- pers and end-point consumers. This is in contrast to a volun- tary system, in which businesses that incur costs for pollution reduction may be placed at a competitive disadvantage for doing so. Balancing Global and Local Benefits A further challenge for both the public and private sectors is to achieve a balance between the accrual of local versus global benefits of emissions reductions. CAP emissions have the greatest impacts on the local area around the emissions source, with the significance of their impact determined by emissions volumes, meteorological and geo-physical condi- tions, as well as their proximity to sensitive receptors. Thus, not all jurisdictions are equal when considering the manage- ment of air pollutants, and the approaches adopted will nec- essarily differ between local contexts. CAP emissions from freight are of particular concern to state, regional, and local agencies in nonattainment areas that consistently fall short of NAAQS, as these agencies are obliged to develop plans, policies, strategies, and regula- tions to facilitate compliance with air quality standards and state implementation plans. In contrast, the impacts of GHG emissions are both cumulative and global. Thus, no matter where they are emitted, GHG emissions will affect climate change. For both the public and private sectors, assessing the trade- off between GHG and CAP emissions is a complex process. Although GHG emissions are directly linked to the amount of fossil fuel consumed, CAP emissions can vary greatly depending, for example, on vehicle age and type, fuel qual- ity, and end-of-pipe emission controls. Reducing freight ton- miles can reduce GHG emissions, although this ultimately depends on mode of freight transportation (and the energy intensity of production, which affects lifecycle carbon emis- sions), empty miles, and other factors. In some cases, CAP- reduction efforts that reduce diesel or marine oil fuel use can reduce GHG emissions. For example, Californiaâs shore power regulation, intended to reduce population exposure to nitrogen oxide (NOx) and PM (from diesel-fueled ocean- going vessels at dock), is an example of where GHG emis- sion benefits also accrued. However, in many cases, efforts focused on either GHGs or CAP can come at the expense of the other. The GHG reduction benefits of a shorter trans- portation route may be counterbalanced by local CAP emis- sions impacts, particularly if this route passes through an air quality nonattainment area. Conversely, the achievement of significant CAP emissions reductions from heavy-duty diesel engines in recent years has reportedly decreased fuel economy by as much as 12%, resulting in a GHG emissions penalty (McKinnon, 2008; Tunnel, 2010). Further, according
18 to interviews with industry stakeholders, the new Tier 4 loco- motive emissions standards currently can be achieved only at the expense of fuel efficiency and GHG emissions. 2.3 Fundamentals of a Sustainable Approach Combination of Enabling and Restrictive Mechanisms It is generally recognized that the free market, on its own, is unlikely to deliver an environmentally sustainable logistics system, particularly given the short timeframe required to arrest global warming and climate change, and because there are limited direct benefits to the private sector in reducing CAP emissions. Thus, the public sector has a critical role to play in the sustainable management of supply chain air emissions, both by supporting voluntary private-sector initiatives and by leveling the playing field through regulation that establishes a consistent and predictable set of minimum standards to which industry is required to adhere. Restrictive mechanisms (e.g., regulation, taxation, and emissions standards) are necessary both to protect public health and the environment and to ensure that no one sector, geography, or private company is unduly disadvantaged and that all participants do their part. The Fair Winds Charter illus- trates the importance of regulation in supporting voluntary industry-led air emissions reductions initiatives. International carriers who are signatories to the charter commit to switch- ing to low-sulfur fuel while berthed at Hong Kong ports. For these industry participants, there is a financial consequence for using low-sulfur fuel, which is more expensive than the fuel used by competitors. Regulating the use of low-sulfur fuel would create a level playing field across the industry: if all shipping lines incurred the same cost, there is more potential for this to be passed on to shippers and end-point consumers. Industry signatories to the Fair Winds Charter are thus press- ing the Hong Kong and Guangdong governments to regulate shipping emissions, consistent with standards applied in other locations. In response to the Hong Kong governmentâs recent pledge to mandate fuel switching at berth, Fair Winds Charter members agreed to extend their voluntary agreement to use cleaner fuel for another year to January 2014, while the legis- lation to make fuel switch mandatory in Hong Kong is devel- oped. This is intended to keep up the momentum within the industry and is an example of cooperation between the public and private sectorsâin this case, led by the private sector. Where restrictive mechanisms are deployed, they are fre- quently best applied in combination with enabling mechanisms to ensure that private-sector players have ample opportunity to comply with regulations, taxation, and emissions standards to offset costs. Enabling mechanisms can bring a range of options and technologies within the reach of private companies who, on their own, may not be in a position to make the necessary changes. Such enabling mechanisms may include the identi- fication and verification of cleaner and greener technologies, provision of funding and technical expertise to support the adoption of new technologies, providing data and reporting methods for ongoing monitoring of fuel efficiency and emis- sions by the private sector, and offering endorsements and âgreen certificationâ for companies that take steps to reduce their emissions. Coordination Across Agencies Responsibility for policy, funding, and regulation in rela- tion to freight emissions is distributed across multiple public- sector agencies with varying geographic or political reaches. For example, EPA and CARB both develop air quality stan- dards, while agencies such as FHWA and state DOTs pro- vide funding and financing for infrastructure improvement projects. State and regional governments are responsible for developing transport plans, programs, and policies, and for developing strategies to comply with air quality standards. Local governments fund and oversee projects in their respec- tive jurisdictions. However, in many cases, state DOTs and metropolitan planning organizations (MPOs) are organized modally with different divisions responsible for highways, rail, ports, and waterways. This can undermine an integrated approach to freight planning. Cooperation and joint efforts among these divisions and layers of government is essential. In particular, intermodal freight planning requires a commitment to joint working and communication between several agencies at different levels of government. Further, each of these sectors of government requires a firm understanding of the inter- relationships between freight transport, logistics activities, and air emissions if they are to develop effective policies, strategies, and regulations, or influence private-sector behaviors. The California Goods Movement Action Plan (GMAP), released in 2007, is widely recognized for the cross-agency collaborative effort that underpins it. Prepared by the Busi- ness, Transportation and Housing Agency (which incorpo- rates Caltrans) and the California Environmental Protection Agency (Cal/EPA) which incorporates the Air Resources Board (CARB), the planning process brought together a range of public- and private-sector stakeholders. The GMAP sets out multimodal policies and programs to reduce congestion and address freight-related environmental impacts. GMAP also identifies potential projects for Proposition 1B fund- ing. Proposition 1B is a competitive grant program targeting diesel-powered equipment owners to co-fund equipment updates. Access to Proposition 1B funding was itself key in bringing participating parties to the table, with Cal/EPA and local agencies (e.g., the ports and air quality management
19 districts) cooperating closely in the allocation and distribu- tion of funds. Cal/EPA oversees and allocates funds at the state level, but local agencies administer the funds and are accountable for awarding and monitoring project grants. Inland locations also are undertaking collaborative freight planning efforts. The Kansas City Regional Freight Outlook (2009) study and strategic plan is a regional, bi-state exam- ple of cross-agency collaboration, involving the Mid-America Regional Council, Kansas City SmartPort, Federal Transit Administration, FHWA, and the Missouri and Kansas DOTs. The study findings are intended to guide and manage freight growth in the Kansas City region, identifying freight infrastruc- ture needs and outlining a comprehensive freight plan that bal- ances the needs of the community with freight interests. The study fed into the regional transportation plan, âTransporta- tion Outlook 2040â (Mid America Regional Council, 2010). The plan includes a comprehensive framework to review con- ditions, assess needs, and provide direction for prioritizing freight infrastructure investments based on the designation of corridors of freight significance (COFSs) in which future freight investments will be concentrated. Engaging the Private Sector A prerequisite for the achievement of win-win outcomes is the ongoing engagement of the private sector in public policy and decision making regarding the freight sector. Industry consultation is essential if public policymakers and regulators are to develop and maintain an understanding of the supply chain and its impacts. Nevertheless, bringing the private sector to the table can be challenging for public agen- cies, especially given differences in expectations and operating styles. Business leaders may be reluctant to engage in the plan- ning process. Public-sector officials are used to dealing with long lead times and high degrees of uncertainty. In contrast, the business community tends to operate on a much shorter timeframe, responding to changes as they arise, in some cases on a daily basis (NCHRP, 2007). Effective consultation requires that stakeholders have the capacity (time and resources) to engage, as well as the expertise to formulate, a position on particular issues. For small ship- pers and carriers, time and resources may be in short supply. The manner in which the public sector conducts its outreach and engagement activities thus impacts the effectiveness of its approach to managing supply chain air emissions. Several public-sector agencies are taking a proactive approach to industry engagement in freight planning and emissions mit- igation. In developing the âKansas City Regional Freight Outlookâ (2009), the Mid-America Regional Council collabo- rated closely with Kansas City SmartPort (a nonprofit investor- based economic development organization supported by both the public and private sectors). The initiative included a survey of more than 400 businesses, as well as focus groups attended by 50 participants. CARB, together with local agencies (including ports and air resource boards), undertakes extensive outreach using multi- ple methods as part of the solicitations for Proposition 1B (Goods Movement Emission Reduction Program) funding. One-Stop Truck events, conducted in multiple languages, pro- vide funding, education, and one-on-one assistance to truck owners. Interest in the program has surged, with districts receiving more than 8,800 applications for truck upgrade or replacement grants (CARB, 2011a). CARB also has established a sustainable freight section charged with building a coalition of key CARB staff, beneficial cargo owners, domestic carriers, ocean carriers, business, the community, environmental orga- nizations, and energy providers to foster transformational change in developing a long-term vision that moves toward near-zero emissions (CARB staff, 2012, pers. comm.). Increasingly, ports are engaging the private sector in part- nerships to reduce emissions. For example, the Environmental Shipping Index (ESI), developed by the International Asso- ciation of Ports and Harbors and the World Climate Initia- tive (WCI), identifies ocean-going vessels that have lower air emissions than required by the current emission standards of the International Maritime Organization (IMO). The index is intended to be used by ports to reward participating ocean carriers and can be used by shippers in the selection of carriers. The Port of Los Angeles has implemented an ESI with input from the Pacific Merchant Shipping Association and other stakeholders, providing financial rewards and a marketable green credential to ocean carriers that voluntarily reduce ship emissions beyond regulatory requirements. In January 2013, the Port Authority of New York and New Jersey also implemented an ESI-based program. The South Carolina Ports Authority collaborated with the private sector to obtain grants for emis- sions reductions projects. Support letters from the local envi- ronmental and health agency, Chambers of Commerce, and the trucking association, were instrumental in the success of the grant application. Similarly, the Port of Houston (PHA) developed its Clean Air Strategic Plan as a joint initiative with stakeholders including tenants, terminal operators, the trucking community, ocean carriers, public agencies, non- governmental organizations (NGOs), local communities, and citizensâ groups. Consultation was undertaken with more than 150 private industries, and PHA formed partnerships with port tenants and users to apply for state and federal grant programs. Access to funding is a key driver behind these partnerships. Proactive private-sector industry collaboration and lobby- ing is also fostering supply chain sustainability. The Coalition for Responsible Transportation (CRT) is an industry group that actively lobbies for the inclusion of industry perspectives in legislative and regulatory activities (in this case, specifically in relation to port trucks), engages in emissions compliance
20 efforts, and is partnering with ports in switching to clean trucks through shared cost arrangements to make upgrades more affordable (CRT, 2012). This customer-led approach also reduces the risks of competition for discretionary traffic between ports by ensuring that port customers are committed to clean trucks nationwide. Communicating Best Practices The sharing of best practices is essential to ensuring a sus- tainable approach. Both public- and private-sector channels, as well as nonprofit organizations such as the Environmental Defense Fund, contribute to information dissemination. Pro- grams can include advice, benchmarking, and promotional programs to encourage sustainable practices and technologies in an effort to accelerate their uptake by shippers and carriers. Examples include the EPA SmartWay Program, which, in par- allel with technology verification, offers best-practice advice regarding operational behaviors for the reduction of emissions. The Web-based BestLog Project financed by the European Union (EU) provided a platform for public and private sectors to collect and share practical experience in tackling logistics challenges in a sustainable way, addressing both business and policy objectives. The project ran from February 2006 to May 2010, when it was handed over to the European Logistics Association (http://www.elabestlog.org/). In California, the South Coast Air Quality Management District (SCAQMD) Technology Advancement Office engages in cooperative part- nerships with industry, academic and research institutions, technology developers, and government agencies to co-sponsor projects intended to demonstrate best practices in the use of clean fuels and technologies that lower or eliminate emissions. For example, in conjunction with the Ports of Long Beach and Los Angeles, Caltrans, Southern California Association of Gov- ernment (SCAG), Gateway Cities Council of Governments, LA Metro, and Siemens, SCAQMD submitted an application for a $19.2 million federal grant to co-fund a demonstration project for zero-emission container transport between the San Pedro ports and the Intermodal Container Transfer Facility that is 5 miles away (SCAQMD staff, 2012, pers. comm.). Other examples include the low-sulfur fuel switching and locomo- tive powertrain technology demonstration projects at the Port of Houston. Mitigating Impacts on the Economy and Business The inclusion of specific mechanisms for reducing adverse impacts on businesses and the economy is another common factor in successful regulatory approaches. For example, the EU Aviation Emissions Trading Scheme (Aviation ETS) includes measures designed to protect economic growth and the commercial viability of new aviation businesses through the reservation and allocation of a portion of the emissions allowances to new and rapidly expanding aircraft operators at no cost. The California At-Berth Ocean-Going Vessels Regulation applies to particular vessel types and fleets that meet or exceed a minimum port visit threshold. Although both of these regulatory measures sparked controversy (dis- cussed further in Chapter 6) by specifying financial measures to protect new businesses, or a threshold below which mea- sures will not apply, the regulations focus on those fleets or vessels where the greatest opportunities exist to effect emis- sions reductions and relieve small fleets of the administra- tive and capital expenditure associated with the regulatory compliance. 2.4 Components of Public-Private Collaboration at the State and Local Levels Robust, Transparent, and Ongoing Consultation Robust, transparent, and ongoing consultation is a hallmark of effective public-private collaboration and is necessary for enabling sustainable outcomes. It begins at the freight plan- ning stage and continues with investment decision making and environmental regulation. Both the Transportation Equity Act for the 21st Century (1998) and the Safe, Accountable, Flexible, Efficient Trans- portation Equity Act: A Legacy for Users (2005) include requirements for obtaining input from freight shippers and providers of freight transportation services when devel- oping transportation plans and improvement programs. Although the requirements do not establish procedures for industry involvement, FHWA has developed A Guidebook for Engaging the Private Sector in Freight Transportation Planning (FHWA, 2010a). The July 2012 reauthorization of the federal transportation programs, Moving Ahead for Progress in the 21st Century Act (MAP-21), encourages states to develop comprehensive freight plans, and in so doing, to form freight advisory committees to provide ongoing input on freight planning. These committees are to be composed of a âcross-section of public- and private- sector freight stakeholders, including representatives of ports, shippers, carriers, freight-related associations, the freight industry workforce, the transportation department of the state, and local governments.â Their purpose is to âadvise the state on freight-related priorities, issues, projects, and fund- ing needs; serve as a forum for discussion for state transpor- tation decisions affecting freight mobility; communicate and coordinate regional priorities with other organiza- tions; promote the sharing of information between the pri- vate and public sectors on freight issues; and participate in
21 the development of the state freight planâ (U.S. Government, Section 1117, 2012). Several agencies at both the state and regional levels have already set up working groups with the private sector. Examples include the following: ⢠The Integrating Work Group (IWG), composed of regula- tors and industry, community, and environmental leaders, established to develop Californiaâs GMAP. Subject-specific working groups supported the IWG and addressed the tech- nical and public policy issues while the IWG resolved con- flicts among the supporting groups and provided critical input to GMAP development. ⢠Colorado DOT (CDOT) coordinates private-sector sur- veys with MPOs and transportation planning regions, regu- larly attends meetings of the freight interest groups (e.g., the statewide motor carrier associations), and created the Colo- rado Freight Advisory Council (FAC), a forum for discussion on freight movement and freight infrastructure in the state. ⢠Washington DOT (WSDOT) engages with industry on an ongoing basis, conducting surveys and interviews at shippersâ and carriersâ places of business to track trends and freight performance according to metrics relevant to shippers and carriers (WSDOT, 2012). WSDOTâs Freight Mobility Strate- gic Investment Board (with representation from the public sector, ports, railroads, trucking, and steamship industry) is a forum for private-sector participation in freight investment decision making. ⢠Portland Metro has appointed 33 representatives from the public and private sectors to serve on a goods movement taskforce whose function is to provide advice on the regionâs multimodal freight transportation system. ⢠The Chicago Area Transportation Study recruited a team of private-sector experts to share their knowledge and experi- ence to benefit policy and decision making and to act as a âboard of directors.â A specific Intermodal Advisory Task Force advised on issues affecting intermodal movement of goods while working relationships with local universities enabled teaming on specialized studies (e.g., in relation to advanced technologies and cargo-handling methods) (Rawling, 2005). ⢠In California, the Maritime Air Quality Technical Working Group (or Maritime Working Group) provides a forum for discussion of air quality issues relating to maritime activi- ties in California. Participation is open to all interested par- ties and includes representatives from Californian ports, commercial shipping lines, maritime industry associations, EPA, local air districts, as well as community and environ- mental groups. Maritime Working Group members partici- pate in the development of emission reduction strategies for both commercial marine vessels and dockside equipment. (Note that the Working Group is not intended to replace the public process in the development of regulations, but to provide a forum for discussions and information shar- ing at the early stage of strategy development, thereby enhancing the regulatory process.) Industry engagement is equally important to the regulatory process. State-prescribed processes for the involvement of stake- holders at various stages of rulemaking tend to be fairly similar, typically specifying opportunities for comments at key stages and requiring the agency to report on its outreach process, issues raised, and modifications introduced as a result of consultation. For example, CARB rulemaking regarding mobile-source air emissions typically begins with a direction or inputs from gov- ernment, the public, or industry. Staff members conduct surveys and further research at this early stage, and public workshops are held. The private-sector interests to be regulated are usually notified, invited to specially convened consultation meetings, and kept updated and invited to engage throughout an iter- ative rulemaking process as draft versions are evaluated. A formal public engagement process is followed in the draft- ing of regulations, including issuance of an Initial State- ment of Reasons, a public hearing and comment process, and issuance of a revised Final Statement of Reasons. Other states, such as Washington and New York, follow similar rulemaking procedures. CARB staff report that a benefit of the regulatory process is getting to know stakeholders and the emergence of beneficial working relationships with them (CARB staff, 2012, pers. comm.). This ongoing communication can enable a more balanced regulatory approach, affording the private sector the opportunity to provide inputs prior to the formal consultation process and public hearing. In the formulation of tractor-trailer regulations in California, early input based on operational experiences from a private-sector working group ultimately succeeded in changing EPA SmartWay practices to allow for re-tread of low-rolling resistance tires (the use of which is a requirement of the regulation). This change has reduced costs to responsible carriers across the country, cutting emissions and reducing the numbers of tires sent to landfills (CARB staff, 2012, pers. comm.). Conducting the Necessary Data Gathering, Analysis, and Communication of Results Access to data is an essential starting point for the sustainable management of supply chain emissions. For example, data link- ing shipping air emissions to health impacts (provided by the Hong Kong Environmental Protection Department and dis- seminated by the Civic Exchange, a non-government agency), provided an important component of the education of the public and industry, and drove calls for change at Hong Kong ports. Public-sector agencies have a critical role to play in the
22 development and maintenance of air emissions inventories, as well as in the collection and monitoring of data regarding origins and destinations of truck traffic, volumes, congestion, journey time, reliability, and safety. Public- and private-sector stakeholders collect and monitor different metrics relating specifically to their particular man- date. Public-sector stakeholders are typically interested in less- frequently updated measures to assist with policy, planning, and infrastructure investment decisions, while private-sector stakeholders are interested in more continually available mea- sures to make daily operational decisions including reliability and travel-time measures (NCFRP, 2011). Federal agencies, along with state air resource agencies and ports (particularly in nonattainment areas), are most con- cerned with collecting data on the quantity and concentration of air emissions and the health risks these pose to communities. Therefore, they undertake analyses concerned with metrics such as risk of death, cancers, and chronic health effects attributed to respiratory illness as a result of freight emis- sions, and health costs associated with respiratory illness. For private-sector carriers, the use of performance measures to make business practices more efficient was found to be, by far, the strongest motivator. Specific measures included on-time pick-up and delivery, revenue yield by shipment or mile, fuel economy, and equipment use (NCFRP, 2011). However, for many private-sector carriers, these data are proprietary and companies may be unwilling to share them. Nevertheless, close working relationships established over time can be instrumental in enabling information sharing, as exemplified in the memoranda of understanding between CARB and the Class 1 railroads. Option and Alternatives Development and Assessment Various approaches and technologies may be employed to manage freight emissions. The methods adopted should be appropriate to local conditions, the extent of the problem, and the stakeholder concerns in a particular geography. This requires clear definition of air emissions issues and an objec- tive assessment of alternatives in terms of their economic, social, and environmental impacts. The 2012 SCAG Regional Transport Strategy (RTS) has a goods movement component that encompasses initiatives including clean freight corridors, congestion relief, rail, and capacity expansion. Each initiative in the plan is evaluated in terms of impacts on mobility, safety, environment, com- munity, and the economy. Because goods movement and air emissions are inextricably linked in Southern California (which is classified as an extreme nonattainment area), SCAG developed a parallel Goods Movement Environmental Strat- egy that forms part of the RTS. The environmental strategy defines a path for the achievement of federal air quality stan- dards. A phased implementation process is identified that involves substantial research; close working with public- and private-sector partners; testing and evaluation of technolo- gies, feasibility, and funding availability; and ongoing assess- ment of impacts on emissions objectives, efficiency, safety, and reliability of the goods movement system. MAP-21 also mandates the improvement of existing tools and the development of new tools to support an outcome- oriented, performance-based approach to evaluating proposed freight transportation projects. This includes requirements for the systematic analysis of benefits and costs; and tools for ensuring that safety, economic competitiveness, environmental sustainability, and system condition in the project selection process are considered in the evaluation of freight transpor- tation projects. At the federal level, EPA is required to undertake a regula- tory impact assessment (RIA) for all major regulations con- sidering the economic, social, and environmental impacts of the regulation and proposed alternatives (U.S. EPA, 1983). The RIA process employs benefit-cost analysis and considers benefits in terms of the efficient functioning of the economy and private markets, enhancement of health and safety, and protection of the natural environment. Costs include the direct costs of compliance to government, businesses, and others, and adverse effects on the efficient functioning of the economy and private markets (including productivity, employment, and competitiveness). In selecting regulatory approaches, agencies are required to select those approaches that maximize net benefits including economic, environmen- tal, public health, and safety, as well as distributive impacts and equity. Consultation with main stakeholders also is required under an RIA (Bartolomeo et al., 2004). Similarly, the California Environmental Quality Act (CEQA) and CARB regulations require that analysis is under- taken to identify potentially significant adverse environmen- tal impacts of any proposed projects and alternatives. CEQA requires all state and local agencies to give consideration to environmental protection (including air quality and GHG emissions) in regulating public and private activities, and pre- vents them from approving projects where feasible and envi- ronmentally superior mitigation measures or alternatives exist. This requirement was applied to CARBâs agreement with the railroads, for example, requiring CARB to demonstrate that the proposed approach produces better emissions reductions than would the alternatives. Use of Performance-Based Standards The 1990 amendments to the Clean Air Act enable the use of innovative approaches to managing emissions, such as performance-based standards. Generally, a performance-
23 based standard is technology-neutral and sets an upper limit for emissions originating from a source, whereas a technology- based standard dictates the specific control technology. It is considered that a performance-based approach can reduce regulatory rigidity and ease private-sector compliance while also supporting innovation (e.g., through technology forc- ing) and lowering compliance costs. Nevertheless, an effec- tive and sustainable regulatory regime is one that achieves the right balance between consistency, accountability, and enforceability versus flexibility and innovation. The pre- scriptive approach emphasizes control and accountability. The performance-based approach aims to promote flexibility with accountability for results. There are, however, drawbacks to performance-based stan- dards. As identified by May (2003), these can include potential inconsistencies in the application of rules, decreased predict- ability in regulatory expectations, increased costs to govern- mental regulators, and uncertainty with respect to equity and distributive impacts. May suggests that performance-based regulations are less costly to develop because they do not require detailed understanding of relevant technology. How- ever, it may be more costly to ensure compliance because of the vagueness of performance standards and lack of expertise on the part of enforcement agencies. The U.S. GHG emission and fuel consumption stan- dards for heavy- and medium-duty vehicles are an example of performance-based standards. Adopted on August 9, 2011, the rule was jointly developed by EPA, the National Highway Traffic Safety Administration (NHTSA), and DOT, and has the sup- port of industry. The standards, which are technology-neutral, cover not only engines but also the complete vehicle, enabling achievement of the greatest possible reductions in fuel con- sumption and GHG emissions while avoiding unintended consequences. CARB has employed a performance-based approach to mobile-source emissions standards. In California, these have typically been âtechnology forcingâ standards and have tended to require greater emissions reductions than required by EPA emissions standards. (Technology forcing refers to a regulatory agencyâs requirement for the achievement of an emissions level, within a specified timeframe, using unspeci- fied technologies, that have been shown to be feasible on an experimental or pilot-demonstration basis, but are not yet widely available commercially.) Such standards have required advances in technology development, resulting in California becoming a âlaboratoryâ for emissions-control innovations. CARBâs regulatory process is supportive of this laboratory role, allowing Californiaâs standards to be amended rapidly in the face of changing market and technological conditions relative to the EPA regulatory process, which tends to take a long time. An example is the California At-Berth Ocean- Going Vessels Regulation, which includes an equivalent emissions reduction option as an alternative to shore power. Under this option, fleets are required to achieve emissions reductions equivalent to what they might achieve using shore power, by means of another (unspecified) technology. An essential task for regulatory agencies, particularly in air quality nonattainment areas, is to assess various technologies to ensure that the desired emissions reductions are possible, and then to establish performance-based outcomes rather than prescribing technologies or operating procedures. This approach allows private-sector innovation to flourish. Considering Funding Needs and Incentives to Drive Implementation A core component of public-private collaboration is the provision of public funding and financial support to enable industry achievement of the necessary emissions reductions, frequently ahead of, or in addition to, regulatory require- ments. Several examples of successful initiatives are described in this section. The Diesel Emissions Reduction Act (DERA), a federally funded program established under the Energy Policy Act of 2005, gives the EPA new grant and loan authority for pro- moting diesel emission reductions (U.S. EPA, 2012c). The EPA estimates that since 2008, nearly 60,000 pieces of clean diesel technology (including emissions and idle control devices, aerodynamic equipment, engine and vehicle replace- ments, and alternative-fuel options) have been implemented through the National Clean Diesel Campaign, which is funded through DERA. The projects meet critical local air quality needs by deploying both proven and emerging tech- nologies much earlier than would otherwise occur. Projects funded have included truck stop electrification, cleaner locomotives, repowering of gantry cranes, retrofit of auxil- iary engines of ocean-going vessels with advanced maritime emission-control systems (U.S. EPA, 2012). However, staff at the EPA report that federal budget cuts in recent years have necessitated a shift of effort from these incentive and educa- tion programs, with limited resources being focused on air emissions regulation, which is the EPAâs âcore business.â Through Californiaâs $1 billion Proposition 1B Goods Movement Emission Reduction Program, CARB has made grants available to local agencies such as seaports and air dis- tricts, for specific types of projects (e.g., truck programs, ships at berth, cargo-handling equipment, locomotives, and harbor craft), that in turn competitively award them to equipment owners. The program leverages substantial matching funds from private, local, and federal sources (more than $1 for every program dollar invested), thereby optimizing invest- ment efficiencies. CARB estimates that the $475 million pro- gram will save 2,500 tons of PM and 62,000 tons of NOx over the life of the grant terms (CARB, 2011).
24 Funding and financial incentives can reach where state reg- ulation cannot. For example, the Texas Emissions Reduction Plan committed almost $20 million to the reduction of loco- motive emissions in the Houston-Galveston area, which suf- fers from the most severe locomotive emissions and the highest ozone levels in the state, and expects to reduce NOx emissions by more than 3,300 tons at an average cost of $5,900 per ton (Scott, 2006). Ports have played a critical role in providing a conduit for public funding for air emissions improvements. For example, the Port of Houston Authority, along with six private part- ners, was awarded $3.4 million of American Recovery and Reinvestment Act (stimulus) funding to replace, repower, and retrofit more than 128 pieces of old diesel equipment owned by the port and its partners (Port of Houston Author- ity, 2011). The Ports of Charleston and New York and New Jersey are among other port authorities funding clean truck or green port programs. At the level of the metropolitan region, funding of infra- structure projects can have significant positive benefits. For example, the Chicago Region Environmental and Transpor- tation Efficiency Program (CREATE) provides $1.5 billion in funding for some 71 projects. Once completed, the program is expected to save more than 7.4 million tons of NOx emissions and more than 50 tons of PM emissions per year, along with congestion relief, reduced delay for freight and passengers, and safety benefits (CREATE, 2012). Benefits of Partnerships: Case of the California Railroads Railroad operations are governed by federal statute, with railroad air emissions generally deemed to be outside state regulatory powers. Thus, to address air quality issues associated with railyards, public agencies may need to enter into volun- tary agreements with railroad operators. For example, CARB is working with the railroads, encouraging them to curb emissions in California. Although CARB has a unique position under the Federal Clean Air Act to regulate emissions, a collaborative approach building on the railroadsâ growing recognition of the importance of sustainability enabled binding agreements to be forged between CARB and the Class I railroads in 1998 and 2005. Under the terms of these agreements, the railroads com- mitted to a range of measures to reduce air emissions, includ- ing fleet turnover, use of ultra-low-sulfur fuel, and anti-idling technology (CARB staff, 2012, pers. comm.). A critical benefit of these agreements is that there is no delay to the introduction of the specified measures, which can make immediate air quality improvements possible in and around railyards. These partnerships have enabled an accelerated reduction of air emissions in the South Coast Air Basin beyond what is possible through the application of EPA standards, and have enabled air emissions benefits to be achieved in Southern California earlier than in the rest of the country. Importantly, CARBâs decision to approve voluntary bind- ing agreements with the railroads included specific steps to avoid unintended consequences through provisions to ensure that older locomotives are not relocated to other yards in California. A CARB review of the environmental impacts of the proposed 2010 voluntary agreements with the railroads found that the implementation of the pro- posed commitments would be more effective in reducing PM emissions than alternativesâsuch as the regulation of non-pre-empted locomotives, zero-emission cargo-handling equipment, and railroad risk reduction auditsâmight have been (CARB, 2011b). Open discussion, dialog, and data sharing regarding tech- nology, operating characteristics, and inventory are a hall- mark of CARBâs relationship with the railroads and underpin the levels of trust that have been forged. As a consequence of this relationship, CARB is in a position to substantiate the levels of compliance and validate the railroadsâ efforts at emis- sion reductions, using a data-based approach. This validation is also important to the railroads in obtaining community buy-in (CARB staff, 2012, pers. comm.). 2.5 Unique Role of Ports Ports are in a unique position, located at the nexus of trade flows, caught between the need to maintain and grow port business and to mitigate impacts on surrounding communi- ties. Port authorities often find themselves at the intersection of environmental, economic, and social considerations and are regularly at the forefront of the interface between different stakeholders (private business, regulatory agencies, and com- munities). Perhaps more so than other public-sector agencies, they have a deep understanding of supply chain economics as well as operations and available technologies (across several modes), and tend to enjoy ready access to data not usually available to other public-sector agencies or industry. They also tend to have greater capacity to undertake extensive analysis and market assessment and significant opportunities to enter into win-win partnerships through leveraging their relationships. The San Pedro Ports Clean Air Action Plan sought to balance cargo growth with community benefits and to address adverse impacts. Given the significant capital they had invested in San Pedro Bay operations, port tenants had an interest in improving their own environmental perfor- mance in exchange for the ability to expand their terminals and operations. The port also was able to leverage landlord- tenant leases and tariffs to ensure environmental requirements were met.
25 Positioned at the intersection of freight transportation modes, including ocean shipping, rail, and road, ports are able to exert influence over different emissions sources, includ- ing vessels, on-dock port equipment, and drayage trucks. Through partnerships, ports also may extend their reach beyond that of public-sector regulators (as evidenced through the PierPASS Program, for example) and even beyond the port gates (through affecting drayage truck emissions such as the Clean Truck Program at the Ports of Los Angeles and Long Beach). Through their buying power they are also able to influence the local economy. For example, POLA was able to secure discounts from manufacturers from clean drayage truck purchases and require electric truck manufacturers to establish an assembly plant near the port (POLA staff, 2012, pers. comm.). Ports are also achieving air emissions reduc- tions more quickly than might have been possible through regulation alone (as evidenced through the South Carolina State Ports Authorityâs voluntary truck fleet replacement pro- gram, for example). 2.6 Public-Private Collaboration at the National Level: EPA SmartWay Partnerships Perhaps the best example of a win-win approach to emis- sions reduction is the EPA SmartWay Program. This land- mark public-private initiative aims to improve fuel efficiency and reduce GHGs from freight vehicles, with the reduction in CAP being an additional benefit. The program was forged in close collaboration with indus- try to address industry fuel efficiency and emissions issues. Continued stakeholder engagement helped EPA to understand industry challenges and needs as these evolve. The SmartWay program consists of several components as follows: ⢠Identifying and endorsing fuel-saving technologies; ⢠Accelerating the adoption of fuel-saving technologies and operational practices (e.g., through reduced interest and flexible repayment loan programs); ⢠Making accessible the tools and methods that enable busi- nesses to assess, track, and reduce fuel use, GHGs, and other emissions; ⢠Establishing incentives and recognition for top perform- ers, thereby assisting private companies in marketing their services; and ⢠Providing greater transparency of carbon accounting, benchmarking, and reporting. Joining SmartWay is voluntary. As a SmartWay partner, shippers and carriers agree to assess freight operations, cal- culate fuel consumption and carbon footprint, and track fuel efficiency and emission reductions annually. In return, part- ners are entitled to use the SmartWay brand and logo, which provide them with recognition as sustainable service pro- viders. EPA ranks and publicizes the partnersâ performance on the SmartWay Partner List, which reportedly provides a strong incentive for joining, because shippers are increasingly committing to SmartWay-certified carriers. The program is significant in that it enables emissions from the legacy fleet to be addressed, whereas federal emissions standards typically apply to new vehicles only. SmartWay has demonstrated that business-supportive public-sector ini- tiatives can be instrumental in promoting the sustainabil- ity of the supply chain. The success of the program lies in its ability to address gaps within the trucking industry such as the lack of information about energy efficiency options and technologies, high capital costs, lack of reliable techni- cal assistance, and absence of a consistent approach to mea- suring sustainability impacts. SmartWay has helped to build strong market confidence, awareness, and calls for sustain- able freight practices and reduced difficulties faced by freight companies in their adoption of clean technologies. The impacts generated by the SmartWay Program, which has a staff of just 10 people and a budget of $1.5 million, have been significant. As of December 2011, a total of more than 2,900 companies and associations were part of the SmartWay Program. In early 2011, SmartWay reported that its partners had saved an estimated $6.1 billion in fuel costs as a result of the program. Efficiency measures have resulted in savings equiva- lent to 50 million barrels of oil or taking more than 3 million cars off the road for an entire year (SmartWay, 2011b). Emis- sions savings as a result of the program amounted to 16.5 million metric tons of carbon dioxide (CO2), 235,000 tons of NOx, and 9,000 tons of PM at the end of 2010. Air pollution reductions have had economic and environmental impacts, as well as providing social and health benefits, particularly in low-income communities near ports, intermodal yards, truck stops, and border crossings (SmartWay, 2011b). EPA SmartWay has a strong track record of reducing emis- sions while saving companies money, and advancing air emissions objectives in a cost-effective manner. The clear view of the stakeholders the research team interviewed for this research is that it should remain a strong program and should be expanded. However, with federal budget cuts, the program may potentially be at risk. 2.7 Other Federal Initiatives There are two other federal initiatives worth mentioning here. FMCSA has launched an initiative to explore the con- cept of a state-based commercial driverâs certification for safe and fuel-efficient driving. FMCSA proposes to base cer- tification on a combination of standardized knowledge and skills tests. The goal is to achieve improved safety as well as
26 air pollution and GHG emissions reductions. The proposal is based on the eco-driving concept in Europe, focused on improving vehicle energy efficiency through driver behavior. Research by the National Academy of Sciences supports this, with recommendations for the establishment of a curricu- lum and process for certifying fuel-saving driving techniques as part of a Commercial Drivers License (National Research Council of the National Academies, 2010). The U.S. Department of Energy (DOE) SuperTruck Pro- gram has provided $187 million in grants to truck manu- facturers to improve fuel efficiency of long-haul Class-8 vehicles by 50% (with associated emissions savings). The efficiencies are to be achieved through advanced engine systems and vehicle technologies that also meet safety requirements. Partnering with private-sector manufactur- ers, the project aims to get 40% of efficiency gains from engine improvements, with the remaining 60% to be derived from other vehicle systems, including aerodynamics, light- weighting, drivetrain friction reduction, and options such as waste heat recovery, and fuel cell auxiliary power units to reduce engine idling. The manufacturers have until 2014 to meet the goal set by the program. 2.8 Non-U.S. and International Public-Private Collaboration A review of international precedent indicated several examples of partnerships between the public and private sectors aimed at creating win-win outcomes. Three notable examples are as follows: ⢠European Union (EU) Super Green Corridors Project is financed by the European Commission and the private sector and aims to encourage private-sector users of key freight transportation corridors to rely on co-modality and advanced technology in order to accommodate rising traffic volumes while promoting environmental sustain- ability and energy efficiency. The project is benchmarking nine corridors (e.g., in terms of costs, transport time, reli- ability, and emissions) and examining options for the use of green technologies and âsmarterâ use of information and communication technology flows (Psaraftis, 2012). ⢠U.K. freight facilities grant scheme provides capital support for rail freight investment where it can be demonstrated that environmental benefits will result from rail use. This program effectively âbuysâ the transfer of freight to rail. Funding is capped at a maximum of 50% of the eligible capital cost of implementing transport by non-road modes. Between 1997 and 2008, a total of GBP 58 million was awarded in grants, which are estimated to have removed 32.4 million truck miles from Scottish roads each year (McKinnon, 2010a). ⢠New Zealandâs Emissions Trading Scheme (ETS) was intro- duced in 2008 as a low-cost approach to creating market incentives that encourage consumers and businesses to change their behavior and reduce emissions. Intensive consultation was undertaken and the ETS was supported by stakeholders over other emissions reduction strategies because it provides businesses with greater flexibility in managing GHG emissions, gives government greater cer- tainty about the quantity of emissions to be reduced, and allows for adjustments to the international price of emis- sions. Following the introduction of the New Zealand ETS, a 21% reduction in overall GHG emissions was achieved in that country between 2007 and 2009, with the transport sector surrendering over 18% more emission units than originally projected during the first reporting period in 2010 (New Zealand Ministry for the Environment, 2011a). These examples highlight the role that the public sector can play in enabling emissions reduction that the private-sector companies could not easily achieve on their own. This includes funding joint initiatives, providing a forum that brings together partners from across a range of jurisdictions, financing infra- structure improvements, and devising regulatory structures that are responsive to business interests. 2.9 Cross-Private-Sector Collaboration Various collaborative private-sector initiatives have been forged in recent years to address supply chain sustainability. Although their purposes vary, in general these groups seek to share best practices, standardize metrics, and take a private- sector lead in areas where public policies have not yet been established. This type of collaboration also arises when lead- ing firms in an industry or a region find it valuable to develop a jointly agreed-upon measurement framework that can be uniformly applied and reported by all players. As such, these initiatives represent an interesting alternative to publicly led programs and are worthy of examination. There are four kinds of private-sector collaborations, focused on the following: ⢠General sustainability; ⢠Supply chain, logistics, or transportation sustainability; ⢠Industry-sector-based supply chain sustainability; and ⢠Local and regional supply chain or transportation sustain- ability. General Sustainability In the absence of inter-governmental agreement on the regulation of GHG emissions, several private-sector groups
27 have been established to help companies address sustain- ability and report on their progress. Some notable examples follow. The Carbon Disclosure Project (CDP), based in London, was one of the first, involving stakeholders and corporations worldwide to create environmental strategies for, and disclose the GHG emissions of, major corporations. By providing a forum for collaboration among shippers and carriers alike, the CDP allows companies to share challenges and successes, which helps develop best practices and measure progress. The Global Reporting Initiative (GRI) has developed one of the worldâs most established standards for sustainability reporting. GRIs are used by more than 1,500 organizations worldwide, and provide a framework for how a company should structure its sustainability reporting. The GRIâs envi- ronmental reporting protocol set includes a reporting param- eter for the âsignificant environmental impacts of transporting products and other goods and materials used for the organiza- tionâs operationsâ (Global Reporting Initiative, 2012: EN29). These impacts include energy use, emissions (e.g., GHG emis- sions, ozone-depleting substances, NOx, SOx, and other air emissions), and noise. One interviewee noted the difficulties in comparing one companyâs sustainability performance with anotherâs, due to the flexible and incremental nature of the GRI reporting protocol. Founded in 1992 and headquartered in San Francisco, Cal- ifornia, Business for Social Responsibility (BSR) is a global network of more than 250 companies that work together to develop sustainable business strategies and solutions through consulting, research, and cross-sector collaboration. The World Business Council for Sustainable Development (WBCSD) is an organization led by chief executive officers of progressive companies committed to creating a sustainable future for business, society, and the environment. Headquar- tered in Geneva, Switzerland, WBCSD has close to 200 mem- bers, spanning a wide range of sectors and locations. The WBCSD has created a âVision 2050â report that calls for, among other goals, a halving of carbon emissions world- wide by 2050 (from 2005 levels). WBCSD is working on a set of metrics and measurement methods for comparing green performance across companies. Supply Chain Sustainability Some general sustainability forums have launched sub- groups that focus specifically on supply chain and transpor- tation sustainability. Notable among these are BSRâs Clean Cargo Working Group (CCWG) and the Carbon Disclosure Project Supply Chain. The CCWG is specifically committed to integrating sus- tainable business principles into the freight transportation sector and advocating for standardized, credible information. The forum not only provides access to best practice and the sharing of information, but also has developed a CO2 calcu- lator that enables the calculation and comparison of carbon footprints across multiple modes of transportation. Inter- views with both shippers and carriers suggest that they view the CCWG as a useful mechanism to discuss sustainability initiatives and to define a method for estimating a firmâs carbon footprint. The CDP Supply Chain Program also enables compa- nies to estimate their carbon footprints, identify areas for sustainability improvements, and benchmark against their peer groups, as well as to disclose and showcase their results (Carbon Disclosure Project, 2011). Nevertheless, obtaining reliable supply chain emissions data remains a challenge, especially where multiple suppliers are involved. Supplier data tends not to be externally verified (due to the cost of such verification), and member corporations have difficulties with the comparability of data they get from suppliers. Further, suppliers with multiple customers may have difficulties in allocating emissions. CDP has found that some members are willing to deselect suppliers based on sustainability criteria. However, this number is still relatively low (Carbon Disclosure Project, 2011a). The Coalition for Responsible Transportation (CRT) includes leading importers, exporters, trucking companies, clean truck manufacturers, and ocean carriers that are committed to driving significant and permanent improvements in air quality at, and around, U.S. ports. They are investing in the deployment of new clean equipment in partnership with federal and state governments, as well as local ports. CRTâs core goals include developing a proactive compliance attitude to environmental emission regulations, partnering with ports to allow air quality goals to be achieved in a cost-effective manner, and facilitat- ing the inclusion of an industry perspective in legislative and regulatory activities by engaging in a collaborative dialog with policymakers. 2.10 Industry-Based Supply Chain Sustainability Initiatives There are several good examples of private-sector industry- specific initiatives that help companies address supply chain sustainability, including the Outdoor Industry Association (OIA) and the Sustainable Apparel Coalition (SAC). Apparel manufacturers, in particular (perhaps because of consumer sensitivity to green issues) seem to be oriented toward the need to understand, quantify, and reduce carbon emissions. The sharing of information and expertise among companies and sustainability forums has been central to their successes. The OIAâs Sustainability Working Group now has more than 250 member companies and has developed one of the most collaborative, innovative programs yet, the Eco Index. Based
28 on membersâ own internal research and tool development efforts, the Eco Index was developed to address the envi- ronmental impacts of the apparel supply chain and provide a common reference point for the industry. By 2011, OIA members had adopted the first version of the Eco Index and, in conjunction with SAC, began to develop a second version (scheduled to launch in October 2013), which is to be appli- cable to all apparel and footwear products, not just those in the outdoor industry. The index spans the entire apparel life- cycle (materials, manufacturing, packaging, transportation, use, and end of life) and considers environmental impact categories such as GHGs, air pollutant emissions, and social and labor indicators. The goal is to enable designers to make informed decisions based on sustainability considerations. Each finished product receives a score that reflects its envi- ronmental footprint (Outdoor Industry Association, 2012, pers. comm.; SAC, 2012). Globally, companies are organizing on a regional or local basis to address environmental issues facing the freight trans- portation sector and provide leadership in issues where gov- ernment regulation or solutions may be lagging. Inspired by the U.S. EPA SmartWay Program, several European compa- nies in various sectors joined to develop Green Freight Europe (GFE). GFE aims to be the leading independent voluntary program for road freight. A key difference between GFE and the SmartWay Program is the level of government involve- ment. Currently, GFE is a purely private-private collaborative group, although it hopes to have government support and participation in the future. In Asia, the Fair Winds Charter is an industry-led, vol- untary, at-berth fuel switching program for ocean-going vessels calling at Hong Kong and Pearl River Delta ports. The 17 shipping lines that are members commit to burning low- sulfur fuel while docked. This program, conceived by Hong Kongâs Civic Exchange think tank and promoted to the Hong Kong Liner Shipping Association by Maersk Line, is an excel- lent example of how global shipping companies are taking the lead in shaping the regulatory agenda by promoting, on a voluntary basis, best practices for emissions reduction. This unsubsidized voluntary fuel switching program is the first initiative of its kind in Asia (Civic Exchange, 2013). The Fair Winds Charter allows the region to realize benefits while giv- ing the governments of Hong Kong and Guangdong (each of which was reluctant to introduce regulations indepen- dently of the other due to the risk of losing business) time to work together to achieve common legislative requirements by the charterâs expiration. In early 2013, the Hong Kong government pledged to mandate at-berth fuel switching. In response, shipping lines have agreed to extend their volun- tary pact to use cleaner fuel for another year to January 2014, while the legislation to make fuel switch mandatory in Hong Kong is developed. 2.11 Conclusions GHG emission reductions present an opportunity for win- win outcomes because these emissions are directly correlated with fuel consumed. Win-win outcomes tend to be more dif- ficult to realize for CAP emission reductions because reduc- tion mechanisms often increase private-sector costs not offset by tangible business benefits. There are several examples of successful private-sector initiatives that are helping companies address supply chain sustainability. These industry-led initiatives engage in col- laborative dialog with policymakers to promote the adoption of practical, effective legislation and regulations. Such initia- tives are engaging industry in developing a pro-compliance attitude to emissions regulation. The role of public-sector agencies lies in reinforcing these initiatives and focusing their efforts on those aspects of supply chain emissions where the private sector, on its own, is either unlikely or unable to effect change. Public-sector agencies have a particular role to play in assisting the private sector in reducing their CAP emissions through regulation and incentives, as demonstrated by the Fair Winds Charter, for example. Win-win outcomes are developed through cooperation and consensus rather than being imposed. However, in developing consensus-based approaches, various challenges need to be overcome. The trade-offs occur in the distri- bution of benefits between the public and private sectors; across environmental, social, and economic impacts; and between global GHGs and local CAP emissions. In many cases, regulation or strong incentives are necessary to foster collective action on the part of the private sector, level the playing field, provide certainty, and achieve the necessary emission reductions. Because responsibility for policy, funding, and regulation in relation to freight emissions tends to be distributed across multiple public-sector agencies, cooperation and joint efforts among these divisions and layers of government is essential in freight planning, infrastructure provision, and emissions regulation. Public-sector agencies involved in the planning and regu- lation of supply chains require a firm understanding of the interrelationships among freight transport, logistics activities, and air emissions. This not only necessitates the recruitment of knowledgeable staff, but also ongoing engagement of the private sector. The challenges presented by growing demands for goods movement in the face of physical, economic, and environmental constraints are beyond the capabilities of any one private entity, level of government, or community of interest. Collaboration among diverse public and private parties is required to meet these challenges effectively. Access to data is an essential starting point for the sustain- able management of supply chain emissions. The fact that pub- lic and private sector collect and monitor different datasets, all
29 of which are pertinent to sustainability outcomes, adds further urgency to the need for consultation, cooperation, and part- nerships between the public and private sectors. Proactive outreach and engagement of the private sector is required, beginning at the freight planning stage, continuing with decision making relating to infrastructure funding, and through the development of regulations. Proactive outreach encompasses a range of engagement methods and forums to encourage active involvement of the full range of private- sector stakeholders in decision making. Evidence from case studies indicates significant benefits to sustainability out- comes when industry is involved in planning and regulatory processes. A defining feature of a sustainable approach to regulation is the provision of supportive or enabling measures to ensure that private-sector players have ample opportunity to com- ply with regulations, taxation, and emissions standards. Such measures also can assist in offsetting costs to industry. Where regulation is necessary to attain emissions reductions and air quality improvements, specific mechanisms for minimizing adverse impacts on business and economic growth should be considered. Such mechanisms include transition phases and the phased introduction of regulations (as employed in the implementation of the New Zealand Emissions Trading Scheme, for example), concessions for new and small busi- nesses, and the use of minimum thresholds above which the regulations are applied (as included in the EU Aviation Emis- sions Trading Scheme and Californiaâs Shore Power Rule, for example). Sustainable emissions regulations are those appropriate to local conditions and the extent of the problem, and that address stakeholder concerns in a particular geography. This requires an objective assessment of alternatives in terms of their economic, social, and environmental impacts, using rig- orous performance evaluation frameworks as part of the regu- latory process. In order to maintain transparency, such analyses should be publicly available for comment and discussion. The use of performance-based standards, rather than pre- scribing technologies or operating procedures, has better potential for the realization of benefits from private-sector innovation. Performance-based standards also can reduce the costs of private-sector compliance and minimize the need for updates to regulations (e.g., when new technologies are made available).
