1. Freight Logistics: Strategic Focus for Sustainable Development Pablo Guerrero Transforming Transportation Washington DC, January 2011

2. TT IDB Freight Logistics 2 Washington DC 2011 | Transforming Transportation http://www.iadb.org The Inter-American Development Bank Discussion Papers and Presentations are documents prepared by both Bank and non-Bank personnel as supporting materials for events and are often produced on an expedited publication schedule without formal editing or review. The information and opinions presented in these publications are entirely those of the author(s), and no endorsement by the Inter-American Development Bank, its Board of Executive Directors, or the countries they represent is expressed or implied. This presentation may be freely reproduced.

3. TT IDB Freight Logistics 3 Washington DC 2011 | Transforming Transportation  GHG emissions, motorization and freight distribution –What are the implications for policy makers?  Logistics Decisions and Sustainable Freight Transportation  IDB Freight Logistics and Trade Facilitation Strategy  Conclusions

4. How bad is the situation in LAC on GHG emissions from the transport sector 2000 GHG Emissions by Sector as Percentage of Total Emissions—LAC vs World. Source. Taking Action on Climate Change in LAC. IDB 2009 Climate Analysis Indicators Tool (CAIT) Version 6.0. (Washington, DC: World Resources Institute, 2009)  Looking at relatively low LAC GHG emissions levels, the region may not play a major role in reducing GHG emissions worldwide  However, CO 2 emissions from transport have increased more rapidly than from any other energy consuming sector: –as a consequence of rapid urbanization –increased vehicle ownership –aging vehicle fleet –fuel combustion patterns

5. TT IDB Freight Logistics 5 Washington DC 2011 | Transforming Transportation Albeit a small share of total GHG emissions in LAC, the transport sector should play an important role in the region’s climate change agenda  12%-20% annual increase in private vehicle ownership (cars and motorcycles)… before 2008 19952005 LAC (6) 91128 U.S.A. 756837 OECD (14) 455563 High income (4) 303423 Motorization rates LAC: Chile, Colombia, Ecuador, Mexico, Dominican Republic and Uruguay OECD: Germany, Austria, Denmark, Finland, France, Greece, Island, Italy, Korea, New Zeeland, Norway, Sweden, Switzerland and UK

6. LAC motorization rate: two decades and counting of continue vehicle growth Source: Objetivos de Desarrollo del Milenio. 2010 CEPAL Base de estadísticas de indicadores sociales, económicos y medioambientales de América Latina y el Caribe (CEPALSTAT) http://websie.eclac.cl/sisgen/ConsultaIntegrada.asp. Argentina, Belice, Brasil, Chile, Colombia, Costa Rica, El Salvador, Estado Plurinacional de Bolivia, Guatemala, Honduras, México, Panamá, Paraguay, Perú, República Bolivariana de Venezuela y República Dominicana. Number of vehicles per person

7. TT IDB Freight Logistics 7 Washington DC 2011 | Transforming Transportation Source: 2007 Population WB. Fleet and motorization rates ECLAC LAC motorization rate Strong correlation between population and vehicle ownership

8. TT IDB Freight Logistics 8 Washington DC 2011 | Transforming Transportation As motorization grows, the region fails to achieve national and international air quality standards Source: Comisión Económica para América Latina y el Caribe (CEPAL), sobre la base de Organización Panamericana de la Salud (OPS) Evaluación de los efectos de la contaminación del aire en la salud de América Latina y el Caribe, Washington, D.C., 2005. Average annual concentration of MP10 in micrograms per cubic meter (μg/m³)

9. TT IDB Freight Logistics 9 Washington DC 2011 | Transforming Transportation Motorization rate does not only affect the environment, it also poses a huge constraint to the countries logistics system  Logistics costs in LAC = double those of OECD countries  Modal split critical for efficiency= LAC intra-country freight transport total 80%-90% on trucks  Freight and private vehicles share scarce infrastructure in last mile operations  Increase logistics cost affect city competitiveness Source: Kogan & Guasch, 2006 Logistics costs (% of GDP)

10. TT IDB Freight Logistics 10 Washington DC 2011 | Transforming Transportation Last decade of strong economic output and international supply chains operation in LAC generated a strong pressure on national logistics systems Source: WDI, selected countries Port container traffic: flow of containers from land to sea transport modes and vice versa, show consistent average growth for all countries

11. Which in turns increased demand for both last-mile and long haul freight operations affecting countries’ mobility < Freight < Public transport < Private << Urban distribution Growth 2000-2007: 93,9% 50,9% 94,9% << Intra-country and medium distance Source. El Salvador. Energy Efficiency Program. Study and Categorization of Energy Consumption in the Transport Sector. IDB 2010

12. TT IDB Freight Logistics 12 Washington DC 2011 | Transforming Transportation Current projections on emissions and energy consumption have important implications but we might have a different reality… Source. Road transport emissions in Latin America by vehicle type. Source: (Schipper et al., 2009) Original source: 2004 WBCSD Sustainable Mobility Project and IEA. Note: 1 EJ (exajoule=10^18 joules) = 24 MTOE (million tonnes of oil). Data adjusted to include Mexico. Emissions for rail were included in the original Sustainable Mobility Project spreadsheets but are omitted here. 49.9% 51.7% Road Transport Emissions in LAC 2000 by Vehicle Type

13. TT IDB Freight Logistics 13 Washington DC 2011 | Transforming Transportation Type of transport Average daily travel Daily occupancy Average yearly travel (1) km/day (2) year (3) km/year (4) = (2)*(3) Car (private)252085,200 Taxi10031231,200 LCV freight5026013,000 Minibus5031215,600 Heavy truck10026026,000 Busses10031231,200 Motorcycle4026010,400 When relevant data and consistent report mechanisms are implemented, findings will increase the pressure for better more efficient logistics and freight transport systems Source: El Salvador. Energy Efficiency Program. Study and Categorization of Energy Consumption in the Transport Sector. IDB 2010

14. TT IDB Freight Logistics 14 Washington DC 2011 | Transforming Transportation Energy consumption in road transportation: the case of El Salvador TypeAreaModalityMeans Energy (Tcal) GasolineDieselGLPTotal Passenger UrbanRoad Private1,3305901,389 Taxi17520177 Minibus1802740454 Motorcycle29600 Inter-urban Urban Subtotal1,98133402,316 RoadBusses26440646 Rail 0606 Inter-urban Subtotal26500653 Total Passanger1,98498502,968 Freight Urban Road LDV freight < 2 Ton 2,6091,10703,716 Inter-urban Heavy truck > 2 Ton 332,81202,845 Total Freight2,6413,91906,560 Total Transport4,6254,90309,529 68.9% Source: El Salvador. Energy Efficiency Program. Study and Categorization of Energy Consumption in the Transport Sector. IDB 2010

15. TT IDB Freight Logistics 15 Washington DC 2011 | Transforming Transportation Evidence of freight participation by type of service (in Tcal) could imply more emissions than previously estimated from the freight sector and urban distribution Energy consumption in road transportation: the case of El Salvador Source: El Salvador. Energy Efficiency Program. Study and Categorization of Energy Consumption in the Transport Sector. IDB 2010

16. TT IDB Freight Logistics 16 Washington DC 2011 | Transforming Transportation  GHG emissions and motorization  Logistics Decisions and Sustainable Freight Transportation  IDB Freight Logistics and Trade Facilitation Strategy  Conclusions

17. TT IDB Freight Logistics 17 Washington DC 2011 | Transforming Transportation Logistics Decisions and Sustainable Freight Transportation: why emissions and motorization matter for freight logistics Global, regional and local patterns of movement of goods are a consequence of the interaction of three key stakeholders:  Customers: are the driving force behind freight transportation movements. –demand for product and services –generates good movement in the freight transportation system  Supply Chain: corporations of different sizes and geographies exchange goods, information and money to maximize the value between the willingness to pay and the total cost of providing the good or service to the customers.  Government. Setups the “playing field” for the supply chain to operate –This playing field is a combination of regulations, infrastructure and economic incentives.

18. Empty-load trucks entering Belo Horizonte’s metropolitan region on a daily basis, MG Brazil

19. TT IDB Freight Logistics 19 Washington DC 2011 | Transforming Transportation Customers demands for products and services affect the supply processes (and collections to a lesser extent) in cities:  Zero inventory –Fresh products and ready available 24-7 –Collection points (retailers, restaurants) avoid having inventory and request only goods to sell or consume in short periods of time  Numerous small orders –Strong competition demands large UPC in stores ready accessible –Consumption in short periods of time –Require systematic and more frequent deliveries  Lack the proper equipments for reception –Storage, handling and delivery to their points of sale  Complex and conflicting supply logistics –Pharmaceutical industry, hospitality industry (inverse logistics), high value density industry products

20. TT IDB Freight Logistics 20 Washington DC 2011 | Transforming Transportation Key logistical variables and their impact on freight transportation drivers Developing Sustainable Freight Transportation in Latin America: Best Practices and Policy Alternatives. Adapted by Edgar Blanco for IDB from Mckinnon and Woodburn (1996) and Piecyk and McKinnon (2009)  Companies implement environmental parameters (e.g. GHG) to evaluate alternative network designs

21. CENTRO DE FORMACIÓN DE LA COOPERACIÓN ESPAÑOLA. Seminario Internacional sobre Soluciones de Transporte en Ciudades Emergentes. Cartagena, Colombia mayo 2010 What is the knowledge of LAC public agencies and expectations regarding Urban Freight Distribution and freight transport? >

22. TT IDB Freight Logistics 22 Washington DC 2011 | Transforming Transportation Stakeholder Analysis is a cornerstone for developing an Agenda that is in line with the needs of the countries: more efficient and sustainable logistics systems IDB’s stakeholders database includes 437 entries currently covering nine countries

23. TT IDB Freight Logistics 23 Washington DC 2011 | Transforming Transportation However, there is still a long way until common agreements and perception regarding the importance of a National Logistics Agenda is achieved Stakeholders position with regards to advancing a logistics agenda

24. TT IDB Freight Logistics 24 Washington DC 2011 | Transforming Transportation Advancing the agenda implies a long effort on strengthening institutional capacity for critical policy making Stakeholders position and capacity assessment High Low

25. TT IDB Freight Logistics 25 Washington DC 2011 | Transforming Transportation  GHG emissions and motorization  Logistics Decisions and Sustainable Freight Transportation  IDB Freight Logistics and Trade Facilitation Strategy  Conclusions and next steps

26. Belize Trade and Transport Facilitation Assessment Bahamas Customs Modernization project, including ESW Honduras Modernization of Puerto Cortes Modernization of Customs in Puerto Cortes T&T Preparation of an Action Plan for implementing the SAFE Framework Implementing the Regional Single Administrative Document for Customs Caribbean Maritime Freight Performance Analysis Caribbean Customs Performance Indicators LAC Regional Support to city logistics and urban freight distribution in Curitiba Brazil Support the application of ICTs to improve the Freight Logistics Uruguay Support to implement the National Logistics Plan Paraguay Support Logistics and Port Expansion Colombia Support for the implementation of the National Logistics Plan Support the application of ICTs to improve the Freight Logistics Support to design Specialized Logistics Infrastructure PBL Policy Based Loan for Logistics Improvement Regional Freight Logistics Observatory C. America Analysis of Freight Logistics and Trade Facilitation in Mesoamerica Implementation of a system to facilitate the movement of goods in international transit IDB Freight Logistics and Trade Facilitation Operational Activities Mexico Support for the Development of a National Logistics Park System IIRSA Regional Initiative for Infrastructure Integration in South America - Border crossing – Productive integration methodologies Mesoamerica Plan - Road corridors – Border crossings – Customs modernization

27. Regional Targets Primary Stake-holders Short termLong term High Consistently measure GHG transportation emissions Public sector, NGO, Academia  Develop country specific emission factors  Establish measurement standards (e.g. GHG protocol)  Refine current GHG transportation measurements  Freight and logistics observatory: GHG High Actively engage logistics partners in GHG reduction Public and private sector  Establish local private-public GHG partnerships (e.g. SmartWay)  Education on GHG reporting  Multimodal feasibility studies  GHG Certification programs  Consumer labeling  GHG reduction targets  Multimodal infrastructure expansion High Reduce freight related emissions in urban environments Public and private sector  R&D urban logistics programs  Evaluate economic impact of urban distribution platforms  Set urban reduction targets  Invest in urban distribution platforms  Urban freight regulations  Monitor urban reduction targets An Agenda for Achieving Sustainable Freight Transportation in LAC

28. Regional Targets Primary Stake-holders Short termLong term High Consistently measure and monitor transport pollution in major urban areas Public sector, Academia  Pollution studies across LAC cities  Set pollution reduction targets and incentives for urban areas High Phase out high emitting vehicles Public sector  Inventory of freight fleet age  Measure environmental benefits vs. economic replacement strategies  Establish taxes and incentives for vehicle replacement programs Med. Evaluate distribution of biofuels and natural gas alternatives Public sector  Document and disseminate existing success stories on biofuels/CNV  Evaluate economic feasibility of biofuel strategies in LAC  Evaluate economic feasibility CNV strategies in LAC  Track progress of biofuel and CNV Med. Invest in alternative fuel sources infrastructures Public and private sector  Determine economic feasibility of electric infrastructure  Invest in regional alternative fuel distribution networks An Agenda for Achieving Sustainable Freight Transportation in LAC

29. Regional Targets Primary Stake-holders Short termLong term Med. Educate private sector in urban driving environments Public and private sector  Develop safety educational programs by country  Establish professional safety accreditations  Establish safety standards for private and public operators Med. - Low Monitor urban noise trends Public sector  Document urban noise in major cities  Empower urban citizen enforcement Low Develop tire recycle markets Public and private sector  Country studies on tire life cycle analysis  Invest in tire recycling supply chains Low Encourage enforcement of pollution guidelines  None  Empower urban citizen enforcement An Agenda for Achieving Sustainable Freight Transportation in LAC

30. TT IDB Freight Logistics 30 Washington DC 2011 | Transforming Transportation  GHG emissions and motorization  Logistics Decisions and Sustainable Freight Transportation  IDB Freight Logistics and Trade Facilitation Strategy  Conclusions and next steps

31. TT IDB Freight Logistics 31 Washington DC 2011 | Transforming Transportation Why is it important to manage logistics and freight distribution in LAC?  Cities are key to country's logistics performance  Long Distance Traffic –Cities are O/D of the main freight transportation flows  High Demand for Mobility –Increased population to be served –Excessive motorization  Sprawl –Comprehensive land planning shortcomings have resulted in cities with low density –Greater, longer and crowded routes for delivery  More expensive and inefficient distribution networks Urban patterns contribute to supply chain inefficiencies

32. TT IDB Freight Logistics 32 Washington DC 2011 | Transforming Transportation Typical work flow for a city logistics study Data intensive exercise  Fleet information  Flows + O/D  Infra diagnosis  GHG diagnosis and inventory  Identify business logistics and logistics nodes  Market analysis  Logistics platforms traffic simulations  GHG simulations  Define business model for logistics nodes identified  KPI and institutional setting for logistics-driven city planning