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Mode Choice inFreight TransportMode Choice inFreight Transport

Research Report2022

The International Transport ForumThe International Transport Forum is an intergovernmental organisation with 63 member countries. It acts
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Cite this work as: ITF (2022), Mode Choice in Freight Transport, ITF Research Reports, OECD Publishing,Paris.

ACKNOWLEDGEMENTS

Acknowledgements
This report sets out the findings of the ITF Working Group “Mode Choice in Freight Transport”, chaired bySieds Halbesma (Netherlands Ministry of Infrastructure and Water Management) and facilitated by Olaf
Merk (ITF). The report is based on discussions between members of the ITF Working Group on Mode
Choice in Freight Transport. It also benefits from answers to questionnaires circulated to government
officials in the ITF member countries represented in the Working Group and three case studies preparedby members of the Working Group.
The principal author of the report is Olaf Merk (ITF). The case studies are written by Mathieu Grenier, Chris
Hoff, Polina Hristeva, Elaina Liang and Marie-Laure Riel (Transport Canada), Yanhong Li (CATS, China) andJohan Visser (KIM, Netherlands). Awa Xue (University of Oxford) also contributed to the report. The reporthas been reviewed by the Working Group, the ITF Transport Research Committee and Steve Perkins (ITF).
The report was edited by Edwina Collins (ITF).
The ITF Working Group “Mode Choice in Freight Transport” consisted of the following members: Sieds
Halbesma (Chair, Netherlands), Maximilian Bauernfeind (Austria), Polina Hristeva (Canada), Yanhong Li(China), Zhongkui Li (China), Xianguang Wang (China), Gernot Liedtke (Germany), Raffaele Alfonsi (Italy),
Alberto Andreoni (Italy), Francesca Fattorini (Italy), Luca Conticini (Italy), Johan Visser (Netherlands), Inge
Vierth (Sweden), Rein Juriado (Sweden), Maria Koidu (European Commission), Frida Youssef (UNCTAD),
Olaf Merk (ITF), Stephen Perkins (ITF) and Layla Khalaf (ITF).

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TABLE OF CONTENTS

Table of contents

Executive summary............................................................................................................................ 7
Mode choice: Concepts and the rationale ....................................................................................... 10
Concepts, conceptual approaches and methodology ....................................................................... 10
Who influences the choice of freight transport modes?................................................................... 11
What are crucial determinants for freight transport mode choice .................................................. 13
Different characteristics ....................................................................................................................... 14
Possible game-changers for freight transport .................................................................................... 14
Modal split and its determinants ..................................................................................................... 15
Modal split in freight transport ........................................................................................................... 15
Determinants of mode choice ............................................................................................................. 20
Main differentiators.............................................................................................................................. 29
Modal shift requires specific government interventions.................................................................. 32
Modal shift policies and their motivations ......................................................................................... 32
Classifying policy instruments .............................................................................................................. 33
Subsidies ................................................................................................................................................ 33
Taxes and charges ................................................................................................................................. 35
Infrastructure ........................................................................................................................................ 39
Integrated freight corridors ................................................................................................................. 42
Digitalisation .......................................................................................................................................... 43
Innovation policies ................................................................................................................................ 43
Which policies have been effective? ................................................................................................... 44
Future-proofing freight mode policies ............................................................................................. 47
Technological developments ............................................................................................................... 47
Organisational developments .............................................................................................................. 48
Disruptive events .................................................................................................................................. 49
Policy implications ................................................................................................................................ 50
Case study: Short sea shipping in the lower mainland of British Columbia ...................................... 53
Why is modal shift considered in the Lower Mainland?.................................................................... 55
Past concept development for short sea shipping............................................................................. 55
Current initiatives ................................................................................................................................. 57
Impacts .................................................................................................................................................. 57
Lessons learned..................................................................................................................................... 58
Case study: Mode choice in freight transport – Jiangsu province in China....................................... 62
Instruments and approaches ............................................................................................................... 63
Impacts of modal split in Jiangsu ......................................................................................................... 65
Policy implications ................................................................................................................................ 65

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Case study: The freight corridor approach in the Netherlands ........................................................ 66
What is a freight corridor? ................................................................................................................... 66
The freight corridor approach in the Netherlands ............................................................................. 67
Designing the freight transport corridors ........................................................................................... 71
Modal split in the Netherlands ............................................................................................................ 73
Modal split policies in the Netherlands .............................................................................................. 75
What are the influencing factors for modal split in this case study? ............................................... 75
Future modal shift .............................................................................................................................. 76
References....................................................................................................................................... 77

FiguresFigure 1. The main determinants for freight transport mode choice ............................................... 13
Figure 2. Modal split shares in freight transport in 51 ITF countries ................................................ 16
Figure 3. Modal split shares in freight transport in 51 ITF countries in 2019 ................................... 16
Figure 4. Modal split in containerised freight transport in European countries in 2019 .................. 17
Figure 5. Modal split shares in freight transport in China, United States
and the European Union in 2018 ..................................................................................................... 18
Figure 6. Modal split shares in freight transport in 51 ITF countries over 1980-2017 ...................... 19
Figure 7. Modal shift in Austria, 2000-19 ......................................................................................... 20
Figure 8. Range of values on CO2 emissions for different transport modes..................................... 27
Figure 9. Modal split in freight transport per commodity group in the EU-28, 2019........................ 30
Figure 10. The Vancouver region ..................................................................................................... 53
Figure 11. The Vancouver Gateway ................................................................................................. 54
Figure 12. Multi-lateral corridor agreements in a public and private sector context ....................... 67
Figure 13. The multimodal nodes and infrastructure in the East and Southeast corridor ................ 69
Figure 14. Yearly cycle of monitoring, reporting, decision making and realisation fortransport corridor development ...................................................................................................... 71
Figure 15. The five pillars and their roadmap as part of the future agenda ..................................... 72
Figure 16. Freight flows to, within and from the Netherlands in weight in 2018 ............................. 73
Figure 17. Modal split of Dutch domestic and international inland freight transport in 2018 .......... 74
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TablesTable 1. Countries with predominantly non-road freight transport modes ..................................... 18
Table 2. Modal shifts in 51 ITF countries, 1980-2019....................................................................... 19
Table 3. Studies on price-demand elasticities for freight transport modes ...................................... 21
Table 4. Overview of price-demand cross-elasticities for freight transport modes .......................... 22
Table 5. Demand elasticities for freight transport modes ................................................................ 24
Table 6. CO2 emissions for different transport modes ..................................................................... 26
Table 7. Government policy goals and instruments ......................................................................... 33
Table 8. Benefit/cost-ratio of modal shift instruments .................................................................... 45
Table 9. Industry and public policy concerns related to freight transport
in the Vancouver region .................................................................................................................. 55
Table 10. External and internal factors that might drive short sea shippingin the Vancouver region .................................................................................................................. 56
Table 11. Lower Mainland’s SSS players .......................................................................................... 60
Table 12. Modal shift potential in 2040 of rail and barge ................................................................ 75

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EXECUTIVE SUMMARY

Executive summary
What we did
This report examines why freight carriers and shippers choose one transport mode over others. It analyses
the main determinants for using road, rail, inland waterways, coastal shipping or pipelines to move goods
and assesses government policies to influence it. Airfreight is not considered. The study also reviews how
shifting freight to more sustainable modes could reduce the contribution of goods transport to climatechange and provides recommendations for more effective policies. The role of mode choice in alleviatingcongestion and making goods transport safer is also addressed. Three case studies from China, Canada
and the Netherlands highlight modal-shift policies.

What we foundRoad transport currently represents approximately 40% of the tonne-kilometres transported in 37 out of
the 51 countries examined. This share is significantly larger than that of rail freight (24%), coastal shipping(16%), inland waterways (13%) and pipelines (7%). Road freight’s share of goods transport has increased
steadily, rising from 25% in 1980 to 40% in 2017. In China, around one-third of freight uses roads, a quarter
inland waterways, another quarter coastal shipping and about 14% rail. Generally, non-road transportmodes are more often used for bulk goods such as coal, petroleum products and minerals. Containers aretransported by lorry as well as by other modes.
Shifting freight to different transport modes is a policy goal in its own right in several countries. Such modal
shift can achieve high-level policy objectives such as environmental sustainability, better connectivity andincreased safety. Over the past forty years, only three of the countries examined for this report havesucceeded in shifting the modal split from road freight to other forms of transport. Slovenia and Austria
have increased the share of rail and Italy that of coastal shipping, at least in part related to policy
interventions. In all other countries that saw changes in freight's modal split, the movement has been from
non-road modes to different non-road modes. It shifted from rail to coastal shipping in Turkey, from rail
to inland water transport in Romania and China, and from coastal shipping to rail in the United States andAustralia. In 44 out of the 51 countries examined, the modal share of road freight transport has increased
over the past four decades.
Shippers prefer road transport because it often perfectly fits their requirements in terms of reliability,
flexibility, accessibility and shipment size. Although rail freight is cheaper per transported tonne-kilometre,it usually adds costs to shippers' logistics systems. In most circumstances, rail's ability to substitute roadtransport is limited. For example, demand for rail transport is mostly for bulk commodities over long
distances, while trucking demand is for short distances. That said, non-road modes offer economies ofscale while the external costs generated by road transport are generally higher than for other modes. CO2
emissions from road transport are usually higher per tonne-kilometre than for pipeline, rail, inland
waterways or coastal shipping.
The overall external costs of road transport (per tonne-kilometre) such as air pollution, climate change,noise, congestion, habitat damage and crashes are, on average, at least twice those of rail or inland
waterway transport. For this reason, governments have sought to influence mode choice in freighttransport via targeted policies. Yet, while governments can create conditions for a change in modal split,

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EXECUTIVE SUMMARY

private actors within the logistics chains have freedom of mode choice. Various countries have formulated
explicit modal-split targets and supported rail transport, inland water transport and coastal shipping.
Governments also adopt policies that do not directly aim at mode shifts but impact mode choice. Suchpolicies can take the form of subsidies, tax benefits, regulation, infrastructure provision and othermeasures. However, policies are often not aligned. Despite measures aimed to stimulate non-road modes,
most governments simultaneously continue to support road freight transport, for example via fuel tax
exemptions.
Pinpointing those policies that demonstrably alter the modal split in freight transport is difficult. Not manyof the evaluated policy measures allow the effects of reduced emissions and mitigation of other externalcosts to be quantified. Overall, policies can result in a modal shift, but these cases are relatively rare. The
crucial factor blocking interventions from effecting real change appears to be an inelastic demand for roadtransport. Other factors can include missing infrastructure links, high transaction costs of shifting toanother mode, and lack of competition or regulation in freight-rail markets in certain countries. The reach,
speed, flexibility and reliability road transport offers is generally superior, so price changes do notfundamentally alter the mode-choice decisions of shippers.
In some cases, government intervention has been insufficient or poorly targeted. Subsidy programmes for
non-road freight operations are sometimes too short-lived and thus do not create the long-term
confidence that will make shippers switch to other transport modes. Additionally, subsidies for modal-shiftprojects may have little effect if they apply to existing non-road transport operations.
The big transport trends will also impact modal shift: digitalisation, automation, zero-carbon technologies
and multimodal logistics chains. These developments will have mixed effects on the attractiveness ofdifferent freight-transport modes. Self-driving trucks could ultimately help relieve driver shortages andimprove road transport's safety record; electrification could improve the road sector's environmental
performance. At the same time, the growth of road freight transport will not help alleviate congestion.
Within the rail sector, electrification is well advanced. Further electrification will help sustain its position
as a low-emission, energy-efficient freight transport provider. In the meantime, governments could
support more business innovation in rail-freight transport to increase its attractiveness.
Incentives to use more waterborne transport could help to decongest road and rail infrastructure. At thesame time, this might negatively affect the environmental performance of inland and coastal shipping
unless the decarbonisation of this mode is accelerated. Shifting liquid bulk transport to pipelines could
require additional infrastructure costs but would also reduce safety risks. Digitalisation can help build
multimodal logistics chains – if rail and waterborne freight modes can develop services and products thatmeet customer requirements better than they do today. The outlook for each freight mode is contextdependent, making specific rather than generic mode-shift policies all the more relevant. In light ofongoing change, the value of shifting freight from road to other modes will need regular review.
The Covid-19 pandemic has had significant impacts on freight transport. Whether and which of theseeffects will be long-lasting is not yet clear. Cost explosions (notably for container shipping), deteriorationof schedule reliability, equipment bottle-necks and labour shortages challenge the resilience of the freighttransport system.

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EXECUTIVE SUMMARY

What we recommend
Apply integrated policy approaches to create coherent interventions across freight-transport modes
Achieving modal shift is challenging. All elements of the multimodal chain must align to achieve thetargeted change, which requires coordination and cooperation. Effective programmes focus on specificcorridors and networks to offer shippers multimodal options with complementarities and interoperability
between different modes. Effective interventions also align the strategies and instruments of different
tiers of government, including non-transport measures such as spatial planning. Effective interventions arealso coherent across modes in terms of infrastructure investment, tax subsidies, regulation, support for
innovation, standards for data and information exchange to stimulate more informed modal choices.
Modal shift requires multimodal options but also better information about them. Only then can users makethe appropriate choices. Here, digital technology is critically important – and therefore government
standards for data and information exchange. Integrated policy is necessary to avoid conflicting incentives,contradictory policy measures or isolated measures that risk being ineffective by nature.
Focus on mitigating external costs associated with each freight mode, rather than on modal shift as such
Instead of making modal shift as such the policy objective, on the assumption that such shifts will reduce
freight emissions, alleviate congestion and reduce safety risks, governments should formulate more
immediate policy goals. For example, they could quantify the desired emissions reduction for a freighttransport mode and develop measures to achieve this. Such a specific and differentiated approach would
make policy more effective because it addresses clearly identified objectives with specific instruments
within a determined area and period, rather than deploying generic instruments without considering local
specificities.
Improve the evaluation of policy interventions’ effectiveness to better inform measures that influence thechoice of freight transport modes
Clear objectives for policy intervention require relevant performance indicators. Performance evaluationmust go beyond establishing whether modal shift has occurred and also measure the benefits this shift
has generated. Such performance evaluations should be publicly available. Full transparency will enable
policy makers to assess which measures have worked in other countries and learn from the experience ofothers. Regular monitoring of interventions' success, rather than occasional reviews, would allow
continuous adaptation of policy. A reduced need for significant adjustments would help provide thecontinuity and stability that shippers and carriers value.
Create fair competition between freight transport modes
Governments should maintain a framework for fair competition between freight transport modes andwork to reduce market and government failures. Climate impacts, air pollution and safety risks require
fiscal or regulatory intervention to contain them. Fossil-fuel subsidies, in particular, need to be phased out.
Many modal-shift policies attempt to address cost distortions caused by fossil fuel subsidies and tax
exemptions for specific transport modes. For instance, subsidies for rail freight operations co-exist with
fuel tax exemptions for road freight. Such contradictions must be addressed. A coherent framework forintermodal competition would create momentum towards a multimodal transport system in which allmodes play their role based on where they are more efficient, more sustainable and safer than others.

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MODE CHOICE: THE CONCEPTS AND THE RATIONALE

Mode choice: Concepts and the rationale
Countries throughout the world have deployed mode shift policies to achieve a variety of objectives, inparticular environmental and economic objectives. What could we learn from these policies? Can they beeffective? Under what conditions and compared to which alternative policies? This report assesses thefactors driving mode choice in freight transport. Better informed choices between modes can support
broad government objectives related to accessibility, sustainability, climate change, safety, resilience andeconomic development. Mode-choice policies are of particular importance to policy makers in light ofgrowing attention to greenhouse-gas emission reductions required to achieve climate goals.
This chapter sets out the methodology for the analysis throughout the report. It introduces theterminology, concepts and considerations that will be further developed in the report. In doing so, it
analyses government policies and their effectiveness including those of transnational organisations likethe European Union.

Concepts, conceptual approaches and methodology
This report covers six freight transport modes: road, rail, inland waterways, short sea shipping, short-haul
air transport and pipeline. These modes are considered within the context of end-to-end freight transport
chains, with a focus on longer distance connections – national and intra-continental – whilst avoiding
extensive coverage of urban logistics, which would require a separate report.
Modal shift refers to changing the transport mode used to transport a certain good; for example a modal
shift from road to rail means that a good that was previously transported by road will now be transported
by rail. Modal shift over time means that that non-road modes increase their market share – and roadtransport decreases its market share. Theoretically, it is possible to shift between all six of these transportmodes. In practice, this obviously is not the case: some modes can be excluded depending on
geography – for example by lack of navigable rivers or coastlines – or lack of technical or commercial
feasibility. Policy makers have focused efforts mainly on shifting freight from road to rail and watertransport, for a variety of reasons, including assumed positive impacts on environment, safety andcongestion. This report will use the concept of modal shift in line with this policy practice, as developed
over the last decades. The shift from rail and waterborne transport back to road transport will here beconsidered as “reverse modal shift” or “modal back shift”. The term “mode choice” refers to the choiceshippers or other transport stakeholders make with regards the modes of transport for transporting theirgoods. Mode-choice changes often go hand-in-hand with changes of logistics chains. This means that an
analysis of mode choice should also include logistics. Modal split or modal share refers to the share ofgoods transported via a certain mode (e.g. a rail modal share) and usually measured in tonne-kilometres.
Most freight transport is offered in multimodal or intermodal transport chains. Intermodal transport
requires standardised load units, e.g. containers.
There is a huge literature on mode choice in freight transport with a variety of methodological approaches
to how research has been conducted. These approaches try to describe, explain and predict mode choice,mostly by aggregated freight flows or by individual companies. There are different ways to categorise thesestudies. A common distinction is between macro and micro-level. A macro-approach analyses aggregated10

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MODE CHOICE: THE CONCEPTS AND THE RATIONALE

freight flows on regional, national or international levels, using freight flow matrices and characteristics ofthe transport network. A micro-approach analyses transport chains at the firm level, using information on
the behaviour of individual companies, and the key determinants for their choices on logistic solutions andtransport modes, such as cost, reliability and transport time. Such models could be qualitative or
quantitative and can differ with respect to the transport modes that are covered. Road and rail transport
being the most extensively studied modes. Despite various methods of available analysis two models aremost common for analysing mode choice in freight transport: case studies at the firm level and freighttransport network models in which behaviour is econometrically estimated.
Case studies survey the preferences of individual firms. These preferences can be used to estimate modal
elasticities and cross-elasticities that indicate the extent to which the utilisation of one transport mode(e.g. road transport) changes due to changes in the price of another transport mode (say rail). Modal
elasticities are the sensitivity of the utilisation of a transport mode to changes in its price and can be used
to predict modal shift. The range of cross-elasticities found in the literature is wide and values are locationspecific.
Freight transport network models usually start with modelling economic processes, such as production,
consumption and trade. Based on these economic estimations, these models then use four steps related
to flows of freight:•

trip generation: the flow to be generated•

trip distribution: distribution of goods•

mode choice: the transport mode used•route assignment: the transport networks used.

This four-step model often needs additional steps to transform trade flows in monetary units to physicalflows of goods in tonnes and then further into vehicle flows with specific vehicle utilisation factors. In past
decades, the modelling of freight transport demand has evolved significantly, from the use of aggregate
models based on global data of shippers and shipments, to the use of more sophisticated disaggregatedmodels taking into account individual firm-level data. Recently, freight transport models have integrated
logistics-behavioural modelling in order to increase policy sensitivity and realism (De Jong et al., 2013).
Several challenges to mode choice remain despite considerable efforts to improve analytical approaches.
These challenges – not unique to freight transport modelling – are related to the fact that neither thedecision makers of mode choice, nor the transport modellers, have comprehensive information on prices
and performance of transport providers in different modes. Even if available, many freight logistics
decision makers would not dispose of the analytical tools to utilise such comprehensive information wereit available. There is systemic inertia and path dependency that sustains certain past choices, which makeschanging more challenging. Additionally, switching from one mode to another – or even switching carriers
within the same mode – can be costly if contracts need to be broken, or new information-sharing
arrangements need to be put in place.

Who influences the choice of freight transport modes?
Many actors have an impact on mode choice in freight transport. The private parties that constitute thedemand and supply on freight transport markets are the main influencers:

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MODE CHOICE: THE CONCEPTS AND THE RATIONALE•

Shippers generate demand for freight transportation as they are the senders or recipients of thegoods. They plan shipments to satisfy their customers and define how their freight should be
moved. Thus, they formulate their logistics strategy, which may include intermodal transport.
They can organise their freight transport themselves, or outsource this to logistics service
providers.

•

Logistics service providers (including freight transport forwarders) undertake various logistics
tasks within an intermodal transportation system. They provide a range of value-added logistics
services, such as warehousing, distribution, shipping, inventory management, co-packing,labelling, repacking, weighing, and quality control. They can also act as intermediaries for shippers
with respect to both domestic and international intermodal transportation activities, also
referred to as integrators. Shippers often outsource logistics activities in order to focus on theircore businesses and benefit from the expertise of logistics providers.

•

Carriers are the transport operators or transport companies that perform the transport for the
shippers or logistics service providers. Some carriers operate dedicated services, in which avehicle or container serves a single customer. Others operate on the basis of consolidation, in
which each vehicle or container may contain different customers’ freight with different origins or
eventual destinations.

In addition, there are the actors that influence the conditions for private firms:•

Infrastructure managers may be public entities, private entities or hybrid entities. They deal withthe management of the physical network and infrastructure, including roads and highways, therail infrastructure, intermodal port terminals, and so on. Thus, they play a central role byproviding efficient physical networks and the necessary technology to control and optimise theuse of infrastructure and facilities.

•

Policy makers, that is governments and public administrations who tax, give incentives, set up
policies, and regulate transport activities. Policy makers also address externalities related totransport. That is, the effects on others than the direct transport users that are not taken into
account in the price of transport. Policy makers frequently aim to guide the transport and logistics
system towards being more beneficial to society and resilient ways of operation. For example, ,the usage of specific corridors or vehicle and motorisation types, mode changes from road-based
to water- and rail-based transportation, the reduction of externalities, the consideration ofenvironmental impacts, etc.. National governments as well as transnational institutions such as
the European Commission are included in this class of actors.

It is the interaction between these actors that determines the mode choice in freight transport but theliterature generally considers that shippers, and logistics service providers play a dominant role in thischoice. There are, however, several reservations to be made here.
First, the choice of the preferred transport mode is often part of a larger decision-making process that
includes other factors, such as supply chain strategies. The choice of transport modes is often derived fromthese other issues.
Second, although the subject of this report is mode choice, the actual choice for shippers and logistics
providers is often between different logistics solutions that comprise several modes. Sometimes, one leg
is served by several modes in parallel (synchro-modality). In this situation, modal combinations andoperational schedules could be changed after the shipment is on the way, in response to new information.
Transport chains are frequently constituted by several modes, which is then defined as multimodality,

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MODE CHOICE: THE CONCEPTS AND THE RATIONALE

inter-modality and combined transport. Containerisation of freight transport has increased the possibilities
of intermodal transport as it has reduced the time and costs of transferring cargo from one transport modeto another.
Third, in some freight-transport sectors the power of decision might be shifting from shippers to carriers,
due to increased market power and vertical integration. Vertically integrated carriers will give priority to
infrastructure or modes that they operate themselves. For example, container-shipping companies arealso active in port-terminal handling and trucking: they will prefer to use their own port terminals thatmight not have rail connections and give priority to their own trucking services. Market power in containershipping could give them the possibility to impose a certain bundle of transport modes that would notnecessarily be in line with the preferred combination of the shipper.

What are crucial determinants for freight transport mode choice
Freight transport could be considered an interlinked set of markets – the interplay of demand andsupply – embedded in regulatory frameworks and other policy instruments (e.g. infrastructure fees andtaxes). These instruments constrain to a more or lesser extent the market; they take certain public
objectives into account that can make modal shift possible. The following three elements – the demand ofshippers, the supply of transport infrastructure and the regulatory framework – constitute the main
determinants for freight transport mode choice (Figure 1). The section below describes these three
determinants.
Figure 1. The main determinants for freight transport mode choice

Demand of shippers

A huge number of studies deal with the criteria that shippers or their intermediaries – like freight
forwarders – take into account when choosing their transport mode. Independently of who has conducted

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the studies, costs, transit time, and reliability have been found to play the most important role in transportmode choice.
SupplyWhile shippers have a set of criteria for the transport services they prefer, the extent to which these could
be realised depends on geography, which is fixed in the long term, and the infrastructure supply whichcannot be changed in the short term but that could be influenced by government policies.
Policy instruments

Modal shift in freight transport is a policy goal to achieve high-level policy objectives, such asenvironmental sustainability, connectivity and safety. Modal goals often are expressed in a target for thedesired modal split or modal shift. In this report policy interventions are classified according to the main
determinants that are important for shippers when deciding on mode choice: costs, transit time, reliability
and frequency. A central question in that analysis will be the extent to which the policy instruments
manage to influence these determinants. It is important for policy makers to assess the extent to which
policy instruments manage to promote connectivity, environmental sustainability, safety and economic
development in a cost-effective way. The different institutional contexts that these policies are
implemented in – for example the responsibilities of different levels of government – must be considered,as they could explain why certain policies work in some countries but not in others. It could help todetermine under which conditions policy interventions should be considered.

Different characteristics
Whereas the previous sections have set out determinants for mode choice generically, the final choicemade is highly dependent on the specific characteristics of the cargo and cargo flow; the maindifferentiators.
The main characteristics that need to be differentiated here are:•the distance between origin and destination•

the commodity type•shipment size and•the profile of the decision-makers on mode choice.

Possible game-changers for freight transport
The merits of the various transport modes for both transport users, and society as a whole, are not static,
but in continuous flux due to new developments that make some modes more and others less attractive.
Policy instruments, can stimulate such developments, for example via support for innovation, creating newmarkets and transitions towards uptake of alternative fuels. Such measures that policy makers can takeform the focus of this report, but new developments can obviously also take place without government
intervention, instead driven by market forces, research and other societal forces. In the final chapter, thisreport explores a few of these possible future developments that might act as game changers with regards
to mode choice in freight transport.
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MODAL SPLIT AND ITS DETERMINANTS

Modal split and its determinants
This chapter gives an overview of official statistics on the freight modal split and data sources on its
performance. Existing modal-share data show that in most ITF countries road transport is the predominant freight transport mode, and that this share has considerably grown over the last four decades.
The chapter provides findings of the different transport modes with regards to costs, transport time,
reliability and service frequency, as well as performance of transport modes on environmental
sustainability, alleviation of congestion, safety and reduction of other external costs.

Modal split in freight transport
Modal split figures are usually expressed in tonne-kilometres. Other, but less frequently used indicators
are based on tonnes of goods or value of goods. These are less frequently used because they do not
express the extent of transport activity in a certain mode: there clearly is a difference between transportinga tonne of crude oil over 10 kilometres or 200 kilometres. This analysis expresses freight flows in tonnekilometres, but will also contrast with the modal split when focusing on tonnes. The domestic transport
flows being considered are inland transport modes – via road, rail and inland waterways – and also coastal
shipping and pipelines. As such, it is different from many overviews of modal splits in freight transport thatare traditionally focused on inland transport, e.g. the modal-split statistics of the European Commission.
Our data source are ITF data, as collected from national transport authorities.
Road transport has the highest share of freight mode in most ITF countries. The ITF statistics databaseconsists of 51 ITF countries which have recent and complete data on freight transport modes. Road
transport currently represents approximately 40% of the tonne-kilometres transported in these 51 ITF
countries, a significantly larger modal share than freight transport via rail (24%), coastal shipping (16%),inland waterways (13%) and pipelines (7%).
In 37 out of these 51 countries, road transport is the predominant mode; in 35 of these countries roadtransport represents more than 50% in the modal split (Figure 2). In only 14 out of 51 ITF countries is a
non-road transport mode the dominant transport mode. Rail transport is the next most widely used,predominantly in a few Eastern European countries, the Russian Federation, Australia and Canada (Table1). These last three countries all have vast land surfaces; these large distances are generally morefavourable to rail transport. Eastern European countries generally have a legacy of freight rail transport,
dating back to Soviet times when these countries where highly interconnected to and acting as gateways
to the Soviet economy. Inland waterways represent the highest modal share in the Netherlands, coastal
shipping in Norway and Japan and pipelines in Azerbaijan, Armenia and Belarus, but these are relatively
rare cases.
The dominance of road freight transport is expressed even more clearly when calculations of modal sharesare based on tonnes transported (and not on tonne-kilometres). This comparison cannot be made for all
the countries that were covered in Figure 2 as the relevant data were not publicly available, but for thecountries where this could be done (Figure 3), the road share is almost always higher when calculations
are based on tonnes and not tonne-kilometres. This reflects that distances travelled via road are almost
always shorter than those by rail, inland waterways and coastal shipping. In Austria, Slovenia, Sweden and
Finland the average distance per tonne transported via rail is considerably higher than via road. In Norway
and Italy the average distance transported via short sea shipping (SSS) is considerably higher than road.

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MODAL SPLIT AND ITS DETERMINANTS

Figure 2. Modal split shares in freight transport in 51 ITF countries
in tonne-kilometres

Note: data are presented for the most recent year for which data are available. For most countries this is 2019,with the exception of China, Denmark, Iceland, Korea, Spain, Switzerland, United Kingdom, United States (all2018), Armenia, India, Montenegro (2017), Australia, (2016), Canada (2015), Albania (2013) and Belgium(2011).
Source: ITF statistical database and Eurostat (PIPE_GO).

Figure 3. Modal split shares in freight transport in 51 ITF countries in 2019
in tonnes

Note: data are presented for the most recent year for which data are available.
Source: ITF statistical database and Eurostat database (MAR_SG_AM_CW, PIPE_GO_TON, IWW_GO_ATYGO).

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Rail modal shares hold a relatively higher level in containerised transport (Figure 4). In most of theEuropean countries examined, the ratio of road compared to rail and inland waterway transport is lower
for containerised transport than for non-containerised transport. Thus, rail and inland water transport aremodes that are attractive for transporting containers in most European countries. The main exceptions tothis are Sweden, Finland, Estonia and Latvia where freight trains are predominantly used for transporting
bulk goods. Some of the countries in Figure 4, such as Sweden, also have a relatively large share ofcontainerised coastal shipping.
Figure 4. Modal split in containerised freight transport in European countries in 2019
in tonne-kilometres

In the People’s Republic of China, around one-third of the freight transport is done by road, a quarter byinland waterways, another quarter by coastal shipping and around 14% by rail (Figure 5). In comparison,
freight transport in the United States is dominated by two modes – road and rail – that together represent
78% of the tonne-kilometres of freight transport. Freight transport within EU countries, another big market
for freight, is dominated by road transport, representing 70% of the freight transport modal split.

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Table 1. Countries with predominantly non-road freight transport modes
Freight transport mode

Countries

Modal share

Rail

Georgia

81%

Ukraine70%

Slovenia

70%

Montenegro

62%

Russian Federation

60%

Australia

56%

Latvia48%

Canada46%

Azerbaijan

68%

Armenia

68%

Belarus41%

Norway

44%

Japan

42%

Netherlands

46%

Pipelines

Coastal shipping

Inland waterways

Note: data are presented for the most recent year for which data are available. For most countries this is 2019,with the exception of Armenia, Montenegro (2017), Australia, (2016) and Canada (2015).

Figure 5. Modal split shares in freight transport in China, United States and the European Union in 2018

The modal share of road freight transport has increased steadily from 25% in 1980 to 40% in 2017 (Figure6). Looking at individual countries, there is a clear trend of an increasing road freight share in 44 out of 51
countries. In three countries, this trend has remained stable since 1980: Belarus, Denmark and Portugal.
Only two countries show a declining modal share of road transport over 1980-2019: Slovenia and Italy,
and then Montenegro since 2001.

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Figure 6. Modal split shares in freight transport in 51 ITF countries over 1980-2017
in tonne-kilometres

Modal shifts to non-road modes are rare. Between 1980-2019, Slovenia shifted from road to rail and Italy
from road to coastal shipping (Table 2). Over that same period, there were five countries that witnessed ashift from one non-road mode to another non-road mode, namely rail to inland water transport (Romania
and China), coastal shipping to rail (United States and Australia) and rail to coastal shipping (Turkey). Morechanges in modal splits are taking place when reviewing shorter time periods. For example, between
2003-19 Austria managed a change in modal split from road to rail, returning its rail usage to its share from1980 even if rail did not become the dominant mode (Figure 7). Montenegro has managed a change inmodal split from road to rail since 2001. Policy interventions in these countries are at least partly
responsible for these changes in modal split, which will be described in the next chapter.
Table 2. Modal shifts in 51 ITF countries, 1980-2019
Which modal shift?

Countries

Modal shift development over 1980-2019

Road to rail

Slovenia

Rail (from 50% to 70%); road (from 50% to 30%)Road to coastal shipping

Italy

Coastal shipping (from 17% to 30%); road (from 66% to 56%)

Rail to inland water transport

Romania

Inland water transport (from 2% to 16%), rail (from 68% to
15%)

China

Inland water transport (from 13% to 23%), rail (from 49% to
14%)Coastal shipping to rail

Rail to coastal shipping

United States

Rail (from 25% to 35%); coastal shipping (from 17% to 4%)

Australia

Rail (from 29% to 56%); coastal shipping (from 48% to 15%)

TurkeyCoastal shipping (from 0% to 6%); rail (from 9% to 4%)

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Figure 7. Modal shift in Austria, 2000-19

Determinants of mode choice
Freight transport costs

Cost models exist for each individual freight transport mode. These models give insight to the costs of atypical transport vehicle in various typical situations. For example, the maritime consultancy Drewry
releases an annual publication on operational costs in maritime transport that make it possible to assess
the costs for a selection of ship types, sizes and ages under different circumstances. Such publications
show that the annual operating costs of a container ship likely to be used in coastal shipping is
USD 1.6 million, per year. Similar publications exist for other transport modes. Another approach of
estimating transport costs is to assess the prices of transport services. Transport costs (for the transport
provider) and transport prices (for the transport users) differ but correlate, and prices are often used as aproxy for costs. Transport prices are expressed in freight rates for typical corridors that can be public,
although many contractual rates between transporters and their clients are not publicly available. Some
organisations have the ambition to provide comprehensive and detailed overviews of freight transport
costs per corridor, commodity and transport mode, but do not yet exist, as far as known. A recent example
of such an ambition is the Global Transport Costs dataset for International Trade, developed by UNCTAD
and the World Bank.
A variety of case studies exist that give insight to the costs of different transport modes. It is prudent not
to generalise, however, it is possible to note that road freight transport is often the least expensive
transport mode over short distances. The economic business models for rail freight transport and inland
waterways only works with large volumes and massification of cargo. When such a large and stable volume

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for both fronthauls and backhauls does not exist, it is difficult for transport operators to make a non-road
service viable (Woroniuk et al., 2013; Zunder et al., 2012).
Road freight transport is a competitive market with fairly limited concentration. This is different in rail
freight transport where market competition is imperfect and characterised by oligopolies, in many cases
also monopolies, despite decades of policy efforts aimed at liberalisation (Crozet, 2017). In coastal
shipping, many countries protect their national operators via cabotage restrictions. This limitedcompetition could also explain, in part, the higher costs of certain non-road modes in certain countries,
especially in countries where economic regulation of the freight transport sector is insufficient (Schmidt,
2001; Betarelli et al., 2020).
Instead of focusing on freight transport costs per mode, various researchers have focused on total logistics
costs. The central idea here is that the freight mode choice process is characterised by a trade-off between
transportation costs and inventory costs (Baumol and Vinod, 1970). Faster and more reliable transportmodes might be more expensive, but they could also reduce the inventory costs of the shipper. Thisapproach considers more mode choice determinants than simply transport costs. For example, transit timeis acknowledged when calculating the costs of inventory in-transit and costs of safety stocks, and reliabilityof a transport mode is also expressed via the costs of the safety stock (Blauwens et al., 2006). These
approaches have been used to provide comparisons of different mode choices on freight transport
corridors.
The relevance of transport costs and prices can be determined by assessing elasticities. Such elasticities
express the changes in demand for a transport mode (e.g. road transport) if the price of that modechanges. Cross-elasticities indicate the changes in demand for a transport mode (e.g. road transport) if theprice of another transport mode (e.g. rail transport) changes. Negative price elasticities lower than minus
one (an absolute value larger than one) means that a price increase leads to a decrease in demand. Positive
cross-elasticity higher than one means that the price increase in one mode (e.g. road) results in moredemand for another mode (e.g. rail), so a positive cross-elasticity generally also indicates that these modes
compete with each other.
Many studies focus on multimodal freight transport price elasticities, in particular for road and rail freighttransport. Methodological choices and data can influence estimates of transport demand elasticities thatmight be sources of biases. For example, Oum (1989) finds that trucking price elasticities range
from -0.69 to -1.34 depending on the methodological specifications. Moreover, elasticities differ per
country, commodity, market structure and transport volumes, so they cannot always easily be comparedor generalised (Beuthe, Jourquin and Urbain, 2014). Table 3 provides an overview of the price elasticities
as found in the literature. A summary of these findings is provided in Table 4.
Table 3. Studies on price-demand elasticities for freight transport modes
Study

Road

Rail

Waterways

Oum (1979a)

-0.16

-0.29

-0.74

Lewis and Widup (1982)-0.52 to -0.67-0.92 to -1.02

Beuthe and Nouillet (1992)

-0.26

-0.11

Lenormand (2002)-0.26 to -0.48-0.41 to -0.93

Levin (1978)-0.51-0.25 to -0.35

Oum (1979b)-0.33 to -1.07-0.39 to -1.20

Friedlaender and Spady (1980)-0.14 to -1.72-1.45 to -4.01

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Study

Road

Rail

Waterways

Friedlaender and Spady (1981)-0.83 to -1.81-0.37 to -1.16

Kim (1987)-0.10 to -1.24-0.12 to -1.73

Oum (1989)-0.65 to – 0.69

-0.54 to -0.60

De Jong (2003)-0.40 to -1.01-1.40 to -3.87

Rich et al. (2011)-0.01 to -0.28-0.10 to -0.40

Beuthe et al. (2001)

0.00 to -4.50

0.06 to -4.42

Winston (1981)-0.04 to -2.97-0.08 to -2.68

MacFadden et al. (1985)

-0.75

-1.16

Inaba and Walace (1989)-0.25 to -0.92-0.04 to -0.99

Abdelwahab (1998)-0.75 to -2.19-0.91 to -2.49

Marzano and Papola (2004)-0.01 to -0.02-0.78 to -1.35

Garcia-Menendez et al. (2004)-0.32 to -0.49

De Jong and Johnson (2009)

-0.03

-0.13

-0.073 (short sea shipping)

Windisch (2009)

0 to -1.43-0.68 to -3.18-0.84 to -2.78 (Short sea)

-0.04 to -11.7

Stratec (2010)-0.56 to -4.74

Arencibia et al. (2015)-1.53 to -1.79

Source: Beuthe, Jourquin and Urbain (2014).

Table 4. Overview of price-demand cross-elasticities for freight transport modes
Cost

DemandRoad

Rail

Inland waterways

Short sea shippingRoad

0 to -1.2

0.4 to 1.7

0.3 to 0.9

0.2 to 1.1Rail

0.1 to 0.5

0 to -1.6

0.2 to 0.8

0 to 0.3

Inland waterways

0.1

0.2 to 0.9-0.4 to -1.3

Short sea shipping

0.1 to 0.3

0 to -1.8

Source: Vierth et al., (2017); Merkel et al., (2021).

The picture that emerges from the analysis of price elasticities of freight transport modes is mixed anddepends on the aggregation level. The more aggregated the data, the more inelastic values are found. On
the other hand, individual data models tend to exhibit a wider range of estimates and frequent cases ofelastic demands (Beuthe et al., 2014). Most aggregated time series analyses from countries find inelastic
demand, whereas there is a larger range of elasticity values and higher elasticities in studies based on
disaggregated individual shipment data.
There is a tendency for rail elasticities to be higher than for road freight transport, for which many casesof inelastic demand are found. There are only a few estimated elasticities for inland waterways and short
sea shipping (SSS); so the values in the Table 4 are probably specific to local market circumstances anddifficult to generalise. Road transport demand is more price sensitive on longer distances, whereas rail andwaterborne transport are more price sensitive on shorter distances. Road transport demand is also more
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price sensitive for heavy bulks, for which alternative modes compete more intensely. Rail and inland watertransport are more price sensitive for time-sensitive goods, such as agricultural products and food (Vierth
et al., 2017)
Cross-price elasticities have lower absolute values than own-price elasticities. This means that the demand
for a transport mode tends to respond more to a percentage change in its own price than to the same
percentage change in the price of a competing mode. However, there are differences between transportmodes. The demand for rail, inland waterway transport and coastal shipping are relatively responsive tochanges in the price associated with road transport. This is not the case the other way around: the demand
for road transport is insensitive to the cost of the alternative freight transport modes. One explanation forthis could be that trucks are considered to have a comparative advantage in service quality that is
sufficiently high to off-set any price cuts of competing modes (Vierth et al., 2017).
Transit times, reliability, service frequency

Rapid transit times are of importance for shippers of time-sensitive goods. These include perishable goods(such as fresh food), goods that rapidly lose market value over time (such as fashion and computercomponents) and goods where urgent delivery is required, such as Covid-masks and replacement parts.
These goods are often transported by the more rapid transport modes, such as aviation and roadtransport. Rail transport and sea transport are generally slower transport modes, used for goods that areless time-sensitive. However, much depends on local circumstances. High-speed freight trains have been
established in China that compete with short-haul aviation, the Asia-Europe rail connection is more
expensive but faster than maritime transport, for goods where faster transit times are advantageous. In
shipping, the average speed is lower than what could be offered to clients, but high-speed ocean transport
services with price premium have generally not found enough interest in the market. For the shorter
distances, intermodal transport is often not competitive due to considerably longer transit times incomparison to road transport. Investments in infrastructure and intermodal capacity can help in reducingthat gap in attractiveness.
Reliability of transport services is of great importance for shippers that deploy just-in-time supply chain
strategies. Transport delays will translate quickly into disruptions in the production or sales process.
Recurrent problems in reliability will mean that shippers must increase their buffer inventory capacity,which will increase their inventory costs. Reliability is all the more important in case of limited-service
frequency, as this means that the costs of unreliable transport are larger. For this reason, service frequency
is often considered one of the most important mode-choice criteria for shippers, as it provides them withthe possibility to limit or catch up with transport delays. In addition to reliability and service frequency,
shippers also value certain transport modes – such as road transport – that provide the flexibility tocircumvent delays or congestion, e.g. by using alternative routes.
Other criteria that shippers consider important, depending on commodity types, regions and markets are:service quality, flexibility, security, sustainability and marketing value. Service quality could refer to many
attributes of the transport service, e.g. transparent communication, possibilities for tracking and tracing
cargo, service help-desks, and guaranteed stable conditions for certain types of cargo, such as refrigerated
cargo. The transport of high-value goods and dangerous goods requires more security – e.g. less accidents,
lower lost cargo rates – that cannot always be guaranteed by all transport modes. In terms ofsustainability, there is increasing pressure on firms, especially producers and sellers of consumer goods,
to reduce the environmental and carbon footprint of their logistics supply chains. Carriers are also
confronted with increased scrutiny of their environmental impacts, for example with regards to pollution,
land use and climate change. Virtuous behaviour in this respect could boost the brand value of the firm.

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As for transport costs, it is possible to express these service attributes into elasticities. The elasticities areinterpreted as the effect on mode substitution holding total transport demand constant. They reflect thechanges in demand for that transport mode if one of its own attributes (e.g. transport time) changes.
Table 5 provides elasticities for transport time, service frequency, reliability (delay time) and damage risk,
based on an overview study by Vierth et al. (2017). The values in the table represent the full range of
estimates found in the literature. As there is only a limited number of studies expressing these service
attributes into elasticities the results should be interpreted with caution.
Table 5. Demand elasticities for freight transport modes
Road

Rail

Coastal shipping

Transport time

0 to -0.9-0.3 to -1.3

0 to -0.8

Service frequency

0.1 to 0.2

0.1 to 0.2

0.1 to 0.2

Delay time

-0.2 to -0.5

-0.1 to -0.4

-0.1 to -0.4

Damage risk

-0.2

-1.9 to -3.4

Source: Vierth et al. 2017, based on Garcia-Menendez et al. 2004; Arencibia et al. 2015; Bergantino et al. 2013;
Román et al. 2016; de Jong, 2003; Rich et al. 2009; Johnson and de Jong, 2011; Johnson and de Jong 2011;
Bühler and Jochem 2008; Vierth et al. 2014; Feo et al. 2011

Across all transport modes, elasticities for transport time, delay time and damage risk are negative, whichmeans that the demand for these modes decreases when their transport time, delay time or risk of damage
increases. In contrast, the sign of the impact of service frequency is positive. This means that eachtransport mode is more likely to be chosen when it offers more departures per time unit.
There are also some differences between transport modes. Demand for road transports seems to be lesstime sensitive compared to the other modes. Although the average values in Table 5 overlap, demand forroad is consistently less elastic than demand for the other modes when estimates from the same study arecompared (Vierth et al., 2017). The responsiveness to the other variables is similar across the transportmodes, although demand for coastal shipping stands out as being more sensitive to the damage risk.
Road transport is in many cases well aligned to demands of shippers in terms of reliability, flexibility,
accessibility and shipment size. Rail freight is often cheaper per transported tonne, but it can also create
additional costs in logistics systems of shippers. Substituting road transport by rail transport is often
challenging: for example, rail transport is attractive mostly for bulk commodities over long distances
providing economies of scale, while the trucking demand is for short distances.
Infrastructure and superstructure

Transport infrastructure can be categorised into nodal infrastructure and modal infrastructure. –. Nodal
infrastructure brings transport flows together and includes terminals, ports, airports and dry ports. Modal
infrastructure is needed for transport modes to function, connects transport nodes, and includes roads,
railroads, inland waterways and fairways.
The quality of infrastructure networks is determined by how modal and nodal infrastructures are linked
together. The possibilities of mode shift are often dependent on how well nodes are connected to modal
infrastructure. For example, ports without on-dock railway connections or barge terminals will haveconsiderably more difficulties shifting port hinterland cargo from truck to train or barge than ports thathave such connections. More links between nodal and modal infrastructure increase the possibilities ofintermodality. The costs to use the modal and nodal infrastructure are reflected in the price of transport.
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Infrastructure managers can apply different strategies to make sure that infrastructure costs are coveredby transport users.
The services connected to transport infrastructure are a crucial element in effective transport networks.
This means, the flows of transport vehicles utilising the infrastructure. The more services connected to an
infrastructure, the more attractive it can become, as connectivity is a major attractor of more services,
especially in the case of hub-and-spoke transport networks. This is also the case for value added services
in nodal infrastructures, such as storage space, refuelling, recharging points, repair facilities and transport
service providers. Transport services benefit from proximity and institutional arrangements that facilitate
co-ordination and reduction of transaction costs.
The availability of infrastructure is not sufficient for mode shift. The extent to which infrastructure isaligned to the characteristics of the different transport modes is crucial. For example, whether road andrail infrastructures are designed in such a way that road and rail transport could substitute for one another,
if needed. In some cases, the lack of appropriate infrastructure is not prohibitive, but will lead to longer
handling times, and therefore higher transport costs. Terminal structure and costs for loading andunloading inside the terminals are also crucial for the possibilities of multi- and intermodality.
The possibilities of mode choice are delimited by geography. Island states will be more dependent onshipping, countries without navigable rivers cannot realistically aspire to develop inland waterway
transport. Mountains could constrain the possibilities of road or rail transport, but various countries (e.g.
Switzerland) have found ways to work around these constraints. Differing geographical characteristics
often inhibit best practices in modal-shift policies from being applied universally across countries. The
economic structure of a country is also, to a significant extent, determined by geography and drives theneed for easily available and high quality infrastructure and transport services. Shippers can decide to
relocate due to high-transport costs if policy does not mitigate geographical constraints.
Environmental sustainability

There are many environmental factors to consider when electing mode choice to create sustainable supply
chains. This report focuses on greenhouse gas-emissions, local air pollution and noise pollution. The
emissions –of different freight transport modes, such as CO2 and local air emissions, can be assessed byexpressing them in grammes of emissions per tonne-kilometre. This can be done conceptually and via realcases. A conceptual assessment usually calculates emissions of different vehicle types, considering theenergy efficiency of engines and the emission factors of the fuel used and relates these to the averagetonne-kilometres transported by these vehicles. It is conceptual in the sense that it defines typicaltransport vehicles in each mode and makes certain assumptions about load factors of fronthauls andbackhauls. Case studies usually calculate the actual emissions on certain corridors, considering actual
emissions and loads. The difference between conceptual modelling and case studies is not trivial, as fuelconsumption of vehicles – and hence emissions – is very sensitive to vehicle-load factors. Industry
representatives promoting the green credentials of their mode sometimes base the calculations for theirmode on high levels of utilisation, while using average-load data for competing modes (McKinnon, 2014).
Greenhouse gas emissions can be assessed for transport operations, but also for upstream emissions.
Emissions from transport operations, or gas emissions, are also called tank-to-wheel (TTW) emissions.
Upstream emissions are those associated with fuel extraction, production and transport and electricity
production and transmission, also called well-to-tank (WTT) emissions. Adding tank-to-wheel and well-totank emissions creates well-to-wheel (WTW) emissions, which gives the most comprehensive overview oftransport emissions. This report focuses on CO2 emissions for the assessment of greenhouse emissions.

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Table 6 presents a selection of studies on the CO2 emissions per tonne-kilometre for the different transportmodes. A graphic representation of these findings (Figure 8) shows that the transport mode with thehighest CO2 emissions per tonne-kilometre is road transport and that rail and inland waterway transport
are emitting less CO2. There is a large range of values for SSS, indicating that its emissions per tonnekilometre are highly sensitive to assumptions on load factors. Various authors concluded that cleaner fuelsin road haulage and improving the truck emissions-efficiency via innovative technologies might be better
strategies to minimise CO2 emissions in freight transport than deploying SSS (Hjelle, 2010; Hjelle, 2014;
Nealer et al., 2012; Rodrigues et al., 2015; Raza, Svanberg and Wiegmans, 2020).
Variations in local circumstances often explain the differences between the outcomes of the studies. For
example, the relatively low CO2 emissions found for trucks in Johansson, Vierth, and Holmgren (2021) canbe explained by the high share of relatively CO2-efficient 60-tonne truck in that study; and the very low
values for trains in the same study are due to the high level of electrification of railways in Sweden and its
use of “green” electricity.
The energy production from and the production of vehicles and infrastructure all have negativeenvironmental impacts. The most significant effect are the greenhouse gas emissions due to energy
production for the transport sector: the well-to-tank emissions. Those well-to tank emissions are more orless similar for the different modes: 0.20 euro-cents per tonne-kilometre for heavy goods vehicles,
between 0.14 and 0.16 for freight trains and 0.13 for inland waterway vessels (CE Delft, 2020). In terms ofthe costs of emissions from production of vehicles and infrastructure, a study on Germany showed that in2016 these costs were forty to one hundred times higher per vehicle-km for a freight train than for a truck(UBA, 2019).
Table 6. CO2 emissions for different transport modes
in grammes per tonne-kilometre
Truck

Rail

IWT

SSS

88-256

12

24-38

22

60-190

18-21

17-34

65

2

180 (gas), 16
(oil)
29

14
55-124

Pipeline

PeriodPlace

Calculation

Source2020

Netherlands

WTW

CE Delft (2021)

2002

United States

WTW

Nealer et al. (2014)2017

SwedenTTW

Johansson, Vierth,and Holmgren(2021)

2018

World

IEA-UIC (2017)80

Hjelle 2014

101

Leonardi and
Browne (2010)11

IMO (2009)

The air pollution costs of the different freight transport modes have been relatively well studied. The
emission of air pollutants can lead to: negative health effects, damages to buildings and material damages
and loss of crops and biodiversity. The inhalation of air pollutants leads to a higher risk of respiratory andcardiovascular diseases, such as bronchitis, asthma and lung cancer. These negative health effects lead to
medical treatment costs, production loss at work due to illness and, in some cases, to death. Air pollutants
can lead to pollution of building surfaces through particles and dust, and to damage of building facades
and materials due to corrosion processes, caused by acidic substances. An increased concentration of
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ozone and other substances can lead to lower crop yields. Air pollutants can directly damage ecosystems,
including the acidification of soil, precipitation and water and the eutrophication of ecosystems. Damages
to ecosystems can lead to a decrease in biodiversity.
Figure 8. Range of values on CO2 emissions for different transport modes
in grammes per tonne-kilometre

Note: the blue symbol indicates the lowest value found in the literature; the orange symbol the highest value
found in the literature. Source: own elaborations based on CE Delft 2021; Nealer, Matthews, Henrickson 2014;
Johansson, Vierth, and Holmgren 2021; Hjelle 2014; Leonardi & Browne 2010 ; IMO 2009

Air pollution costs in road freight transport are much higher than in other freight transport modes. The
total external costs related to air pollution for the EU-28 is EUR 29.4 billion for road freight transport,
EUR 1.9 billion for inland waterway vessels and EUR 0.7 billion for freight trains. In relative terms, things
are more nuanced. Road freight transport with heavy goods vehicles generates air pollution costs of
EUR 0.76 per tonne-kilometre on average in EU-28-countries, which is slightly higher than the score fordiesel freight trains (EUR 0.68) and considerably higher than the score for electric freight trains(EUR 0.004). However, inland waterway vessels generate more air pollution costs than heavy-duty
vehicles, namely EUR 1.29 per tonne-kilometre (CE Delft, 2020).
Traffic noise, in particular prolonged exposure to traffic on busy roads, can create significant costs. Suchcosts are mostly health care costs, as prolonged exposure to traffic noise has been linked with increased
chance of heart disease, strokes, dementia and hypertension. The external costs related to traffic noise
range from EUR 0.4 to EUR 1.2 per tonne-kilometre for heavy goods vehicles on average inEU-28-countries, and EUR 0.4 to EUR 0.6 for freight trains (CE Delft, 2020). Noise costs for inland waterway
transport and maritime transport, however, are negligible as they usually take place in sparsely populatedareas and the noise emission factors for those transport modes are relatively low.
Figures like these should be treated with caution. They cannot really be used for intermodal comparison.
Modes can only be properly compared in specific cases, with due allowance being made for the distances
travelled by the respective modes and the up- and downstream transport involved in getting from origin
to destination. This is why many studies compare different multimodal options for the same transport
corridor. Many studies indicate that SSS does not perform better than road transport on emissions per

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tonne-kilometre: due to factors such as high-fuel consumption and lower load factor, intermodal SSS
generates more emissions, at least in the scenarios analysed, per tonne-kilometre than road haulage(Hjelle, 2010; Hjelle, 2011; Corbett et al., 2007; Hjelle, 2014).
Congestion

Congestion refers to a condition where vehicles are delayed when travelling. The costs of congestion aredetermined by the travel time lost in comparison to a situation of flee flowing traffic. For scheduled modes,
like rail, the cost of congestion depends on two factors: the extent to which one scheduled service delays
another and the extent to which the presence of a scheduled service prevents another scheduled service
from operating. The estimated costs of road congestion for heavy goods vehicles in EU countries are
EUR 23.8 billion per year. This represents EUR 1.30 per tonne-kilometre. The estimated costs of rail
congestion for EU countries is considerably lower, namely on average EUR 0.043 per tonne-kilometre(Christidis and Brons, 2016). In the United States, the estimated scores range from zero to EUR 0.014 per
tonne-kilometre (Austin, 2015). Christidis and Brons (2016) indicate that congestion costs of freighttransport for both inland waterways and SSS can be assumed negligible for EU countries.
Where does safety stand?

Traffic accidents incur various costs: damages to vehicles, production loss, medical costs, administrative
costs and human costs, such as shorter lifetime, suffering, pain and sorrow. Market prices can be used to
calculate material costs, but not for human costs, that are valued based on the Value of Statistical Life
(VSL). There are various ways to classify victims of traffic accidents. A typical classification consists offatalities, serious injuries and slight injuries. A fatality takes place when a person is killed immediately ordies within 30 days as a result of an injury sustained as a result of an accident. A serious injury is when aperson has sustained an injury as a result of the accident and was hospitalised for a period of more than
24 hours. Slight injuries involve a person who sustained an injury as a result of the accident but does not
fall under the definition of serious injury (UNECE, 2011). Another classification system is the AbbreviatedInjury Scale (AIS) commonly used by medical professionals, which has formed the basis for data collection
in EU countries since 2014.
Data on traffic accidents are widely collected for road and rail transport, but more difficult to find for inland
waterways. For example, in Europe, road and rail accident statistics can be extracted from the EU’s
Community Road Accident Database (CARE) and databases from the European Union Agency for Railways(ERA). CE Delft constructed an accident rate based on data from the Dutch Department for Waterways
and Public Works that could be considered a proxy for the risk of inland waterway transport, rather thandata on actual accidents that occurred in the period considered (CE Delft 2020).
Traffic accidents are much more frequent in road freight transport than in any other freight transportmode. As a result, the costs related to traffic accidents are much higher for road transport. According to
CE Delft, the total external costs related to accidents for the EU-28 is EUR 42.8 billion for road freighttransport, EUR 0.3 billion for freight trains and EUR 0.1 for inland waterway vessels. Road freight transportalso has higher external accident costs: these were EUR 6.0 per tonne-kilometre for light commercial
vehicles and EUR 1.3 per tonne-kilometre for heavy goods vehicles, compared to EUR 0.1 per tonnekilometre for both freight trains and inland waterway vessels on average for EU-countries (CE Delft, 2020).
Freight transport vehicles can also be involved in accidents with major impacts on the environment. These
impacts can be particularly severe when the accident affects densely populated areas or areas with unique

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biodiversity. Non-road mode accidents tend to cause the most drastic effects considering their shipment
size and cargo characteristics: high quantities of bulky cargo, sometimes highly inflammable.
External costs

Rail and waterborne freight transport tend to generate less external costs. These modes have lower GHGemissions than truck transport and result in a reduced number of accidents and congestion on roads.
According to recent estimations, external costs in 2016 for heavy trucks, rail, and inland waterway
transport were EUR 4.2, EUR 1.3 and EUR 1.9 per tonne-kilometre, respectively, on average for EUcountries (CE Delft, 2020). In this study of CE Delft, external costs include costs related to accidents, air
pollution, climate, noise, congestion, well-to-tank and habitat damage. However, the external costs of thedifferent transport modes vary, depending on several factors such as load factor, where the transporttakes place, and which energy sources are used to power the transport modes.
Even though the external costs are generally lower for rail freight and inland waterways than for road, thisis not always the case for intermodal transportation (Kaack et al., 2018). For example, Santos et al. (2015)
finds that, internalising external costs can even disadvantage intermodal transport operations, dependingon the length of the road haul. External costs for waterborne transports are not automatically lower thanfor road.
Many of the external costs, described above, are not considered in the price of freight transport.
Government policies often attempt to internalise external costs – for example via infrastructure user
charges, truck tolls, taxation and regulation – or create fairer competition between the modes via subsidies
for positive external effects via modal shifts from road to non-road modes. These policies will be coveredin the next chapter of this report.

Main differentiators
Distance is one of the main differentiators in mode choice between regions. Certain transport modes are
more appropriate for longer distances, and others for shorter distances. Longer distances facilitate
economies of scale, bundling of flows and generate fewer intermodal handling costs (changing from one
mode to another) relative to the total voyage cost. For example, sea and rail transport between Asia andEurope allows for economies of scale and bundling of flows whereas trucks do not. Rail transport within
Europe taking place over longer distances means that intermodal handling costs are smaller in proportion
to total voyage costs. Large cargo volumes make it possible to realise economies of scale in capitalintensive vehicles that would not be appropriate for small volumes. In other words, multi- and intermodaltransport is feasible for short and medium distances if the volume is big and if the drayage distances atorigin and destination are low. Cargo volume is more important than distance for efficient intermodaltransportation (Bouchery and Franssoo, 2015).
Heavy bulky goods, such as coal, grain and gravel, are often transported by rail or water. In the EU-28 theshare of rail and waterways within inland transport is slightly over 20% for all transported goods, but morethan 80% for the transport of coal, crude oil and gas (Figure 9). Oil products and metal ores are othercommodities often transported by non-road modes. However, low-weight goods are frequently shippedby road: in the EU-28 nearly all the furniture, machinery, textiles and food products are transported bytruck. Most high-value goods are relatively low-weight. Shipment mode choice is influenced by thestandards that policy makers and infrastructure holders in a country/corridor impose on truck and rail car
weights. Some commodity groups, such as live animals, fresh food or chemicals, require specialised

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equipment. Shelf life, temperature and humidity requirements, sensitivity to acceleration forces and therisk of accidents can limit the modal choice (Brogan et al., 2013). Commodity type often correlates withshipment sizes and time-sensitivity. Both heavy bulky and the very light high-value goods can beconsidered “captive” cargos that can, in practice, hardly be contested with by other transport modes.
Figure 9. Modal split in freight transport per commodity group in the EU-28, 2019

Equipment and material utilized in the transport of goods

Mail, parcels

Secondary raw materials; municipal wastes and other wastes

Furniture; other manufactured goods n.e.c.

Transport equipment
Machinery and equipment n.e.c.; office machinery and computers; electrical machineryand apparatus n.e.c.; radio, television and communication equipment and apparatus;
medical, precision and optical instruments; watches and clocks
Basic metals; fabricated metal products, except machinery and equipment

Other non metallic mineral products
Chemicals, chemical products, and man-made fibers; rubber and plastic products ;nuclear fuelCoke and refined petroleum products
Wood and products of wood and cork (except furniture); articles of straw and plaiting
materials; pulp, paper and paper products; printed matter and recorded media
Textiles and textile products; leather and leather products

Food products, beverages and tobacco

Metal ores and other mining and quarrying products; peat; uranium and thorium

Coal and lignite; crude petroleum and natural gas

Products of agriculture, hunting, and forestry; fish and other fishing products

Total transported goods

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Road

Rail

Inland waterways

Note: n.e.c. means not elsewhere classified.

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For time-sensitive goods, shippers usually consider road transport to be the most reliable mode. This isdue to its flexibility and ability to avoid congestion by taking alternative routes. Moreover, rail and inland
waterway transport often cannot reach the final destination of the cargo, so is dependent on roadtransport for the last-mile delivery. For just-in-time operations, high-value or high-demand goods, theshipment frequency is also important, as it affects inventory costs.
These specific requirements for different commodity types translate into divergent price elasticities. For
trucking, elasticities are the highest for shipments of heavy bulk cargoes – such as solid fuel, petroleum,iron ore, and scraps – whereas they are very small for food, chemicals, and diverse goods. The reverse istrue for water transport that has the lowest elasticities for heavy bulks for which it has some competitive
advantage. Rail elasticities are more dispersed but show a strong competitive position for metallurgicalproducts (Beuthe et al., 2014).

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Modal shift requires specificgovernment interventions
Government policies have a significant impact on mode choice in freight transport. Various governments
have or are developing explicit modal-shift policies. Other governments do not have explicit targets orpolicies but it is clear that their policies have – intended or unintended – effects on the mode choice intheir countries. This chapter examines both explicit and implicit modal-shift policies. It aims to identify themost common government policies that influence mode choice in freight transport and assess what
existing evaluation studies reveal about their effectiveness.

Modal shift policies and their motivations
Modal shift policies are used to reduce external costs of transport, mitigating GHG emissions, connectivity,
environmental sustainability (such as air pollution and noise), safety and resilience. These different
government policy goals can be complementary but also partly contradictory. Modal shift policies cansometimes also be considered the expression of a trade-off between high-level government policy goals,
for example that of between accessibility and environmental sustainability.
Various countries, including the United States, Japan, and France have formulated modal-shift policies for
freight transport. China formulated a Road to Rail Modal Shift policy in 2016, elaborated in 2018 by theState Council in its Three-Year Action Plan for Advancing Modal Shift (2018-20). Modal shift is one of theobjectives of Sweden’s National Freight Transport Strategy, adopted in 2018. Modal shift in freighttransport has been also a recurrent objective of freight transport policies of the European Union, mostrecently in the EU Sustainable and Smart Mobility Strategy, released in 2020.
Modal shift ambitions are sometimes expressed in targets for the desired modal split or modal shift. Suchtargets often take the form of a desired share of non-road transport in the modal split. The modes mostregularly preferred to road transport are rail, inland waterways and short sea shipping (SSS). An oftencited modal shift target comes from the EU Mobility Strategy, released in 2011 that aims at a 30% modal
shift away from road transport by 2030 and of 50% by 2050. These could be considered aspirationaltargets. The Netherlands has formulated a more specific target to shift 5 million tonnes and 0.7 million
standard containers (TEUs) from road to rail and waterways within the East and Southeast freight corridors
in the Netherlands (IenW, 2019). Frequently, countries have modal shift ambitions included in their freighttransport policies without specifying an explicit target.
The main motivation for governments to formulate modal shift policies appears to be the reduction of
external costs of freight transport. Some countries have translated their modal shift target into expected
GHG reductions. Rail and inland waterway transport are generally considered to be safer transport modes
and preferred for dangerous goods. There might also be regional policy motivations for modal shift, forexample to guarantee minimum service of rail transport in certain regions with low demand.
Even if countries do not have explicit modal shift targets, it is evident that government policies have an
impact on the mode choice. For example, the way in which different transport modes are supported, taxed
and regulated will directly affect their attractiveness to shippers. Choices about public infrastructure
provision will determine the extent to which the different transport modes are competitive options.

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Implicit mode choice polices could have similar – sometimes even larger – effects as explicit modal shift
policies.

Classifying policy instruments
Government interventions on freight transport modes can be classified in different ways. Researchers havecome up with taxonomies of mode choice policies, such as push-and-pull instruments; and infrastructure
and incentives. In this analysis of government interventions, policy interventions are classified according
to the main determinants that are important for shippers when deciding on mode choice: costs, transit
time, and reliability (Table 7).
Table 7. Government policy goals and instruments
Mode choice determinant

Policy goal

Policy instruments

Costs

Bridge cost differences between modes

Subsidies, taxation, charges, pricing andregulating externalities, reducing market barriersInternalising externalities
Transit time

Reduce time loss

Infrastructure, dedicated corridors

Reliability

Better coordination between modes

Digitalisation, information exchange

Flexibility

Interoperability, inter-connectivity

Innovation policy (platforms, management)

Government policies are often motivated by reducing the cost differences between road transport andalternative transport modes. Also to compensate for the fact that external costs are not considered equally
between different transport modes. Policy instruments to realise this objective include subsidies, taxation,
charges, pricing and regulating externalities.
The policy goal on transit time is to reduce time loss, such as waiting times and congestion. The associatedpolicy instruments are infrastructure development and dedicated freight corridors.
Better reliability could be achieved by better co-ordination between modes. The relevant policy
instrument here is information exchange and digitalisation.
More flexibility could be achieved by better interoperability and inter-connectivity between transportmodes. This could be stimulated by innovation policy, e.g. innovation subsidies, terminal innovations,innovations in digital multimodal platforms, multimodal supply chain management.

Subsidies
A subsidy is a monetary transfer from a government to a private or public company active on the market,
with or without conditions for services to render. Subsidies can be justified if they generate positive
external effects or reduce negative external costs, for example because they contribute to lower air
pollution. A firms’ internal costs and external costs due to freight transport should be distinguished, even
if these categories are often interlinked in practice. For example, many subsidies for freight transport aim
to reduce the differences in costs for road transport and the alternative transport modes because thehigher costs (firms’ internal costs) for these alternatives are often considered to be the main barriers fortheir uptake. The reason for the relatively low costs of road transport is the relatively low rate ofinternalisation of the negative external costs of road transport, such as air pollution, greenhouse gas

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emissions and accidents. The negative externalities are lower for rail, inland waterway transport and SSS,
or internalised more significantly. Subsidising these modes is considered a way to level the playing field
between transport modes.
Some subsidy schemes explicitly target a modal shift from road freight to other modes. Examples of modal
shift subsidies for SSS are Italy’s and Sweden’s Eco-bonus programme; Norway has a similar scheme. Longstanding modal shift subsidies to stimulate rail freight can be found in Belgium and Italy (the Ferro-bonus
programme). Such programmes are motivated by the positive externalities of the modal shift, that are
made explicit and that form the basis for the subsidy. In many cases, the difference in marginal externalcosts of freight transport by road and the alternative, forms the basis of the aid. For example, in the
Norwegian scheme the subsidy sum per service is reached by multiplying tonne-kilometres (shifted fromroad to water) with the difference in external costs between road and sea transport. However, theboundary between modal shift subsidies and modal subsidies is not always clear-cut, as many of thesubsidies for rail freight and SSS are justified by the lower negative externalities compared to roadtransport, even if they lack a specific target for modal shift.
Rail seems to be the most frequently subsidised freight transport mode. In Europe alone, subsidies for rail
freight transport – in a variety of different forms – exist in Austria, Denmark, Germany, Italy the
Netherlands and Sweden. Outside Europe, China, Japan and South Korea also subsidise rail freighttransport. Subsidies for inland water transport are granted in the Netherlands, Belgium, Austria, Sweden
and Czech Republic. Countries that have subsidies for SSS are Italy, Sweden, Norway and the United States.
The European Union has subsidy programmes for rail transport, for SSS (Marco Polo, Motorways of theSea) and for inland water transport (NAIADES.
Rail freight subsidies exist for intermodal (containerised) transport and for bulk transport (Single Wagon
Load). Subsidy-bases in the rail freight schemes are often similar and based on an amount per trainkilometre or wagon-kilometre. Some of these subsidies, e.g. Belgium’s, compensate for the additionalcosts of combining freight volumes in intermodal terminals and the additional handling costs related tointermodal transport. In several countries, national schemes are complemented with regional or local
subsidy schemes for rail freight transport. For example, in Italy sub-national rail freight subsidy schemes
exist for the provinces of Trento and Bolzano; the regions of Emilia Romagna, Friuli Venezia Giulia; and thecity of Genoa.
The beneficiaries in almost all subsidies are either the transport operators or the contractors of transport
services. For example, the Swedish Eco-bonus scheme is a subsidy for ship-owners offering new short sea
services, whereas the beneficiary of the Italian Eco-bonus scheme are road haulage companies that makeuse of existing or new maritime routes instead of road transport. Most of these subsidies are provided ona temporary basis, assuming that after the subsidy period the new services should be commercially viable.
In most cases, the subsidies are granted to the firms that will operate new services.
Subsidies to road transport are rarer, but exist, and are often linked to environmental performance. In
2020, Sweden put a subsidy scheme in place that provides a premium to companies, municipalities andregions that buy heavy-duty vehicles that run on electricity, gas or bio-ethanol. In 2019 Italy implemented
an investment incentive for third-party road haulage companies, aiming at renewal and technologicalupgrading of the vehicle fleet, collaborative projects and equipment for collaborative projects. Germany
provides an investment subsidy scheme of EUR 8 000 for the acquisition of each truck running oncompressed natural gas (CNG) and EUR 16 000 for each truck running on liquefied natural gas (LNG) (ITF,
2021).
Transport subsidies in European countries are regulated via supra-national EU state aid guidelines. Manyof the generic state aid principles apply to the transport sector, but there are also sector-specific state aid
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guidelines for the railway sector and maritime transport: the 2008 State aid guidelines on railway
undertakings and the 2004 Maritime state aid guidelines that also covers aid to SSS. Despite the sectorspecific differences, there are also various commonalities, such as the requirements that aid must notexceed 30% of total operational costs and be granted based on transparent criteria applied in a nondiscriminatory way. Short sea shipping aid must not exceed three years in duration and the service that iscovered by the project must be commercially viable after the subsidy (EC, 2004; EC, 2008).

Taxes and charges
This section focuses on taxes and charges and how they impact freight transport mode choice. Whereas
subsidies refer to monetary transfers in the form of expenditures from the public sector to private sectors,
such transfers could also take the form of exemptions from taxation or charges, so tax revenues foregone.
The following examines fuel taxes, carbon taxes, corporate income taxes and infrastructure charges.
Fuel taxes

Some freight transport modes are taxed less than others, in particular the global transport modes –aviation and maritime transport – that have more mobile assets. This is apparent with regards to thetaxation of energy use of transport. Long-haul aviation and maritime transport are generally excluded fromtaxation on fuels. The Chicago Convention (the Convention on International Civil Aviation) determines thatfor international flights fuel is exempt from national or local duties and charges. Fuel tax exemptions
extend to regional or domestic transport as well. Only a few OECD countries have a fuel tax for domestic
shipping and aviation. The EU Energy Directive actually discourages fuel taxation of domestic shipping andaviation, but the European Commission presented a proposal in 2021 for the revision of its Energy Taxation
Directive, currently under discussion, which could imply that the fuel tax exemption for intra-EU shipping
will be abolished.
The fuel for inland waterway transport is tax-exempt in many countries. This is, for instance, the case in
Belgium, Switzerland, Germany, France and the Netherlands. The tax exemption in these countries is basedon the Mannheim Convention, an agreement between the Rhine-States, in which it is stipulated that
Member States must refrain from imposing any toll, tax, duty or charge on inland navigation. Other
countries with inland navigation also exempt inland navigation from fuel taxes, including Austria, Romania,
Hungary and Slovakia.
Railway transport is taxed more frequently than aviation and shipping, but many countries provide
exemptions. Twelve European countries do not charge an electricity tax on rail transport or have an
exemption regime. Belgium, Hungary, Norway and Sweden do not charge fuel taxes on diesel used for railtransport.
In contrast, energy use in road transport is generally taxed, but there is a large variation in the extent towhich it is taxed. Fuel for road transport is taxed considerably less in the United States and Canada than inEurope and Japan. In most EU countries, diesel – that most trucks use – is less-heavily taxed than petrol.
Some EU countries – including Belgium, France, Hungary, Ireland, Italy, Romania, Slovenia and Spain –exempt part of the excise duty for diesel that is used for commercial purposes, such as heavy-duty vehicles.
In Chile, truckers benefit from a tax credit on the tax on diesel, and cargo transport companies owning or
renting a truck weighing more than 3 860 kg may recoup a percentage of the tax on diesel under a tax
credit on the VAT. This tax credit is generally about 25% but it exceptionally went up to 80% between 2008
and 2009 following a strike (ITF, 2016).

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Carbon taxes and emission trading

Carbon pricing aims at reducing greenhouse gas emissions by putting a price on carbon emitted. This
strategy generally takes the form of a carbon tax or an emission trading scheme. Various countries haveintroduced carbon pricing schemes. As of 2018, a total of 51 carbon pricing schemes were implemented
or scheduled for implementation: 25 in the form of emissions trading schemes, predominantly introduced
at the subnational level, and 26 in the form of carbon taxes, mostly implemented at a national level (Klenert
et al., 2018).
Transport is included in carbon tax schemes in Finland, Denmark, Sweden, Iceland and Ireland. The
Swedish carbon tax mainly affects the transport sector, with around 90% of the revenues from the carbon
tax coming from the consumption of gasoline and motor diesel (Andersson, 2019). Road transport iscurrently excluded from the EU Emissions Trading System (EU-ETS) but is part of carbon pricing schemesin many EU countries. The European Commission has proposed to include emissions from fuels used inroad transport in a new, separate emissions trading system, designed to start in 2026. Around 95% ofcarbon emissions from road transport are priced, most of this via taxes alone (not only carbon taxes):
around 91% of road emissions are priced by taxes alone at an average rate of EUR 96 per tonne of CO2.
About 4% of road emissions are subject to taxes and an ETS at an overall average effective carbon rate ofEUR 72 per tonne CO2 (OECD, 2021).
Coastal shipping is included in some carbon pricing schemes. Notable examples are Norway and Shanghai.
In Norway, the carbon tax rates for inland transport depend on the energy source, with highest rates for
petrol and lowest rates for heavy mineral oils, such as ship fuels. In 2006, the average carbon tax for inlandtransport and domestic shipping was NOK 190 (EUR 17.6) per tonne of CO2, compared to NOK 208(EUR 19.3) per tonne of CO2 for taxi operations and domestic air transport (Bruvoll and Dalen, 2009). Since
2018, Norway has applied the standard carbon tax rate also to LNG and liquefied petroleum gas (LPG) for
domestic shipping. Shanghai has a regional emission trading scheme in which both ports and domestic
shipping are included. International shipping is for the moment excluded from carbon-pricing schemes,
but the “Initial IMO Strategy on the reduction of GHG emissions from ships” mentions market-based
measures (carbon pricing) as one of the candidate measures, and various countries have submitted
proposals to the IMO in 2021 for carbon pricing mechanisms.
The European Commission also has formulated in 2019 the ambition to include shipping into the EU-ETS.
Since 2021, the European Parliament has discussed a proposal to include CO2 emissions from the maritime
sector in the EU Emissions Trading System (ETS) using revenues to support investment in innovativetechnologies and infrastructure, such as alternative fuel and green ports, to decarbonise the maritime
transport sector.
Corporate income taxes

Maritime transport companies are clearly less taxed than other transport modes when it comes to taxationof corporate income. Shipping companies frequently register their ships in open ship registries (flags ofconvenience), which minimises their tax burden. In addition, many maritime countries have developed
very favourable tax regimes for shipping companies, often in the form of tonnage taxes; a fixed tax
dependent on the cargo volumes of ships that replaces regular corporate income taxes. More than 20
EU countries have tonnage tax regimes, as do the United States, South Korea and India. Short sea shipping,although not subject to international tax competition, benefits from similar tax advantages in most of theseschemes. Maritime companies are in various countries exempted from the obligation to pay social security
charges.

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MODAL SHIFT REQUIRES SPECIFIC GOVERNMENT INTERVENTIONSInfrastructure charges and internalising external costs

The cost coverage for the infrastructure of freight transport is generally very low. A study on EU countries
found cost coverage rates of 25% for diesel freight trains, 17% for electric freight trains, 13% for heavy-duty
vehicles and 12% for inland waterway transport. The cost coverage ratios found for seaports was 4% (CEDelft, 2019). Cost coverage of external costs is higher than for infrastructure cost: 56% for freight diesel
trains, 36% for heavy-duty vehicles, 32% for electric trains and 12% for inland waterway vessels. There areconsiderable differences between countries when it comes to cost recovery. For example, in Sweden,
where a national system of fairway dues is applied to cover infrastructure costs and external costs, thedegree of internalisation ranges from 53% to 90%, or 23% to 28% when the effects of a recent re-appraisalof CO2 in the Swedish official guidelines for cost benefit analysis are taken into account (Vierth and Merkel,2020). Cost coverage for passenger transport appears to be higher than for freight transport, both for roadand rail transport.
Some countries have made deliberate efforts to increase the cost coverage of infrastructure. Canada’s
National Marine Policy, introduced in 1995, noted that much of Canada’s maritime infrastructure wasoverly dependent on government subsidies, which represented an unfair treatment towards othertransport modes. In order to solve this, the financial burden for marine infrastructure was shifted from the
Canadian taxpayer to users, by transforming port authorities and the Pilotage Authority – in charge of theprovision of pilotage services in seaports – into self-sufficient entities. A similar requirement of selfsufficiency is in place for the services that Transport Canada provides for the vessels using facilities in the
public ports that it owns.
In rail freight transport, operators must often pay a user charge to an infrastructure manager. EU
Regulation 2020/1429 allows and encourages governments to reduce, waive or defer charges for accessing
rail infrastructure below direct costs. The objective of this measure is to support modal shift from road torail. Several countries have used this possibility. For example, Germany reduced the rail-user charge by
98% in 2021 compared to the original charge and reserved EUR 410 million in its federal budget to makeup for the revenue foregone from the lower user charges. Similar reductions or cancellations of rail-user
charges have been implemented in Belgium and Austria. Deductions of rail-user charges can also stimulate
reduction of negative externalities from freight rail transport. For example, in Hamburg (Germany) the
operation of hybrid shunting locomotives is facilitated by a 50% exemption of rail infrastructure charges
on the port railway network for hybrid and electric shunting locomotives (ITF, 2021).
As for heavy goods vehicles, there is a wide variety of countries with road charges. In Europe, the main
framework in this respect is the Eurovignette Directive, in place since 1999. It defines how EU member
states can charge heavy goods vehicles for the use of certain roads. EU member states are not required tolevy road infrastructure charges, but if they introduce charges, member states have to respect theprovisions of the Directive, in order to avoid distortion of competition between transport operators. A
revised version of the Eurovignette Directive is currently under discussion. It aims to align the Directivewith the European Green Deal by basing user charges for heavy goods vehicles on CO2 emission standards.
Current vignettes are planned to be phased out of the core TEN-T network as part of that revision.
As of 2016, seventeen EU countries applied distance-based road charges. Eight use physical barriers andnine apply an electronic network-wide scheme. In 2017, Slovenia switched to an electronic network-wide
scheme as well. Additionally, Denmark, Luxembourg, the Netherlands and Sweden apply the Eurovignette
for heavy goods vehicles above 12 tonnes, while Bulgaria, Latvia, Lithuania, Romania and theUnited Kingdom apply alternative vignettes for heavy goods vehicles (HGVs). In the European Union, only
Finland applies neither road charging for trucks, nor a vignette. In most countries, charge levels aredifferent between truck type and emission standard of the truck, reflecting the fact that these charges are
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often differentiated to vehicle weight and emission standard (Schroten et al., 2019). Various countries
have urban congestion pricing schemes, but these are not specific for freight.
Several countries use exemptions from road tolls and charges as a policy instrument to reduce emissions
from trucks. For example, trucks running on compressed natural gas (CNG) and liquefied natural gas (LNG)
are exempted from the German toll system for trucks (known as LKW-Maut), the logic being to internalise
the external costs of truck transport. This toll exemption was put in place in 2019 and was recently
extended to 2023 (ITF, 2021).
Reducing barriers to competition

Competition can help to improve service level and bring down costs. Various countries have attempted toincrease competition by liberalising freight rail transport operations. The European Union has gradually
opened the rail transport markets up to competition. An initial liberalisation package was adopted in 2001.
Important elements in that package were the licensing of railway undertakings, the allocation of railway
infrastructure capacity and the levying of charges for the use of railway infrastructure and safety
certification. That package was followed by a second one in 2004 that aimed to open up the rail freightmarket in the European Union. Its main instruments were the establishment of a European Railway Agency
and directives on the interoperability of the trans-European high-speed and conventional rail system. A
third package was adopted in 2007 focusing on the certification of train drivers operating locomotives andtrains on the railway system in the community. A fourth railway package was adopted in 2016, designed
to complete the single market for rail services (Single European Railway Area). As a result of these different
packages, the rail freight market was opened to competition on 15 March 2003 on the trans-European rail
freight network, then on 1 January 2006 for international freight and finally for rail cabotage from 1 January
2007.
There are also cabotage regulations in trucking. In the European Union. Provisions on cabotage arereflected in Regulation 1072/2009/EU, also called Mobility Package 1, that restricts the number ofcabotage operations that each haulier is entitled to perform to three operations within a period of sevendays, starting the day after the unloading of the international cargo. This restriction (three operations inseven days) was maintained in EU Regulation 2020/1055 that amended the 2009 regulation, but the 2020
regulation also introduced a cooling-off period of four days before more cabotage operations could be
carried out within the same country with the same vehicle.
There are also other market restrictions related to road freight. In some countries, such as Austria, there
are driving restrictions for trucks on weekends and public holidays, general bans on night driving for heavy
goods vehicles, as well as specific local traffic bans for trucks. There are also restrictions on certain cargo
categories transiting the country that cannot be transported by road but need to be transported byrailways.
Short sea shipping is often subject to restrictive cabotage laws. Such laws prohibit coastal shipping byforeign-flagged ships, vessels with foreign staff, vessels that were not constructed in the country, or a
combination of these restrictions. Such laws have had a very discouraging impact on SSS. Generally, therange of maritime cabotage regimes is wide, ranging from very restrictive in the United States and Japanto very liberal in New Zealand (Merk and Notteboom, 2015). The regime in the United States, regulatedby the Jones Act, requires not only US-flagged vessels and US crews, but also that the vessel is built in the
United States. Many countries are less restrictive and do not include the “built in” requirement. Althoughcabotage legislation is sensitive and difficult to reform, various countries liberalised their legislation. Oneof the more recent liberalisations was conducted in China in 2013, with the implementation of the
Shanghai Pilot Free Trade Zone. Thanks to this measure, foreign-flagged vessels are now allowed to38

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operate in cabotage between Shanghai and other domestic ports – provided that the owner of the vessel
is Chinese (ITF, 2016).
In practice, many countries have exemptions to cabotage rules. For example, coastal shipping in Mexican
waters is, as a general rule, reserved to Mexican shipowners with Mexican vessels, but if there are no
Mexican-flagged vessels available, foreign flagged vessels may engage in cabotage trade under temporary
cabotage permits granted by the Ministry of Communications and Transportation. These cabotage permits
are granted for three-month periods and can be renewed seven times, with a maximum total of two years(OECD, 2017). Many countries have such exemptions, sometimes to the extent that the cabotage rules
practically no longer apply. The European Union has cabotage regulation that applies to the entire intraEU market (Box 1).

Box 1. Maritime cabotage regulation in the European Union
In 1993, the European Union liberalised coastal shipping for member states. The regulation allows
providing maritime transport services within a Member State for Community ship-owners operating ships
registered in an EU State and flying the flag of one of these States. Vessels must comply with all cabotage
conditions in the host country, especially with the manning requirement for island cabotage. This reform
was part of the regional integration process, aiming at completing the common market, and establishinga common maritime policy. It had to deal with different backgrounds on coastal shipping; Southern
European countries like France, Italy, Spain and Greece were more protectionists, while Northern Europe
and mainly the United Kingdom had a more open vision of cabotage. This is linked to countries having
different needs for costal shipping, with the south being more dependent on cabotage for mainland/island
passenger transport than the north.
Consequently, reluctance to a liberalisation of short sea shipping mainly came from Mediterranean
seafarers. However, the European Union was able to overcome it, thanks to a gradual and consensual
process. First, a legislative package opened the way to a common maritime policy in 1986. In 1992, thecouncil regulation tackled the issue of cabotage and set a gradual phasing of the timetable for coastal
shipping liberalisation, acknowledging the differences between the north and the south of Europe.
Southern countries had until 1999 to open up their regular coastal passenger services, and Greece had
until 2004. In addition, the process was flexible enough to adapt to certain demands of opponents; forexample, one issue was that Mediterranean seafarers feared that the change from host-State to flag-State
manning conditions on ships engaged in coastal shipping would distort the market. This was linked withthe possible entrance of northern ship-owners, hiring low-paid foreign crew, hence jeopardising European
seafarers’ employment. The Commission heard this concern and a compromise was found; in the case ofregular passenger services (island cabotage), all matters related to manning are the responsibility of theState in which the vessel is performing transport services.
Source: ITF (2016).

Infrastructure
The possibilities for mode choice in freight transport are conditional on the availability of infrastructure.
At the same time, government and private investors must weigh such investments in infrastructure against
alternative uses of funds, space and political capital. Infrastructure policy frequently reflects such trade-

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offs: it often consists of optimising existing infrastructure, identifying the missing links that limit theinterconnection between different modal and nodal infrastructures. Investments in transport
infrastructure could focus on resolving these missing links but could also be much more substantial in caseof huge transport demand, obsolescence of existing infrastructure or in order to accelerate
decarbonisation of transport. For example, large investments in charging stations or electric roads (Box 2)would be needed electrify road freight and coastal shipping, as well as alignment of private investments invehicles and public or private investments in charging stations, which would also necessitate harmonisedand common standards.
Infrastructure or superstructures are also frequently financed, designed and developed by private actors.
Governments or public bodies can engage in public-private finance arrangements, such as leases andconcessions. An essential part of such arrangements is the distribution of risks. If risks and benefits are notbalanced among different stakeholders, projects might be challenging to realise, as illustrated by the casestudy on SSS in Canada.

Box 2. Electric road systems
Electric road systems (ERS) enable a transfer of electricity between vehicles in-motion and the roadtransport infrastructure. They are wireless or conductive systems. The latter include roadside, inroad andoverhead catenary arrangements. A number of demonstrative projects for wireless systems have beendeveloped in France, Korea, Italy, Germany, Spain, Sweden and the United States.
Sweden has been the country that developed the most consistent set of demonstration projects on
conductive systems, along with Germany and Japan (Bateman et al., 2018). These efforts drew positive
conclusions on the capacity of these technologies to operate effectively. Overhead catenary technologies
have been the most frequently considered and extensively tested ERS projects at highway speed or on
high-capacity roads and developed in partnership with major truck manufacturers. Large-scale shuttle
pilots for the overhead contact line solution were opened in Germany at a first test track in 2019 (BMU,
2019).
One of the core challenges for the development of technical standards to-date include the need to ensureinteroperability. This would enable ERS to be developed by more than a single manufacturer. In addition,
metering systems will be important to enable payments that account for the electricity consumed. ERS will
also need adequate safety specifications.
ERS faces challenges regarding billing users but may take advantage of existing regulations for road tolling.
It could use road tolling components, processes and structures (billing and metering on a kilometre basis
would fit in the existing road tolling system) to enhance an energy premium once a metering system isdeveloped.
Additional important areas for research are whether ERS should be assimilated to a power grid, a roadinfrastructure, or both. This has implications for the need to meet existing regulatory standards or require
standards to be adapted to allow for the implementation of these novel technologies (Bateman et al.,2018).
Source: ITF (2020b).

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Modal infrastructures

Rail infrastructure is often a bottleneck to modal shift. The same rail infrastructure is often used forpassenger and freight transport that obviously do not have the same requirements: passenger trains
usually connect city-centres, not the most natural destinations for freight trains. Hence, freight train
networks might require by-passes to avoid travelling through city-centres. Freight rail capacity is also
dependent on how long freight trains are allowed to be. The longest freight trains can generally be foundin North America. Longer trains could increase the operational efficiency of freight trains but would require
adaptations of infrastructure on certain parts of the rail system. The European Union has developed
criteria regarding the speed, length and weight of trains that operate on the TEN-T network. China hasdeveloped high-speed freight train services, which can be competitive on the market for mail and parcels.
Rail infrastructure investments can also include traffic management systems, electrification of rail tracks
and adaptations to facilitate larger and heavier trains.
Road freight transport is confronted with similar issues. Most road infrastructure is used for passenger andfreight transport, and there are limited dedicated road-freight connections. One of the few connections
are direct access roads to seaports – circumventing city centres – that are often more or less dedicated totruck traffic. Longer trucks could also help to optimise efficiency of the road network but might raise
concerns on traffic safety that would need to be considered. Finland and Sweden have a long tradition inusing 25.25 m and 60 -tonne articulated vehicles, commonly referred to as long and heavy vehicles (LHVs),
while other countries in Europe and North America mostly use 18.75 m and 44- tonne vehicles, commonlyreferred to as heavy goods vehicles (HGVs). Since 2013, Finland allows trucks of up to 76 tonnes on Finnish
roads. On bridges and smaller roads, usage of such high capacity vehicles (HCVs) can be restricted withtraffic signs, but otherwise HCVs can operate freely. After successful trials, in January 2019 the longest
permitted truck length was extended to 34.50 m from the previous 25.25 m on all roads in Finland(Liimatainen et al., 2020).
The use of inland waterway transport is dependent on the navigability of the waterways. Frequent
bottlenecks include insufficient depth, currents and sudden differences in water level. Navigability ofwaterways often requires canalisation, dredging and a system of locks to deal with water level differences.
Regular investments to upgrade infrastructure include increasing locks and deepening of fairways.
Pipelines could also provide alternatives to freight transport. An extensive network of pipelines connects
the petrochemical areas around the ports of Rotterdam and Antwerp. The Netherlands has set up a
working group to assess the cost-efficient use of pipelines as part of further development of the national
freight system.
Nodal infrastructures

Seaports require regular upgrades to receive calls from ever-larger ships or new sorts of ships, e.g. thosepowered by alternative fuels or electricity. This could mean investments in stronger quay walls, larger
turning basins, shore power, electric charging or alternative fuel bunkering facilities. The possibilities ofmodal shift in ports are radically increased if all possible transport modes are connected to the port. This
could mean dedicated short sea terminals, barge terminals and on-dock rail. All three measures minimise
additional handling costs, facilitate cargo consolidation and smoothen the intermodal process (Merk andNotteboom, 2015; Gonzalez-Aregal, Cullinane and Vierth, 2021).
Several countries have invested in intermodal facilities to transfer containers from road to rail transport.
Belgium has invested in an intermodal facility in Genk as France has in Le Havre. In most cases, theseinvestments cover infrastructure, but some schemes – e.g. in Poland – also subsidise purchase or

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modernisation of rolling stock. There are generally three main models for intermodal terminal
development, depending on who develops and finances: the port authority, terminal operator or ocean
carrier. In the first case, the seaport authority regularly invests in inland ports or terminals. In the case ofdevelopment by terminal operator or carrier, the infrastructure will likely be privately owned; in case thegovernment subsidises part of the facilities, it will generally require equal access provisions for all potential
users. In some countries, there are enough intermodal facilities available, but the awareness of theopportunities offered by these facilities is limited. For that reason, Sweden has mapped the existing
infrastructure to make the offer visible (Trafikverket, 2019).
Various countries invest in greening nodal infrastructures for freight transport. The Netherlands decided
in 2020 to equip all public berths for inland waterway transport with shore power facilities. These facilities
will make it possible for barges to switch off their engines at berth, which reduces emissions and noise.

Integrated freight corridors
A special transport infrastructure that needs mention here is the dedicated freight corridor: a piece ofinfrastructure that will exclusively be used for freight transport. This can help to decrease transit times, asrail infrastructure is often shared between passenger and freight rail, but passenger transport often getspriority. A distinction can be made between short-range and long-range corridors. A well-known shortrange corridor is the Alameda-corridor that connects the ports of Los Angeles and Long Beach to the interstate railway network, providing for right of way and no interruptions of the freight train traffic within themetropolitan region of Los Angeles. A longer-range corridor is the Betuwe-line, dedicated to rail freightthat connects the port of Rotterdam to the German hinterlands.
In Canada, a set of freight transport corridor projects are funded by the National Trade Corridors Fund
(NTCF) as part of the Trade and Transportation Corridors Initiative, launched in 2017. This builds on an
earlier National Policy Framework for Strategic Gateways and Trade Corridors that aimed at fosteringdevelopment and optimisation of transportation infrastructure, operations, technology, regulation andpolicies for all modes (marine, road, rail, and air) that support freight and passenger flows of nationalsignificance. In order to strengthen and keep building a strong national transportation network theCanadian Government identified three Gateways and Trade Corridors based on the most strategic routes
within the country. The creation of inland logistics platforms have taken place based on the National Policy
Framework and the establishment of the three large infrastructure corridor investments.
One of the most ambitious freight rail corridor projects is the one formed by the Chinese Belt and Road
Initiative (BRI) that includes a variety of dedicated Eurasian freight rail corridors. The European TEN-T
corridor network also means to improve the connectivity of freight rail transport. The EU Regulation No
913/2010 initiated the establishment of a European rail network for competitive freight. It sets out rules
for the selection, organisation and management of the freight corridors. The Regulation also required EU
Member States to establish international market-oriented rail freight corridors in order to strengthen cooperation between infrastructure managers, finding the right balance between freight and passenger
traffic and promoting intermodality between rail and other transport modes. An important role in the
co-ordination of these rail freight corridors is played by RailNetEurope (RNE), a non-profit association
whose members are rail infrastructure managers or allocation bodies. RNE facilitates co-ordination oftimetables and rail freight corridors.

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Digitalisation
Intermodality requires the smooth interconnection between modes. In order to minimise time loss during
this interconnection, information exchange between the different modal stakeholders is essential. Thiscan avoid waiting times, congestion and missed connections. Some countries, e.g. the Netherlands, havea digital transport strategy to integrate various transport modes. Port community systems arearrangements for information exchange involving many stakeholders in the freight transport chain. Manyports, mostly in Europe, have initiated such port community systems, sometimes developed by port
authorities themselves, sometimes outsourced to private service providers. In addition, shipping
companies have developed similar initiatives aimed at improving digital information exchange along thefreight transport chain, e.g. Tradelens. Other transport modes also benefit from information exchange
platforms; e.g. the Swedish Transport Administration hosts a rail sector platform “Together for on-timetrains” that aims at improving punctuality in the rail sector via digital collaboration.
As part of the emerging focus on information exchange, a growing number of port authorities are investingin performance dashboards that regularly update metrics on handling and waiting times for different
transport modes (ships, trucks, trains) in the port. A notable example includes the performance monitoringin the port of Los Angeles. In Canada, the Vancouver Fraser Port Authority (VFPA), Transport Canada, thePrince Rupert Port Authority and other stakeholders collaborate in the “West Coast Supply Chain Visibility
Program”, which aims at increasing the visibility of the supply chain via operational planning andoptimisation tools. An example is the supply chain visibility dashboard tool, which leverages rail and port
terminal activity information and produces key performance metrics for industry participants. This Supply
Chain Visibility Program builds on a successful pilot project launched in 2018 that developed a near realtime dashboard for grain, coal and fertiliser shipments handled through rail and bulk terminals.

Innovation policies
Policies to stimulate innovation in transport can help to accelerate modal shift or the objectives underlying
modal shifts, such as better environmental sustainability. Besides generic support for research institutes
and R&D incentives for companies, many countries support applied transport research bodies andinnovation programmes focused on transport. Co-operation between industry, research and government
could set the agenda for the innovations to support and implement, e.g. in rail freight transport wheremore business innovation could help to increase its attractiveness to customers. Government
interventions are often also needed to create markets or support transitions to new market equilibriums,
within the perspective of decarbonisation, for example.
An example of an area where government interventions have supported transitions is electrification ofcoastal shipping in Norway, where a subsidy programme of the government agency Enova has managed
to stimulate electrification of 75 coastal vessels and the installation of electric charging systems in 60
seaports, within the period of five years, described in more detail in Box 3. Sweden has developed various
pilot projects to assess the viability of electric road systems, i.e. roads that can charge trucks whilst they
drive, as a possible alternative for electrification of trucks. Another example is the German scheme tosupport uptake of light and heavy commercial vehicles with alternative, climate-friendly propulsion
systems. This grant scheme with a total budget of EUR 507.5 million offers aid to companies that want toacquire electrical, plug-in hybrid or hydrogen/cell-fuelled vehicles, charging facilities for electric vehicles,
and the environmental studies carried out related to these acquisitions (EC, 2021).

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Box 3. Roll-out of electric charging systems for electric ships in Norway
In Norway, battery installation on ships and shore power projects in ports are all funded with the goal ofgreening maritime transport. The agency Enova, allocated NOK 2.7 billion (EUR 270.0 million) for thetransport sector between 2017-19. By the end of 2019, Enova had allocated more than NOK 500 million(EUR 49.6 million) for battery installation and other energy efficiency measures in about 75 vessels, alongwith a small number of fully electric vessels. In terms of funding commitments, Enova has awarded morethan NOK 900 million (EUR 89.2 million) for the electrification of 39 ferry connections with 52 associatedferries. Between 2015 and 2019, it supported 89 onshore power projects in more than 60 Norwegian ports
with more than NOK 600 million (EUR 59.5 million).
Source: ITF (2020).
Interventions to stimulate alternative transport modes could also focus on information provision andbrokerage activities. Information provision on rail and inland waterways can be promoted via subsidies.
Brokerage activities are used in the Netherlands where logistics brokers advise companies on the use ofalternative transport modes; they actively look for companies that could consolidate cargo flows, in orderto facilitate transport by rail and inland waterways. Many EU countries also have Short Sea Promotion
Centres that aim to contribute to a modal shift by providing information about SSS. The Short Sea
Promotion Centres in Europe are connected in the European Shortsea Network, which acts as a platform
for exchanging ideas and as a main information source on SSS. Various countries, such as Mexico and Chile,
have also recently invested in the development of logistics observatories (ITF, 2016).

Which policies have been effective?
Meaningful evaluation of modal choice policies in freight transport is lacking. Governments deploy many
policies, most of which have never been evaluated: a recent study identified ninety-three relevant policy
measures, but only twenty evaluations (Takman and Gonzalez-Aregall, 2021).
Most of the existing evaluations do not contain quantifications of effects therefore it is difficult to assess
if policy measures have been effective. Evaluations lack quantification because many policy instruments
have broad, general and unclear targets, which make it difficult to measure to what extent objectives havebeen reached. Several evaluations focus only on the modal shift achieved, and do not evaluate the effecton negative externalities. Notably, some large EU programmes lack specific targets and key performanceindicators – and thus meaningful evaluations. The evaluation of the Connecting Europe Facility (CEF) does
not quantify any effects on modal shift or externalities, due to a lack of clearly defined key performanceindicators and targets (Takman and Gonzalez-Aregall, 2021). The EU Regulation No 913/2010 concerninga European rail network for competitive freight aims to improve the efficiency of rail freight transport
relative to other modes of transport, but its evaluation does not specifically evaluate the policy in termsof modal shift. The EU Motorways of the Sea policy has unclear overall goals and objectives, which makes
it difficult to evaluate the policy quantitatively (ICF, TRT and ISL, 2017).
Various national programmes have been evaluated positively. This can be illustrated by a positive ratio
between benefits and costs of the programme. The benefits are the savings on external costs, e.g. lesscosts related to air pollution, GHG emissions, congestion or accidents. These cost savings (or benefits) canbe related to the cost of the programme. Several national measures – as well as the EU Marco Polo II
programme – managed to generate positive benefit/cost-ratios (Table 8). Several subsidy schemes for
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modal shift to freight rail have been effective in achieving modal shifts, according to their evaluations, e.g.
in the United Kingdom and Austria. The Italian Ecobonus scheme, which aims to promote a modal shift to
SSS, has been evaluated as effective also because of the simplicity of the programme and the user-friendly
approach.
Table 8. Benefit/cost-ratio of modal shift instruments
Programme

Favoured mode

Subsidy amount(EUR million)

Benefit ratio for every
unit of subsidy spent

Evaluation study

Marco Polo II(European Union)

Short seashipping

435

2.9-3.1

INEA (2020)

Mode Shift Revenue
Support (United Kingdom)

Rail or inland
water transport

4.27 (inland watertransport)

DfT (2014)

Waterborne Freight Grant(United Kingdom)

Short seashipping

4.66

DfT (2014)

Rail subsidy Emilia
Romagna (Italy)

Rail

1.9

8

EC (2019)

Ecobonus (Italy)

Short seashipping

240

5.81

Ram S.p.a (2019)

Rail subsidy Austria

Rail

1 118

3.39-3.41

EC (2017)

GBP 89Several evaluations of EU-policy instruments describe a poor or a mixed performance. The Marco Polo I
programme was qualified as ineffective by Europe Economics (2011) and the European Court of Auditors(ECA, 2013), pointing out that only 46% of the expected modal shift was achieved and that several of thefunded projects would have taken place without support from the scheme. However, the European
Commission considers that the modal shift under the Marco Polo Programmes is substantial and that theperception of underachievement is caused by the fact that the objectives were very ambitious. In anotherreport the European Court of Auditors is critical of the NAIADES programme, observing that the policy
objective of shifting freight transport from roads to inland waterway transport has not been achieved andoverall navigability conditions have not improved (ECA, 2015).
Many subsidy schemes of freight transport operations only have temporary effects. According to theevaluation report of the UK Mode Shift Revenue Support scheme, the most likely outcome of withdrawing
the grant would be that cargo flows, transported by rail or inland waterways, would shift back to road orsimply not take place (DfT, 2020). The evaluation of the Italian Ecobonus programme highlighted the riskthat subsidies and grants to the users of transport services may be followed by price increases in tariffs.
The end of the Italian Ferrobonus aid scheme coincided with a decrease in rail freight operations but had
recovered by the time of a new provision of the incentive during 2015 (Marzano et al., 2018).
Some measures have been problematic because they were not aligned with demand. Many services
developed in a Swedish measure under the EU Motorways of the Sea-programme were not based on anassessment of user need. The implication was that many of the services could not be commercialised(Dahlman, 2019 as quoted in Björk and Vierth 2021). The 2013 evaluation of the Marco Polo programmes
I and II by the European Court of Auditors pointed out that there was no ex-ante market analysis on thereasons for the lack of multimodal transport, which meant that the programme's effectiveness in removing
barriers for a modal shift was limited (ECA, 2013).

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Schemes have sometimes also been observed to support operations that have taken place (or would likely
have taken place) without the subsidies. The Swedish Miljökompensation scheme to transfer goods fromroad to rail is paid retroactively and has been criticised for the fact that approximately 22% of the total
funds in 2018 and 2019 went to the LKAB mining company for ore transports, where rail already is thedominating transport mode and where limited competition from road transport exists (Takman and
Gonzalez-Aregall, 2021).
There is, however, some evidence for the effectiveness of pricing mechanisms. Part of the modal shift fromroad to rail in Germany and Austria could be related to the road pricing system in both countries. However,
the evaluation study indicates that it is difficult to prove the causality between the modal shift and theintroduction of the tolls and to isolate the effects from other policy instruments and effects on thetransport sector. According to the evaluation, distance-based toll systems are more efficient than timebased vignettes as they can internalise the external costs in a more efficient way, via the user pays
principle. It is also noted that the wide range of charging systems in the member states and the wide rangeof technologies applied within the systems impose unnecessarily high administrative costs to haulers (EC,2013).

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FUTURE-PROOFING FREIGHT MODE POLICIESFuture-proofing freight mode policies
What are the current and future developments to consider when thinking about mode choice policies?
This chapter highlights some technical and organisational developments, and the possibility of moredisruptive events. It examines possible policy implications based on this overview.

Technological developments
Technological innovations in transport vehicle propulsion will impact the perceived need for modal shifts.
Policies on mode choice are based on certain assumptions of the environmental impacts of each transportmode and how these will change in the future due to innovations related to propulsion.
Trucking, the transport mode that produces the highest external costs could decrease these withtechnological developments. One well-documented measure that does not require any further
technological innovation is to allow heavier and longer trucks (Christides et al., 2009 but it raises roadsafety concerns that would need to be addressed. Trucks in various countries have reduced their GHG
emissions by switching to sustainable biofuels and compressed natural gas (CNG). Electrification of trucks(or roads) is also rapidly advancing. Currently, electric trucks are developing in the smaller segments (upto 7.5 tonnes), but the expectation is that in a few years 44-tonne trucks will also be electrified. Tesla hasannounced the production of electric long-haul trucks, but these are not commercially available yet. Some
operators also expect to see hydrogen-powered trucks, whereas bio-fuels and gas are considered to betransition fuels (ITF, 2021).
Rail transport already has a low carbon footprint. This is likely to decrease even further with the phasingout of diesel locomotives and the roll-out of electrification of railways in many countries – provided thatelectricity comes from renewable sources. In countries where railways are electrified, the main emissions
from rail freight transport operations come from the so-called last mile, both in ports and the inland rail
terminals. The locomotives used for long-range transport are not able to operate on the non-electrified
last mile, and they must be separated from the wagons after arrival within the port area. In the port,
shunting locomotives with separate drivers take over, couple to wagons and push them into the port
terminals. Most shunting locomotives are diesel electric or diesel hydraulic locomotives as they need tooperate independently from the overhead voltage or on non-electrified tracks. The main obstacle related
to zero-carbon shunting locomotives is the market size. For the moment, manufacturers can only realise
limited economies of scale, as the market for hybrid-shunting locomotives is small but there are generally
no limitations related to technology: battery autonomy is going up and fully electric shunting locomotives
are technically possible, as illustrated in the rail terminal in Warstein in Germany (ITF, 2021).
Short sea shipping (SSS) can decarbonise with existing technologies, in particular via electrification. Shortsea shipping takes place over smaller distances, usually in regular patterns, which means that it is relatively
easy to electrify. Norway has shown that it is possible to electrify ferries on a relatively massive scale: there
are currently 39 electric ferries in operation, with 19 more to be planned operational in 2021 and 27 more
after 2021 (ITF, 2020a). This has been achieved by subsidies from the government for charging systems in
ports and for electrification of vessels. However, Norway is an exception for the moment and the movetowards zero-carbon coastal shipping is much slower in most other countries.
The development of alternative fuels – such as green hydrogen, methanol and ammonia – have increased
the prospects of decarbonisation of all transport modes, but differences between modes might lead to
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different deployment trajectories. For governments that consider mode shift to be a viable strategy for
reducing greenhouse gas emissions, certain scenarios might make discussions about modal shift
superfluous. – For example that all road transport is zero-carbon before rail and sea transport. Such a
scenario is likely considering the much lower average lifespan of trucks in comparison to ships and rail
locomotives. For this reason, it can be expected that the decarbonisation of road freight transport will takeplace at a faster pace than in railway transport and coastal shipping.
In some countries, this is already the reality. In Sweden, heavy trucks are the only freight transport modethat has reduced its GHG emissions between 2010-18 at a rate in line with the Swedish climate target. Thisconsists of a reduction target of 70% within the transport sector by 2030 (Takman, Trosvik and Vierth,2020). In such a scenario, generic modal shift policies are no longer effective instruments for emission
reductions, as they could lead to a shift away from the mode that performs best in reducing emissions. A
recent study on mode choice in freight transport in Sweden modelled possible GHG emissions and air
pollution from modal shift policies in the future and concluded that by 2040 modal shift policies might
result in net increases in GHG emissions instead of the decreases that modal shift policies aim at(Johansson, Vierth, and Holmgren, 2021).
Automation and digitalisation could lead to reduction of the costs of road transport, by reducing wage
costs of drivers. Automated trucks are technically possible and already applied in various seaports. It is
likely that trucks with some form of automation will be deployed in the coming years. As such, thesetechnological developments could reverse the effect that regulations of truck drivers and rest times (suchas the EU mobility package EU 2020/1054) and a shortage of drivers have on pushing up the costs of roadfreight transport. Automated ships and trains are also being discussed – and tested in some countries – butlikely to take more time to implement than automated trucks. Automated vehicles could also increasetransport safety.
At the same, many of these technologies could have an impact on the costs of the different freighttransport modes. For the moment, automated, electrified and zero-carbon vehicles are generally more
expensive, but the production costs could decline as technology advances and uptake increases, so that
economies in scale could be realised. This can have different impacts: overall freight transport costs could
increase, which – depending on the demand elasticities – might affect transport volumes. The costdevelopments could also be different according to transport mode, which means that the relative cost
attractiveness of freight transport modes could evolve over time.

Organisational developments
Technical innovations, like digitalisation, have given rise to new business models, such as e-commerce, thephysical internet, internet of things, freight transport platforms and increasing integration of LSP andcarriers. These developments can have mixed effects on mode choice in freight transport. On the one hand
they could improve the visibility and co-ordination between different stakeholders and as such improvethe effectiveness of intermodal transport. Growth in e-commerce has also resulted in increased
warehousing close to urban centres, which provides the volumes required for intermodal transport. On
the other hand, e-commerce and the reverse logistics related to it, have in practice probably resulted in
an increase of transport over road. The increased application of artificial intelligence (AI) in supply chain
management also requires greater scrutiny of economic power in algorithm-based governancearrangements.
Long-range train transport has received substantial impetus from China’s Belt and Road Initiative (BRI) thathas provided the title for huge investment in Asia-Europe rail corridors. Although not aimed at achieving
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mode shifts, it has increased the business case for long-range rail freight transport. The BRI has likely
shifted some air cargo to rail but its effect on ocean cargo has so far been limited. However, this mightchange given the drastic increase of ocean freight rates since the Covid-19 crisis that have madeintercontinental rail rates more competitive than ocean transport rates. The high visibility of the BRI has
also resulted in the emergence and revival of competing long-range corridor development.

Disruptive events
Extreme weather events have become more frequent. Human-induced climate change is affecting many
weather and climate extremes in every region across the globe. These include heatwaves, heavy
precipitation, droughts, and tropical cyclones that have all occurred more frequently over the last years.
Human influence has likely increased the chance of compound extreme events since the 1950s. Compound
extreme events are the combination of multiple drivers and/or hazards that contribute to societal orenvironmental risk. Examples are concurrent heatwaves and droughts, compound flooding (e.g., a storm
surge in combination with extreme rainfall and/or river flow), compound fire weather conditions (i.e., a
combination of hot, dry, and windy conditions), or concurrent extremes at different locations.
Extreme weather events are predicted to increase over the coming years. For example, due to relative sea
level rise, extreme sea level events that occurred once per century in the recent past are projected tooccur at least annually at more than half of all tide gauge locations by 2100. In coastal cities, thecombination of more frequent extreme sea level events – due to sea level rise and storm surge – andextreme rainfall or river flow events will make flooding more probable (IPCC, 2021).
Such events will disrupt supply chains. Droughts could make rivers and inter-ocean canals unnavigable, as
do extreme precipitation and river flow events. Storm surges, floodings and tsunamis will affect ports andrequire fall-back options for transport chains. Extreme weather events in general will likely increase thedamage to transport infrastructure. Heat affects transportation infrastructure by warping roads andairport runways or buckling railways, and high temperatures reduce air density leading to aircraft take-off
weight restrictions. Important transportation routes are threatened when floods exceed design standards
commonly based around flood magnitudes of a given historic return period (e.g., 1-in-100 year flood
events). Landslides, mudslides, rock falls, and other mass movements could block critical transportationroutes. Tropical cyclones, severe coastal storms, sand and dust storms could severely damage transport
infrastructure. Frequent inundation by salt water can also have significant impacts on transportation
systems due to corrosion and undercutting of coastal roads, bridges, and rails (IPCC, 2021).
Covid-19 has shown the vulnerability of global transport chains. The changes in demand for freighttransport, due to the lockdowns in many countries, in combination with the adaptations of transport
supply by transport companies (in particular container shipping) have resulted in a disruption of supply
chains, as illustrated by extremely low schedule reliability of liner shipping companies, long ship waitingtimes in ports, limited availability of containers and shipping prices that are seven- to ten-times higher
than prior to the emergence of Covid-19. This disruption has affected places with limited spare capacity
for, or alternative, transport options. It is not yet clear which, if any, of these impacts will be long lasting.
Disruptive events underline the importance of resilience and robustness in supply chains. Resilience isdefined here as the possibility to bounce back and the possibility to use alternative networks and services
during disruption. Robustness refers to the avoidance of direct and indirect economic losses of a transport
network, which is defined as the degree to which the transportation network can function in the presenceof various capacity disruptions on transport elements. An example is the port system in Chile that has
multiple ports in the same bays but they differently exposed to the wind and currents to make sure that
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there is still effective port capacity in case a tsunami strikes one regional port. Extreme weather events
could also facilitate the use of certain transport modes.
In a similar way, multimodality and an effective choice in freight transport modes could help to keeptransport systems accessible. This combination could provide for more alternative options in case part of
the freight transport system is disrupted. The robustness of the multimodal transport system is dependent
on the interconnections and interdependencies in the system. Intermodal transport allows switchingamong different modes of transport at transloading terminals. At a transloading terminal two or more
modalities are interconnected. If such terminals are disrupted, the freight cannot switch to a differentmode of transport. Interdependency refers to situations where the three main inland freight transport
modalities (waterway, road and rail) cross each other. At each crossing, a civil engineering structure isneeded, e.g. bridge, tunnel, railway crossing, to efficiently use both modalities. Thus, the disruption of asingle civil engineering structure (for example a bridge) can affect multiple modalities (road andwaterways). This causes the interdependency between the modalities. The relation of interdependency
between these two nodes implies that if either node is disrupted, the other node will be disrupted as well.
An assessment of the robustness of the Dutch freight transport network showed that the degradation
capacity of roads could exert a disastrous growth of the total travel time, while shifting more loads to theinland waterways could decrease the total travel time (He et al., 2021).

Policy implications
The developments highlighted above will have mixed effects on the attractiveness of different freighttransport modes. Within the road freight sector automation could eventually help to improve safety andrelieve driver shortages, whilst electrification could improve its environmental performance. At the sametime, growth of road freight transport will not help to alleviate congestion. Within the rail sector,
electrification is already well advanced and further electrification will help to sustain its position ofproviding low emission, energy efficient freight transport. In the meantime, governments could support
more business innovation in rail freight transport to increase its attractiveness to customers, i.e. thecompanies that need to ship cargo. Modal shifts to waterborne transport could help to decongest roadand rail infrastructures but might decrease environmental performance if decarbonisation of this mode is
not accelerated. Shifting liquid bulk transport to pipelines could mean additional infrastructure costs, but
reduced safety risks. Digitalisation could help to build multimodal logistics chains if rail and SSS can develop
services and products that meet customer requirements. In other words, the outlook for each mode iscontext-specific. This would suggest a need for integrated policy approaches, developing specific rather
than generic mode shift policies, improving evaluations and stimulating fair competition between thetransport modes.
Apply integrated policy approaches

Modal shift is challenging. All elements of the multimodal chain must be aligned to achieve objectives andrealise targets. This requires co-ordination and co-operation. The potential of different freight transportmodes is highly dependent on local specificities, such as commodities, shipment sizes, local market
conditions and geography. A way to take these specificities into account is via tailor-made corridor andnetworked approaches. An example of such a corridor approach is described in the case study on thefreight corridor approach in the Netherlands, further on in the report. The elaboration of such corridors
and networks makes it possible to stimulate an appropriate multimodal freight transport offering, withcomplementarities and interoperability between different modes.

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FUTURE-PROOFING FREIGHT MODE POLICIESThe effectiveness of policy measures is largely dependent on the alignment of strategies of different tiersof government and their instruments, including non-transport measures such as spatial planning. It
requires coherent intervention across modes concerning infrastructure investment, taxation, subsidies,
regulation support for innovation, standards for data, and information exchange to stimulate more
informed modal choices. Such integrated policy approaches – underlined in the case studies of both China
and Canada – are necessary to avoid situations of conflicting incentives, contradictory policy measures or
isolated measures that risk being ineffective. An example of inter-agency co-operation is theimplementation scheme to promote multimodal transport in Jiangsu province, jointly issued by theprovincial financial department and 23 other provincial departments, as described in the case study further
on in this report.
Specific objectives rather than modal shift as a primary goal

Modal shift targets could be considered both a political objective and a policy means. According to Björk
and Vierth (2021) this could be problematic for two reasons: it might constrain political flexibility, and it
might complicate efforts to evaluate the effectiveness of policy measures. The underlying reason for thisis that modal shift targets rely on assumptions of relative environmental performance between transportmodes. However, as indicated earlier in this report, the average environmental performance cannot be
generalised; in many cases it depends on local circumstances. External costs are not automatically lower
for waterborne transports than for road. Political flexibility is clearly constrained when a modal shift target
needs to be achieved irrespective of the effects on negative externalities.
Therefore, it is important that modal shift is treated as a means to reduce negative external costs, rather
than as a primary goal in itself when policy instruments are designed and evaluated. Modal shifts might incertain cases be desirable, but they should be considered one of several instruments towards achieving
government objectives related to safety, environmental performance, health concerns and congestion(Björk and Vierth, 2021). So, for example, the focus in Sweden is on improving transport efficiency in allmodes, as well as intermodal solutions.
Modal shift policies could also lead to silo-thinking. Freight transport policy measures are highly
compartmentalised, with many mode-specific policy measures, e.g. different programmes to stimulate rail
freight, inland waterway transport or coastal shipping. Mode-specific policies can be justified if they help
to address mode-specific barriers, but only if it targets specific objectives rather than simply highaspirational goals.
Instead of targeting modal shift and assuming it will achieve objectives such as emissions reductions,
alleviation of congestion and reduced safety risks, governments should formulate more direct objectives
for what policies should achieve. These achievements could, for example, take the form of a specified
reduction of emissions from freight transport, and develop measures to achieve these. A specific anddifferentiated approach to freight transport modes could increase policy effectiveness. It will formulate
specific objectives to be achieved with specific instruments within a determined area and period, rather
than generic instruments that are deployed without taking local specificities into account. For example,
the Dutch corridor-approach, as described in a case study in this report, formulates the modal split
potential per transport corridor.
Improve evaluation of the interventions to influence mode choice

Despite a large amount of policy instruments on mode choice in freight transport, there is only a limited
number of instruments that have been properly evaluated. The urgency to mitigate GHG emissions and

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other external costs, such as air pollution, congestion and safety risks highly increase the relevance of good
policy evaluations on freight transport policies. Digital technologies could provide tools for better
monitoring of policies, provided that policy makers stress the importance of strengthening policy-relevant
data collection and define policies in such a way that they can be evaluated quantitatively.
This starts with clear objectives of policy measures, performance indicators and an evaluation not only on
whether modal shift has been achieved, but also on which benefits this has generated in terms of emission
reductions, increased safety, accessibility and resilience of the freight transport system. Such evaluations
should be publicly available, so that policy makers across countries can learn which policies have worked
or have not worked elsewhere. Policy makers could also move beyond periodic evaluations and insist on
regular monitoring of policy measures, so that policy adaptations can be made. Very frequent monitoringof freight movements from ports is taking place in Los Angeles and Vancouver (Canada). Despite the needfor regular adaptations, continuity in policy measures is important for ensuring stability for shippers andcarriers.
Create fair competition between freight transport modes

Governments should maintain a framework for fair competition between freight transport modes andwork to reduce market and government failures. Climate impacts, air pollution and crash risks are external
to the market and require fiscal or regulatory intervention to contain them. Governments deploy a large
variety of instruments to influence the mode choice in freight transport. Policy interventions can be
motivated by the ambition to create a level playing field between modes, but they are often also necessary
because of previous policy interventions that created distortions to that competition. For example, many
modal shift policies are attempting to address distortions in costs of transport modes caused by fossil
subsidies. This is the case when countries subsidise freight rail operations and at the same time provide
fuel tax exemptions for road freight. These contradictions need to be addressed. Establishing a coherent
framework for inter-modal competition in would help progression toward a multimodal transport system
in which all transport modes play a role according to where they perform best in terms of efficiency,
environmental sustainability and safety.
The need to decarbonise freight transport would require phasing-out fossil subsidies and make sureexternal costs of freight transport are better reflected in their costs. An example of the limited
internalisation of external effects is evident from the toll tariffs that the road freight transport sector pays
in many countries: truck toll payments often do not cover the damage caused by the trucks in terms ofroad deterioration for which maintenance costs are incurred.

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CASE STUDY: SHORT SEA SHIPPING IN THE LOWER MAINLAND OF BRITISH COLUMBIA

Case study: Short sea shipping in the lower
mainland of British Columbia
Short sea shipping (SSS) is defined as the movement of cargo by water over relatively short distances,
excluding trans-oceanic voyages. In the North American context, SSS is mostly used for domestic cargo
movements but can also be used for cross-border movements.
This case study will focus on SSS for container movements 1 in Metro Vancouver and the Lower Mainlandof British Columbia, Canada (Figure 10). Regional gateway stakeholders expressed a great interest in SSS
initiatives as a modal choice alternative to regional drayage since the mid-2000s. During this period a
number of smaller-scale public and private sector SSS projects have not succeeded for a variety of reasons.
Most recently, however, a small-scale service that was initiated in early 2021 appears to be sustainable
and have prospects for growth. Concurrently, there is an ongoing public and private sector interest in
creating an environment to enable a sustainable large scale SSS within Metro Vancouver. This case study
will explore the past and current SSS initiatives in the Lower Mainland and the lessons learned.
Figure 10. The Vancouver region

Source: Statistics Canada Census Divisions, U.S. Census Cartographic Boundary File

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The Port of Vancouver is Canada’s largest and most diverse port, which handled 145 million metric tonnesof cargo in 2020. This included 3.5 million TEUs (40% of national port cargo volumes). In the Port of
Vancouver, import containers are generally handled through two main transloading 2 activities: (i) roughly
two-thirds of import-laden containers are transported directly by rail to other parts of Canada or to the
mid-west United States (ii) roughly the remaining one third of import-laden containers are handled in
Metro Vancouver by truck for the purposes of transloading or local market. Export activity is roughly the
inverse, with most of the export transloading undertaken within larger gateway industrial complexes inmetro Vancouver.
The Port of Vancouver is located in a rapidly growing and densifying urban area, with population forecast
to grow from 2.5 million to 3.5 million by 2050. The port has four container terminals located in different
parts of the city: Centerm and Vanterm terminals are located on the northern part of the city of Vancouver;Fraser Surrey Docks is located along the Fraser River; and Deltaport is in the southern part of the city (seeFigure 11). A complex web of trucking activity links the four marine terminals with off-dock import andexport transloads in the larger gateway industrial complex.
Figure 11. The Vancouver Gateway

Source: Applied Freight Research Initiative: Freight GIS (F-GIS) (2020).

The Vancouver gateway’s activity extends well beyond the waterfront and is heavily dependent on trucking(Figure 11). Goods, equipment (e.g. chassis), containers and information are exchanged through a complex
network of interlocking players in the Port of Vancouver’s industrial complex. The main players involved in
the movement of cargo in the Lower Mainland are: the four container terminals, the shipping lines, thedrayage companies, the railway operators, barge operators, transloaders, the beneficial cargo owners(BCOs) and many other logistical providers.

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It is important to note that significant transloading activity happen along the southern arm of the Fraser
River, which implies that most containers leaving the Centerm and Vanterm terminals have to navigate
through the busy metropolis to be transloaded.

Why is modal shift considered in the Lower Mainland?
The Port of Vancouver forecasts a 50% increase in container traffic over the next decade. However, there
are some strategic issues that could inhibit this growth including terminal capacity, scarcity of industrial
land and increasing constraints on trucking. At a more granular level, the gateway industry and the public
sector also have specific concerns regarding the limitations of drayage trucking to support this future
growth:Table 9. Industry and public policy concerns related to freight transport in the Vancouver region
Industry concerns

Public policy concerns

Disruptions: labour instability due to multiple work
stoppages in the last decade

Environment: particulate matter, criteria pollutants, GHG
emissions

Cost: Higher costs due to an increasingly regulatedindustry*

Quality of life for communities: air quality and healthimpacts, noise and vibration resulting from trucking

Access: constrained truck access to terminals especially forexports

Commuter network: congestion, road safety

Reliability: congestion on transportation network increases
cost and reduces reliability

Cost: cost of capital investment, road wear

Note: * In British Columbia, there are currently legislated rates for trucking, i.e. British Columbia’s truck
commissioner has the authority to set trucking rates and fuel surcharges.

SSS offers the prospect to help mitigate these industry and public policy concerns. It can also allay specifictrucking industry challenges by adding redundancies within the network; by offering more reliability forthe movement of cargo; by reducing dependency on trucking and by optimising the use of existing
infrastructure to enable a more efficient and competitive trade gateway. For all these reasons, regional
gateway stakeholders have been interested in the potential of SSS since the mid-2000s. Despite this, SSS
only operates at a small scale today in the Vancouver Metro area.

Past concept development for short sea shipping
Public and private sector efforts to adopt SSS in Metro Vancouver have been slow and hindered by anumber of internal and external factors. Below are two specific examples from past years that inform thecurrent approach to develop a SSS concept.
2007-10: Government-led industry consultation and funding

In 2007-08, the Vancouver Fraser Port Authority (VFPA) and Transport Canada worked on a vision for thedelivery of a SSS network in the Lower Mainland and surrounding areas.
In September 2008, the federal government agreed to invest up to CAD 20.9 million in five SSS projects in
the Lower Mainland and surrounding area under the Asia-Pacific Gateway and Corridor Initiative

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Transportation Infrastructure Fund (APGCI TIF). This was an open bidding process, where individual actors
in the Gateway industrial complex secured government commitments for capital funding. However, noneof these projects were delivered due to a variety of external and internal factors:•

Internal factors: There was a lack of acknowledgement of the complex network of stakeholders
involved in the implementation of a SSS initiative. The funded projects focused on one actor in avery complex system – and this one actor was expected to take the primary financial risk while
the potential benefits were dispersed among multiple actors. The SSS proposal was treated as asimple funding programme and failed to build all the necessary relations with all the players
involved.

•

External factors: Multiple external factors were unfavourable to the implementation of a SSS
initiative. First, the 2008 economic recession made many investors risk averse. Indeed, many
companies decided to redirect their internal priorities and to withdraw their SSS investment.
Second, the cost of unionised labour was high and cost prohibitive. Finally, at that time, thedifferences in costs of SSS and the costs of regional trucking was marginal.

2014: Private initiative for a barge service

In 2014, a private initiative was started for a barge service between an off-dock terminal and a downtown
marine terminal. It was intended to be a small-scale system connecting parties, but the initiative was neverimplemented.
•

Internal factors: The initiative failed primarily because of a dispute between labour unions.

•

External factors: The cost differential between SSS and trucking was still marginal.

What has changed since 2008 and 2021?
A number of internal and external factors since 2008 are driving the need for alternative constructs tomove goods through the Port of Vancouver industrial complex, suggesting there is opportunity to continue
developing a SSS concept in the Lower Mainland. Here are a few:
Table 10. External and internal factors that might drive short sea shipping in the Vancouver region
External factors

Internal factors

1. Growth in container trade

1. Trucking Regulatory

Over the last decade, container traffic has increased by
40%. Forecasts suggest an increase in traffic of 50% in thenext decade.

After a work stoppage in 2014, a more rigidly structured

The current construct for gateway operations is stressed,
creating opportunity for new gateway traffic patterns such
as SSS.
2. Demographic forecasts

2. Gateway users seeking alternatives

An additional 1 million people will live in the Lower
Mainland by 2050 (40% increase).

Significant disruptions have hindered container movementin the past years: 2014 truck work stoppage, 2020 rail
blockades, Covid-19 surge in demand and 2021 wildfires.

This will be accompanied by increased road congestion in
urban centres, with commensurate effect on trucking.

56

regime for drayage was created 3 that included a regulatory
and oversight role for the provincial government. This
regulated system has led to convergence of the cost oftrucking versus SSS.

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External factors

Internal factors

3. Limited industrial land

3. Receptiveness to innovation and technology

The metropolitan area of Greater Vancouver had anindustrial land vacancy rate of only 0.7% in Q1 of 2021, thelowest rate of North America, and limited land to further
support off-dock container activity.

Arrival of a marine terminal operator that is supportive of
SSS and has multiple properties in Metro Vancouver.
Increasing acceptance of semi automation.

SSS can give access to industrial land and create
opportunities for partnerships.

Current initiatives
Given the changes since 2008, highlighted in Table 10, efforts have been made to study and deliver a SSS
system in Metro Vancouver. In 2017-18, Transport Canada led a scoping study which included ajurisdictional scan of successful operations; the examination of possible models and of their viability; anda review of stakeholder interest. The outcome of this study suggested that SSS would be cost comparable
to existing transport options and potentially viable in the long term.
As a follow-up to the 2018 study, Transport Canada and the Port of Vancouver analysed the viability of,and provided preliminary recommendations on possible operating models for SSS in the Lower Mainlandin 2018-19. The analysis identified two viable options: a focused route i.e. a scheduled service operated bya third party that would run between a terminal and a cluster of cargo owners; or, a common user
expansion terminal i.e. a terminal extension up the Fraser river from the existing terminals, which would
include direct access for trucks, rail and on-site warehouse /logistics facility.
Following this study, the Port of Vancouver is leading a CAD 3.2 million Short sea shipping concept
development project with Transport Canada as a funding partner, making a CAD 1.6 million contribution
from Transport Canada’s National Trade Corridor Fund. The purpose is to further develop SSS to a stage
where a confident investment decision could be made by stakeholders.
In 2021, a SSS service focusing on export transloads linked marine terminals run by the same operator withan end-to-end view of the system in Metro Vancouver. This private sector initiative is still small scale, butwith potential to grow.

Impacts
A modal alternative to SSS could reduce, relocate and/or replace trucking activity that is currently
inefficient.
•

Replace the current transportation activities by the desired modal mix.

•

Reduce certain inefficient transportation activities and the negative externalities associated withthe current modal mix.

•

Relocate the transportation activities to a more optimal location.

The SSS project in the Lower Mainland would probably result in a mix of replacing, reducing and relocating
trucking in different locations, which would lead to the following benefits:
1. Managing the cost of container transportation through the gateway

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Short sea shipping is not necessarily cheaper in terms of direct costs than shipping a container by truck.
Indeed, SSS has a different cost profile than trucking, notably with higher fixed cost component associatedwith the loading and unloading of the barge, but also with a smaller variable cost component. In scenarios
where a container requires trucking before or after barging, the direct costs will almost certainly be lower
for trucking.
However, indirect costs must also be taken into consideration. In the long term, service users will be more
comfortable changing their logistics model to adopt SSS instead of trucking. This shift can be expected toreduce inefficiencies such as chassis movements, unnecessary third legs and storage costs. There are also
indirect financial and non-financial benefits to the gateway related to the reduction of truck traffic. Those
include reduced road congestion, reduced road and bridge maintenance and reduced health care costs
linked to air pollution.
2. Increasing the gateway capacity and resilience
A SSS initiative within the Lower Mainland is also expected to increase the gateway capacity and resiliencein three main areas. First, a SSS will provide another transportation link through and from congested
marine terminals. This will therefore increase the capacity of the gateway. Second, a SSS service willconnect the terminal to additional rail links. Additional rail access points can become crucial in the adventof service failures or access challenges. Finally, SSS can become an important player in the redistribution
and access to empty containers. Container imbalances is currently an important challenge in Canada andcould become a threat to gateway capacity and resilience in West Coast ports.
3. Generating an efficient use of scarce industrial land
SSS has been identified as a solution to the scarcity of industrial land in the Lower Mainland. The Lower
Mainland is surrounded by mountains, the ocean, the US border and the Agricultural Land Reserve 4, whichmeans new industrial land cannot be created easily. Moreover, current and former industrial lands havebeen rezoned to meet community housing and transit infrastructure needs. With demand rising, the Lower
Mainland could run out of land for new industrial development between 2035 and 2045.5
SSS could mitigate the shortage of industrial land. Indeed, SSS can support the optimisation of goods
movement to and from facilities or regions where industrial land is cheaper and less constrained. SSS would
also create more efficient use of the current industrial land by facilitating more efficient container
throughput and additional trade activities using limited land and transport infrastructure.
4. Decrease emissions, criteria pollutants and particulate matter
Additional tug and barging operations would lead to a decrease in commercial trucking activities in Metro
Vancouver. There is a consensus that a mode shift towards SSS would lead to a multitude of positive
externalities including reduced greenhouse gas emissions, road congestion, and road wear and tear. SSS
could provide a less carbon-intensive alternative than trucking for the movement of goods. 6 However,some concerns have been raised regarding underwater noise and pollution of a mode shift towards SSS.
An environmental impact assessment and consultations with Indigenous groups will be necessary in theconcept development to address these concerns.

Lessons learned
Three lessons can be learned from this case study of SSS in the Lower Mainland. These lessons areapplicable to SSS operations within growing urban centres with transloading activities.

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1. SSS requires a system perspective

In Metro Vancouver, the implementation of SSS is complex as it requires each stakeholder to conduct an
end-to-end assessment to decide if SSS fits into their business model and corporate strategies. Indeed, themain challenge to successfully implement a modal choice policy is to convince all the players that themodal choice alternative is a valuable project to invest in and to make this project more attractive thanthe current model.
To capture this system perspective, the following considerations are crucial:•

An end-to-end assessment of stakeholder implications. Stakeholders will not look specifically at
the segment of the cargo movement where SSS is involved but will look at the end-to-end cargo
movement and will assess how a modal alternative would impact their business based on theirbusiness model. For example, for marine terminals, on one hand, SSS would provide flexibility in
optimising their existing footprint, while on the other hand it would increase complexity on docks
by adding co-ordination challenges between modes. Table 11 provides a complete list of players
involved in SSS and their roles and considerations.

•

The value of a modal choice model is determined by direct and indirect costs as well as reliability.
SSS and trucking have different cost profiles for direct costs (fixed and variable costs) and indirect
costs. Moreover, as the SSS is a scheduled timed service, it can offer more reliability since it is notaffected by urban road construction, and the off-dock location can be used as a buffer for arrivalat terminals.

2. The risks should be distributed amongst all the players

While stakeholders in the gateway might be supportive of the implementation of a SSS initiative, risks
might not be equally distributed among them. For example, in one of the attempts to implement SSS in
the Lower Mainland, most of the financial risks were expected to be held by the terminal operator, while
the benefits spread among multiple actors. To ensure its sustainability, a SSS initiative must be attractive
in terms of risks and benefits for all the interconnected partners. For this, SSS must clearly demonstrate
financial, efficiency and reliability benefits.
While a SSS initiative is designed for a group of stakeholders, naturally stakeholders will look at a SSS
proposal through their individual business-model lens. In the end, the players will often choose thecheapest and most reliable shipping option. Therefore, both the group and individual needs must be
considered, since the participation of all players is needed to implement a successful SSS initiative.
3. Considering labour and union dynamics early on is crucial

The long-term viability of a SSS service can depend on labour and union. In the first stages of the concept
development of SSS, players will want to see cost certainty of labour not to be more expensive than intrucking. The following considerations for policy-makers are crucial early on in the process:•

Assessing the views and interests of the labour unions in SSS•

Meeting with SSS operators to discuss their labour options and strategy

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Table 11. Lower Mainland’s SSS players
PlayerDescription

Role

MarineTerminals

Marine Terminals possess the infrastructure usedby tug and barge operators, and they also decide
which shipper can have access to those
infrastructure when there is limited capacity andcompeting services. The Port of Vancouver has fourcontainer terminals.

Terminals have a major role to play in SSS initiatives.
Adding SSS services at terminal increases thecomplexity of their operations (limited capacity at thewharf, increased costs if ocean vessels or barge
services are delayed or cancelled) but would also
generate significant benefits such as optimisingterminal storage space, providing flexibility in existing
footprint and reducing congestion on docks.

Tug/Barge

A tug is a marine vessel that pushes or tows othervessels such as barges which transport cargo.

Tug and barge operators would be operating SSS
services.

Beneficial
Cargo Owners(BCOs)The party that takes possession of the cargo at the
final destination (the importer of the cargo).

BCOs could benefit from the implementation of a SSS
initiative through higher resilience of the gateway,higher fluidity, and lower carbon emission for thetransportation of their cargo. BCOs will howeverconsider if SSS would create any challenges thatwould make it difficult for them to receive or returncontainers (detention and demurrage charges).

Shipping LinesBusinesses transporting cargo using container
ships.

For these businesses, containers are a major capital
asset, there is therefore a strong emphasis on
maintaining control on their container supply and SSS
could help to optimise container cycle times. SSS
would however change how they allocate containers
to customers, demurrage and detention, andcontracts with terminals and rail.

Off-docks

Where containers are stored, stuffed and de
stuffed outside of the port premises, before they
are loaded or offloaded from a ship. Off-docks canalso be seen as the connection node between
marine terminals and BCO.

Import: Off-docks of the import side are primarily
interested in unloading the contents of a laden
import container and evacuating the emptied
container to make room for other laden importcontainer.
Export: Off-docks of the export side are primarily
interested in securing empty containers to meet theirbusiness demand.

UnionsUnions can have a decisive role in theimplementation phase of a SSS initiative. Two main
issues could arise: high wages negotiated by theunion could make the SSS project cost prohibitive,
and rivalry between unions involved could lead to aunion not supporting a SSS project. Engaging early on
with unions to avoid labour issues is therefore critical.

Trucking

There are over 70 drayage companies in the Lower
Mainland.

The adoption of a SSS initiative will optimise truck
movements where they are currently inefficient in
the Lower Mainland but would also price out smaller
players due to increased costs for improvements or
to meet new standards. There are currently legislated
rates for trucking. This is helpful in providing abenchmark for SSS costs.

Railways

In Canada, most of the freight arriving by marine
links is then transported by railways. In 2020, 69%of the import containers which arrived at the Portof Vancouver departed the marine terminal via rail.

Railways would benefit from a SSS initiative in theLower Mainland through better fluidity of containers
to existing rail access point and the creation of
additional rail link access which can become crucial to60

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PlayerDescription

Role

There are five railway operators in the Lower
Mainland.

increase the gateway’s resilience and the network
capacity. SSS may however overlap with private rail
shuttle initiatives planned between a marine terminal
and intermodal rail yard.

Indigenous
GroupsPort
Authorities

In the Lower Mainland, consultation with Indigenous
groups will be necessary notably to address concerns
regarding the impacts of SSS on marine life, increased
vessel traffic and potential decline in water quality.
Canada Port Authorities have the wider
responsibilities of enabling international trade,setting their own fees and maintaining anddredging commercial shipping channels. They also
act as landlords by leasing their port operations to
private operators.

FederalGovernment

The Vancouver Fraser Port Authority is currently
exploring development of a dedicated common user
SSS terminal, while also not precluding existing
private sector progress on SSS.

The role of the public sector in SSS is to create theconditions for the industry players to participate andto collaborate. The public sector has the uniqueability to transcend private sector interests and takeon risk that no individual private sector stakeholder
would be able or willing to, providing private sector
stakeholders with the conditions to experiment andinnovate within their operations.

Other
Community
GroupsThis includes cities, public transport authorities,
etc.

In the case of the Vancouver region, cities and public
transport authorities would indirectly benefit from a
SSS initiative via reduced trucking traffic and urban
congestion, reduced wear and tear of roadinfrastructure, and reduced air pollution.

Other players

This includes industry associations, etc.

Their role will depend on the SSS model and design
adopted.

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CASE STUDY: MODE CHOICE IN FREIGHT TRANSPORT – JIANGSU PROVINCE IN CHINA

Case study: Mode choice in freight transport –Jiangsu province in China
Promoting the adjustment of transport structure is a major task deployed by the State Council. Moreover,transport structure adjustment is an important part of the critical battle against pollution.
In September 2018, the State Council issued the three-year action plan to advance transport structure
adjustment. Objectives and tasks are stated in this action plan. In addition, this plan provides thefundamental criterion of transport structure adjustment and shows the strong determination to promote
this work from Central Committee and State Council in China.
Jiangsu Province is in the eastern part of China. With a GDP of CNY 10.27 trillion in 2020, it is one of thehighest-performing provinces with regards to comprehensive development in China.
It has also formed a comprehensive modern transportation system, integrating road, railway, water, airand other transport modes. In 2019, Jiangsu's freight volumes were 75.01 million tonnes by rail,
1 645.78 million tonnes by road and 906.7 million tonnes by waterways.
Jiangsu Province has also formulated action plans and subsidy programmes for transport structure
adjustment, which have achieved good results. Therefore, it is typical to choose the case of transport
structure adjustment in Jiangsu province to represent the case of China.
In February 2019, the General Office of Jiangsu Provincial Government issued an implementation plan for
promoting transport structural adjustment in Jiangsu province.
The implementation plan aimed to promote transport structural adjustment through seven actions. They
are freight railway capacity expansion, waterway transport upgrade, speed-up of multimodal transport,
high-quality development of China-Europe freight trains, road freight management, urban and rural green
distribution, and information resource integration.
The targets of this plan are as follows. By 2020, the provincial transport structure would be optimised
remarkably and the bulk cargo traffic volume undertaken by railway and waterway would increasesignificantly. The port collecting and distributing volume, intermodal container volume and inland
container volume would increase sharply. The overall work of transport structural adjustment would
achieve remarkable results and build a model for transport structure shift along the Yangtze River
Economic Belt.
Under this action plan the volume of cargo undertaken by rail would increase by 19.45 million tonnes
compared to 2017, an increase of 34.2%. The volume of multimodal freight transport and the volume ofcontainerised rail to water transport at key ports would increase by more than 30%. Inland river containertransport capacity would reach 500 000 TEU. The proportion of railway and waterway transport for key
enterprises such as steel, electrolytic aluminium, electric power and coking shall exceed 50%.

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Instruments and approaches
Subsidies

The provincial transport department and Finance authority issued a joint subsidy scheme for transport
structure adjustment in Jiangsu province. The goal of this scheme is to promote a modal shift from roadto waterway and from road to rail with regards to bulk cargos and containers. In addition, it aims to reduceroad traffic, increase railway and water traffic, and enhance transport organisation simultaneously so thatit could provide a strong support for high quality economic development.
The subsidy scheme determined three areas for modal shift in important enterprises: shifts from road torail and road to waterway, intermodal trains, and modal shift from road to rail and waterway in key ports.
This gave rail and water transport prices a comparative advantage as a result. The total budget of thisspecial subsidy funds is CNY 120 million.
Three types of enterprises could apply for the subsidies in accordance with this scheme. The first areenterprises that shift road transport to railway as to bulk cargos. The second, operators who engage in the
shipment of the point-to-point freight trains. The third are key ports that implement modal shift from roadto rail and waterway and have marked achievements. Above all, each should operate in accordance withlaw, have good credit, perform statistical obligations, and have no history of major safety or environmental
liability accidents.
The subsidy criteria in accordance with this scheme, are as follows. A subsidy of CNY 3 per tonne will be
provided for the annual increment of railway transport volume of bulk goods. For road-rail-waterwayintermodal trains, the subsidy for container trains is CNY 200 per TEU, and the subsidy for shed car trains
is CNY 500 per vehicle. Concerning modal shift in key ports, a subsidy of CNY 3 per tonne will be given to
the incremental volume of bulk cargo railway transport at major coastal ports. In addition, the subsidy forcontainer road barge from Taicang Port of Suzhou Port to railway freight of Suzhou West Railway Station
is CNY 600 per TEU, and the subsidy for waterway barge is CNY 800 per TEU.
Exempted and reduced charges

To promote container transport there are exemptions from transport tolls. All the container transports inand out of Nanjing port, no matter if empty or full, are exempted from tolls in all the provincial highways
and ordinary road toll stations. In addition, railway transport fees are reduced to promote the railway
transport.
Infrastructure

From 2018-20, the railway construction investment exceeded CNY 140 billion in Jiangsu province. The LianYan railway, Xu-Su-Huai-Yan railway, Lian-Huai-Yang-Zhen railway and other major projects were built
successively. The transport department and office of natural resources requested an acceleration of
construction to promote the construction of industrial railways, and to innovate the mode of industrial
railway operations.
The comprehensive capacity of coastal ports along the Yangtze River has reached 2.12 billion tonnes andthere are eight ports whose capacity exceeds one hundred million tonnes currently. These two indexes areranked high among China’s ports.
Channels are also being cleared to create high-grade waterways. A basic two longitudinal and fivehorizontal” waterway trunk line network currently connects a 1 000-tonne network of channels.

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Subsidy measures for hub station construction guide and promote the construction of freight parks.
Twenty-three logistics parks have received CNY 178 million. At present, the province has built
40 intermodal freight hubs, 13 have been built since the end of 2017.
Digitalisation

Digitalisation can deepen freight network development. Efficient matching of supply and demand logistics
can be enhanced by active application of cloud computing, big data, Internet of things, new technologies,
artificial intelligence and block chain. A total of 80 freight enterprises receive this type of digital service in
the Jiangsu province.
The visualisation and construction of 36% digitally connected logistics parks have had great success in
Jiangsu province. The shipping information management system, inventory management system andvehicle real-time scheduling system has been adopted by 58% of these parks. In addition, more than 70%
of logistics enterprises in the transport sector use the positioning system and vehicle-sensing equipment.
Co-ordination mechanisms

A conference system to promote transport structure adjustment was established in Jiangsu province. In
this system, the Vice Governor convenes communication between 29 government departments, including
the provincial development and reform commission, who constitute the membership. They all join forces
to promote transport structure adjustment.
Transport structure adjustment was included in the 100 annual critical works by the Jiangsu provincial
government. Special meetings are held to further this agenda.
In August 2019, the Transport department and China railway Shanghai bureau agreed to comprehensively
deepen co-operation to formulate policies and measures of modal shift from road to rail via a port, an
enterprise or even a project. Moreover, the transport department and each cargo centre assisted to pushmodal shift from road to rail. The intensive cooperation between Nanjing transportation bureau and the
Nanjing cargo centre was an example, which raised railway capacity 600 000 tonnes per year.
Lianyungang port group strengthened their co-operation with central Asian countries such as Kazakhstan
and Uzbekistan for a China-Kazakhstan connection to promote the development of international
multimodal transport. It also formed the renowned “One park and Three sites” chain layout which includes
Lianyungang core area, Xinjiang Huoerguos depot and the east gate logistic park of Kazakhstan.
Demonstrations of typical projects

The further development of multimodal transport in Jiangsu province was supported by a scheme issued
by the provincial financial department and 23 other departments.
Since 2016, the transport department in conjunction with the Development and Reform, Industry andInformation have carried out a multimodal transport construction project demonstration. A total of
CNY 8.2 billion has been invested in 22 demonstration projects and 116 demonstration lines were opened.
The multimodal transport volume exceeds 170 million tonnes and the multimodal container transportvolume exceeds 3.7 million TEU for these projects. Demonstrations made by this project drove creation of
the hub of multimodal transport lines, terminals, transport organisation mode and information systems,
and related service companies.

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To build a combined river-sea container transport system, the provincial development and reform
commission and seven other units introduced the action plan for the development of inland containers in
Jiangsu province from 2018 to 2020. From 2018 to 2020, a special fund was allocated for inland container
development to support the open or encryption-container routes.
A three-tiered urban distribution network was formed in Suzhou, which included an integrated logistics
centre, a public distribution centre and the connections to the distribution network. As a result, transport
costs for cargo distribution (in tonne-kilometres) fell by an average of 12%.

Impacts of modal split in Jiangsu
In 2019, the railway freight volume is expected to exceed 83 million tonnes in Jiangsu province, with ayear-on-year increase of 7.2%, which has had greater improvement than last year.
The ratio of total social logistics costs and GDP fell to 13.8% in Jiangsu province in 2019. This was a decreaseof 0.1% points compared to 2018 and 0.9% points lower than the average level of China in 2019.
In 2019, the ecological and environmental quality of Jiangsu Province improved steadily, and the ambient
air quality continued to meet the standards. The proportion of days with good ambient air quality was
71.4% in Jiangsu province in 2019. The proportion of days with good air quality in 13 cities ranged from
59.2% to 80.8%. In addition, the concentration of particulate matter, sulphur dioxide, nitrogen dioxide andcarbon monoxide among major pollutants decreased year-on-year. Among them, the average annual
concentration of PM2.5 in Jiangsu province was 43 micrograms per cubic metre, down 8.5% from 2018. In
contrast, the concentration of ozone increased year-on-year.

Policy implications
In 2008, a comprehensive transport management system that covered road, railway, waterway, andaviation was formed in Jiangsu province. This is one of Jiangsu’s most innovative transport structure
adjustments as it made combining all kinds of separate transport modes into an interconnected networka reality.
A system of joint conference to promote transport structure adjustment was established in Jiangsu
province. In this system, the vice governor convenes over 29 government departments to join forces topromote transport structure adjustment.
Transport structure adjustment was included in the 100 annual critical works by the provincial governmentand deploy it by a special meeting.

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CASE STUDY: THE FREIGHT CORRIDOR APPROACH IN THE NETHERLANDS

Case study: The freight corridor
approach in the Netherlands
This case study explains the purpose of and thoughts behind the freight corridor approach in the
Netherlands. The freight corridor programmes in the Netherlands are still a work in progress. It is therefore
not yet possible to evaluate the freight corridor programmes on the effectiveness on influencing the modal
split of freight transport.

What is a freight corridor?
The main components of a transport corridor are usually a seaport, waterways, road and rail networks in
the hinterland, inland ports or bulk ports and border controls. Besides land corridors, there are also
maritime corridors, with short sea shipping and aviation corridors. In a corridor, all modes of transport
follow the same spatial orientation and serve the most important agglomerations and economic centres
within their route. A distinction can be made between corridors according to their scale, from corridors
within and between regions to corridors that stretch and connect entire continents, such as the silk routefrom China to Europe. In addition, there are differences in the approach to the corridors, from narrow,meaning only the co-ordination of and developing the infrastructure, to very broad, in which co-ordinationof spatial, trade and economic developments are also part of the corridor approach.
Hope and Cox (2015) distinguish several stages in the development of a corridor from narrow to broad.
The successive stages are (1) transport corridor, (2) transport and trade facilitation corridor, (3) logistics
corridor, (4) urban development corridor and finally (5) economic corridor. These stages are recognisable
as ideal types, but it is not necessarily the case that they are all complete. This classification is therefore
more of a typology of different types of corridors than a sequential development path that corridors go
through.
A corridor is more than the co-ordination and co-operation between governments. It is a combination ofprivate and public activities, in which the private sector organises trade and transport while the public
sector facilitates this with infrastructure and trade agreements. The division of tasks between the private
and public sectors can be represented schematically as follows.
Corridors start as natural transport routes and investments in physical infrastructure for one or moretransport modes to then become a transport corridor. The next evolutionary step requires thedevelopment of the soft infrastructure of transport services and transport logistics. The development intoa fully-fledged economic corridor requires a broader approach and investment in the regions served by
the corridor. Srivastava (2011) further notes that corridors must stimulate economic growth to be viable,
and that corridors in themselves do not create economic strength, but channel, focus and enhance thepotential for economic growth. A corridor that connects two nodes but between which there is no growthpotential is also of limited interest. The stops along a corridor are more interesting than connecting theendpoints.

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Figure 12. Multi-lateral corridor agreements in a public and private sector context

Source: COMCEC (2017).

Building a transport corridor and expecting development to follow automatically is unlikely to be the way
it works (COMCEC, 2017). It is more likely that the transport corridor, connecting the right places, becomesthe mode of a series of accessibility benefits that will lead to further positive feedback. This process, also
called circular and cumulative causality, gives rise to the idea that growth is concentrated on corridors
connecting places that are highly interactive. The prerequisite is that there is a common set of objectives
around which political adhesion can exist. In some cases, this may be driven by the fact that landlocked
countries demand secure trade routes; in other cases, it may be economic and social cohesion, as in theEuropean Union, but a driver for political integration is a prerequisite.
The administrative elements of corridors typically follow a similar pattern. A memorandum of
understanding is signed that establishes a set of common objectives, which have no legal force, to aninternational treaty that commits governments to a set of economic, financial and legal obligations thatmust be ratified domestically. An essential part of this process is always the creation of a transport corridor
co-ordinating organisation. Such an organisation can take different forms, for example an independent
entity or a board of participating members.

The freight corridor approach in the Netherlands
The Netherlands, situated by the North-Sea and the Rhine-Meuse-Scheldt Delta within its borders, is an
import linking point for global flows of goods from and to North-Western Europe. Three of the twelve
European TEN-T corridors run through the Netherlands, namely the North Sea-Baltic Corridor, RhineAlpine Corridor and the North Sea-Mediterranean Corridor. As part of the implementation of the TEN-T
corridors, the Dutch Ministry defined an international core infrastructure network as part of the mobility

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policy in the Netherlands, laid down in the Structuurvisie Infrastructuur en Ruimte (SVIR) policy document(Ministry of Infrastructure and the Environment, 2012). This network contains the relevant cross-borderhinterland connections for freight transport to and from the economic centres in the Netherlands. The
SVIR subsequently promised that the central government, together with the freight transport sector andregional authorities will develop a national core network, including a shared vision on container terminals
in the Netherlands. To develop this national core network, it was decided in 2013 to start with two mostimportant freight transport corridors within the Netherlands (see Figure 13). The focus was to identify the
options and obstacles in optimising freight transport within these corridors:•

The East freight transport corridor (Rotterdam – Arnhem / Nijmegen – Germany). This corridor ispart of the TEN-T Rhine-Alpine corridor. Parts of this corridor are also part of the North Sea-Baltic
and North Sea-Mediterranean corridor. The Rhine-Alpine Corridor is one of the busiest routes for
freight transport in Europe, which connects the seaports of Rotterdam and Antwerp withGermany, Switzerland and Italy. This corridor includes the modalities road (A15), rail (the Betuwe
freight railway line) and inland waterway (the Waal).

•

The South-east freight transport corridor (Rotterdam – Noord-Brabant / Limburg – Germany). This
corridor is also part of the European Rhine-Alpine corridor. Parts of the waterways in the corridor
are also located on the North Sea-Mediterranean corridor: the ports of Rotterdam and Moerdijk(which is also located on the North Sea-Baltic corridor) and the inland shipping on the Maas riverto the south. This corridor is comprised of the modalities road (A16 / A58 / A67), rail (the Brabantroute) and inland shipping (the Maas and the Brabant canals).

To develop these two freight corridors a study started in 2014 to investigate the challenges, meaning thebottlenecks but also the opportunities to improve freight transport within these corridors (Ministerie vanInfrastructuur en Milieu, 2017). This study was followed by a policy programme in 2017 to set up projectplans for the challenges identified in the 2014 study. The purpose of this programme is to optimise freighttransport using existing and planned infrastructure and multimodal nodes. It is about implementing smart
and solutions other than infrastructure measures and is intended to keep the Netherlands, and theseaports in particular, accessible without having to invest in new or expanding existing road infrastructure.
The programme focuses on a more efficient use of space and the available capacity within the totaltransport system. This mainly concerns reducing the overload on the road by a modal shift of freighttransport to water, rail and pipelines. The robustness of the transport system requires a solid modal shift
instrument to ensure a good flow in changing circumstances (e.g. managing blockages, large-scale
maintenance or drought). A modal shift also helps to reduce the high management and maintenance costsof the road network. This freight corridor programme focuses on the spatial and economic developmentof multimodal logistics hubs and their importance in making better use of rail transport and inlandshipping.

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Figure 13. The multimodal nodes and infrastructure in the East and Southeast corridor

Note: English translation of Dutch key, “Bovenregionaal knooppunt” = supra-regional node; “knooppunt” = node;“knooppunt met onderliggend network” = node with underlying network; “spoor” = rail; “weg” = road;“binnenvaart” = inland navigation; “buis” = pipeline.
Source: Programmaraad Goederenvervoercorridors Oost en Zuid-Oost (2021).

In 2020, the Ministry of Transport and Waterworks together with the provinces of North Holland, South
Holland, North Brabant and Zeeland and the ports of Amsterdam, Rotterdam, Moerdijk, and North Sea
Ports began to investigate the feasibility and need for a programmatic approach for the freight corridor
South.
•The South freight transport corridor (Amsterdam, Rotterdam, Terneuzen to Belgium). This corridor
is part of the North Sea-Mediterranean Corridor and is connected to the Rhine-Alpine Corridor
and the North Sea-Baltic Corridor. The corridor connects the main seaports in the Netherlands(Amsterdam, Rotterdam, Moerdijk, Vlissingen, Terneuzen) with those in Belgium and further
abroad. This corridor comprises the modalities road (A4, A17 and A16), pipelines (pipeline corridor
Rotterdam-Antwerpen), rail (Rotterdam-Antwerpen), short sea and inland shipping (North andSouth Holland canals, midden-Zeelandroute and Schelde-Rhine canal).

The fourth corridor, namely the North freight corridor, is in traffic volume smaller than the other threefreight corridors. There are no plans to develop a corridor programme for the North corridor but there are
initiatives, mainly private, to develop multimodal freight transport by rail and water.
The basic idea behind the freight corridor approach is that it will be better achieved through private andpublic co-ordination and co-operation. This joint approach will assist the common goals of economic

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development, sustainable handling and transportation, and the efficient use of available infrastructure by
freight flows in the freight corridors. The freight corridor programmes focus an integrated approach
towards infrastructure use and spatial and economic development. Through cooperation, coordination,
spatial concentration and bundling, inland shipping and rail can become more attractive, and sufficientvolume is created, making the corridors more attractive places to locate, while innovations, such assustainable charging infrastructure (clean energy hubs) become feasible. More freight by rail and inlandshipping would help to avoid congestion on the roads and reduce the impact of freight transport on theenvironment.
The freight corridor programmes in the Netherlands are joint programmes by the national and regional
governments to optimise the freight corridors from the port of Rotterdam to the German and Belgium
borders in terms of connectivity, and accessibility, economic growth and sustainability. Only the East andSoutheast freight corridors have their programmes ready. In 2021 the Toekomstagenda Corridor
ontwikkeling 2030 (Future Agenda Corridor Development) was published (Programmaraad
Goederenvervoercorridors Oost en Zuid-Oost, 2021). There are some aspects of the freight corridor
programmes that needs to be explained.
First, it concerns national programmes, yet the corridors are part of the international TEN-T corridors. For
example the freight corridor East requires consultations with the German region Nordrhein-Westfalen, but
the programme focuses fully on the challenges and actions required on the Dutch side of these corridors.
Second, the focus of the freight corridor programmes are on optimising the freight transport system. The
corridor approach combines economic and sustainability goals but the focus is not on stimulating trade,like in other international corridors. The focus lies on a better performance of the multimodal freighttransport system within the corridors. The freight transport system is not used optimally and therefore itis neither sustainable nor performing economically. Optimising the freight transport system means using
the available capacity on the waterways, rail and pipelines and a better use of road transport capacity bybundling and higher load factors. Optimisation will make freight transport more sustainable and makes theintroduction of new sustainable technologies easier. It will also generate economic benefits, which will
make the corridors more attractive to businesses.
Third, the freight corridor programmes are based on an integrated approach, meaning a broad scope anda coherent approach. In order to make a modal shift possible all conditions for intermodal transport mustbe right, the intermodal chain is as weak as the weakest link. Possible components of freight corridors are:multimodal terminals at the origin and destination, the connecting infrastructure, the pre- andend-haulage by road and the multimodal transport services by rail and waterborne. Additional
components to consider in the integrated approach are: the spatial planning of terminals, the industrial
areas around it and the location of distribution centres. In the corridor programme East and South-East,
the corridor partners have agreed to take a more active approach to cluster logistics activities. The
availability of sufficient space near multimodal terminals for expanding business development is an
important factor in the process of optimisation. All actions are considered and implemented in conjunction
to maximise coherency within the programme.
Because of the integrated approach, co-operation and co-ordination is needed between all parties in thelogistics chain and the authorities responsible for infrastructure planning and spatial planning.
Finally, the approach is based in adaptive programming. The corridor programme is not a solid blueprint
with fixed dates on which actions have to start and finish. Adaptive programming is a more flexible
approach, responding to problems and opportunities when they occur in light of what the actors want toachieve in the longer term. Figure 14 reflects an annual process for this programming of project70

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monitoring, discussion of new actions, decision making and summarising decisions and agreements madewithin a framework of set ambitions and route maps.
Figure 14. Yearly cycle of monitoring, reporting, decision making andrealisation for transport corridor development

Source: Programmaraad Goederenvervoercorridors Oost en Zuid-Oost (2021).

Designing the freight transport corridors
To create the East and South-East corridors the challenges for them were first defined (Ministerie vanInfrastructuur en Milieu, 2017).
The second step was to get commitment and willingness to co-operate and to have consensus on the
purpose and the scope of the programme, on the road maps and finally on the adaptive process andorganisation of the programme until 2030. This is all laid out in the Future Agenda for the East and SouthEast corridor (Programmaraad Goederenvervoercorridors Oost en Zuid-Oost, 2021). This agenda provides
direction for the period up to 2030 with a joint and coherent future perspective for five pillars and for eachpillar a roadmap for the short (up to 2025), medium (2025-30) and long term (after 2030). The fiveroadmaps are:•Future-proof connections between Mainport Rotterdam and the European hinterland•

International multimodal accessibility of strategic multimodal nodes

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Sustainable spatial-economic development of strategic multimodal nodes•

Making the East and Southeast top Corridors more sustainable•

State of the art digital facilities

The strategic multimodal nodes are those areas which have the most extended multimodal transhipment
facilities and largest spatial concentration of logistic centres within a freight corridor. In the case of theEast and Southeast corridors, the multimodal nodes are: Moerdijk, Tilburg, Tiel, Nijmegen/Arnhem, Venlo
en Sittard-Geleen/Stein.
Figure 15. The five pillars and their roadmap as part of the future agenda

Source: Programmaraad Goederenvervoercorridors Oost en Zuid-Oost, (2021).

Four of the five roadmaps are directly aimed at influencing the modal split. Pillar 1 and 2 focus on themultimodal connections and infrastructural accessibility of the multimodal nodes. Pillar 3 is about spatial
clustering at the nodes around multimodal terminals. Pillar 5 is about the digitalisation of the information

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supply around multimodal transport. The corridor programme aims to shift 5 million tonnes and
0.7 million TEU from road to rail and waterways until 2030.

Modal split in the Netherlands
The annual transport volume of all modes of transport, including sea and air is almost 2 billion tonnes per
year in the Netherlands. About one-third of the total transport volume consists of transhipment within the
Dutch seaports, another-third is domestic freight transport and the final-third are international inlandtransport flows going in or out of the Netherlands. These figures show that the international transport
flows exceed domestic flows in total volume. Hence an important part of the infrastructure available for
freight is designed and even dedicated, like the Betuwe railway line, to accommodate these internationaltransport flows.
Figure 16. Freight flows to, within and from the Netherlands in weight in 2018
in million tonnes

Source: KIM (2019).

The main modes of inland freight transport are road, waterborne, pipeline and rail transport. The annualtransport performance of inland freight transport was about 132 billion tonne-kilometres in 2019 in the
Netherlands and dropped to 126.7 billion tonne-kilometres in 2020.
Road and inland waterway transport together account for around three fourth of the tonne-kilometres infreight transport in the Netherlands. The main difference between domestic and international transport is

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that road transport dominates domestic, whereas inland navigation dominates international transport.
The share of rail transport is negligible for domestic transport and fairly modest for international transport.
In domestic freight transport, waterborne and rail can only compete with road transport in the areas ofcontainer transport and bulk transport. In international freight transport, these modalities have a muchlarger share compared to road. Waterborne and pipeline transport indeed have a relatively high share in
freight transportation in the Netherlands compared to other countries. This is supported by the many
waterways in the Netherlands, and the large volume of maritime containers and fossil fuels moving
through the Netherlands.
Figure 17. Modal split of Dutch domestic and international inland freight transport in 2018
in tonne-kilometres

Source: CBS database.

The expectations are that freight flows – combining domestic and international transport – will keep
growing in the longer term. In 2018, almost 115 billion tonne-kilometres were transported in the
Netherlands by road, rail and waterways. In the low-economic growth scenario this increases by 4% to120 billion tonne-kilometres by 2040 and by 23% to 142 billion tonne-kilometres in the high-economic
growth scenario (Dat.mobility and Districon, 2021). Both scenarios calculate the potential further modal
shift to waterway or rail modes by 2040 per freight corridor. The potential modal shifts for rail and inland
waterway navigation should not, however, be added together as the total potential shift for the
Netherlands. This is because part of the goods can be transported by both modes and are added to thevolume of both modalities.

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CASE STUDY: THE FREIGHT CORRIDOR APPROACH IN THE NETHERLANDS

Table 12. Modal shift potential in 2040 of rail and barge
Rail

Barge

Corridor East

9-10 million tonnes (Mt)

6.6-8 Mt

Corridor South12-14 Mt

17-19 Mt

Corridor North*15-18 Mt

14-18 Mt

Corridor South-east

6.6-8 Mt

8-10 Mt

Note: * there is no freight corridor programme developed for freight corridor North but it is recognised as one of
the four freight corridors in the Netherlands.
Source: Dat.mobility and Districon (2021).

Modal split policies in the Netherlands
The Netherlands included an active modal shift objective in its national traffic and transport policy in 1990.
It stipulated that approximately 65 million tonnes of growth in road transport should be shifted to inlandshipping and rail by 2010 (Jonkeren, 2020). This modal shift objective was elaborated in an action plan in
1996. However, this modal shift objective was abandoned in 2001. The argument was that all modalities
are necessary for the entire logistics system to function. The focus is then on stimulating transport by rail
and waterways and better utilisation of road transport capacity by bundling and higher load factors
through better logistics chain management. The concept of Synchromodality (Topsector Logistiek, 2011)is being developed for this purpose. In the freight transport agenda, the Ministry of Infrastructure andWater Management (2019) announced that it will focus on promoting modal shift with actions that tie inwith earlier programmes concerning rail freight transport and inland shipping in the coming years. The
freight transport corridors play an important role in this. The ministry indicates that it will focus on modal
shift in co-operation with the logistics sector and the governments concerned.

What are the influencing factors for modal split in this case study?
These roadmaps in the corridor programme will influence the modal split for the Netherlands. They explain
which steps are required to achieve modal shift.
Improving multimodal connections and infrastructural accessibility of the multimodal terminals will reducetransport times and traffic, and can make larger transport volumes possible. Shorter lead times andeconomies of scale make multimodal transport more attractive in the competition with roadtransportation. The roadmap future-proof connections between Mainport Rotterdam and the European
hinterland focuses on catching up and accelerating measures for management and maintenance,
replacement and renovation of the existing connections, ensuring that freight transport is hindered as little
as possible during implementation and, where necessary, making additional investments in missing links
and bottlenecks. Pipeline transport is also examined as an alternative mode in the roadmap. The
Netherlands are considering the expansion of the pipeline route Rotterdam – Chemelot – Ruhrgebiet as aresult. The roadmap “International multimodal accessibility of strategic multimodal nodes” focuses on the
improvement of railway yards, quay walls and the access of inland ports.

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Spatial clustering of logistic facilities at multimodal terminals works two ways. First, the spatial clustering
near a terminal ensures shorter distances in the pre- and end-haulage. This reduces the costs of transport
to and from the terminal. This makes multimodal transport cheaper but also makes it more attractive toshift from road transport to multimodal transport. For example, in the Netherlands, the general distancelimit is that companies at a distance of more than 25 km from a terminal are unlikely to use multimodaltransport. When companies are located at the same industrial area as the terminal, the containers areoften transported from the terminal to the company using the company's own tractors. The pre- and endhaulage costs are thus reduced to a minimum. Second, when more companies establish themselves
around a terminal, the demand for multimodal transport will increase. The volume of multimodal transport
will increase and therefore the quality of the service, in terms of frequency, will improve. Larger scalemeans economies of scale and unit costs will decrease. A condition is that the space to grow must be
available. In the roadmap “Sustainable spatial-economic development of strategic multimodal nodes”, ajoint policy is drawn up to facilitate and direct expansion and new branches at nodes. Its goal is toaccommodate inter- and nationally oriented logistics activities (distribution), manufacturing industry andthe agro-food sector with a preference for intermodal supply and transport.
Many shippers are not familiar with multimodal transport. The information exchange between carriers andshippers is often not designed for it and multimodal transport often requires bundling of different loads.
The roadmap Digitalisation of the information supply around multimodal transport focuses on efficientexchange of logistical digital data and information, in order to make it easier to use multimodal transport
services within the corridors. This should make multimodal transport more accessible, easier to organise
and more efficient. For example, the short-term focus of the corridor partners is the roll-out of theConnected Transport Corridor (CTC) approach. Part of this is setting and creating the necessary
preconditions to stimulate digital platforms for real-time data exchange and other digital system solutions(applications) that can be tested within the corridors and that successful applications can be scaled-up at
corridor level. This also offers perspective to developers and other market parties.

Future modal shift
The Netherlands aims to shift 5 million tonnes and 0.7 million TEU from road to rail and waterborne modes
by 2030. The development of transport corridors will be crucial to achieve this. The corridor programmein the Netherlands is based on a yearly cycle of reporting, decision making and realisation. It will be
important to monitor the modal split and the progress within the agreed actions to achieve programme
goals as part of this yearly cycle. This ongoing interaction helps to fine-tune or adjust measures as needed
and to improve the modal split within the freight corridors.

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REFERENCES

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NOTES

Notes
1

Transborder SSS will not be covered in this case study. Cross-border SSS operations is a different market with its unique set of market
drivers, public policy goals and levers, and operational circumstances that fall outside of the scope of this case study.

2

Transloading refers to the unpacking and reorganising of cargo shipment, which often facilitates the switch from one mode to anotheras part of the end-to-end transit to its final destination. Ex: A 40 feet container arriving at the Port of Vancouver can be unloaded at
a transloading facility and repackaged into domestic containers or trucks.

3

The Office of the Container Trucking Commissioner was created in 2008, which provided more direct oversight on drayage.

4

The Agricultural Land reserve is a provincial zone in British Columbia in which agriculture is recognised as the priority used. It protects
approximately 4.6 million hectares of agriculturally suitable land, some of which surround the Metro Vancouver area.

5

Source: “The Changing Nature of Industry and Industrial Land Demand in Metro Vancouver: Discussion Paper”, June 2019,
Wollenberg Munro Consulting. Document prepared for Metro Vancouver and released online in September 2019.

6Note that the magnitude of the impact would depend on the fuel source and on innovation.

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Mode Choice inFreight Transport

International Transport Forum
2 rue André Pascal
F-75775 Paris Cedex 16+33 (0)1 73 31 25 00
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2022-02/Photo credit: Denis Belitsky/ShutterstockThis report examines why freight
carriers and shippers choose one
transport mode over others. It
analyses the main determinants forusing road, rail, inland waterways,
coastal shipping or pipelines to movegoods and assesses government
policies to influence it. The study
also reviews how shifting freight
to more sustainable modes could
reduce the contribution of goods
transport to climate change andprovides recommendations for more
effective policies. The role of mode
choice in alleviating congestion andmaking goods transport safer is also
addressed. Three case studies from
China, Canada and the Netherlands
highlight modal-shift policies.