Chapter 1: The Carbon Dilemma of Rail Freight

Rail freight in North America is proving to be a higher carbon alternative compared to electric trucking, a stark contrast to other regions. To achieve decarbonization, the focus will need to shift towards more electric trucks in the US, Canada, and Mexico.

In 2010, during my consultancy with Canadian National Railroad under the leadership of the notable Hunter Harrison, I witnessed firsthand how my proposals on reducing carbon emissions often went unheeded by firms entrenched in traditional practices. At that time, CNR, along with other rail companies, would frequently assert that their carbon emissions were significantly lower than those of trucks. However, this claim did not hold for pipelines, which, despite their fossil fuel focus, garnered little concern from the public.

CNR was heavily involved in transporting oil through its extensive network across 10 provinces and 18 US states, often linking up to 16 cars for efficient loading and unloading. Roughly 70,000 oil cars traversed North American tracks annually, and railroads promoted this mode as a viable alternative to pipelines. This was in addition to transporting around 4 million coal cars yearly. While oil transport could be piped, coal was not as easily moved.

However, it seems contradictory to boast about the low carbon footprint of rail transport when a significant portion of its cargo consists of high-carbon materials. Approximately 33% of rail freight in North America comprises coal and oil, making the claim of lower emissions somewhat dubious.

North American railroads predominantly rely on diesel. While some locomotives feature electric motors, they operate on diesel-generated electricity. Although dynamic braking systems utilize electric motors to slow down long trains, the excess electricity generated is typically discarded rather than stored for future use.

Furthermore, these rail companies have resisted enhancing their operational efficiency for years. Locomotives are often kept in service far beyond their expected lifespan due to the higher costs associated with upgrading to more efficient models. In an industry characterized by low profit margins and high volume, the focus remains on minimizing costs rather than investing in long-term sustainability.

This focus on short-term profits is reflected in the increasing rate of derailments in the US. The business model prioritizes quarterly earnings over human safety and environmental considerations. This short-sightedness aligns with a broader trend in corporate governance that has evolved since the 1970s, significantly influenced by leaders like Jack Welch of General Electric.

In contrast, many regions outside North America have maintained better accountability across various stakeholder groups. Although the US is gradually shifting back towards a multi-stakeholder governance model, progress is slow, and powerful lobby groups still advocate for profit maximization over all other priorities.

Chapter 2: Global Perspectives on Freight Transportation

The first video, How America Saved Its Failing Freight Trains, explores the issues surrounding the freight rail system in the US, including its challenges and the steps taken to modernize.

The table detailing domestic freight ton kilometers by mode illustrates the stark differences in freight transportation practices globally. Notably, India is nearing completion of its electrification of heavy rail, achieving 75% decarbonization, while China boasts a significant portion of its freight moving via electrified rail and waterways.

In North America, the anticipated upheaval in transportation modes is not aligned with the current US transportation blueprint. This blueprint discusses shifting transportation modes according to their emissions, advocating for densely populated living spaces that promote walking, cycling, and public transport. However, it fails to adequately prioritize electrification over hydrogen and other less efficient fuels.

The infrastructure built since World War II has created sprawling communities designed around automobiles. While electric vehicles and heat pumps may mitigate some climate impacts, the challenge of reversing deeply entrenched urban layouts seems insurmountable.

In North America, a staggering 92% of weekday trips occur by car, a far cry from Asia’s 30% or Europe’s 45%. Encouraging a shift in transportation modes is a daunting task, particularly as those residing in urban centers will likely benefit from enhanced public transport options, leaving many in rural areas reliant on their vehicles.

The Jones Act complicates the transition to water freight, imposing strict requirements on domestic vessels that have led to a decline in US shipbuilding capabilities. As a result, the potential to transfer more freight to ships is severely limited, impacting the ability to construct future battery-electric vessels.

Despite blaming China for the challenges facing the US shipping industry, the underlying issue remains the lack of cohesive and forward-thinking industrial policies in the US.

The second video, What Makes U.S. Shipping So Difficult | CNBC Marathon, delves into the complexities and obstacles that hinder efficient shipping practices in the United States.

While freight movement remains largely reliant on rail, the electrification of logistics is progressing at a faster pace in other parts of the world. The American Association of Railroads has downplayed the feasibility of rail electrification, even as other nations succeed in implementing it.

Statistics show that the US freight rail system lags significantly behind other major regions in terms of efficiency. With half the freight moved per kilometer of track compared to global counterparts, revenues are diminished, leading to inadequate maintenance and investments in electrification.

Despite the belief that rail is the greener option, electric trucks are proving to be more carbon-efficient. The shift towards electric trucks is inevitable, with advancements in battery technology and declining prices making them increasingly viable alternatives. Electric trucks are not only cheaper to operate but also produce fewer emissions than their diesel counterparts.

The landscape of freight logistics is rapidly changing, with electric trucks poised to dominate the market. As battery prices continue to drop, the cost of transitioning to electric logistics becomes more feasible. This shift could fundamentally alter the freight transportation paradigm in North America, with railroads facing significant challenges ahead.

Ultimately, the shift towards electric trucking represents a positive step toward reducing carbon emissions and enhancing the efficiency of freight logistics in North America. The urgency to adapt to this reality may finally prompt the rail sector to reassess its strategies and embrace the necessary changes for a sustainable future.