Written evidence submitted by Logistics UK (FTF0010)

Executive Summary

• An efficient and effective logistics industry needs a pathway to Net Zero requiring the right supportive policies and incentives to help its journey to decarbonise.
• Fiscal incentives remain important for the adoption of ultra-low or zero tailpipe emission vehicles, given we are still in the early adoption phase for vans and research phase for HGVs. These incentives can support buying decisions for operators, as these vehicles remain significantly more expensive than the diesel equivalents.
• Our members are keen to adopt transitional technologies and low carbon fuels on the pathway to Net Zero, recognising the need to help achieve forthcoming carbon budgets through reducing emissions from both new vehicles and those already in use.
• Logistics UK would like to see the Freight Facilities Grant re-established to support modal shift from road to water and rail.
• Low carbon fuels will play a crucial role for decarbonising aviation with the use of biofuels or jet fuel created from energy from waste increasing. 
• There are opportunities to utilise existing transport stock by moving freight from the road and onto water and rail and reducing carbon emissions through further incentives than those that already exist.
• Logistics operators must feel confident that infrastructure provision will work for all operators across the UK, so the Government must set out a long-term plan on how this will be delivered.

About Logistics UK

Logistics UK is one of Britain’s largest business groups and the only one providing a voice for the entirety of the UK’s logistics sector. Our role, on behalf of over 19,000 members, is to enhance the safety, efficiency and sustainability of freight movement throughout the supply chain, across all transport modes. Logistics UK members operate over 200,000 goods vehicles - almost half the UK fleet - and some one million liveried vans. In addition, they consign over 90 per cent of the freight moved by rail and over 70 per cent of sea and air freight.

An overview of UK freight movements is included in Annex 1

Response to inquiry

The Government’s ambitious target of Net Zero emissions by 2050 provides a very clear end goal, which Logistics UK strongly supports. The current challenge is to identify the necessary steps required to enable industry to achieve this as efficiently as possible. As our members seek to decarbonise their operations, they need confidence and certainty on which solutions will be commercially viable so they can plan and invest appropriately, supported by Government policies and incentives to help enable this transition to Net Zero.

1. The effect of Government fuel policy on future road, rail, air and maritime connectivity

Although Government policy has now set phase-out dates for the sale of non-zero emission vans and Heavy Goods Vehicles (HGVs), the market has not yet provided all the solutions to deliver this. Currently 79% of freight is transported by road[1], yet we are still a long way away from having a reliable, market ready zero emission HGV that can transport goods across the entire UK. While we support the clarity that comes with having clear phase-out dates, we must now work to make these dates attainable.

As the market transformation curve below shows, the technologies for most modes are not yet ready for mass market adoption. Indeed, aside from smaller commercial vehicles, it could be argued that only rail has a clear pathway to decarbonisation and that is to fully electrify the rail network.

To enable the logistics industry to be able to continue be efficient and effective on the pathway to Net Zero, there must be the right supportive policies and incentives to help its journey to decarbonise. Our members are keen to adopt transitional technologies and fuels on this pathway, recognising we are not yet in a position to have all the answers. 

The market transformation curve

Connectivity between our four nations is vital for logistics, which is the backbone of our economy. The recent recommendations in the Union Connectivity Review will go some way to ensuring smooth connectivity across the UK.

2. Whether and how the Government is ‘technology neutral’ in its regulation and assessment of alternative fuels, and how its policies on alternative fuels influence investment, research, development and production

A technology neutral approach is important for the development of alternative fuels across all logistics transport modes but what our members seek most is clarity of direction to enable them to invest with confidence.

For road transport, a technology neutral approach is being pursued by the Government for zero tailpipe emission HGVs in the heavier weight categories that travel long distances. The Government is undertaking feasibility trials for battery electric, electric road systems and hydrogen technology solutions to help determine which will be commercially viable and most suitable for use on UK roads.

For lighter HGVs, the Government highlighted in its consultation on phase-out dates for new, non-zero emission HGVs[2], that lighter zero tailpipe emission HGVs are already coming onto the market in increasing numbers, primarily using battery electric technology. The Government notes that “this technology is largely mature and, as batteries get cheaper and the supply chain scales up, this technology could be a direct swap for diesel vehicles in the lighter weight categories.” Logistics UK supports this statement but is mindful that this must not result in other options for operators being ruled out too early, including hydrogen and low carbon fuels.

Logistics UK is particularly concerned about curtailing the use of low carbon fuels in road transport prematurely. In our response to the new, non-zero emission HGV phase-out date consultation, we supported vehicles designed to be used with low carbon fuels being allowed to be sold past the phase-out dates. While the Government has ruled this out, the Government should remain technology neutral in encouraging their adoption to lower emissions immediately. The Government strategy on low carbon fuels that is expected later this year should be used to set out clearer supportive policies for use of these fuels.

For vans, the market has moved towards battery electric, with a significant focus from Government on the development of recharging infrastructure. The consensus of battery electric vans being the predominant technology solution has enabled our members to feel confident in this technology. For heavier vans or for certain use cases, there could be a role for hydrogen or even low carbon fuels, so these must not be ruled out completely.

For rail, electrification is the appropriate solution, as is being pursued by Government. For aviation and shipping the path is the least clear, given the challenge of fully decarbonising these transport modes. Low carbon fuels have an important role to play and other viable technologies must be pursued.  We explore each transport mode in more detail below.

Road Fuels

Logistics UK has a technology-neutral position and believes all alternative fuels and technology solutions for all transport modes must be explored given the complexity of the industry and the urgent need to reduce transport emissions. Our members do, however, need long-term certainty over which zero tailpipe emission solutions will be commercially viable.

Feedback from our members illustrates that they are still concerned about the transitional period between now and 2050, as emissions must be reduced on the journey to Net Zero in order to reach the UK’s Carbon Budgets. Given the early-stage development of zero tailpipe emission technologies for HGVs, operators must consider other viable options for reducing their emissions prior to zero-tailpipe emission HGVs reaching mass market adoption.

For this reason, low carbon fuels have an important role to play in reducing road transport emissions. Many members are already exploring alternative fuels, such as biomethane and hydro-treated vegetable oil (HVO). However, they highlight concerns over availability of refuelling for alternative fuels and concerns over future taxation changes or Government policy that could impact the business case for switching. This could have the unintended consequence of fewer operators switching to lower emission alternatives more rapidly as they delay long-term investment decisions due to this uncertainty.

Government policy towards these fuels could support a greater shift towards these fuels:

• The tax system should be used to incentivise the use of appropriate low carbon fuels during the transition to fully zero tailpipe emission HGVs. This has worked well in Sweden, where a tax exception has been introduced for certain biofuels for use as a motor fuel or in heating, leading to a significant uptake in their use[3].
• Certainty that the current gas duty differential will extend beyond 2024, when it could be reviewed. This continued uncertainty means operators are nervous about investing in biogas, vehicles, which can reduce emissions by up to 85%[4] immediately.

In turn, strong policies that support these fuels could result in the market developing the refuelling stations needed, as currently these are limited in number.

For many van fleets, transitioning to zero tailpipe emissions will be achieved through battery electric powertrains. The market for electric vans is developing at pace, with the technology more readily available for these vehicles compared with HGVs. Some larger or specialist vans may prove more challenging to switch to zero tailpipe emission powertrains given the loads they carry, or the power needed for their use so there may be a role for low carbon fuels or hydrogen. However, our members feel confident in battery electric as predominantly the right technology choice, meaning our members have already begun adopting these vehicles into their fleets.

Fiscal incentives remain important for the adoption of ultra-low or zero tailpipe emission vehicles, given we are still in the early adoption phase for vans and research phase for HGVs. These incentives can also support buying decisions for operators, as these vehicles remain significantly more expensive than the diesel equivalents.

Sudden changes to the grant criteria impact business planning and investment decisions. Long-term certainty on the future of the plug-in grants is needed, with complimentary fiscal incentives required to help lower the total cost of ownership of these vehicles for operators. Any incentives should apply for the lifetime of the vehicle at its point of sale, to help support operators’ business cases and allow time to transition.

It is widely understood that as petrol and diesel vehicles are phased out over the coming decades, this will reduce and eventually eliminate tax revenues from fuel duty, with the possibility of road user charges being introduced. Long-term certainty is needed over the future of taxation changes to overcome business hesitancy and to aid long-term investment decisions.

Aviation fuels

Low carbon fuels will play a crucial role for decarbonising aviation in addition to improvements in fuel-efficiency. The use of biofuels or jet fuel created from energy from waste is on the increase and ground operations are moving quickly towards becoming carbon neutral.

We believe that the Government must work with more urgency to determine two key objectives to support the development of Sustainable Aviation Fuels (SAFs) in the UK – a mandate and a price stability mechanism. Both are vital to ensuring the price gap between kerosene and SAF is reduced, and to stimulate the market and investors to start developing SAFs on a wider commercial basis. 

Rail

Electrification is the clear path to net-zero for the rail sector. Unlike the passenger rail sector where Government procures a significant proportion of new rolling stock, rail freight stock is owned and operated by private sector companies who rely on long-term policy signals from Government to guide investment decisions. Certainty around the Government’s electrification programme will provide the incentives required for operators to invest in electric rail freight locomotives and for manufacturers to produce them for the UK market; therefore, we are calling on Government and industry to accelerate the delivery of electrified rail network

3. The infrastructure required to develop, produce, store and dispense alternative fuels

The energy and infrastructure needed to support the transition to zero tailpipe emission vehicles is of great interest and concern for our members. Without it, operators simply will not be able to make the transition to these technologies at scale.

For HGVs, whether the future vehicles are battery electric, run on electric road systems or hydrogen, all require substantial infrastructure investment and energy capacity. We therefore need targets for infrastructure development, to ensure the phase-out dates for new, non-zero emission HGVs can be met. Although uncertainty still exists around which technology, or mix of technologies, will be commercially viable, early planning must still start now as part of the zero emission road freight trials.

Current thinking for HGVs is that the pattern of charging will need to be focused predominantly on the strategic road network (SRN) and in commercial facilities, such as depots. The Climate Change Committee estimated that for a hydrogen-based switchover, 800 refuelling stations would be needed by 2050 and electrification would need 90,000 depot-based chargers for overnight charging[5]. Therefore, the Government should look to future proof any work already underway. For example, as energy infrastructure is increased along the strategic road network to support charging for electric cars and vans, this should include possible future requirements for other road vehicles, including HGVs. This will avoid further cost and disruption in the future.

For depots, an urgent solution is needed to ensure a fair and equitable approach to funding increased power supply needs – this will be of benefit to van fleet operators now and HGV operators in the future. One significant challenge that has been highlighted by our members is that where depot premises are leased, businesses are very nervous of investing in charging infrastructure as if the lease is not renewed, they would lose that infrastructure they have invested so much money into.

A further concern for our members is not only the cost of a power upgrade, but also the charging units. For HGVs that need to be charged rapidly, these are currently incredibly expensive to install. Electricity costs are also variable depending on the site, which can mean an operator is unable to make the business case for investment as the total cost of ownership is simply too high. 

The experience of some members installing chargepoints for vans has shown there can be delays with repairs and the technology can become obsolete due to the design and capability of chargepoints rapidly changing. This will be a concern for operators investing in electric trucks, as well as vans, as the reliability of the chargepoints will be essential for business operations. It is important to also remember that charging infrastructure will be needed that can support third party supplier vehicles, as well as operators’ own fleets.

For operators that run their vehicles 24/7, consideration needs to be given to how they will charge them, given overnight slow charging won’t be viable for their business models. Manufacturer’s advice is that currently, only using rapid chargers will degrade the battery meaning it will need to be replaced far more quickly, adding additional cost for the operator. This again impacts on total cost of ownership and commercial viability of investing in battery electric vehicles.

It is also important logistics operators feel confident that infrastructure provision will work for all operators across the UK, including in remote locations. Recharging and refuelling infrastructure will be needed away from the main arterial routes, so a long-term plan on how this will be delivered is essential.

Challenges already exist for the charging of electric light commercial vehicles, with issues around the size and availability of some chargepoints for commercial vehicles and particularly around depot charging. To address this, we need larger parking bays, more rapid charging, suitable home charging, longer cables, simple billing systems and clear and unobstructed signage to chargepoints.

4. Steps that the Government could take to maximise the utility of the UK’s existing transport stock, while meeting its climate-change commitments

There are opportunities to utilise existing transport stock by moving freight from the road and onto water and rail and reducing carbon emissions. It can be more expensive to move freight by rail or water than by using the road. With logistics companies operating on very low margins, using different modes can be cost prohibitive. To increase utility of existing transport stock there is scope for further incentives than those that already exist.

Logistics UK would like to see the Freight Facilities Grant re-established to support modal shift from road to water and rail. Freight Facilities Grants remain in operation in Scotland – confirmation of the reintroduction of Freight Facilities Grants for rail and water in England and Wales would be beneficial to operators, including terminal operators, to allow them to replace equipment. While the Modal Shift Revenue Support Scheme (MSRS) is welcome, future certainty over long term budgets would provide confidence for businesses and operators. Rail equipment and locomotives have a much longer lifecycle and are particularly costly to replace with lower carbon alternatives.

By 2050 most transport modes will be Net Zero. If we can support modal shift we will see a reduction on the number of vans and lorries on the roads, helping alleviate a shortage of drivers, as well as reducing congestion for the remaining traffic and helping reduce emissions in the interim between now and 2050. A recent independent review of the effectiveness of MSRS Intermodal found an increased environmental impact to society of £54.24 million is the scheme were to be withdrawn[6].

River and canal freight has the potential to bring goods to the heart of our cities in a sustainable, eco-friendly way. Urban planning policy should ensure that riverside water freight infrastructure is preserved and enabled for freight use, which can be challenging given the pressure for waterside residential developments 

Currently, inland waterway usage is very low, accounting for only 5% of all waterborne freight and down by 21% in 2020[7]. Most vessels are still using diesel engines. We know that eventually all vessels will be Net Zero and there are there are significant movements underway toward Net Zero in the wider international maritime (see below), including some innovative examples of alternative fuel shipping, such as the first zero emission container ship in Norway[8].

The inland waterway sector in the UK may alone not be large enough to provide a business case for innovation and market supply of these smaller vessels. If the Government can support the uptake of the movement of goods on our vast inland waterways, it should in turn increase demand for greener and more sustainable vessels to carry the goods. Until then, there is not enough incentive to move goods off the road and onto inland waterways. Development is happening more rapidly in other countries: EV charging posts for vessels are already commonplace on the canals of Amsterdam, and Venice has started to expand its network of EV mooring posts along its extensive canal network.

International shipping

The International Maritime Organization (IMO) has adopted mandatory measures to reduce emissions of greenhouse gases from international shipping, under IMO’s pollution prevention treaty (MARPOL); these are the Energy Efficiency Design Index (EEDI) which is mandatory for new ships, and the Ship Energy Efficiency Management Plan (SEEMP). With excellent maritime facilities nationwide, ensuring ports and wharves have good road and rail connections can support environmental goals and regional development.

Rail freight

Within rail, many decarbonisation projects are focused on passenger routes and trains but electrification of the rail network could benefit freight transport. The rail freight industry needs certainty over timescales for projects, including electrification, to plan for rolling stock and technology. There are several quick wins for electrification – rail freight sector could be two-thirds electrified by 2033 if the government carries out an “infill” approach, electrifying strategic parts of the network in a staged approach.

Planning

The planning system should ensure that transfers between modes are as smooth and frictionless as possible. There are opportunities to update regulations and guidance to ensure that any planned upgrades to existing sites or applications for new sites help the move to alternative fuels and net zero, for example by mandating sufficient EV charging infrastructure at modal points, such as canals and wharves, and that there is dedicated parking at railheads.

Low carbon fuels

As highlighted in our response to Question 2, it is widely recognised that low carbon alternative fuels have a crucial role to play in decarbonising road transport. Barriers to adoption of these fuels include the lack of refuelling stations within geographical reach to support their use. Operators can opt to have supply of these fuels on site, as they may do currently with diesel, but this requires substantial investment.

With the right incentives and by addressing these barriers to adoption, the Government could help maximise the utility of those HGVs already in use, as operators could switch to lower emitting drop-fuels, or in the case of gas vehicles, biogas could be adopted.

Longer Semi-trailers (LST)

Load efficiency is a major opportunity to reduce emissions using existing technology. For this reason, Logistics UK members would like to see better recognition in Government policy of the role of load efficiency of existing technologies on the road to zero tailpipe emissions.

Since 2012, trials of LSTs of up to 15.65 metres has taken place on roads in Great Britain, enabling 30 standard pallets to be transported in a trailer opposed to 26, offering more efficiency and fewer lorry journeys for commodities limited by bulk as opposed to weight. The trial has been a success for both safety and the environment; up to the end of 2019 the trial result indicated that: on average, the use of LSTs reduced journey numbers by 1 in 12, with more than 54 million vehicle kilometres saved 48,000 tonnes of CO2(e) and 241 tonnes of NOx have been saved on a per kilometre basis. LSTs have been involved in about 53% fewer personal injury collisions and casualties than the GB articulated HGV average[9].

We are currently awaiting the details of the implementation of LSTs’ introduction into general circulation, which will be a carefully managed process to ensure continued environmental and safety benefits. We consider that the Department for Transport should not reduce the benefits these vehicles could bring to the road fleet by requiring regulatory requirements beyond those expected for a standard semi-trailer. We are particularly concerned with the possibility that specific mandatory training could be required.

In addition Logistics UK believes there is more the Government can do to increase load efficiency for commercial vehicles including further increases in dimensions and “road train” combinations offering opportunities to decrease emissions per mile of existing Euro VI diesel engines.

Manufactures have made clear that, along with expectations of improvements in vehicle range, customers and Governments should not expect that goods vehicles are going to get lighter. This presents a choice for society: more zero emission vehicles to do the work that petrol/diesel vehicle do currently or realign the regulatory regime to recognise a new “light” vehicle up to 4.25t which is not in scope of road freight transport regulation such as Operator Licensing, vocational driver licensing, heavy vehicles testing and tachograph rules. Legislation must be written now to recognise zero emission vehicles as the norm for our future, rather than framing them as “alternatives” which require a derogation from the norm.

5. The contribution that alternative fuels could make to sustainability, transport decarbonisation and connectivity.

The widespread switch to zero emission technologies will have a significant impact on the sustainability of the logistics industry and transport decarbonisation overall. This will take many decades to achieve, particularly where the right technology solutions are still being determined.

Road transport

To achieve full sustainability, the lifecycle emissions of the vehicle, including those created in the manufacturing process and through generating the fuel needed to power the vehicles, must also be addressed. For all zero-tailpipe emission technologies, the electricity needed to support the vehicles must come from renewable sources in order to reach Net Zero. We support the UK Government commitment that all the UK’s electricity will come from renewable sources by 2035[10].

Our members have expressed concern over how to sustainability manage batteries at the end of their use. Clear information about how to reuse, recycle and dispose of electric vehicle batteries must also be provided as part of the total sustainability picture.

As we talk about in our response to Question 2, it is widely recognised that low carbon alternative fuels will contribute to transport decarbonisation. In the Government’s Transport Decarbonisation Plan, it states that “low carbon liquid and gaseous fuels – predominantly biofuels deployed in road transport – deliver about a third of all domestic transport carbon savings under current carbon budgets”. The Government’s stated strategy is to use low carbon fuels across transport in a way that achieves maximum GHG savings.

Zemo Partnership’s report, Market Opportunities to Decarbonise Heavy Duty Vehicles Using High Blend Renewable Fuels[11], highlights that HVO can have GHG emission savings of 85% compared to diesel and over long-haul duty cycles for both Euro VI CNG and LNG vehicles, 85% and 71% GHG emission reductions respectively have been achieved compared to a diesel Euro VI truck.

If operators are able to switch to low carbon fuels, these findings demonstrate the significant immediate reduction in carbon emissions that could be achieved supporting transport decarbonisation and sustainability of logistics.

Multimodal sustainability

Incorporating the most efficient use of all modes within the various stages of a supply chain can have a positive effect on reducing logistics’ environmental impact. In the Government’s 2021 spring Budget, it announced funding for eight new freeport locations. The cross-modal potential of freeports is expected to yield significant environmental benefits, particularly if they provide sustainable, innovative technologies within them. In Scotland, freeports are called ‘green ports’, partly for this reason.

Air freight

In 2020, the Government launched the Jet Zero Council, a partnership between industry and Government with the aim of delivering zero-emission transatlantic flight within the next thirty years. Its remit includes developing and industrialising zero-emission aviation and aerospace technologies, establishing UK production facilities for sustainable aviation fuels and developing a coordinated approach to the policy and regulatory framework needed to deliver Net Zero aviation by 2050.

The aviation industry itself has committed to improving its sustainability, with industry executive members of UK Sustainable Aviation pledging to achieve net-zero carbon emissions by 2050. Current focuses include moving to sustainable/biofuels, noise reduction and technology improvements, as well as the reduction of emissions for ground operations through carbon-friendly warehousing and cargo operations around airports.

Rail freight

Further to our response on grant funding for modal shift in question 4, we support rail network electrification. Research by the Railway Industry Association suggests decarbonisation of the rail sector will likely only be possible with large-scale railway electrification. Hydrogen and battery alternatives will need to play a role, but they cannot act as a replacement. By the end of 2020, the Office of Rail and Road (ORR) reported 38% of the mainline railway route across Great Britain was electrified, after 251 new electrified track kilometres were added to the network in 2019-2020[12].

Water freight

Where goods are not time sensitive, water remains the preferred mode for long distance global freight movement; shipping remains the most efficient way to move freight to, from, and around the UK[13]. Increasing the use of inland waterways – effectively moving supply chains from the road to water – is being called for to support logistics’ efforts to improve its carbon emissions, especially if paired with the decarbonisation of port operations. Freeports will likely play a role in this, where they are situated at traditional seaports.

In 2020, the British Ports Association published several proposals to support the industry in meeting Government’s ambitious emissions reduction targets, following research that examined the barriers to shore power in UK ports[14]. One of these called for a ‘Green Maritime Fund’, to research and develop the new technologies required to support greener vessels.

Allowing improved vehicle load efficiency should reduce emissions and increase safety

While alternative fuels can make a contribution to transport decarbonisation, vehicle design can also support this, which is explained in our response to question 4 about the Longer Semi Trailer trials.

Annex 1

Overview of UK freight movements

Logistics plays a crucial role in moving goods to, from and around the UK via various modes. Below are some statistics to provide an overview of freight movements in the UK.

• In 2019-20 over half a million licensed HGVs covered 16.4 billion vehicle miles[15].
• In 2019-20 4.34 million licensed vans covered 50.5 billion vehicle miles[16].
• Battery electric van uptake significantly increased with 12,759 new zero emission vans sold in 2021, equating to a total market share of 3.6% (compared with 5,266 and 1.8% in 2020)[17].
• In 2019, 79% of domestic freight was transported by road, 13% by water and 8% by rail.
• Over 16 billion tonne kilometres of goods were moved by rail in 2019.
• Over 2.5 million tonnes of international and domestic freight was moved by air in 2019.
• 78% of inter-modal journeys (49 million tonnes) began or ended at a shipping dock.
• 3% of inter-modal journeys (2 million tonnes) began or ended at an airport.
• 90% of goods arrive into the UK by sea freight and 15% of domestic freight is moved by water.
• Air represents 40% of goods by value.
• In 2019, 95% of UK’s international freight tonnage was moved by sea.

January 2022

Endnotes