Biden Admin Lays Out Zero Emissions Freight Goal
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The Biden administration has officially set a nationwide goal to produce zero emissions across the freight sector, including trucking, rail, air and ocean freight.
A White House fact sheet released Wednesday did not include a projected timeline to reach the goal, which builds on existing goals to reach zero emissions across the wider transportation sector, as well as the whole U.S. economy, by 2050.
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That blueprint, conjured up by the Biden administration in January 2023, aims to enable zero-emissions medium- and heavy-duty vehicles to reach 30 percent of new sales in 2030 and 100 percent of new sales by 2040.
As part of the recent zero-emissions commitment, the administration will dole out a combined $1.5 billion to support the transition.
In particular, the Environmental Protection Agency (EPA) unveiled it would apply $1 billion in funding from President Biden’s Inflation Reduction Act to help cities, states and tribes replace school buses, trash trucks, delivery trucks and other heavy-duty vehicles with zero-emissions vehicles.
Under the requirements of the Inflation Reduction Act, at least $400 million of the EPA funding will serve communities dealing with significant air pollution.
The other $472 million of investments into zero-emissions freight are going toward a program aimed at reducing truck emissions at and near ports, as well as an educational program about electric charging at depots and truck stops.
The investment follows the Biden administration’s recent announcement last month of a strategy to put charging infrastructure for electric freight trucks in high-traffic corridors, including parts of Interstate 95 (I-95) in the Northeast, sections of I-5 in California, Washington and Oregon, I-80 between the East Coast and Illinois and along several highways in Texas.
As the White House seeks to cut emissions within logistics and transportation, the freight industry in the U.S. is still trying to recover from a freight recession characterized by excess carrier capacity for hauling cargo and softened demand for goods that declined from pandemic-era highs.
But one commercial vehicle research firm, ACT Research, appears to think a turnaround is “likely within a couple of months,” noting that trucking capacity is starting to align further with demand.
According to Tim Denoyer, vice president and senior analyst of ACT Research, the shifts mirror some of the regulatory changes implemented under the Biden administration, as demand for greenhouse gas-emitting trucks goes by the wayside.
“In our view, private fleets who operate vehicles on longer trade cycles are likely planning for the 2027 emissions regulations, which may drive record demand for new commercial vehicles in the next few years,” Denoyer said in a statement.
In April, the EPA finalized a set of new regulations, requiring an 82.5 percent reduction of nitrogen oxides emissions in heavy-duty trucks for model years 2027 and beyond.
“For the past year, cost economics have taken a back seat to supply chain resilience and planning for upcoming climate rules, as we see it, supporting new truck demand and pressuring freight rates,” said Denoyer. “But this is changing in 2024 as order intake has softened and private fleets join for-hire fleets in reconsidering costly capacity additions. We think a lower Class 8 tractor supply dynamic will be very helpful in bringing freight back to the for-hire market.”
Freight players see subdued demand
UPS’ first-quarter earnings seemed to suggest that demand was at least slightly improving, with the package delivery giant expecting a second-half return to volume and revenue growth. While total average daily package volume decreased 3.6 percent across U.S. and international shipments on an annual basis, this decline improved a less than 1 percent dip in March, according to CEO Carol Tomé.
Another major logistics company, Switzerland-based freight forwarder Kuehne+Nagel, moved 1 million 20-foot equivalent units (TEU) of sea freight volume in the first three months of the year, representing 1.5 percent year-on-year growth. Air freight volume reached 491,000 tons in the period, or 3.4 percent higher than in the previous year.
Nevertheless, the improvements didn’t seem to convince the international freight giant of a longer-term trend.
“Volume trends showed some improvement in the first quarter amid challenging market conditions,” said Markus Blanka-Graff, chief financial officer of Kuehne+Nagel, during a Tuesday earnings call. “Nonetheless, market demand overalls and yields remained subdued.”
Transportation and logistics giant J.B. Hunt was more bearish on the current state of the freight market, calling overall demand for intermodal services “weaker than our expectations.” Loads were relatively flat at a 0.2 percent decline within intermodal, the company’s largest segment, and dipped an even further 6.8 percent in the company’s dedicated third-party contract services.
