Freight Transport: at Any Price?

Freight Transport: at Any Price?


H Runhaar, TU Delft, NL



Freight transport is essential in modern societies. Fast, reliable, and relatively cheap transport of goods allows firms to compete efficiently and effectively in markets that have become increasingly internationalized and in which ever higher logistical demands are requested. Yet, at the same time freight transport generates substantial negative effects to society, including noise, environmental pollution, casualties, and congestion. These costs are typically not paid for by actors that cause them (i.e., carriers and firms that have their goods transported), but are passed on to society. As substantial growth in freight transport is forecasted, these negative ?external? effects will only increase in magnitude.

The above situation is considered problematic, both from a theoretical economic perspective as well as from the more general view of public interest. It is felt that the costs related to freight transport outweigh its benefits. The amount of transport consumed may be efficient to individual firms, but not to society asa whole. Therefore, increasing efforts can be observed within Europe (both at the level of the European and on the level of individual Member States) to slow down the growth in freight transport, inparticular transport by road. One of the instruments that is gaining popularity is taxation. From an economic perspective, this instrument is justified because ?internalization? of the external costs would lead to a more efficient allocation of transport resources, thus raising welfare.

In practice, however, it seems that shipping firms who generate the demand for freight transport- have become less and less sensitive to transport costs: the logistical organization has become more and more transport-intensive, due to among others centralization of production and elimination of inventories. Minimization of logistical costs other than the cost of transport seems to be of primary importance to shipping firms. This raises the question to what extent transport policies that aim to affect transport costs will prove to be effective in reducing the growth in freight transport.

In the paper, the effects of two specific transport interventions that directly affect transport costs are explored:(a) the internalization of marginal external social costs by means of a charge per ton-kilometer, levied on carriers;(b) a very restrictive infrastructure policy, which in combination with an expected growth in both passenger and freight transport, will lead to a substantial increase in congestion. A two-tier approach is employed. One, the impact of the two policy scenarios on the transport sector is explored. In particular, the effects on ?generalized transport costs? are examined, i.e., carrier rates, transit times, and delivery reliability. The reason is that it appears from the literature that freight transport demand is affected by these three factors rather than only the direct cost of transport (i.e., carrier rates). For the purpose of this part research, a Delphi survey among 70 experts in the field of transport was conducted. The survey focused on road haulage, inland navigation, rail transport, airfreight, short sea shipping, and deep-sea container shipping from or to the Netherlands. It appeared that carriers are expected to absorb a relatively large part of the initial negative effects of these policy scenarios by adapting their transport operations (e.g., increase load factors by acquiring more return cargo, co-operate more with other carriers). This indicates that a more efficient use of transport equipment is possible. Yet, it is expected that notably road transport will face difficulties in coping with the two scenarios. Its absorptive capacity proves to be the lowest, which deteriorates its competitive position vis-a-vis other modes. Yet, a weakened competitive position of road haulage is also expected autonomously.

Two, the paper examines how shipping firms may respond to the changes in generalized transport costs, that the Delphi participants expect as a result of the above two policy scenarios. For this purpose, a so-called stated adaptations survey was conducted among 30 mainly Dutch firms that are active in the production and distribution of books and newspapers. The sample includes old paper collectors and wholesalers, paper producers and wholesalers, printers, publishers, distributors, and book retail organizations. The main response of shippers to the ton-kilometer scenario, in which carrier rates increase by on average 50 percent, is raising prices; relatively few modifications on the level of logistical systems are mentioned (e.g., modal shift or allowing higher inventory sizes coupled with FTL shipments). On average, more adaptations are mentioned related to the management of transport operations, e.g., a better information exchange with carriers, employment of larger vehicles, or outsource transport to commercial carriers. This indicates that the effectiveness of taxation as a means to affect shippers? logistical decisions that have a transport effect will be limited. In contrast, the congestion scenario on average yielded more logistical responses. Apparently, the costs related to transit times and delivery reliability are more important than direct transport costs.


Association for European Transport