CPB

Corporate Partnership
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Zero Carbon
Supply Chains
The Case of Hamburg

Case-Specific Policy Analysis

Zero Carbon
Supply Chains
The Case of Hamburg

Case-Specific Policy Analysis

The International Transport ForumThe International Transport Forum is an intergovernmental organisation with 63 member countries. It acts
as a think tank for transport policy and organises the Annual Summit of transport ministers. ITF is the only
global body that covers all transport modes. The ITF is politically autonomous and administratively
integrated with the OECD.
The ITF works for transport policies that improve peoples’ lives. Our mission is to foster a deeper
understanding of the role of transport in economic growth, environmental sustainability and social
inclusion and to raise the public profile of transport policy.
The ITF organises global dialogue for better transport. We act as a platform for discussion and prenegotiation of policy issues across all transport modes. We analyse trends, share knowledge and promoteexchange among transport decision-makers and civil society. The ITF’s Annual Summit is the world’s largest
gathering of transport ministers and the leading global platform for dialogue on transport policy.
The Members of the Forum are: Albania, Armenia, Argentina, Australia, Austria, Azerbaijan, Belarus,
Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Chile, China (People’s Republic of), Colombia, Croatia,
Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India,
Ireland, Israel, Italy, Japan, Kazakhstan, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta,
Mexico, Republic of Moldova, Mongolia, Montenegro, Morocco, the Netherlands, New Zealand,
North Macedonia, Norway, Poland, Portugal, Romania, Russian Federation, Serbia, Slovak Republic,
Slovenia, Spain, Sweden, Switzerland, Tunisia, Turkey, Ukraine, the United Arab Emirates, theUnited Kingdom, the United States and Uzbekistan.

International Transport Forum
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contact@itf-oecd.org
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Case Specific Policy Analysis Reports
The ITF’s Case-Specific Policy Analysis series presents topical studies on specific issues carried out by the
ITF in agreement with local institutions. Any findings, interpretations and conclusions expressed herein arethose of the authors and do not necessarily reflect the views of the International Transport Forum or theOECD. Neither the OECD, ITF nor the authors guarantee the accuracy of any data or other information
contained in this publication and accept no responsibility whatsoever for any consequence of their use.
This work is published under the responsibility of the Secretary-General of the ITF. This document, as wellas any data and map included herein, are without prejudice to the status of or sovereignty over any
territory, to the delimitation of international frontiers and boundaries and to the name of any territory,
city or area.
Cite this work as: ITF (2021), “Zero Carbon Supply Chains: The Case of Hamburg”, International Transport
Forum Policy Papers, No. 91, OECD Publishing, Paris

Acknowledgements
This report was written by Olaf Merk of the ITF. It was informed by interviews and exchanges with a variety
of stakeholders, including Dr. Andreia Thiel, Ingrid Boqué and Dorita Hermes (Hamburg Port Authority),
Jan Hendrik Pietsch (HHLA and Metrans), Andreas Schruth (Eurogate), Jörg Erdmann, Ulf Schawohl andPyers Tucker (Hapag Lloyd), Edgar Uribe (Kühne + Nagel), Holger Schneebeck (DHL), Björn Tiemann (Konrad
Zippel), Martin Aden and Malte Lübbers (Otto).
The author would like to thank Steve Perkins of the ITF for his review of a draft version of the report andRichard Venturi for editorial support.

TABLE OF CONTENTS

Table of contents
Executive summary ............................................................................................................................. 6
Introduction ........................................................................................................................................ 8
The port of Hamburg ......................................................................................................................... 10
Carbon emissions .......................................................................................................................... 11
Targets .......................................................................................................................................... 11
Measures to reduce emissions of the port authority .................................................................... 11
Measures to reduce emissions from ships .................................................................................... 12
Measures to reduce emissions from rail transport ....................................................................... 12
Drivers ........................................................................................................................................... 13
Container terminals in Hamburg ....................................................................................................... 14
Carbon emissions .......................................................................................................................... 15
Targets .......................................................................................................................................... 15
Measures....................................................................................................................................... 15
Drivers ........................................................................................................................................... 16
Obstacles ....................................................................................................................................... 16
Container shipping ............................................................................................................................ 18
Carbon emissions .......................................................................................................................... 18
Targets .......................................................................................................................................... 19
Measures....................................................................................................................................... 19
Drivers ........................................................................................................................................... 19
Obstacles ....................................................................................................................................... 19
Hinterland transport.......................................................................................................................... 21
Carbon emissions .......................................................................................................................... 21
Rail freight measures..................................................................................................................... 22Road freight measures .................................................................................................................. 22
Drivers ........................................................................................................................................... 23
Obstacles ....................................................................................................................................... 23
Logistics service providers ................................................................................................................. 24
Carbon emissions .......................................................................................................................... 24
Targets .......................................................................................................................................... 24
Measures....................................................................................................................................... 24
Drivers ........................................................................................................................................... 25
Obstacles ....................................................................................................................................... 25
Shippers ............................................................................................................................................ 26
Carbon emission targets................................................................................................................ 26
Measures....................................................................................................................................... 26
Drivers ........................................................................................................................................... 26

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TABLE OF CONTENTS

Obstacles ....................................................................................................................................... 27
The interlinkages ............................................................................................................................... 28
Targets .......................................................................................................................................... 28
Measures....................................................................................................................................... 29
Potential drivers ............................................................................................................................ 30
Obstacles ....................................................................................................................................... 30
Policy implications ............................................................................................................................. 32
A proactive strategy from the port authority ................................................................................ 32
Stronger involvement of the city administration in zero carbon freight ....................................... 33
Facilitation of zero carbon freight transport by the federal government ..................................... 34
References ........................................................................................................................................ 35

TablesTable 1. Estimated carbon emissions of container transport from Shanghai to Prague ..................... 28
Table 2. Carbon emission reduction targets of companies in the Hamburg transport chain .............. 29

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EXECUTIVE SUMMARY

Executive summary
What we did
This report assesses the potential of zero carbon supply chains by way of a case study of the freighttransport chain linked to the port of Hamburg. It maps the initiatives to decarbonise freight transport, as
undertaken by select main stakeholders connected to the port. What’s more, it analyses how these
initiatives are inter-related and offers recommendations on how the move towards zero carbon supply
chains could be accelerated. The analysis is based on desk research and interviews with the relevant
stakeholders.

What we foundThe Hamburg port and container terminals have developed relatively ambitious emission reduction
targets, which is less the case for other parts of the chain. On the maritime side, only a few carriers havedeveloped ambitious long-term targets. On the landside, most transport operators have not formulated
long-term emission reduction targets, the exception being large logistics operators, although they are
dependent on transport operators to realise the most substantial emission reductions.
Hamburg can be commended for a range of measures it is taking to reduce the carbon emissions of freighttransport. It has managed to achieve a high share of rail in transport serving the port, the legacy of decadesof investment in rail tracks within the port and a policy to facilitate port rail transport. Hamburg’s main
terminal operators have proactively invested in low-emission yard equipment and cranes. All this has madeit possible for certain forwarders to offer practically zero carbon transport chains from the port of Hamburg
to its hinterland destinations, something that is not yet possible in many other places.
In maritime and road freight transport, Hamburg (and Germany as a whole) has developed policies tostimulate the use of natural gas via incentive programmes and roll-out of infrastructure. Although more orless consistently and coherently pursued, this strategy cannot be considered a long-term – or even a
medium-term – zero carbon solution. More generally, Hamburg could be considered reactive rather thanproactive with regard to alternative fuels and energy sources. It is not a frontrunner when it comes tocharging facilities for electric ships.
Many stakeholders in the freight transport chain are inter-related: most companies are either suppliers or
customers of other companies in freight transport. In practice, these linkages are currently not being used
to push for decarbonisation. Neither does any level of government fully exploit its potential leverage overshipping companies. The city-state of Hamburg has an ambitious GHG emission reduction strategy and is
one of the main shareholders of the container shipping line Hapag Lloyd. Yet it does not appear to use thisposition to pressure Hapag Lloyd to develop a more ambitious and proactive stance on GHG emission
reductions. Hamburg and other local, regional and national governments could use the leverage they haveover the shipping industry via maritime state aid to incentivise the companies they support to engage in
ambitious GHG emission reduction measures.

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EXECUTIVE SUMMARY

The higher costs of zero carbon transport is a challenge for the whole freight transport chain. Zero carbon
freight transport is generally more expensive than conventional transport because the negative externalcosts of transport – such as emissions – are not charged for. Fossil fuel subsidies also make high-carbon
options even less expensive than zero-carbon options. The end result is companies are effectively
encouraged to use fossil fuels. An overhaul of the system of incentives in freight transport is therefore
needed to stimulate the transition towards zero carbon power sources.
Reforms often take time because of concerns of maintaining a level playing field. The argument is thatunilateral action – say, by Hamburg or Germany – would be ineffective because it would lead to a
substantial part of freight transport activity simply relocating to other places. In order to avoid this, coordination between the jurisdictions that could be considered competitors in terms of freight transport
flows is important if decarbonisation measures are not to be delayed. At the same time, bold action bycertain port authorities can also drive change by others.

What we recommend
A more proactive strategy from the port authority
The Hamburg Port Authority (HPA) could play a more proactive role in driving the decarbonisation of thefreight transport companies using the port of Hamburg. This would require a strategic reorientation:
instead of focusing almost exclusively on its own emissions, it could leverage its position as a key node
where a multitude of freight transport flows come together. Moreover, it could develop a clear strategy
aimed at stimulating zero carbon road, rail and maritime freight transport. As part of this strategy, it couldchange its focus to possible long-term solutions instead of stimulating transition fuels like LNG. A proactive
port strategy could benefit from stronger incentive schemes: not only deductions for good performers but
also surcharges for bad performers.
Stronger involvement of the city administration in zero carbon freight
The city-state of Hamburg could more actively drive the decarbonisation of container shipping. As one of
the shareholders in the shipping firm Hapag Lloyd, it could use its leverage to get commitment to a more
active GHG emission reduction strategy. The city-state of Hamburg could also initiate a co-ordination groupfor port cities in Europe and across the world to develop common policies. Co-ordination of
decarbonisation policies is desirable to avoid potential leakage effects of measures taken in isolation. Coordination could take place with regard to port city measures to stimulate zero carbon freight transport,
incentive schemes, charging and refuelling infrastructure, and mitigation of the GHG impacts of ships,
trucks, trains and barges coming to the port city.
Facilitation of zero carbon freight transport by the federal government
The federal government could help the transition to zero carbon supply chains by phasing out the fossil
fuel subsidies for shipping and terminal operators, subsidies and toll exemptions for gas-powered trucks,
and maritime state aid without strings attached. Such support measures should be transformed tofacilitate the transition to zero carbon operations. Certain EU initiatives, such as changes to the EU Energy
Taxation directive and inclusion of shipping in the EU-Emission Trading System, could help such atransformation. Finally, Germany’s support for these measures could facilitate the transition towards zerocarbon supply chains.

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INTRODUCTION

Introduction
The need to mitigate greenhouse gas (GHG) emissions is urgent. Global temperatures have already risen
by an average of 1°C relative to pre-industrial levels. Ice sheets are melting; sea levels are rising. And
extreme weather events exacerbated by climate change are fast taking their toll across the globe and will
only become more frequent and more intense as a result of inaction. To limit global warming to 1.5°C
above pre-industrial levels – a key aim of the 2015 Paris Agreement – will require a significant scaling-up
and acceleration of action by governments and other stakeholders (OECD, 2021).
Freight transport has an important role to play in reducing GHG emissions. The carbon emissions fromworldwide freight transport were approximately 3 billion tonnes of CO2 in 2020, representing roughly 9%of total global carbon emissions (ITF, 2021). The emissions from freight transport are expected to increaseover the coming decades in most scenarios. According to the business-as-usual scenario for freighttransport, emissions from it will continue to grow until 2050 (ITF, 2021). And sea freight emissions areprojected to increase by up to 50% by 2050, compared to 2008 levels (IMO, 2020).
Freight transport chains consist of many stakeholders, and their efficiency is dependent on theinterconnections between these stakeholders. Door-to-door freight transport involves different transportmodes connected by various nodes, and each transition risks generating friction, waiting times andtransaction costs. Focusing on the interactions between transport modes and nodes can not only increase
their efficiency but also reduce emissions, hence the relevance of assessing whole freight transport chains.
Policy frameworks for freight transport are fragmented. Many policies are developed per transport mode
without much reflection on how these policies relate to other modes or possible synergies. Relevant highlevel ambitions have been formulated in different settings, resulting in targets that are only loosely
connected. The Paris Agreement, negotiated within the United Nations Framework for Climate Change
Convention (UNFCCC), sets forth the ambition of “…holding the increase in the global average temperature
to well below 2°C above preindustrial levels...”. However, it does not explicitly mention global aviation andmaritime shipping. Since the Kyoto Agreement, the responsibility for GHG emissions from aviation andshipping has been delegated to the International Civil Aviation Organisation (ICAO) and the International
Maritime Organisation (IMO), respectively. In 2016, the ICAO developed its own emission reduction
strategy. The IMO, for its part, formulated its Initial GHG Strategy in 2018, with relative and absoluteemission targets, including the target to reduce shipping emissions by at least 50% by 2050. Both the ICAO
and IMO emission reduction targets are only in line with the ambitions of the Paris Agreement if they leadto substantial immediate emission reductions. This is just one example of the multitude of different
jurisdictions with regard to climate policy for transport and the lack of a holistic vision on freight transport
emissions.
Most of the different parts of the freight transport chain are connected to ports. At least four-fifths ofglobal trade volumes are transported by sea and handled in ports. Significant shares of truck, train andbarge transport come from or are destined for ports. Only air freight is somewhat independent of ports,
and even then there are some connections in places that act as combined sea-air freight hubs (e.g. Dubai).
Seaports are therefore unique nodes where many trade flows come together. This characteristic of ports

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INTRODUCTION

gives them potential leverage over decarbonisation of the whole freight transport sector. Ports could play
an essential role in stimulating emission reductions in the whole freight transport chain. And this reportseeks to shed light on this potential, based on a case study of the port of Hamburg.
The port of Hamburg is an interesting case. Owned by the city-state of Hamburg, it is one of the largest
ports in Europe and has both a large carbon footprint and a significant ecological constituency. Contrary
to most other ports throughout the world, Hamburg has a close-knit and interconnected community of
locally-based stakeholders, including terminal operators, shipping companies, freight forwarders, andtrading and industrial companies. These local interconnections could well encourage stakeholders to coordinate their GHG reduction strategies.
This case study assesses the GHG reduction strategies of the different local stakeholders, including theport authority, terminal operators, shipping companies, trucking and train operators, freight forwarders,logistics operators and shippers. The focus is on the containerised transport chain, in particular in its
relation to the retail sector. The report assesses for each stakeholder the amount of emissions, emission
targets, the main measures to reduce emissions, the drivers of emission reductions and the obstacles.
Based on this mapping of the different stakeholders’ initiatives, an analysis of the coherence of thesedifferent initiatives is conducted to identify policy recommendations that could help accelerate themovement towards zero carbon supply chains. These recommendations target policy makers in Hamburg,
but the case study also aims to inform policy makers throughout the world by pointing to the main lessons
that could be learnt from the case of Hamburg. The analysis for this case study is based on desk researchof strategic documents and studies, as well as interviews with the main stakeholders based in Hamburg.

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THE PORT OF HAMBURG

The port of Hamburg
The port of Hamburg is one of Europe’s largest ports. It handled 137 million tonnes of goods in 2019, 69%of which were containerised goods, representing 9.3 million standard containers (twenty-foot equivalent
units [TEUs]), making it the third largest container port in Europe. It rose to prominence in the 13th century,
when it was one of the main ports of the Hanseatic League, a confederation of merchant communities innorthern Europe. Hamburg and Bremerhaven are the main German ports, serving a hinterland thatconsists of Germany and Eastern Europe. Their main competitors for containerised German cargo are theports of Rotterdam and Antwerp. One of the specificities of the port of Hamburg is that is about 100 km
from the North Sea: ships access it via the river Elbe.
The Hamburg Port Authority (HPA) administers the port. Its role could be described as infrastructure
manager: it is responsible for development and maintenance of port land, quay walls, access channels,
roads and bridges in the port area. The HPA has a marketing organisation, Hamburg Port Marketing, incharge of promoting the port of Hamburg nationally and abroad. Like many port authorities throughout
the world, the HPA does not actually perform operations, rather it grants concessions to private terminal
operators.
The main clients of the ports are terminal operators and other firms that occupy port land. These
companies pay concession fees or rents to the port. Shipping companies that use the port are not thedirect clients of the port authority but of terminal operators. However, they pay port dues that are in effectfees to cover the use of port infrastructure. Like with most seaports, the HPA’s main revenue sources areconcession fees and port dues.
The HPA procures the construction and maintenance of significant pieces of infrastructure. Recent large
infrastructure investments include the transformation of the Steinwerder terminal into a cruise terminal.
Other important investments include dredging access channels in the port and deepening the Elbe River,necessary to be able to attract the companies with the largest container vessels.
The City of Hamburg is a city-state, with similar responsibilities as the other German regional states(Länder). As such it is the sole shareholder of the HPA, appointing its director, who reports to the citystate’s government. Prior to the foundation of the HPA in 2005, the port was administered directly by thecity administration. Both the city-state and the federal government consider Hamburg to be a real-life test
bed of innovations in a variety of fields, including urban development and logistics.
A considerable part of Hamburg’s economy is connected to its port and the logistics of its operations,generating considerable economic value added (Merk and Hesse, 2012). The flipside of the economic
impact is its spatial footprint. The port of Hamburg occupies a land area of 43 km2, which represents
approximately 5% of the land area of the city-state of Hamburg. The largest part of the port area isdedicated to handling containers.
As a consequence, the city administration has multiple, sometimes conflicting, perspectives on its port. It
wants to promote it, but it also competes with the port for space. Case in point is Hamburg’s leading urban
redevelopment project, Hafencity, developed on former port land. The proximity of the port to urban areas

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means the city-state administration is highly sensitive to the port’s impacts. In short, the HPA has no choice
but to take citizens’ concerns with regard to the port seriously.

Carbon emissions
The HPA was responsible for emitting around 7 000 tonnes of CO2 in 2019. More than half of theseemissions come from the harbour vessel fleet, and around one-third are generated by the natural gas used
for energy consumption in port buildings. More than half of the HPA’s energy consumption comes fromelectricity, but this represents only a marginal share of the carbon emissions due to the use of renewableenergy. The emissions from the harbour car park are also relatively small.
These calculations are based on the energy consumption of the HPA in seven different categories: heating
oil, natural gas, liquefied gas, electricity, vessel fleet and car park. For each category an emission factor isused to calculate the CO2 emissions related to the energy use. A similar calculation model is used by thecity-state of Hamburg. The HPA deserves credit for monitoring emissions on an annual basis. Theseemission data are communicated periodically in its sustainability report, the most recent of which is from2017-18.

Targets
The HPA has formulated various emission reduction targets for its own activities, most recently in the
document “Klimastrategie 2.0 – Klimaschutz und Klimaanpassung” [Climate strategy 2.0 – Climate
mitigation and adaptation] (HPA, 2020). This covers energy use from its buildings and car and vessel fleet,but it does not cover terminals and transport by other actors, as the port is not directly responsible forthese emissions. The HPA’s latest emission reduction and energy use targets are the following:

a 50% reduction of direct CO2 emissions by 2025 from 2012 levels



a 5% reduction of energy use by 2025 from 2015 levels in increments of 0.5% each yearzero carbon emissions by 2050.

This last target is likely to be adjusted to zero carbon emissions by 2040, in line with Hamburg’s goal to becarbon-neutral by that date. These targets follow up on earlier emission reduction targets aiming at a 40%
carbon emission reduction by 2020 and an 80% reduction by 2050, compared to 1990.
These medium- and long-term targets are translated into annual targets. According to the HPA’s emission
calculation modal, a yearly reduction of 311 tonnes of CO2 per year would be necessary to reach carbon
neutrality by 2050. Its climate action plan for 2021 has assigned the 311 tonnes to its different
departments, with each bearing the responsibility to reach its target.
Reducing levels 40% by 2020 from 1990 levels has been achieved, but there was considerable fluctuationin emissions from 2010-20, with a clearly distinguishable downward trend only in the last four years.

Measures to reduce emissions of the port authority
Emissions have decreased since 2010 because the use of heating oil has gone down and the harbour vessel
fleet has been reduced. In addition, the HPA gradually increased its share of clean electricity to 100% in
2020. Moreover, it bought carbon offsets prior to 2010 to reduce its emissions, but they have not been

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THE PORT OF HAMBURG

used since then. Energy use via electricity has decreased slightly since 2010, and the use of natural gas hasremained stable.
The largest emission reductions in the future could be achieved by reducing emissions from the harbour
vessel fleet. The HPA considers this to be one of the largest challenges, as it does not currently how this
could be realised before 2050, considering the immaturity of existing technologies. Continued phasing outof heating oil could realise emission reductions in the short term. The HPA considers that ongoingdigitalisation could lead to rationalisation in the number of port buildings, resulting in less energy use.
A large procurement item for the HPA is the dredging of the Elbe River. It indicates it would be interested
in procuring low-emission dredgers, but these are much less affordable than conventional dredgers.

Measures to reduce emissions from ships
The HPA provides discounts on port dues related to environmental criteria. One of the possible discounts
is a reduction of a maximum of 15% in port dues for ships powered solely by liquefied natural gas (LNG).
In addition, ships can get a discount based on their score on the environmental ship index (ESI). This index
contains a variety of environmental indicators, part of which relate to GHG emissions. The maximum
environmental discount per ship in Hamburg is EUR 3 000.
The port of Hamburg has operated an onshore power facility at the Altona cruise terminal since 2017 andplans to expand the number of such facilities. Shore power facilities make it possible for ships to shut off
their engines at berth by connecting to the electricity grid. This can substantially reduce the emissions
from ships in port. Shore power facilities are planned to be installed in the coming years at
20 to 25 locations in some of the main container terminals (e.g. Predöhlkai, Burchardkai and Tollerort) andcruise terminals (Steinwerder and Hafencity). Discussions are ongoing on a possible LNG terminal in
Brünsbuttel, near Hamburg, which would help the HPA provide LNG bunkering in the port of Hamburg.

Measures to reduce emissions from rail transport
Hamburg is one of the few ports in the world that has managed to achieve a relatively high rail share in its
transport to and from the hinterland. Rail transport accounted for 42% of the modal split of the port’s
hinterland transport in 2019, and it generally emits less CO2 emissions than truck transport, as well as lesslocal air pollutants such as NOx and particulate matter. This high rail share is the result of a sustained
strategy to promote rail transport to the port, associated with a high density of railway tracks in the port
area. The proportion of containers transported by rail to the port’s hinterland has increased by over 25 %in the past ten years.
In recent years, the HPA has aimed at increasing the proportion of rail-based container traffic by an averageof 0.5 percentage points a year up to 2020, when port railway throughput was projected to increase to
47.4 million tonnes. The port authority also formulated a target of train capacity utilisation of 75 TEUs per
train by 2020.
The HPA has put an incentive scheme in place to increase the environmental performance of rail transport
in the port. These incentives take the form of discounts on the port railway’s infrastructure user charge
system, known as INES. Locomotives equipped with black carbon particle filters can get a 50% discount on
this charge. Similar discounts are applied for hybrid locomotives or electric shunting locomotives. In 2018,
61 locomotives were registered as having black carbon particle filters or as being hybrid locomotives,
which represents approximately 35% of the shunting locomotives. Other incentives include a bonus for

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every passage by wagons equipped with modern, low-noise brakes that cause approximately 10 decibels
less noise than conventional systems.

Drivers
The main driver of HPA’s environmental strategy is the city-state of Hamburg, which requires thecompanies it owns to formulate ambitious climate targets in line its own. The HPA has to also take accountof the concerns of various environmental non-governmental organisations (NGOs), which are often vocal
about the port’s ecological footprint. NGOs have been particularly focused on the environmental impactsof dredging the Elbe River, justified by the HPA’s desire to attract the largest container vessels to Hamburg.

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CONTAINER TERMINALS IN HAMBURG

Container terminals in Hamburg
The port of Hamburg has four main container terminals. These are terminals that exclusively handle
containerised goods transported in containerships. Three of these terminals (Buchardkai, Tollerort and
Altenwerder) are operated by Hamburger Hafen und Logistik AG (HHLA) and one by Eurogate, part of theEurokai Group (there are other smaller terminals [e.g. Hansa] that handle containers, but their share isminor). In 2019, approximately 75% of the port’s container volumes were handled by HHLA and 22% by
Eurogate. Terminal operators have acquired the right to operate the terminals via concession contracts
with the Hamburg Port Authority (HPA); these are often long-term contracts, with an average life span of
20-30 years.
The main responsibilities of terminal operators are the handling of cargo (terminal operations) anddeveloping their terminals, in particular by investing and maintaining the equipment needed for cargohandling (i.e. the superstructure of a terminal). Cargo handling involves transferring cargo from ship toshore, storing it in yards and then loading it onto trucks, trains, barges or ships to be transported to thehinterland.
The main clients of container terminals are container-shipping companies, also called carriers. They havecontracts with terminal operators, often for a period of one to three years. Terminal operators are
generally paid per effective move they perform; their contracts with carriers might include incentives
related to performance, e.g. the number of effective moves per hour. The payments from shipping
companies present the main source of income for terminal operators.
Terminal operators regularly invest in terminal equipment, considering that their terminal lease orconcession almost often exceeds the typical lifetime of ship-to-shore cranes and yard equipment, such as
straddle carriers, reach stackers, automated guided vehicles (AGVs) and rail-mounted gantry cranes.
Terminal operators procure these from equipment manufacturers, such as ZPMC, Liebherr, Kalmar andKonecranes.
HHLA is listed on the Frankfurt stock exchange. As of 2019, its main shareholder was the city-state ofHamburg, which owned 68.4% of its shares; the rest were flee-floating shares, 23.2% of which were in thehands of institutional investors and 8.4% private investors (HHLA, 2020). Shipping company Hapag Lloydowns a 25.0% share of HHLA’s Container Terminal Altenwerder in Hamburg, .
Eurokai, a financial holding company, owns 50% of the Eurogate group, and BLG Logistics, which is fully
owned by the city-state of Bremen, owns 50%. Eurokai is a majority shareholder of Contship, which
operates terminals in Italy. More than 75% of Eurokai’s voting share capital is held by the Thomas H.
Eckelmann family.
Eurokai has terminals in the other German container ports Bremerhaven and Wilhelmshaven, as well as inports in Italy, Morocco and Cyprus. HHLA has terminals in Tallinn and Odessa, and it also has a freight railsubsidiary, METRANS.

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CONTAINER TERMINALS IN HAMBURG

Carbon emissions
The emissions from container terminal operations in Hamburg amounted to 150 thousand tonnes of CO2
in 2019, according to data from the terminal operators. This includes emissions generated directly at theterminals and indirect emissions, i.e. from the use of energy that is generated somewhere else, such as
electricity.
HHLA and Eurogate deploy similar technologies for calculating emissions, in compliance with international
reporting standards. HHLA calculates its CO2 emissions on the basis of the Greenhouse Gas Protocol
Corporate Standard (revised edition), a global standard for recording GHG emissions. Eurogate uses the
Guidance for Greenhouse Gas Emission Footprinting for Container Terminals. HHLA has regularly reported
is carbon footprint since 2008. Its website has provided annual sustainability reports since 2012, withsections on carbon emissions. These reports are written in accordance with the international guidelines of
the Global Reporting Initiative (GRI). Eurogate also releases its emissions estimates in sustainability
reports, but these do not appear every year.
Around three-quarters of the Hamburg container terminals’ emissions comes from yard equipment, suchas straddle carriers or AGVs in the automated CTA terminal. Considerably smaller emission sources arecontainer cranes, buildings and lighting and electricity for reefer containers that contain refrigerated
cargo.

Targets
HHLA and Eurogate have formulated targets for relative emissions (i.e. per container handled), consistingof reductions of 30% (HHLA) and 25% (Eurogate) by 2020, compared to 2008. In addition, HHLA has set
itself two absolute emission targets: a reduction of 50% by 2030, compared to 2018, and being carbonneutral by 2040. Eurogate, for its part, aimed to reduce energy consumption 20% by 2020, compared to2008, and is currently developing a new medium-term emission target.
A three-year average trend of HHLA’s CO2 targets is taken into account in executive board remuneration:achieving the agreed target range triggers the payment of a bonus.
HHLA and Eurogate have both achieved their emission targets to be met by 2020, with the former
reporting a relative emission reduction of 39% in 2019 and the latter 27% in 2018.

Measures
The absolute emissions from all container terminal operations in Hamburg increased 25% from 2010 to2019, but there are considerable variations among terminals. One of the container terminals managed toreduce its emissions by 35% over the same period. Another, the Container Terminal Altenwerder (CTA),
was certified by the certification company TÜV Nord to be climate-neutral in 2019, which meant that all
unavoidable CO2 emissions resulting from container throughput were offset.
The largest emission reductions in the Hamburg container terminals were realised by reducing the carbon
intensity of the terminal equipment. The container cranes (ship-to-shore) were gradually electrified invarious terminals. In the CTA, the electrification rate of container cranes is 100%, and 50% of the AGVs areelectrified (AGVs transfer containers from under STS cranes to container stacks in the terminal yard). By
2022, all AGVs will have been converted to fast-charging lithium-ion batteries. The carbon intensity ofother pieces of yard equipment has also decreased via regular multi-year investments in low-emission orZERO CARBON SUPPLY CHAINS: THE CASE OF HAMBURG © OECD/ITF 2021

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CONTAINER TERMINALS IN HAMBURG

hybrid straddle carriers. What’s more, HHLA’s truck trailers – now diesel-powered – will be electrified thisyear. HHLA also reduced energy use by filtering diesel residues in straddle carriers.
Container terminals in Hamburg use green electricity and produce part of their energy needs via solar
panels. Certain emission reductions were also achieved by replacing the existing lightning with LED
lightning. In the CTA, the share of yard cranes with LED lightning was increased from 46% in 2014 to 100%in 2016. And all of the lights at Eurogate’s terminal were replaced by LEDs in 2019. The latter also produces
electricity by a wind turbine, representing 7.8 milion kWh electricity produced in 2019.
Operational measures that were applied in the Hamburg container terminals were related to the
optimisation of container storage, dual cycling at the Altenwerter terminal and twin operations at the
Tollerort-terminal. HHLA has also created a joint venture with the company HyperloopTT to focus on using
hyperloop technology for port and inland shipping container operations.
HHLA’s CTA has managed to be certified by the certification company TÜV Nord as a climate-neutral
terminal in part thanks to carbon offsetting. In its offsetting activities, HHLA supports climate-friendly
projects that are certified according to the highest standard (the Gold Standard) of Voluntary Emission
Reductions (VERs), a type of carbon offset exchanged in the voluntary market for carbon credits. These
projects include wind farms in India, low-friction anti-fouling paint for ship hulls and the reforestation of
depleted rainforests in Panama.

Drivers
A significant driver of the emission reductions is reduced operational costs. Electric AGVs reduce
operational costs because of the efficiency of their engines: combustion engines waste of a lot of energy
via heat, which is not the case for electric engines. The traditional straddle carrier needs 30 litres of diesel
per hour; a diesel-electric straddle carrier needs 20 litres; and a hybrid straddle carrier – deployed in
Hamburg since 2019 – only requires 15 litres per hour thanks to its battery packs. The electrification of
AGVs and the hybridisation of straddle carriers have not only reduced emissions but also significantly
reduced fuel costs.
Terminal operators are also under pressure from society and government to reduce emissions. HHLA’s
goal of climate neutrality by 2040 is aligned to the ambition of its main shareholder, the city-state ofHamburg.
Clients drive the environmental agenda of terminal operators to some extent. This is not so much thecarriers but rather the freight forwarders on behalf of some of their customers. HHLA has developed its“HHLA Pure” product at the request of a freight forwarder for the car industry. This product offers
customers certified, climate-neutral container transport and handling, with all the CO2 emissions resulting
from handling and transportation within the HHLA network offset via compensation projects. Terminal
operators expect the pressure of certain shippers (e.g. IKEA) on carriers to become carbon-neutral will atsome point also trickle down to terminals. For the moment, the zero carbon push from their customers
has not led carriers to pressure terminals to decarbonise.

Obstacles
It is currently uncertain what the technologies will be that will allow terminal operations to become fully
carbon-neutral. Various options are considered likely for powering terminal equipment, such as electricity
from renewable energy sources, hydrogen and hydro-treated vegetable oil (HVO). Fully-electric yard

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CONTAINER TERMINALS IN HAMBURG

equipment, like straddle carriers, would require further advances in battery development, for example,
with regard to the speed of re-charging. The current hybrid straddle carriers in Hamburg need to berecharged every hour, which takes a few minutes per hour. Shifting to full electric mode would also be
more expensive, considering that electricity is at the moment more expensive than diesel. Straddle carriers
powered by hydrogen would also be a possibility, and there is strong political interest within Hamburg andthe federal government for developing hydrogen as an energy source, but it is not commercially viable forthe moment. The same is true for HVO, which has been tested at APM Terminals Gothenburg.
Commercial viability would be increased if the cost differential between current and cleaner energy
sources would decrease. This is challenging in times of falling oil prices, like 2020. In addition, terminal
operators benefit from a tax exemption of 25%-50% for the fuel used in their terminals, which makes it
more difficult to bridge the cost gap between diesel and alternative power sources, such as electricity fromrenewable energy sources, not covered by the tax exemption. The background of this tax exemption isthat 50% of the regular fuel tax is used to finance infrastructure. As terminal operators finance their own
infrastructure they do not benefit from this earmarked infrastructure funding, hence the partial tax
exemption, which can be justified but risks locking in fossil fuel use in terminals. A zero carbon transport
chain would be helped by focusing the tax exemption on low- or zero-carbon fuels. At the same time,
terminals are covered by the German CO2 tax, which will increase each year. Another relevant elementwith regard to commercial viability is the scale of renewable energy production. Synthetic fuel production
would need sufficient scale for it to become commercially viable.
Environmental indicators do not form part of lease and concession agreements between the port and theterminal operators. These agreements date back and are generally not updated. In the event new
terminals are developed in the port of Hamburg, new terminal concessions could include environmental
criteria along the lines of the concessions for the container terminals in Rotterdam’s Maasvlakte 2.

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CONTAINER SHIPPING

Container shipping
All major container lines provide services to Hamburg. Container carriers provide the long-haul oceantransport, either in their own ships or in ships that they charter from non-operating ship owners. They
provide these transport services for shippers (cargo-owners) or for freight forwarders, which act asintermediaries for shippers.
Not surprisingly, shipping companies’ most important investments are in their ships, which they either buy
from other ship owners or order in shipyards. Container ships are constructed in a fairly select group of
shipyards, mostly based in South Korea and China. Many of the investments in ships are financed via loans
or other forms of external finance. Providers of external finance, such as shipping banks, have committed
to decarbonise maritime transport by launching the Poseidon Principles, an initiative to incentivise
shipping’s decarbonisation in line with the climate goals of the UN’s International Maritime Organization(IMO).
There are considerable differences in the corporate governance of the major container carriers. There are
publicly listed companies, non-listed private companies, state-owned companies and companies that are
hybrids. This means that these companies have a huge diversity of shareholders, ranging from families,
states, and institutional and private investors.
Among the container carriers, Hapag Lloyd is particularly relevant for this study: it is headquartered in
Hamburg and partly owned by the city-state of Hamburg. Moreover, the city-state of Hamburg formed thecore of a group of Hamburg-based stakeholders (the Albert Ballin consortium) that protected Hapag Lloydin 2008 from a foreign takeover (Hesse, 2018). Hapag Lloyd also receives annual subsidies from theGerman government (EUR 10 million in 2019) and US government (EUR 25 million in 2019). Its main
shareholders include Kühne Holding AG (29.6%), the Chilean carrier CSAV (27.8%), the city-state ofHamburg (13.9%) and the investment funds of Qatar (14.5%) and Saudi Arabia (10.2%). Rounding this off,
4% of the shares were free floating in 2019.

Carbon emissions
In 2018, the global container shipping fleet emitted around 232 million tonnes of carbon emissions. This
represents 22% of total CO2 emissions from global shipping. Between 2012 and 2018 the CO2-equivalentemissions of container shipping grew by around 5%, and the average GHG intensity (average CO2equivalent emissions per vessel) remained stable (IMO, 2020). These calculations are from the Fourth IMO
GHG Study, which appears every few years (the Third IMO GHG Study was published 2014).
An annual overview of GHG emissions from shipping is provided by BSR’s Clean Cargo, based on data
provided by 17 major container carriers. These data are also available per trade lane. For example, theaverage CO2-equivalent emissions on the Asia-North Europe trade lane were 42.3 grammes of CO2 per TEU
kilometre in 2019 (BSR Clean Cargo, 2020). These are emissions on a Well-to-Wheel-basis (it also calculates
data on a Tank-to-Wheel-basis). In addition, various large container carriers detail their CO2 emissions in

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their annual reports or sustainability reports. For example, Hapag Lloyd reported that it emitted
13.7 million tonnes of CO2 in 2019 (Hapag Lloyd, 2020).

Targets
The International Maritime Organization formulated GHG emission reduction targets for the shipping
sector as a whole in its 2018 Initial GHG Strategy (IMO, 2018). These targets include two relative mediumterm targets and one absolute long-term target, namely reducing GHG emissions from shipping by at least
50% by 2050, compared to 2008. Container shipping companies have also formulated targets themselves.
Twelve out of eighteen container shipping companies disclosed emission reduction targets in 2019 (CDP,2019). Of these companies, Maersk and CMA CGM have formulated the target to be carbon neutral by
2050. Hapag-Lloyd aimed to reduce its CO2 emissions per TEU-kilometre by 20% by 2020, compared to2016.

MeasuresMain measures taken by container shipping companies have been speed reduction after the economiccrisis of 2008 and the ordering of larger, more energy efficient vessels. Some carriers have focused on
LNG-powered ships as a short-term measure to reduce carbon emissions from shipping. This is notably thecase of CMA CGM, which ordered a series of nine LNG-powered container ships, operational in 2020 and
2021. Hapag Lloyd has carried out pilot projects with LNG-powered vessels. Maersk and CMA CGM bothoffer the possibility to their customers of shipments powered by biofuels. Various container carriers havecarried out pilot projects related to alternative fuels and renewable energies, e.g. rotor sails. Container
carriers that call at Californian ports have equipped their vessels with the possibility to connect to onshore
power, as this is mandatory in California. For example, of the 168 container ships that Hapag Lloyd
operated in 2019, 19 were equipped for connection to onshore power.

Drivers
The measures taken so far by the container shipping industry have been partly driven by the need tocomply to the IMO sulphur regulation, which has led some shipping companies to acquire LNG-powered
vessels. The 2008 economic crisis has generally resulted in slower vessel speeds, first as reaction to deal
with lower transport demand and then as a way to keep maritime transport costs low. Reducing unit costs
primarily motivated the tendency of ever-larger container ships, but it has also resulted in more energy
efficient container transport. Some customers of container carriers are interested in zero carbon maritime
transport, but there are only few of them that would be willing to pay significantly more for such a service.
Financial institutions active in shipping, such as shipping banks, have in large majority signed up to the
Poseidon Principles, which, as mentioned, aim to decarbonise shipping, but this has yet to have muchpractical impact.

Obstacles
The main challenge for zero carbon shipping is higher costs, which for the moment hinder the commercial
viability of zero carbon ships and zero carbon fuels. These are generally more expensive than conventional
ships and fuels because negative external costs – such as emissions – are not taken into account, but fossil
fuel subsidies are another factor. Examples include the fuel tax exemptions for shipping and the exemption

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CONTAINER SHIPPINGof carbon taxation almost everywhere in the world. Another relevant element with regard to commercial
viability is the scale of renewable energy production. Synthetic fuel production would need sufficient scale
for it to become commercially viable.

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Hinterland transport
The main hinterland transport modes related to the port of Hamburg are road and rail transport. Morethan 50% of the containers are transported to and from the port by truck, about 42% by train. Around200 freight trains, carrying approximately 5000 rail cars, reach or leave the port on every working day.
With rail freight volumes to and from the port equivalent to 2.3 million TEUs, Hamburg is the mostimportant rail port in Europe, much more so than the ports of Rotterdam and Antwerp, which generateconsiderably lower volumes and shares of port hinterland rail transport.
Various types of companies provide these transport services. There are specialised trucking companies
and freight rail operators that operate on partly complementary markets. In general, the market for roadfreight transport is fragmented, whereas the market for rail freight is more concentrated but neverthelesscompetitive.
There are also combined transport operators that offer intermodal rail and road services. An example isthe Hamburg-based Zippel Group, which has a fleet of 200 trucks and operated 2000 block trains a year in
2019.
Some of the rail freight operators, such as DB Cargo, have become active as third party logistics companies
and freight forwarders. There are also other forms of vertical integration. As mentioned before, theterminal operator HHLA has a rail transport subsidiary, Metrans, linking the HHLA terminals to inland rail
terminals in Germany, Poland, Hungary, Slovakia and the Czech Republic.
In public areas within the port of Hamburg, the port railway is owned and operated by the Hamburg Port
Authority (HPA), extending to 300 kilometres of rail track. An additional 160 kilometres of track are locatedin 130 private sites, owned by industrial, cargo handling and logistics companies.
The clients of hinterland transport companies are shippers (cargo-owners) or freight forwarders acting as
intermediaries for shippers. The main investments for trucking companies are their trucks, in a fairly
concentrated market. The main investments for rail operators are locomotives and wagons, produced inan even more concentrated market.

Carbon emissions
The ITF has not found any calculations or estimations of the total carbon emissions related to the port
hinterland transport of Hamburg. Although not impossible to collect, it would involve a considerable datacollection effort, as it would require information on the exact origin and destination of all shipments, thevehicles involved and fuel type. Some individual companies that provide hinterland transport to and from
Hamburg monitor their emissions (e.g. Metrans), but most logistics operators, even large ones, do not
systematically monitor the emissions of their transport activities. Sustainable last-mile freight transport
has been the focus of initiatives of the Logistics Initiative Hamburg (LiHH), a network organisation of themain stakeholders in the freight transport chain in Hamburg.

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HINTERLAND TRANSPORT

Rail freight measures
Most of the rail tracks in Germany are electrified, which means that direct carbon emissions from freightrail transport are limited. The main emissions come from the so-called last mile, both in ports and theinland rail terminals. The locomotives used for long-range transport are not able to operate on the nonelectrified last mile, and they have to 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 theport terminals. Most shunting locomotives are diesel electric or diesel hydraulic locomotives as they haveto be able to operate independently from the overhead voltage or on non-electrified tracks (Girard, Oostra
and Neubauer, 2008). They are typically provided by dedicated port shunting companies. Depending on
the size of the port, there are different companies active in the shunting business (Krämer, 2019). In
Hamburg, shunting operations are carried out by the HPA and rail operators, such as Metrans.
There are currently four hybrid shunting locomotives in the port of Hamburg, two of which Alstom
manufactured and Metrans operated. Depending on their assignment, these hybrid shunting locomotives
can run on battery power for between 50% and 70% of their operational time, which reduces fuelconsumption up to 50%. The operation of hybrid shunting locomotives is facilitated by the 50% exemptionof rail infrastructure charges on the port railway network for hybrid and electric shunting locomotives.

Road freight measures
The reduction of carbon emissions from road freight transport has so far come mostly from reductions
made over short distances. An example is Zippel Group reducing emissions for last-mile truck transport at
the request of its customer BMW. In 2018, it started to provide bio-fuel-powered truck transport between
the BMW production plant in Leipzig and the intermodal terminal Schkopau, which is connected via rail tothe port of Hamburg. The trucks used run on compressed natural gas (CNG), using 100% bio-methanol
made from straw. Scania manufactured the CNG trucks; the bio-fuel comes from Verbio. The fuelling
station is located between the BMW factory in Leipzig and the combined terminal Schkopau. The Zippel
Group currently owns 12 CNG trucks that are also deployed in the BEHALA inland port near Berlin, also
connected by rail to the port of Hamburg. It intends to order 10 more CNG trucks in 2021, which will
represent around 15% of their fleet. According to Zippel, CNG trucks powered by their type of bio-fuelhave 90% less CO2 emissions than diesel trucks, and it estimates that thanks to its CNG trucks it emitted
18 000 less tonnes of CO2 from 2018 to 2020.
This project was facilitated by a federal subsidy scheme and an exemption from the German truck toll
system, which equates to a substantial operating subsidy. The investment subsidy scheme consists of a
subsidy of EUR 8 000 for the acquisition of each CNG truck and EUR 16 000 for each LNG truck. LNG and
CNG differ in the way in which they are stored and delivered: LNG is frozen in order to turn it into liquid
form, whereas CNG is pressurised to the point where it is highly compact. CNG also generally has lower
production costs than LNG. In addition to being subsidised, CNG and LNG trucks are exempted from theGerman toll system for trucks (known as LKW-Maut), the logic being to internalise the external costs oftruck transport. This toll exemption was put in place in 2019 and was recently extended to 2023.
These measures form part of a broader policy to stimulate gas-powered truck transport. Since 2018, a
network of LNG refuelling stations for trucks has been put in place in Germany. The first of these stations
was located just south Hamburg at Georgswerder Bogen, near the Hamburg Süd motorway interchange
and not far from the Hamburg Süd motorway triangle, an important axis for freight transport near the
Hamburg port.

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Hamburg’s Ministry of Economy and Innovation is also the lead partner in an EU Interreg programme,called Smooth Ports aims to reduce CO2 emissions from port-related road traffic by improving regional
policy instruments in a holistic manner. Key themes in the project, undertaken with stakeholders in
administrations, ports and logistics business, are: finding optimal procedures for the clearance of thegoods, ICT solutions for port-related traffic flows and alternative fuels for future port activities.

Drivers
An important driver for low-carbon truck transport is the customer (e.g. BMW in the case cited above). A
few other shippers, notably in the food industry, are also interested in such transport options, but for mostcompanies zero carbon truck transport is not considered a priority. Transport companies willing to do thisare driven by the strong motivation of their management and company boards and are currently able toprovide such options thanks to government-funded incentive schemes. The same applies to rail transport
operators.
It is not certain that hybrid-shunting locomotives would have been acquired in Hamburg without the
incentive of the partial exemption of the rail infrastructure charge. These incentives take the form of
discounts on the port railway’s infrastructure user-charge system, known as INES. Locomotives equippedwith black carbon particle filters can get a 50% discount on this railway user charge. Similar discounts areapplied for hybrid locomotives or electric shunting locomotives. In 2018, 61 locomotives were registeredas having black carbon particle filters or hybrid locomotives, which represents approximately 35% of theshunting locomotives. Other incentives include a bonus for every passage by wagons equipped withmodern, low-noise brakes, which cause approximately 10 decibels less noise than conventional systems.

Obstacles
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 fairly small. There are generally no limitations related to technology: the most recently acquired shunting
locomotive in Hamburg already has more battery autonomy than the one acquired in 2016. Fully electric
shunting locomotives are also possible, as illustrated in the rail terminal in Warstein (Germany). This is
despite the fact these are for the moment most appropriate for extremely short distances (50-100 metres)
and less for the longer distances travelled by shunting locomotives in the port of Hamburg.
Transport operators currently have little certainty on what the truck of the future will look like. At the
moment, electric trucks are being developed in the smaller segments (up to 7.5 tonnes), but the
expectation is that in a few years 44-tonne trucks will also be electrified. Tesla has announced 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 be transition fuels.
A common challenge is the need for recharging or refuelling infrastructure. CNG trucks currently seem
most appropriate for smaller distances (up to 100 km) considering the recurrent need for refuelling. In
terms of costs, CNG trucks are 10%-15% more expensive than conventional trucks, and electric trucks aremany times more expensive. The creation of a market for zero carbon trucks seems difficult without
bridging this cost differential, either by providing positive incentives for the acquisition of zero carbon
trucks or by increasing taxation on diesel trucks.

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LOGISTICS SERVICE PROVIDERS

Logistics service providers
Logistics service providers offer transport logistics solutions to their customers. This can be either isolated
activities, such as storage, packaging and customs brokerage, or a whole range of door-to-door freighttransport services, such as acting as a freight forwarder or an intermediary for shippers (cargo owners). In
the latter case, they procure transport services from transport operators, such as trucking companies andocean or air freight carriers. Various container lines, including Maersk, CMA CGM, Cosco and NYK, havetheir own freight forwarding subsidiaries. Some owners of freight forwarders (Kühne) hold shares inshipping companies (Hapag Lloyd).

Carbon emissions
Large logistics service providers, like DHL and Kühne + Nagel, monitor carbon emissions and report onthem in regular sustainability reports. Their emissions monitoring includes both the emissions for which
they are directly responsible and the indirect emissions generated by the transport operators with which
they work.

Targets
The large logistics service providers have all formulated carbon emission reduction targets. For example,
Kühne + Nagel had a global target to reduce relative carbon emissions by 15% by 2020 (compared to 2010
levels), carbon neutrality of scope 1 and 2 emissions by 2020 and carbon neutrality of scope 3 emissions
by 2030. Such global targets are generally translated into regional and national targets.

Measures
The main measures to reduce emissions in warehouses include electrification of equipment and installing
LED lighting. All of the forklifts operated in Kühne + Nagel warehouses are electrified, and 75% of its lighting
is LED lighting. Last-mile deliveries in urban centres are increasingly electrified. Other measures include
changes in the layouts of logistical processes to reduce the movements of forklifts and trucks.
A few customers have asked freight forwarders for zero carbon supply chains. Freight forwarders have so
far made arrangements with transport operators for premium zero-emission services, but some intend in
the future to deal directly with producers of bio-fuels. The target of carbon neutrality of some logistics
service providers is partly achieved by offsetting. Kühne + Nagel, for its part, will move towards what is
known as carbon insetting: developing its own projects that compensate for carbon emissions.

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Drivers
The main driver of zero carbon strategies for logistics service operators in Hamburg is the motivation of
the owners and management of the logistics companies to be more sustainable. Although their clients pay
more lip service to environmental sustainability, few of them demand zero carbon freight transport.
Freight forwarders are able to accommodate zero carbon transport and expect to do more of this in the
future, but the number of clients that are willing to pay for the additional costs that come with zero carbon
supply chains is quite small.

Obstacles
The main obstacle for most logistics service providers is not so much their own emissions but the ones of
the transport operators on which they are dependent. In ocean transport, there are a few possibilities for
low-carbon shipping, but this is generally more difficult in road transport, where such options for the
moment hardly exist. Few customers are willing to pay for premium zero carbon transport services, butthere is an expanding potential interest.

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SHIPPERSShippers
Shippers are at the origin of freight transport chains; it is their desire to ship goods throughout the worldthat creates the demand for freight transport. There is a wide variety of shippers, ranging from small
enterprises to huge multinationals. The port of Hamburg is focused on containerised transport, which isthe predominant way of transporting consumer goods. The industry at the origin of a substantial part ofcontainerised transport – and therefore making up a large portion of shippers – is retail, an example ofwhich would be the Hamburg-based retailer the Otto Group. As one of the world’s largest e-commercecompanies, it operates in more than 20 countries. Companies like Otto procure considerable amounts offreight transport services either directly or via freight forwarders to get goods to their warehouses andthen on to customers (Otto Group has its own freight forwarding company, Hermes).

Carbon emission targets
Several large shippers have carbon emission reduction targets. Otto Group, for instance, had a target of
reducing emissions by 50% by 2020, compared to 2006. Its new target is to be carbon-neutral by 2030.
Main emission sources for retailers are inbound transport (whether by sea, air, rail or road), warehouses
and last-mile transport. They have most leverage over the latter two, as they own both warehouses andvehicles for last-mile transport. Groups like Otto calculate carbon emissions per transported article andreport on this through their purchasing departments every month.

Measures
The factor that has the highest impact on the retail sector’s emissions is the share of goods transportedby plane. Otto Group, for example, has managed to reduce its emissions on inbound transport by 75%
since 2006 in essence by reducing the share of goods transported by plane from 25% in 2006 to 5% in
2019. This was possible because the composition of transported goods changed over time, frompredominantly fashion goods, often transported by plane, to mostly furniture, which is generallytransported by ship. In addition, Otto Group worked on improving its internal planning processes toshorten the time between production and delivery to customer. This made it possible to shift more goods
to ocean transport, even seasonal goods. However, disruptions or sudden promotions require theflexibility and speed of aviation. E-commerce has also made demand for goods less predictable and thustransport-planning more challenging.

Drivers
The drivers of the emission reduction strategies of shippers are diverse. Shippers in direct contact withend customers will generally be confronted by the increased awareness and concern of customers withregard to climate change. But even in these companies it is usually the motivation of the company owners– or managers – that drives zero carbon strategies and the company culture necessary to achieve it.

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Obstacles
The main obstacle for shippers appears to be the lack of zero carbon transport solutions offered bytransport operators. Hardly any operator in road, ocean or air transport is currently able to offer a
premium zero carbon transport chain. The only zero carbon freight transport chain that exists in practicewould be a combination of rail transport with sustainable last-mile transport powered by bio-fuel orelectricity. Shippers interested in zero carbon maritime transport can subscribe to the GoodFuels
programme or an occasional service provided by two carriers (Maersk and CMA CGM), but there is little
choice.

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THE INTERLINKAGES

The interlinkages
It is a challenging task to estimate the carbon emissions of the whole freight transport chain connected tothe port of Hamburg. Methodologies for calculating and monitoring the carbon emissions of the different
stakeholders vary, so a fully consistent comparison is not possible. This is not surprising considering thatcarbon emissions monitoring within the different industries themselves is often already problematic. For
example, the container shipping industry has widely diverging practices in this respect (Sea Intelligence,2020). Harmonisation of GHG emissions reporting along the chain would help to increase coherence, but
this requires increased collaboration and co-ordination of different groups of stakeholders.
Ports are the nodes where the different transport flows come together, but their share of the carbon
emissions of the whole freight transport chain are negligible. For example, only an estimated 1% of theemissions from transporting containers from Shanghai to Prague via the port Hamburg would be
generated by terminal handling in Hamburg (Table 1). In this example the largest share of emissions comesfrom container shipping (84%), despite the fact that it is relatively energy efficient per TEU-kilometre.
Hinterland transport via train would generate 6% of the emissions of the container transport chain (HHLA,
2020b).
Table 1. Estimated carbon emissions of container transport from Shanghai to Prague
From/toTransport leg

Share of GHG emissions

Inland to Shanghai

35 km by truck

3%

ShanghaiPort handling2%

Shanghai to Hamburg

Ocean shipping

84%

Hamburg

Port handling1%

Hamburg to Prague

Train

6%

PragueInland port handling1%

Last mile to customer

35 km by truck3%

Source: HHLA (2020)b.

Targets
The Hamburg port and container terminals have developed ambitious emission reduction targets, whichis less the case for other parts of the chain. The port authority and HHLA terminal operator have aligned
their targets to the carbon emission reduction target of the city-state of Hamburg: zero carbon emissions
by 2040, a target likely to be adopted by Eurogate as well. On the maritime side, only a few carriers havedeveloped a long-term target, the most ambitious of which is zero carbon emissions by 2050 (adopted byMaersk and CMA CGM). The global target, as formulated by the International Maritime Organization, is areduction of at least 50% by 2050, which falls well short of ambitions as formulated by the Hamburg Port

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THE INTERLINKAGES

Authority (HPA). On the landside, most transport operators have not formulated long-term emission
reduction targets, the exception being large logistics operators that are dependent on transportcompanies to realise the most substantial emission reductions (Table 2).
Table 2. Carbon emission reduction targets of companies in the Hamburg transport chain
Organisation

Relative target

HPA
HHLA

-30% by 2020, compared to 2008

Eurogate-25% by 2020, compared to 2008

K+N

-15% by 2020, compared to 2010

Hapag Lloyd-20% by 2020, compared to 2016

Otto

Absolute target-50% by 2025, compared to 2012
Zero carbon by 2050
-50% by 2030, compared to 2018
Carbon-neutral by 2040
Carbon neutrality of scope 1&2 by 2020
Carbon neutrality of scope 3 by 2030

-50% by 2020, compared to 2006
Climate-neutral by 2030

Measures
Hamburg can be commended for a range of measures undertaken to reduce the carbon emissions offreight transport. It has managed to ensure a high share of the transport to and from the port is by rail,
the legacy of decades of investment in rail tracks within the port and a policy to facilitate port rail transport.
The environmentally-motivated exemptions of the port rail infrastructure charges have helped to create
demand for hybrid shunting locomotives, and Hamburg’s main terminal operators have proactively
invested in low-emission yard equipment and cranes. All this has made it possible for certain forwarders
to offer practically zero carbon transport chains from the port of Hamburg to its hinterland destinations,something that cannot be realised in many places.
Hamburg – and Germany as a whole – have developed policies to stimulate the use of natural gas inmaritime and road freight transport. At the port level, this takes the form of deductions of port dues for
LNG-powered vessels. An LNG bunker barge has been acquired for refuelling cruise vessels, and there areplans to develop LNG bunkering facilities in Brünsbuttel, near Hamburg. At the federal level, support takes
the form of subsidies and toll exemptions for LNG-powered trucks, and a roll out of LNG refuelling stations
for trucks. Although more or less consistently and coherently pursued, this strategy cannot be considereda long-term or even a medium-term solution to mitigate the GHG emissions from transport. Using LNG asa fuel could limit carbon emissions to some extent, but it increases methane emissions, which creates
more long-lasting damage to the climate. LNG vessels or trucks could use biofuels, but there will generally
not be enough waste or residual products to generate biofuels for a large share of the truck or vessel fleets.
Hamburg could be considered reactive rather than proactive with regard to alternative fuels and energy
sources. It is no frontrunner when it comes to onshore power facilities in port terminals or charging
facilities for electric ships. It could become a testing ground for a variety of projects related to alternative
fuels in shipping, in particular with regards to the port-side infrastructure and facilities needed to facilitate
the transition towards zero carbon shipping.

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THE INTERLINKAGES

Potential drivers
Many stakeholders in the freight transport chain are interrelated: most companies are either suppliers or
customers of companies in freight transport. It is through these linkages that companies could potentiallyinfluence the behaviour of other companies. In practice, these linkages are currently not being used topush for decarbonisation. Carbon emission reduction potential is at best considered a secondary criterion
in the shipper’s choice of transport operators. Carriers do not take carbon emissions into account in theircontracts with terminals. Emissions hardly play a role in the concession contracts between ports andterminal operators. And the level of emissions is just one of many indicators in the demand that transportcompanies articulate to manufacturers of vessels, trains, trucks, terminal equipment, dredgers and pilotboats. Due the strong interlinkages of all stakeholders, the clear articulation of concerns on carbon
emissions by one group of stakeholders could rapidly trickle down to the other stakeholders.
There are differences in the regulatory approaches of the different freight transport sectors. In road freighttransport, regulation is developed with vehicle manufacturers in mind, whereas regulation in shipping isdeveloped in co-operation with the ship owners and operators rather than with the ship-builders. One canwonder if the transition towards zero carbon shipping is most effectively driven by the demand or supplyof zero carbon vessels. It is possible that the International Maritime Organization’s practice of co-creating
regulation in close consultation with the shipping industry is creating a lock-in into existing solutions rather
than a dynamic interaction with vessel or engine manufacturers that have greater interest in innovative
solutions.
Compounding this, governments do not use their leverage over shipping companies. The case of Hamburg
is a good illustration. The city-state has an ambitious GHG emission reduction strategy and is one of themain shareholders of Hapag Lloyd, yet it does not appear to use this position to push Hapag Lloyd to amore ambitious and proactive stance on GHG emission reductions. A similar remark could be made withregard to the federal government: it provides a specific subsidy to Hapag Lloyd and a variety of support
measures to the shipping industry in Hamburg – such as a generous tonnage tax scheme and exemptionsof social security payments – without asking for anything substantial in terms of public value in return.
Governments should use the leverage they have on the shipping industry via maritime state aid to force
the companies they support to engage in ambitious GHG emission reduction measures.

Obstacles
A common challenge for the whole freight transport chain is the higher costs of zero carbon transport
activities. Zero carbon freight transport is generally more expensive than the conventional freighttransport because negative external costs – such as emissions – are not taken into account but also
because of fossil fuel subsidies. Examples include the fuel tax exemptions for the shipping and terminal
industry in Hamburg. Such tax exemptions create a lock-in to fossil fuels. An overhaul of the system of
incentives in freight transport is needed in order to stimulate the transition towards zero carbon powersources.
Reforms often take time because of considerations about ensuring a level playing field. The idea is thatunilateral action, say, by Hamburg or Germany, would be ineffective because it would a substantial numberof the freight transport businesses to relocate to other places. Although there is some merit to thisargument, it also often leads to institutional lock-in and stagnation. Co-ordination makes sense between
the jurisdictions that could realistically be considered competitors in terms of freight transport flows. In
the case of the containerised trade flows that pass through the port of Hamburg, competitors are othercontainer ports in north-western Europe (and to a much lesser extent those in southern Europe). Co-

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THE INTERLINKAGES

ordination at this level would help avoid carbon leakage effects, as it could make sure that the conditions
for zero carbon freight transport are similar, e.g. with regard to incentives, taxation, regulations anddeployed technologies.

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POLICY IMPLICATIONSPolicy implications
Three major players could make Hamburg more effective in directing the transition towards zero carbon
supply chains: the port authority, the city administration and the federal government.

A proactive strategy from the port authority
The Hamburg Port Authority (HPA) could play a more pro-active role in driving the decarbonisation of thefreight transport companies using the port of Hamburg. This would require a strategic orientation: insteadof focusing almost exclusively on its own emissions, it could leverage its position as a key node where amultitude of freight transport flows come together. It could develop a clear strategy aimed at stimulating
zero carbon road, rail and maritime freight transport. This could take several forms. The HPA could
systematically measure and monitor airborne emissions – including GHG emissions – from ships, trucks
and trains using the port – and report about it regularly, like the Port of Los Angeles. HPA could encourage
major port users to develop targets in line with its own target of zero carbon emissions by 2040. It could
develop a multitude of measures that stimulate zero carbon freight transport. This could include pilot
projects to stimulate innovations, technology transfer programmes, roll out of relevant supporting
infrastructure and coherent incentive schemes, properly evaluated for effectiveness.
The HPA should focus on possible long-term solutions instead of stimulating transition fuels. It is unclear
how its current focus on facilitating LNG will help to achieve its ambitious zero carbon target by 2040, as
the potential to reach this goal via LNG is limited. Its projected installation of onshore power facilities
should be considered in a longer-term context of battery-powered ships: could these investments be used
as a catalyst for electrification of certain categories of ships calling at Hamburg, for example, short-haulshipping in the North Sea and Baltic region? An example of an ambitious roll-out of electric charging
systems in ports is the case of Norway (Box 1).

Box 1. Roll-out of electric charging systems for electric ships in Norway

In Norway, batteries, electrification and shore power projects in ports are all funded with the goal ofgreening maritime transport. The agency Enova, whose allocations from 2017-19 were NOK 10.4 billion(EUR 1.0 billion), of which NOK 2.7 billion (EUR 270.0 million) was for the transport sector. By the end of
2019, Enova had allocated more than NOK 500 million (EUR 49.6 million) for battery installation and otherenergy efficiency measures in about 75 vessels, along with a small number of fully electric vessels. In termsof funding commitments, Enova has awarded more than NOK 900 million (EUR 89.2 million) for theelectrification of 39 ferry connections with 52 associated ferries. 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).

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POLICY IMPLICATIONS

A proactive port strategy could benefit from an incentive scheme with stronger positive and negative
incentives. Existing schemes provide deductions from port fees (for ships) or infrastructure charges (forrail operators). These incentives are often relatively small, begging the question if they have any effect atall (ITF, 2018). Incentive schemes could have larger effects if there are substantial differences in price topay. This could be by not only using bonuses but also so-called maluses to dissuade undesirable behaviour,along the lines of the incentive scheme in Bergen (Box 2).

Box 2. Environmentally differentiated port fees
Various ports throughout the world have introduced environmental discounts on port fees. The impact ofmost of these schemes is marginal, as the difference for the best and worst performing ships is too small:most schemes only provide incentives for a few vessels and no penalties for the ships that have poor
environmental performance (ITF 2018).
Truly environmentally differentiated port fees are relatively new and for the moment restricted to cruise
ships calling at Norwegian ports. This practice is based on an index developed by Norwegian ports, called
the Environmental Port Index (EPI). Unlike previous indexes such as the Environmental Ship Index (ESI) andthe Clean Shipping Index (CSI), the EPI measures the actual operational efficiency of a ship at port.
Moreover, various Norwegian ports have developed a pricing structure that allows for a wide spread
between the best and worst performing ships. For example, in the ports of Bergen and Stavanger, the best
performing ships get a 17.5% rebate and the worst performing ships a 150.0% surcharge on the generalport tariff.
Source: ITF (2020).

Stronger involvement of the city administration in zero carbon
freight
The city-state of Hamburg could be one of the driving forces in the decarbonisation process of container
shipping. Its ownership of the HPA and the majority of shares in HHLA has resulted in an alignment of theemission reduction targets of the city, the port and the HHLA port operator, driving change towards zerocarbon port activities. Moreover, as one of the shareholders in the shipping firm Hapag Lloyd, the citystate of Hamburg could use its leverage to make the company to commit to a more active GHG reduction
strategy.
The city-state of Hamburg could also initiate a co-ordination group of port-cities to develop common
policies. Such a network could include port-cities that own ports that can be considered competitors, suchas Rotterdam, Antwerp, Amsterdam, Zeebrugge, Bremerhaven and Gothenburg. Co-ordination on
decarbonisation policies would be needed to avoid potential leakage effects of measures taken in isolation.
Co-ordination could take place with regard to port-city measures to stimulate zero carbon freighttransport, such as developing incentive schemes, charging and refuelling infrastructure, and regulation ofships, trucks, trains and barges.

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POLICY IMPLICATIONS

Facilitation of zero carbon freight transport by the federal
government
The federal government could help the transition to zero carbon supply chains by phasing out fossil fuelsubsidies. The shipping industry benefits from an exemption from the fuel tax. Yet as this tax exemption
does not apply to renewable energies or electricity, it locks the shipping industry in a fossil-fuel energy
trajectory. Terminal operators are also exempted from a fuel tax, which runs counter to efforts todecarbonise the sector. In addition, the federal government provides subsidies and toll exemptions for
gas-powered trucks. It also provides maritime state aid without strings attached. All these support
measures require an overhaul to make sure that they facilitate the transition to zero carbon operations.
What this could mean is: abolishing fuel tax exemptions and subsidies or transforming them into support
for zero carbon power sources. An example could be to attach carbon emission reduction criteria to thetonnage tax, a shipping-specific tax regime (Box 3).

Box 3. Greening tonnage taxes

A tonnage tax is a specific tax for the shipping sector that replaces a regular corporate income tax. The tax
base is the net tonnage of the ships that a shipping company operates (hence the name of the tax) rather
than corporate income or profit. The tonnage tax is favourable to the shipping sector as it results in lower
tax burdens than those incurred by a regular corporate income tax. As such, it has become one of the main
mechanisms to subsidise the maritime sector in recent decades. While Greece has had a tonnage tax since1957, many European countries only started to introduce a tonnage tax after the Netherlands put one inplace in 1996. Currently, more than twenty EU countries have introduced a tonnage tax, and certain nonEU countries have done so as well (e.g. Japan, the Republic of Korea and India).
The tonnage tax schemes of some countries are differentiated according to the environmental
performance of ships. In Norway, a shipping company can obtain a reduction of the standard tonnage tax
of up to 25%, dependent on the environmental rating of their ships. This incentive aims to reward
companies for exceeding the mandatory requirements with regard to the environmental performance of
their ships. In Portugal, in the case of ships with a tonnage of more than 50 000 net tonnes that use
mechanisms for preservation of the marine environment and climate change mitigation, a reduction of up
to 20% of the amount of the tax base can be granted. Other tonnage tax schemes provide incentives foryounger ships, which could facilitate GHG emission reductions if new ships are more energy efficient thanexisting ones. For example, the tonnage tax scheme in Malta provides a reduction from the standard
tonnage tax rate when the ship is less than 10 years old and increases the tonnage tax when then ship is
15 years old or more.
Source: ITF.

Certain EU initiatives could help such an overhaul. The European Commission is currently reviewing its
energy taxation regulation, including the requirement that ship fuel should be exempted from taxation.
Abolishing the ship fuel tax exemption would help the costs of zero carbon and conventional fuels toconverge. Another measure that could help is the announced insertion of shipping into the EU emissions
trading system (EU ETS). Germany’s support for such measures could facilitate the transition towards zerocarbon supply chains.

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REFERENCES

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Zero Carbon Supply Chains

International Transport Forum
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contact@itf-oecd.org
www.itf-oecd.org

Published: 06/2021 | Photo credit: TimSiegert-batcam | ShutterstockThis report assesses the potential of zero carbon supply chains
via a case study of the freight transport chain linked to the portof Hamburg. It analyses the initiatives taken by selected mainstakeholders to decarbonise freight transport. In addition, it offers
recommendations on how the move towards zero carbon supply
chains could be accelerated.