Reforming Government and Corporate Procurements to Drive Cleaner Trucking Services Warren G. Lavey August

U.S.-China Climate Change Working Group (July 10, 2013) Five action initiatives include: “Reducing emissions from heavy-duty and other vehicles: Heavy-duty vehicles are the fastest growing source of greenhouse gas emissions from transportation in the United States and account for more than half of transportation fuel consumed in China. Light-duty vehicles also contribute significantly to greenhouse gas emissions, fuel use and air pollution. Efforts under this initiative will include advancing comprehensive policies to reduce CO2 and black carbon emissions through: enhanced heavy-duty fuel efficiency standards; cleaner fuels and vehicle emissions control technologies; and more efficient, clean freight.” 2

“If you’re a business that needs to transport goods, I’m challenging you to replace your old fleet with a clean energy fleet that’s not only good for your bottom line, but good for our economy, good for our country, and good for our planet.” (Apr. 2011) 3

Lots of Federal Programs Aim at Cleaner Trucking 4

Fuel Efficiency Standards Getting Tougher (for light-duty vehicles and heavy-duty trucks) 5

Opportunity: Leverage $ 500 Billion in Annual Fed Purchases 6

Outline 1.Trucks and Climate Change 2. Some Leading Corporate Programs 3. On-going Efforts to Engage the Federal Agencies 7

1. Trucks and Climate Change Major emitters of GHG and other air toxics Environmental injustice Availability of cleaner technologies, fuels and infrastructure 8

Transportation Accounts for 28% of U.S. GHG Emissions (EPA) 9

Trucks Emit 50% More GHG than Cars, and 75 Times More than Buses (Cong. Res. Serv. 2013) 10

Growth in Truck Emissions (Cong. Res. Serv. 2013) 11

“Air pollutants from diesel- powered vehicles contribute to respiratory illness, heart disease, cancer, and premature death. Minority and low-income communities near transportation hubs and throughways bear disproportionate impacts.” (EPA advisory report, 2009) Truck Emissions Disproportionality Harm Minority and Low-Income Communities 12

Availability of Cleaner Vehicles and Fuels 13

14

Potential growth of low-emitting technologies, fuels and infrastructure for goods movement Energy Sec. Steven Chu requested advisory report: “What actions could industry and government take to stimulate the technological advances and market conditions needed to reduce life-cycle GHG emissions in the U.S. transportation sector by 50% by 2050, relative to 2005 levels, while enhancing the nation’s energy security and economic prosperity” (Apr. 2010) 15

Findings of Energy Advisory Commission Advisory report (Aug. 2012) If technology hurdles and infrastructure challenges can be overcome, economically competitive low-carbon fuels and improvements in fuel economy for all vehicles could achieve a 40% reduction in GHG emissions per mile by 2050, compared to Fuel economy could double for heavy-duty vehicles via advances in engine and vehicle designs Growth in non-petroleum fuels, especially natural gas, biofuels and, for light-duty vehicles, electricity and hybrids However, vehicle miles travelled are projected to increase by 60-80%, which counteracts reductions in GHG emissions per mile 16

2. Some Leading Corporate Programs Frito-Lay (PepsiCo) 17

18

19

20

Procter & Gamble Goals – Reduce truck transportation by 20% per unit of production (including more use of trains) – Convert 20% of for-hire truck loads to natural gas between Press Release (6/27/13): “P&G Invests in Growth of Natural Gas Industry by Awarding Loads to Eight Natural Gas Transportation Carriers” 21

Owens-Corning Goal: Convert 50% of its network miles to natural gas by 2020 “Owens-Corning is talking to nearly all its trucking partners about switching to natural gas…. Some who balked at the proposal have lost "a piece" of the building material maker's business…. Dillon Transport Inc, a privately held company based in Burr Ridge, Illinois, agreed to Owens Corning's request, adding 25 LNG trucks in Texas about a year ago.” Reuters (3/22/13) “Not only do customers want to see more predictable, and hopefully lower, fuel costs, many also have internal goals to reduce the carbon and tailpipe emissions of their supply chains." 22

Targets and achievements by package delivery companies UPS – Achievements Reduced CO2 emissions by 1,000 U.S. domestic packages by 4.9% from Reduced fuel used by U.S. domestic ground package by 8.7% from – Goals Reduce emissions per vehicle of fine particulate matter by 75% and nitrogen oxides by 60%, Double alternative fuel miles driven, Reduce carbon intensity (including U.S. operations and global airline) by 10% by

24

FedEx Goal: Increase FedEx Express vehicle fuel efficiency 30% by 2020 compared to 2005 Achieved 22% improvement through 2012 (beat initial target of 20%) 25

26

Some FedEx Actions More than 10,000 clean diesel vans (70-100% more efficient than vehicles they replaced) 358 hybrid electric and 92 all-electric vehicles in North Am. 6 CNG and 2 LNG vehicles in North Am. DHL Goal and Achievement Goal: Improve by 30% carbon efficiency of operations, Achieved 16% improvement,

Procurements from SmartWay Transport Partners Requiring carriers to track and reduce their emissions -- Hewlett-Packard, Best Buy, others Lower barriers to participation s of medium-sized and small businesses Cost effective as well as environmental benefits Truck leasing options 28

UIUC Became First SmartWay Partner Academic Institution “EPA congratulates The University of Illinois at Urbana- Champaign for registering as a shipper partner in EPA’s SmartWay Transport Partnership and committing to improve the performance of its freight operations,” said Christopher Grundler, the Director of EPA’s Office of Transportation and Air Quality. "As the first-ever academic institution to register in SmartWay, The University of Illinois at Urbana-Champaign leads the way for universities and other institutions to work as shippers in SmartWay and engage with their carriers and suppliers to improve freight efficiency, reduce greenhouse gases and other emissions from goods movement while also helping enhance our nation's energy security.“ June

3. Federal Government Efforts Framework of Laws and Executive Orders Alternative fuel fleet vehicles: Energy Policy Act of 1992, as amended in 2005 Alternative fuels for fleets and reduced GHG emissions: Energy Independence and Security Act of 2007 Reducing petroleum use and emissions for fleets; green suppliers: EO “Federal Leadership in Environmental, Energy, and Economic Performance” (2009) Reducing Health Impacts on Disadvantaged Groups: EO “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (1994) 30

31 Sustainability Plans and Annual Reports for Agency Operations

32

33

Government Shippers and Carriers -- Better Targets Than Government Fleets Larger spending More petroleum consumption and emissions Higher utilization of suppliers’ trucks Leverages private sector investment and uses Opportunities through improved contract structures and procurement practices 34

Opportunities in Government Procurements of Trucking Services Reduce Spending Emissions Petroleum consumption and imports Spur the markets for alt fuel infrastructure and vehicles Enhance national security Increase domestic jobs 35

Some Recent Actions Addressing Fed Agencies’ Procurements GSA’s Green Purchasing Plan (2009) – GSA “must consider to the maximum extent practicable a preference for environmentally sustainable products or services when developing best value evaluation factors.” Federal Acquisition Regulation amended to reflect “sustainable acquisition policy” (May 2011) – Agencies shall advance sustainable acquisition by ensuring that 95% of new contract actions are energy efficient, environmentally preferable – “Best value must be viewed from a broad perspective and is achieved by balancing the many competing interests in the System. The result is a system which works better and costs less.” 36

U.S. Postal Service Program Addressing Trucking Carriers Tracks and reports contractors’ fuel use Targets reducing suppliers’ transportation emissions and petroleum use 20% by 2020, with annual reporting Will require suppliers with contracts >$500,000 annually to report emissions and other data Will use standard sustainability clauses in contracts to engage suppliers and encourage improvements 37

USPS Estimated Savings from 20% Reduction in Petroleum Consumption Annual Budget Savings ($ mil) Annual Petro Fuel Savings (gallons mil) Annual Emissions Savings (MMT CO2 equiv.) Fleet – 0.4 Transportation Contractor Services –

Recommendations from American Clean Skies Foundation’s “Oil Shift” Report (Aug. 2012) Agencies report annual measures and targets for fuel use and emissions from suppliers of transportation services – Targeting petroleum reductions – Targeting alt fuel gains – Open to logistics improvements, multimodal, fuel efficiency, etc. Procurement preferences for cleaner trucking Multiyear contracts with incentives for reduced petroleum use and emissions Identify attractive candidates for alt fuel trucking services 39

Some Actions to Promote Procurements of Cleaner Trucking Services by Fed Agencies Outreach to Fed Agencies – Presentation at GreenGov Conference (Sept. 2012) – Meetings with GSA OMB CEQ EPA DOE USPS Domestic Policy Council CEA – Workshop for fed procurement staff to learn from private sector experiences – Specific recommendations for GSA tools and procurements 40

Work with consultants and industry – Case studies of cost-effective changes in procurements – Preliminary analysis of fed agencies’ shipments to identify “low-hanging fruit” – Access for government staff to experienced commercial procurement officers Support from other environmental and energy security non-profit organizations 41

Opportunity in Third-Generation Domestic Delivery Service Solicitation Up to 5 years – $ million annually – million packages annually DDS2 (2009) failed to: – Assign preference to cleaner carrier – Require reporting of emissions or fuel use for deliveries – Require improvements New developments – EO – More SmartWay and other measurements and reporting – Advances in alternative fuel vehicles, infrastructure and corporate commitments 42

Proposals for DDS3 Solicitation Selection preference for vendor environmental commitments – Fuel efficiency, emissions and alt fuels by year – Fleet-wide Annual targets in contract Annual reporting Contract incentives for superior environmental performance – Annual contract extensions; renewal expectancy 43

Vision and Traction “[T]he only way we're going to break this cycle of spiking gas prices for good is to shift our cars and trucks off of oil for good.” President Barack Obama, Address from Argonne National Laboratory (March 16, 2013) 44