Is sustainability moving too fast? Day 3 at SMC3 Connections grapples with policy problems
Authored by SMC³ on July 12, 2024
LTL continues to grapple with how sustainability concerns are poised to reshape the industry in the coming years. Promising innovations from within the industry and stringent regulations imposed by state and federal agencies all but guarantee seismic shifts on the near horizon. The question on everyone’s lips: will these changes transform the industry for the better – or do they have the potential to destroy it?
Day 3 of the SMC3 Connections 2024 grappled with this question from a variety of perspectives. James H. Burnley IV, former US Secretary of Transportation, took a deep dive into federal policy and its role in shaping current approaches to the sustainability question.
Burnley noted that administration changes matter more today than they did in, say, the Reagan era. For example, at an agency like the Department of Transportation (DOT), there is a small handful of appointees dictating the vision and action of a much larger bureaucracy — sometimes numbering near 100,000.
Burnley noted a troubling trend where the definition of infrastructure in federal policy continues to expand. Across the Infrastructure and Investment and Jobs Act, the CHIPS Act, and the Inflation Reduction Act, the definition has gone far beyond traditional highway and transportation. This expansive definition, combined with cash incentives and less oversight, has the potential to abet a great deal of fraudulent activity carried out in the name of sustainability and infrastructure.
Burnley predicted that the industry will see a coming rash of “Solyndras” — referring to the Obama-era scandal in which a solar panel manufacturer received a $535 million U.S. Department of Energy loan guarantee and filed for bankruptcy shortly thereafter.
“You’re going to see projects that turn out several years from now to have some notoriety for waste, fraud, and abuse. It’s just going to happen,” Burnley warned.
As a corrective to this black hole of oversight, Burnley urged the industry to protest the weakening of traditional transportation through whatever channels they have at their disposal — including congressional delegations and advisory committees at the DOT.
“The one thing I would emphasize to this audience is what is happening in Washington, and will continue to happen, is going to affect your operations and it’s going to affect your bottom line,” Burnley said. “It already does.”
Aside from bloated spending packages that could introduce corruption, recent trucking regulations in California also had panelists skittish. By 2035, California has mandated that 100% of trucks sold have to be zero-emission battery electric. One session plumbed the views of the Clean Freight Coalition. This group of industry professionals was recently formed to educate stakeholders on what trucking has done to support good environmental stewardship and advocate for public policies that enable a just transition to zero-emission trucks.
In the Coalition’s opinion, California and the EPA have gone too far and too fast in their efforts to establish policies that advance sustainability goals. The Coalition believes they have the potential to cut the industry’s legs out from under it before there is adequate time to adjust.
Given the unsuitability of electrification technology for long-haul trucking, it will likely take 33% more trucking capacity to keep up with the demands of shipping. Jim Mullen, a Coalition member and Chief Strategy Officer for the National Motor Freight Traffic Association, stressed that there are other, even better, options to reduce emissions. For example, natural gas boasts a 67% improvement over diesel on a trucking operation’s carbon footprint — compared with battery electric’s 33% improvement.
The Coalition hired Roland Berger, a management consulting company, to conduct a study quantifying the industry-wide cost to make the shift to full electrification. They returned with a figure of about $1 trillion — including $620 billion of capital expenditure costs for the trucking companies and $370 billion in utility upgrades. Mullen warned that the only way to pay for all this would be a substantial rise in the price of goods.
“We’re all going to pay for it,” Mullen said, adding that some of the heaviest burden would be shouldered by small businesses.
Mullen also took pains to note that the trucking industry was not averse in principle to sustainability concerns, citing its success in reducing emissions by about 98% through the stack. He argued more efficiencies are possible by upgrading the nation’s current fleet of trucks to post-2010 engines, which are built at a higher standard of efficiency and would reduce over 80% of current emissions. He proposed incentivizing these upgrades by cutting the federal excise tax, a relic from World War I, which taxes the purchase of new equipment by 12%.
“There are things that we absolutely could be doing today to help have cleaner trucks,” Mullen said. “And these don’t come at the expense of a trillion dollars and revamping the entire supply chain.”
Todd LaFond, VP of Strategic Partnerships at Flock Freight, noted how tighter collaboration between shippers and carriers could produce better environmental outcomes. There is a lot of underexploited opportunity in this area. For example, LaFond noted that in 2023, 43% of every truckload was partially empty, with the unused deck space averaging 29 linear feet.
Flock Freight’s work to leverage technology like AI to fill up truckloads with greater efficiency was presented as a win-win-win. It is better for shippers because of cost savings; better for carriers because of increased earnings on their assets; and better for the environment because of emissions reductions.
“Every day that we’re able to increase our pooling capabilities within our platform itself, that is the success that we’re looking at,” LaFond said.