Switching Transport Modes to Meet Voluntary Carbon Emission Targets

The transport sector is the second largest carbon emissions contributor in Europe and its emissions continue to increase. Many shippers are committing themselves to reducing transport emissions voluntarily, possibly in anticipation of increasing transport prices. In this paper we study a shipper that has outsourced transport and has decided to cap its carbon emissions from outbound logistics for a group of products. Setting an emission constraint for a group of products allows taking advantage of reducing emissions substantially where it is less costly and less where it is more costly. We focus on reducing emissions by switching transport modes within an existing network, since this has a large impact on emissions. In addition, the company sets the sales prices for the products, which in uences demand. We develop a solution procedure that uses Lagrange relaxation. Conditions on total logistics cost and unit emissions are derived determine which transport mode is selected for a product. It is observed that a diminishing rate of return applies in reducing emissions by switching transport modes. In a case study we apply our method to a producer of bulk liquids and find that emissions can be reduced by 10% at only a 0.7% increase in total logistics cost. Keywords: carbon emissions, green supply chains, sustainability, transport mode selection, Lagrange relaxation, pricing.