Effect of carbon emission regulations on transport mode selection in supply chains

TLDR

Policy‑makers are developing regulations to curb transport‑related carbon emissions, noting that faster modes lower inventory but raise emissions and costs. The study examines how two regulation mechanisms affect transport mode selection. Using a model that selects a single transport mode for one item, the authors compare an emission cost and an emission constraint, calculating emissions accurately and incorporating them into the decision framework. Results show that an emission cost has little impact on mode choice, whereas imposing an emission constraint is needed to achieve substantial carbon reductions.

Abstract

Policy-makers are developing regulation mechanisms to drive down carbon emis- sions resulting from among others transport. We investigate what the effect of two regulation mechanisms is on the transport mode selection decision. We analyze the situation in which a single transport mode is to be selected by a decision-maker to conduct all transport (for one item). A faster transport mode typically results in lower inventory (or a higher service) at the cost of higher emissions and transport costs. We consider two possible emission regulation alternatives: an emission cost and an emission constraint. We use an accurate calculation method to determine the carbon emissions and incorporate them explicitly in our model. Our results show that the emission cost is only a small part of the total cost and we conclude that introducing an emission cost for freight transport via a direct emission tax or a market mechanism such as cap and trade are not likely to result in significant changes in transport modes and hence will not result in a large reduction of emis- sions. If policy-makers aim to reduce carbon emissions by a large fraction, they should implement a constraint on freight transport emissions.