China’s road freight problem and its solutions

Shifting freight off China’s roads could be key to tackling air pollution in the 14th Five Year Plan period (2021-25), according to an annual report by the environment ministry.  Motorised vehicles have become a key driver of pollution; a single diesel truck creates as much pollution in China as 200 private cars. Diesel-powered goods vehicles are in fact responsible for 60 per cent of the nitrogen oxides and 85 per cent of the particulate matter pollution released on China’s roads, despite making up only 8 per cent of all vehicles.

These vehicles are thus a central target for pollution control measures.

Polluting road freight

National average levels of PM2.5 – the most dangerous particulate matter pollution for human health – dropped 27 per cent between 2015 and 2019, according to the latest report from the Center for Research on Energy and Clean Air. But nitrogen dioxide levels fell only 9 per cent, while ozone actually rose 11 per cent. The transportation sector is China’s third largest source of nitrogen oxides, second only to coal-fired power stations and industry.

It is also the second largest source of ozone, after industry, accounting for 20 per cent of the total. Between 2013 and 2018, the number of heavy-duty diesel vehicles on Chinese roads increased an average of 4 per cent per year.  Li Ganjie, head of the Ministry of Ecology and Environment (MEE), said at a recent meeting on national environmental protection work that “the reliance on road freight remains unchanged,” a fact he described as a weak point in the MEE’s work to manage the environment.

According to the MEE’s “2018 China Vehicle Environmental Management Annual Report“, the nature of pollution in many Chinese cities is changing. What was once simply a product of coal-burning is now a more complex mix coming from coal, vehicles and secondary pollutants. Data released by the Beijing Municipal People’s Congress in mid-January shows that mobile pollution sources, not coal-burning and industry, are now the main cause of PM2.5 in the city, accounting for 45 per cent of annual emissions.

Tackling diesel vehicle emissions is not easy. At the China Blue Sky Observers Forum in December last year, Ni Hong, a researcher at the MEE’s Vehicle Emissions Monitoring Centre, said that the majority of these vehicles are owned by their drivers, some of whom adulterate their fuel to lower cost. Vehicles may also avoid environmental checks, be driven above the speed limit, overloaded or in breach of emissions standards.

The authorities do not have the capacity to carry out full checks, or to ensure that issues are resolved. Another approach would be to rely less on roads to carry freight around the country and more on the alternatives.

Costs associated with shifting to rail or water

It is cleaner to move freight by rail, rivers, canals and coastal shipping than by road. Commonly accepted industry figures show rail uses one-seventh of the energy needed to move the same goods by road, and produces one-thirteenth of the nitrogen oxides and PM2.5.

Transportation by water, meanwhile, uses one-fourteenth of the energy and produces one-fifteenth of the pollution. But the bulk of China’s freight still travels by road. Figures from the National Bureau of Statistics show that in the past decade the proportion of road freight has fluctuated around the 76 per cent mark, while water transport has increased a little in the last five years and rail freight is actually decreasing.

Road freight accounts for too much long-distance transport of commodities such as coal, ores, and iron and steel. Progress in moving these bulk goods off the roads is slow. Speaking at the forum, Xu Honglei, a senior researcher at the Ministry of Transport, said this is down to distorted pricing.

There is fierce price competition in the road freight sector, with varying degrees of unhealthy competition, low prices and overloading. Meanwhile, market reforms of the rail sector are proceeding slowly, with transportation costs not coming down. “When moving bulk goods a distance of less than 800km, door-to-door prices for rail are usually higher than for road,” he said. “And road freight haulers offer a single price, while rail freight includes various miscellaneous fees.” In a 2018-2020 plan for restructuring the transportation sector, the State Council called for “deeper market reforms of rail freight prices, a complete and flexible freight pricing system, and the use of the market to allocate resources,” in order to increase the amount of freight moved by rail.

But so far, rail freight market reforms have had very little effect. Zhao Jian, director of Beijing Jiaotong University’s China Urbanisation Research Centre, recently wrote in Caixin that when taking administrative measures to move freight from road to rail, the government needs to improve efficiency and speed in order to meet market needs. That means looking at how the railways are managed, and carrying out more extensive reforms.

Zhao Jian wrote that rail freight in China remains, in great degree, a monopoly. The China State Railway Group keeps overall control of all railway assets and finances nationwide, with 18 regional railway bureaus managing local freight operations. Zhao thinks this renders railway freight companies unable to respond to market demands.

Regional railway bureaus cannot earn income directly, as payments must pass through the China State Railway Group. Nor can they set their own prices or purchase or dispose of assets, and they have no incentive to reduce costs. As each bureau covers too small an area, and rail freight in China usually travels over 700km, they are often unable to guarantee shipments will arrive on time, respond to rapidly changing market demands, or adopt modern logistics systems – and so they lose a great deal of business.

At the forum in December, Xu Honglei also pointed out that rail, road and water freight networks are not interconnected with infrastructure allowing goods to move between them. Meanwhile, dedicated railway lines to serve ports, logistics zones and large industrial and mining firms are underdeveloped; they suffer from poor quality links to the rest of the network. Peng Chuansheng of the China Waterborne Transport Research Institute at the Ministry of Transport told China Dialogue that unless customers have their own docks, trucks are still needed to shift water freight from docks to factories. “It might work out cheaper for the company to just use road freight,” he said.

Improving rail and water freight

Experts say faster market reforms and better infrastructure and transportation links are needed to allow rail and water freight to reduce costs and make use of their competitive advantages.

Zhao Jian thinks the best way to boost the vitality of rail freight firms is to break the railway monopoly. In his Caixin article, he suggested restructuring the 18 railway bureaus into three larger regional rail companies, with the China State Railways Group to be a holding company, responsible for managing capital. The three new companies would have control within their regions and be able to set prices and acquire or dispose of assets, become market actors in their own right.

He told China Dialogue that this approach could be trialled by expanding some railway bureaus to cover wider areas. The Harbin and Shenyang bureaus could be restructured into a single bureau covering north-east China, for example. This would reduce the barriers preventing rail freight from making use of its advantages.

Commenting on the lack of freight infrastructure, Xu Honglei said at the forum that work to build railway main and dedicated lines should continue, rail services to businesses and logistics zones should be improved, and links at freight hubs improved. On water freight, Peng Chuansheng said the government should encourage companies to have their own docks, giving them a direct link with ports. There is no doubt that some transportation of bulk goods could be shifted from road to rail and water.

However, road still has an advantage in parcel freight, and China’s express delivery sector is growing rapidly. Data from the postal authorities show 50 million express deliveries were made in 2018, up 26.6 per cent on the previous year. These rapid deliveries of smaller items must still be made by road. Peng Chuansheng said industrial restructuring and changes in the energy mix will mean goods being moved will be smaller and lighter, but more valuable, requiring faster deliveries and better services.

Rail and water freight cannot yet provide these.  The rapid growth of parcel deliveries by road reminds us that while changing the freight transportation mix is important, reducing emissions from road freight remains an urgent task.

This story originally published by Chinadialogue under a Creative Commons’ License.

 

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