Road Freight: Between A Rock And A Hard Place On Decarbonisation

Further consolidation is likely if the road freight industry is to make a meaningful reduction in carbon emissions according to new research from Westpac NZ’s economic team.

Westpac NZ Industry Economist Paul Clark says that the ability of most road freight operators to decarbonise is really limited to improving operational efficiencies. That can be achieved by maximising the use of existing carrying and storage capacity, and/or by improving fuel efficiencies.

“However, reducing fossil fuel consumption and minimising the carbon content of fuel used is easier said than done. Technologies can help to some extent, but most are either immature or the associated infrastructure is lacking. Addressing that will require significant investment,” Mr Clark says.

Mr Clark says most road freight operators are not well positioned to make these changes.

“This is an industry full of small owner-operators. Even during the best of times, competition is cutthroat, and in a marketplace where price is king, margins are tight.”

“With most operators focused on keeping their heads above water, investment in lower emission vehicles is hardly front of mind. That’s not good for decarbonisation. It’s also not good for operating efficiencies, which are adding further pressure on margins. Over time that’s likely to be unsustainable, leading to consolidation in the industry.”

“Government also has a key role in helping the road freight sector to decarbonise, directly through incentives or indirectly by changing the nature of demand for road freight. It could also look to quicken the pace of consolidation in the industry by driving up the price of carbon through limits imposed on carbon credits traded within the New Zealand Emissions Trading Scheme.”

Mr Clark says the end result is likely to be fewer but larger road freight operators, better able to deliver the required carbon emissions reductions.

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