This report is in the context of the DMA-DTU project on Market Based Measures (MBMs) The aim of this project is to provide an overview and discussion of potential Market Based Measures under the Initial IMO Strategy for the reduction of green house gas (GHG) emissions from ships. In this context, some related developments are also seen as directly relevant to the scope of the project, mainly in the context of the possible inclusion of shipping into the EU Emissions Trading System (ETS). In 2010 an Expert Group was appointed by the IMO’s Secretary General after solicitation of member states and was tasked to evaluate as many as eleven (11) separate MBM proposals, submitted by various member states and other organizations. All MBM proposals described programs and procedures that would target GHG reductions through either ‘in-sector’ emissions reductions from shipping, or ‘out-of-sector’ reductions via the collection of funds to be used for mitigation activities in other sectors that would contribute towards global reduction of GHG emissions.
This report presents the results of Activity 3.2-2 of the Scandria®2Act project. It investigates the sensitivity of the Ro-Ro services along the Scandria® corridor to fuel cost fluctuations, anticipates the adverse effects of a possible fuel price hike and discusses potential mitigating measures.
Among the 77 Ro-Ro services that include at least one direct connection between two Baltic ports, the Finland-Germany connections were selected for further examination mainly because this is where the ScanMed and NSB core network corridors meet providing two major alternatives, each of which offer at least two options. In terms of abatement options available to the Ro-Ro operators, the study considers only the switching from Heavy Fuel Oil (HFO) to the compliant but more expensive Marine Gas Oil (MGO), which happens to be the only feasible solution in the short-run that does not require a substantial capital investment.
The study deployed two different approaches in meeting its objectives. The first one looked at the problem from the macro-level perspective and the analysis was based on aggregate annual statistics of the ports serving the Finland-Germany connections. A multiple regression model estimated the sensitivity of cargo flows to fuel price fluctuations. Although most of the cargo volumes exhibit a statistically significant sensitivity to fuel price, in all cases this is below 1.0, indicating a rather inelastic
behaviour. The results show that an increase in fuel price penalises the volume of lorries on the longdistance Helsinki-Germany route in favour of the shorter Helsinki-Tallinn and Hanko-Germany options. The trailer (unaccompanied) traffic exhibit a different behaviour that might relate to the pricing policies of the Ro-Ro operators in relation to this market segment.
In supporting multimodal freight transport services, Activity 3.2-3 focuses on identifying the priorities of the shippers (cargo owners) in relation to intermodal logistics solutions that comprise the core of multimodality.
A literature search was performed on this subject. It identified a long list of characteristics that shippers consider necessary for efficient and effective intermodal transport. They include price, delivery time, time reliability of delivery, frequency of shipments, cargo safety and security, reliability of pick up time, ability to respond to customer needs, proactive notification of problems, etc. A number of pre-conditions
were also identified. They include the commodity type, value, density and time-sensitivity, freight distance, direction of haul (head-haul/back-haul), meaningful load factors and transhipment costs. Based on the results of the literature search, a questionnaire was designed for obtaining shippers’ assessment of their experience with intermodality, the factors driving it and the measures proposed for its promotion. It is noted that the latter subject has not been treated by the previous studies examined.
After being revised on the basis of feedback received from logistics experts, the questionnaire was promoted through shipper associations in the five study countries (Germany, Denmark, Sweden, Norway and Finland). Responses were received through an electronic survey lasted from July 2017 to June 2018. The questionnaire was also distributed in paper form to the participants of the event “Future transport and logistics in the Fehmarnbelt Region – How to be prepared for changing cargo flows” on 29 May 2018 during the Fehmarnbelt days 2018 in Malmö, Sweden. Furthermore, responses were enriched by a number of interviews from selected companies and associations.
The majority of the 33 usable responses obtained comes from Germany and Denmark. The companies that have arranged intermodal shipments during 2016 find their experience more than satisfactory.
Germans appear to be 25% happier with intermodality than their Danish counterparts, who are still satisfied. The differential is greater with regard to business types. Freight forwarders, who are more exposed to intermodal realities than shippers, display a much higher satisfaction than the latter, who fall a bit short of the satisfactory level albeit still on the positive side.
Among the reasons for going intermodal, the specific customer/supplier instructions appear to be the most important one. This finding suggests the need to identify the right decision-makers prior to designing activities promoting intermodal transportation. Competitive pricing follows suit surpassing all other quality characteristics (in Germany, it is even more important than customer preferences). This
result contradicts the findings of other studies that assign more importance to attributes such as frequency of service, reliability, etc. The appropriateness of shipment size and the convenience of transit time follow price concerns in the scale of importance. It is interesting to note that the advantages offered by intermodality in terms of low emissions and improved company image appear very low in the
importance spectrum despite the emphasis placed on them by the policy makers.
As expected, the type of business has a bearing on these priorities. Competitive pricing is the main concern of shippers, while from the freight forwarders’ perspective, customer preferences remain the decisive factor. An interesting observation is that the only occasion that environmental concerns climb higher than shipment size and transit time is when it comes to other businesses, probably pointing to the more distant positioning of this type of respondents to the realities of the market place