Principal investigator: Bruno Benevit
Original title: Toward sustainable port-hinterland transportation: A holistic approach to designing modal shift policy mixes
Authors: Taolei Guo, Pei Liu, Chao Wang, Jingci Xie, Jianbang Du and Ming K. Lim
Location of the Intervention: China
Sample Size: Simulations between the years 2000 and 2035
Sector: Transportation Economics
Primary Variable of Interest: negative externalities
Type of Intervention: "Policy mix" in the transportation sector.
Methodology: Monte Carlo simulation
Summary
With the expansion of global trade chains in recent decades, ports have become exponentially relevant to the economic development of countries. However, the receipt and flow of cargo to ports involves connecting maritime transport with hinterland transport. The hinterland, an inland region logistically and economically connected to a port, can be impacted by negative externalities, especially environmental ones and worsening road traffic. This study sought to analyze the impacts of different policies implemented in China on changes in port transport modes and these externalities. The results revealed that economic growth in the hinterland significantly increases port trade and port-hinterland transport externalities. Additionally, the results also showed that the effectiveness of the set of policies in reducing externalities increases with increased freight demand, but the integrated effect of the policies is less than the sum of the effects of the individual policies.
- Policy Problem
Despite the economic gains resulting from global trade integration, the logistics required to support the supply of cargo for maritime transport pose challenges to sustainability. Ports and hinterlands, the inland region logistically and economically connected to a port, play a central role in this process, representing the links between maritime transport and the flow of products to the rest of the economy (GUO et al., 2023).
However, within the entire logistics chain related to ports, port-to-hinterland transport, which includes the collection and distribution of cargo (TALLEY; NG, 2017), is responsible for a large part of the negative externalities. These externalities involve both environmental aspects, such as the expansion of greenhouse gas (GHG) emissions, and quality of life aspects, congestion, and health/safety, traffic accidents.
In a multimodal port-hinterland freight transport system, the use of more efficient transport and coordination between road and rail modes can represent important solutions for sustainability. Therefore, promoting modal shift through targeted policies is important for port-hinterland transport systems to mitigate negative externalities arising from these operations. In this sense, it becomes relevant to evaluate how different sets of policies within the modal structure of port-hinterland transport can promote its efficiency and sustainability.
- Policy Implementation Context
Despite initiatives implemented by some of the world's largest ports, significant gaps remain in the exploration of strategies that consider cargo volume, infrastructure, vehicle fleets, energy sources, and policies. Transport between ports and hinterlands differs from general freight systems due to its strategic function of connecting global and local markets, directly influencing regional economic development.
Promoting sustainable transport often involves modal shifts, such as replacing more polluting modes of transport with more efficient and less impactful alternatives. Policies aimed at this goal can target reducing dependence on road transport by promoting the expansion of subsidies and rail services, as well as implementing policies for internalizing external costs (IEC). In the case of the European Union, modal shift strategies have been adopted as part of its efforts to decarbonize transport. These have already demonstrated a positive impact on the sector's sustainability.
An integrated approach, or “policy mix” (policy mix“), which combines different policy instruments synergistically, has the potential to generate differentiated global impacts. According to BOUMA et al. (2019), such an approach produces holistic effects resulting from mutual gains between the policies adopted in an integrated manner and the hinterland economy. Although the impact of these policies has already been observed separately, there is a lack of studies analyzing the global impacts of these combinations on port-hinterland transport.
- Evaluation Details
For the analysis in this study, a case study was considered based on the Port of Qingdao, one of the largest in the world. Currently, the port faces challenges stemming from the economic transition of Shandong province in China. In 2018, Shandong province initiated a long-term economic plan called Kinetic Conversion from Old to New Industries (KCONI). Its objective is to reduce traditional coal and metal-based industries, replacing them with new high value-added industries.
Thus, the holistic impacts of the Qingdao Port hinterland economy and the “policy mix” of modal shift on the sustainability performance of its hinterland transport were evaluated. For this purpose, official data from Shandong province were considered (GUO et al., 2023). The analytical model adopted to study the sustainability of port-hingrenland transport followed a structured three-step flow: definition of economic scenarios, establishment of the integrated model, and model simulation.
The model was validated through structural and behavioral tests, comparing its predictions with historical data from the Port of Qingdao. Additionally, the model was applied to the Port of Shanghai, which presents distinct characteristics in terms of its hinterland economy and transportation modes.
- Method
The impact of the hinterland economy and the “policy mix” of modal shift on the sustainability of port transport was estimated using an econometric model that correlates economic scenarios with port traffic. The study's econometric model estimated the relationship between port traffic and economic variables such as imports and exports, gross industrial product, and road network length.
The port-hinterland transport system was represented in a diagram. hub-and-spoke, where ports act as hubs Connected to the hinterlands by different modes of transport. The integrated model was based on the classic four-stage theory of transport, dividing the freight process into cargo generation, trip distribution, modal split, and traffic allocation. Within this framework, five sub-models were employed:
- Submodel for estimating port traffic: uses economic variables, such as the total value of imports and exports, to predict freight demand.
- Modal split submodel: considers different transport options – road, rail and waterway – taking into account generalized costs, flexibility and accessibility of each mode.
- Port-hinterland traffic submodel: converts freight flows into traffic flows and incorporates the impacts of congestion on highways.
- Cost pricing submodel: estimates freight price dynamics, considering operational costs, taxes, and government regulations.
- Submodel of sustainability for port-hinterland transport: which measures external costs associated with greenhouse gas emissions, air pollutants, congestion, and traffic accidents.
Finally, a dynamic Monte Carlo simulation model is used to evaluate different combinations of modal shift policies and their effectiveness in promoting the sustainability of the system. The simulations considered different scenarios and modal shift policies, in order to identify exogenous parameters that affect the results in the face of uncertainty in the economic evolution of the hinterland. The economic scenarios considered low, medium and high growth prospects, while the policies included: (i) IEC policies, (ii) highway construction, (iii) rail service provision and (iv) rail subsidy.
- Main results
The results showed that the throughput of the Port of Qingdao varies significantly between different economic scenarios. In the medium scenario, port throughput grew steadily, increasing by about 50% by 2035 compared to 2020. In the low scenario, expansion slowed due to weak economic activity and the prolonged impacts of the COVID-19 pandemic. In the high scenario, the authors identified that the port could reach one billion tons of cargo in the long term.
Regardless of the scenario, simulations indicated that road transport would remain predominant, representing more than 80% of total transport. However, this preference for road transport, despite its higher operating costs compared to rail, indicates that the low quality of rail services – especially long waiting times – is a determining factor in its reduced share of freight transport.
As a consequence of the predominance of this mode of transport, negative implications were observed in the form of externalities of port-hinterland transport. External costs, such as congestion and emissions, do not increase proportionally to port traffic, as the growth in demand accentuates the inefficiency of road transport. In the high-cost scenario, where cargo flow grew by 90% by 2035, congestion costs more than doubled, indicating that the road network may be affected by severe congestion.
Regarding the implementation of modal shift policies, efficiency was identified in mitigating negative externalities, reducing external costs by 35%, 40%, and 52% in the low, medium, and high scenarios, respectively. Among the measures evaluated, external cost-based pricing (ECP) stood out as one of the most effective, especially in the high scenario, improving the competitiveness of rail transport compared to road transport. The simulations also suggested that raising the level of rail service can play an important role in reducing externalities, being more efficient than granting subsidies to the rail sector.
The cost-benefit analysis conducted in the study indicated that the IEC policy presents significant potential to make modal shift economically viable. Conversely, the environmental gains associated with rail subsidies, improvements in rail service levels, and expansion of road infrastructure would be less than the costs of implementing these measures. The authors also highlighted the need for investment in technological improvements to increase the energy efficiency of rail transport.
- Lessons in Public Policy
This study analyzed the integrated (holistic) impact of the hinterland economy and the implementation of modal shift policies on the negative externalities of transportation between the hinterland and the port of Qingdao, located in China. To this end, the authors presented several models to understand the dynamics of the economic environment of port-hinterland transportation and performed Monte Carlo simulations considering different economic scenarios and types of policies.
Although this approach has already been implemented in some regions of Europe, its adoption in China is still uncertain. The results show that the reduction of road transport externalities is accompanied by an increase in rail externalities, reinforcing the need for investments in energy efficiency in the rail sector to maximize the benefits of the modal transition and ensure a more sustainable port-hinterland transport system.
The formulation of policies aimed at modal shift should consider not only their effectiveness in reducing externalities, but also their feasibility of implementation, making them a promising alternative for reducing externalities. The evidence from this study indicates that the interaction between policy instruments should be considered to optimize their effectiveness.
References
BOUMA, JA et al. Policy mix: mess or merit? Journal of Environmental Economics and Policy, v. 8, no. 1, p. 32–47, 2 Jan. 2019.
GUO, T. et al. Toward sustainable port-hinterland transportation: A holistic approach to designing modal shift policy mixes. Transportation Research Part A: Policy and Practice, v. 174, p. 103746, Aug. 2023.
TALLEY, W.K.; NG, M. Hinterland transport chains: Determinant effects on chain choice. International Journal of Production Economics, v. 185, p. 175–179, mar. 2017.
