Obstacles to energy efficiency

Date: 13, October 2015
Sweco, a Swedish consultancy firm has had a look at how to increase energy efficiency in Swedish goods transport. Findings include that the most important obstacles to energy efficiency are lack of stable policies, limited rationality and asymmetric information for the involved parties.

Of these, the lack of stability of the relevant policy is the most severe obstacle to energy efficiency in transports. Unpredictability in how taxes and policy instruments will evolve over time, as well as sudden changes in policy, make it difficult to plan business accordingly. The industry  may seem slow to adapt to changes in legislation, but in reality the problem can actually be ascribed to poor information from the government.

Limited rationality occurs because there are innate patterns and a flattening learning curve. People working daily with transport “do as they always have”, they know it works and there is little incentive to change modus operandi. Sweco comments that this is likely caused by these people considering themselves to be rational. This conclusion is confirmed by the statements from an expert panel, which estimates the limited rationality obstacle to be more important than road operators believe it to be.

Asymmetric information becomes a problem when more links are involved in a transport chain. It is not a problem experienced by haulers and companies, who usually buy their own fuels and vehicles, and therefore perceive they have control over the whole chain. However, the expert panel interviewed for the study as well as the Swedish Association of Road Transport Companies have a different, broader view. They emphasize that when many actors are involved, there is little transparency in the procuring of transports, and who is liable and responsible for what becomes blurred. It is not unusual for  one transport to involve the buyer, a freight forwarder and the hauler as well as the end-customer, city planner, politicians and executives. The most important effect of the asymmetric information problem is trucks driving one leg empty where it would have been more efficient to carry load on both legs.

Ambiguity and opaque liability between transport buyer and hauler leads to non-efficient market solutions. This obstacle can be overcome if  actors from the public sector start demanding more energy efficient transports. Further, there is a lack of enforcement of  the rules for long distance and cross-border transports, including cabotage; rules such as market access, load securing, speed, driving and rest time etc. As a result, drivers lack incentive to adhere to these important rules and according to Sweco this can lead to inoptimal energy efficiency.

According to Sweco increased energy efficiency in the transport sector is achieved through decreasing demand of transport, increasing demand for combined transport and using more energy efficient vehicles and strategic urban mobility planning.

Thus, Sweco’s advice are threefold:

-        Increased monitoring and control of cross-border and long distance transport.

-        Using the law of public procurement to promote energy efficient transport.

-        More awareness in urban mobility planning.

“The findings from Sweco’s work done for the Swedish government are interesting in many ways. First of all they show how the systems can result in perfectly rational decisions being taken, which however are not energy efficient. In other words, you can’t blame the driver or the hauler or the government. It’s the combination of all these interests that can cause problems and we need to solve that problem” states Søren H Larsen, CEO of NLA. “Second they show that control and enforcement is important as always! And finally the report underlines the huge importance of the public sector – not only for setting rules but also for setting trends when ordering transport.”

The report can be read here