Greening the APEC supply chain through energy efficiency

It’s not just about creating cleaner, lower-carbon trade, but also being more efficient and having more efficient products.

The world’s waterways were once the premier means of transporting goods, and as global economies look to reduce their carbon footprints, they could regain superhighway status.

The US state of California, for example, is working to reduce emissions and road congestion by shifting freight transportation from trucks to barges. The California Green Trade Corridor is scheduled to open in 2012, and officials say upgrades to port facilities along the coast will create new opportunities to transport exports east to Asia, helping facilitate trade that is less energy intensive.

Energy use among APEC member economies accounts for around 60% of world energy demand, and that figure is set to grow more than 30% by 2030 as those economies expand and their populations become more integrated. ¹

With concerns over mobility and energy efficiency in mind, APEC is preparing its first Transportation and Energy Ministerial Conference in September, which will focus on how the APEC region can move toward a low-energy, low-carbon sustainable transport future. The meeting, the first joint initiative of APEC’s Energy and Transportation Working Groups, will build upon progress made separately by both bodies in May.

At a gathering in Vancouver that month members from the Energy Working Group agreed to improve energy efficiency in transport, phase out inefficient fossil fuel subsidies and encourage low-carbon communities.

In Montana in May, APEC’s trade ministers went to work on a plan aimed at furthering APEC’s green growth agenda. To promote better sharing of environmental technologies, they discussed ways to advance trade in green vehicles and technologies by encouraging technology transfer. Ministers also agreed to support the green agenda by promoting trade in remanufactured goods that reduce waste and save energy.

Green growth is a key priority for APEC in 2011, as are ongoing efforts to strengthen integration, expand trade and promote regulatory cooperation between its 21 members.

Not only does a greener economy create growth – largely through new jobs that, in turn, deepen prosperity – but it also helps grow trade and investment in the APEC region.

“If everyone is addressing environmental concerns in the same way, if we have similar standards in place, similar testing procedures, it should increase trade among everybody, which again gets back to economic growth,” said Dr. Phyllis Genther Yoshida, the Lead Shepherd of APEC’s Energy Working Group and Deputy Assistant Secretary for the International Energy Cooperation.

Greening the supply chain through energy-efficient freight transportation is one of four topics on September’s conference agenda and will enhance previous efforts APEC has put toward improving trade.

Those include expanding the modes of transport so the flow of goods does not depend entirely on trucks or airplanes, and improving transport linkages to facilitate a more seamless movement of people, goods and services.

APEC’s green agenda extends to its supply-chain connectivity action plan, a key initiative of APEC’s Committee on Trade and Investment (CTI).

Through a supply chain framework laid out in 2009, APEC adopted a set of action plans that will optimize supply chain efficiency by addressing eight “chokepoints” that currently impede the flow of goods. Broadly, they relate to customs inefficiencies, inadequate infrastructure and the quality of logistical services and management.

In addition to setting guidelines on regulations and tariffs and improving access to information through online references, such as the APEC logistics website, it is also conducting studies on environmental goods and services.

For example, within the supply-chain connectivity action plan is a study and seminar that would assess the environmental benefits of transit-oriented development and compare case studies from developed and developing economies. To help improve the quality of APEC members’ logistics services and management, APEC economies are coordinating to share successful experiences of companies that have “greened” their supply chains to help enhance the competitiveness of regional logistics providers. ²

In 2007 APEC’s Leaders resolved to reduce the energy use needed for economic output to 25 percent of 2005 levels by 2030, and the APEC Leaders’ Growth Strategy adopted in Yokohama, Japan, in 2010 prioritizes a transition to a clean energy future.

Based partly on pledges member economies made to support renewable energy and improved efficiency during the UN Climate Change Conference in Cancún last November, APEC is already set to surpass its 25 percent reduction goal. The Asia-Pacific Energy Research Center expects a 38 percent decline by 2030 under a business as usual scenario. ³

The move in the US for a higher fuel economy for cars and trucks, and industrial efficiency in China also count for a big chunk of the energy savings, said Dr. Yoshida, who predicts reductions will probably reach closer to 40 or 50 percent.

That is APEC’s real mission; the pragmatic implementation of best practices, she says, and is the impetus behind September’s conference.

In the run-up to that meeting, the Energy and Transportation Working Groups have been striving to intertwine and intensify their individual efforts. One of the four pillars of a new APEC-related Energy Smart Communities Initiative – announced last November by the US and Japan – is smart transportation.

Already 16 projects are up and running, and the EWG will bring these examples to the APEC Economic Leaders’ Meeting in November. The four projects grouped under the smart transportation pillar will focus on reducing the costs, energy use and greenhouse gas emissions associated with transporting goods. The other pillars cover smart buildings, smart grids and smart jobs, which focuses on workforce training.

“All of this is meant to take best practices, capacity building and research – like round robin testing for appliances, so we all are testing in the same way – and really provide that concrete piece that helps us get to a more secure APEC in terms of energy and obviously also helps with the environment and trade,” said Dr. Yoshida.

September’s conference, a public-private forum that will bring leading CEOs and others from the private sector together with ministers from APEC member economies, is a way of sharing information about best practices and highlighting projects that can be replicated across the Asia-Pacific region.

Private sector players worth highlighting could be FedEx, said Dr. Yoshida. In a recent news release the company said it plans to add more than 4,000 fuel-efficient vehicles, including hybrid-electrics, to its fleet around the US, dramatically reducing fuel use and carbon dioxide emissions in the delivery sector. Hybrid trucks improve fuel economy by 42 percent and cut greenhouse gas emissions by a quarter. FedEx’s current 330 hybrid-electrics have saved almost 300,000 gallons of fuel and reduced CO2 emissions by around 3,000 metric tons since 2005. ⁴

Many developing economies still struggle to bring fuel-efficient vehicles online as they work instead to improve inefficient logistics systems caused by poor infrastructure. But that challenge also offers an opportunity to “green” projects from their start, before too much investment is made in less green technologies, say officials at Indonesia’s Chamber of Commerce and Industry, or Kadin.

Currently, businesses’ main concern is how to get products from point A to point B efficiently and without additional expenses. Kadin is working to help businesses see beyond the challenges posed by a lack of ports and railroads in an economy comprising 17,000 islands and spanning a distance as wide as the United States.

“Kadin is developing green innovation awards and would love to see some innovative green projects that are suited to Indonesia’s complicated logistic requirements,” said Shinta Widjaya Kamdani, Vice Chairman for Environment and Climate Change at Kadin.

Already Indonesia, one of the four economies participating in the smart transportation pillar, has begun testing green transport technologies. In 2009 it piloted a technology called Consload that allows shipping and logistics companies to work with SMEs to select goods for consolidation, decide how to pack them and determine the best routes for delivery.

“We see our job as pragmatic implementers, so we can get to the point,” said Dr. Yoshida. “If we have a higher aspirational goal for energy intensity everybody feels like they can buy onto that because they see the tools coming into place to reach it.”

According to the Intergovernmental Panel on Climate Change, transport, including freight, accounts for 13.1 percent of total global greenhouse gas emissions. It also accounts for 27 percent of total energy consumption in APEC economies. ⁵

Road and air transport release the most emissions, with rail and sea being cleaner alternatives. Since freight transport accounts for a substantial portion of energy use in the APEC region, one point of discussion at September’s conference will be how freight shippers can shift from energy-intensive transport modes, such as trucks, to rail and ship.

“It’s not just about creating cleaner, lower-carbon trade, but also being more efficient and having more efficient products, which helps you produce more,” Dr. Yoshida said.

[1] Energy security critical to prosperity, says APEC Secretariat Executive Director; APEC News Release, May 24, 2011.
[2] Committee on Trade and Investment, “2010 CTI Annual Report to Ministers: Appendix 5. Supply-Chain Connectivity (SC) Action Plan”; APEC#210-CT-01.6, November 2010.
[3] Energy Smart Communities Initiative (ESCI), power point presentation drafted by APEC’s Energy Working Group; July 2011.
[4] FedEx Alternative Energy website: http://about.van.fedex.com/corporate_responsibility/the_environment/alternative_energy/cleaner_vehicles
[5] Energy Smart Communities Initiative (ESCI), power point presentation drafted by APEC’s Energy Working Group; July 2011.