The Obama Administration is leaning towards Cap-and-Trade in an effort to reduce carbon emissions. A cap and trade program allows companies with low emissions to sell their unused carbon footprint to companies that are over their pre-established carbon limit. Essentially, it incentivizes companies with low emissions, and requires companies with higher emissions to pay for the right to pollute. While the details on how a program would actually work remain sketchy, the fact is that at some point over the next four years, companies will likely need to start tracking their carbon footprint.

The first question every supply manager will ask is “How the heck to I do that?” Well, there are tools and resources available to make calculating some aspects of a carbon footprint easy, but others remain more difficult.

Most companies can attribute the largest part of their carbon footprint to energy consumption. The DOE can provide you with rule of thumb estimates on how much carbon is generated in the production of electricity, by state. Of course, different forms of energy release different types of carbon, so the first thing a “carbon manager” must do is determine what type of plant (electric, nuclear, coal, etc) is providing the electricity to their facility.

The carbon produced during the transportation of goods can be calculated as well, and it is relatively easy to do so when dealing with full truckload shipments. The Federal Government provides estimated MPG standard on every type of truck on the road. With that info in hand and an estimate of the miles covered, the website can give you an assessment of how much carbon those shipments produced.

But what about LTL or small parcel shipments? These shipments typically use hub and spoke routing procedures, which means the shipment does not take a direct route to its final destination. Would these types of shipments even be included in a carbon analysis for cap and trade programs? Most manufacturers and distributors ship as much or more via LTL and small package as they do Truckload, and the likelihood is these types of shipments would be used when calculating a carbon footprint. Right now calculating the carbon footprint of the carrier is possible, but accurately tying it back to an individual pallet of widgets is where things become tricky. According to the April edition of Logistics Management magazine, the Carbon Disclosure Project – “a collaboration of institutional investors and corporate giants” – is meeting this month to develop a framework for tracking and reporting carbon emissions of LTL and parcel shipments back to the individual shipper.

What is the impact to supply chain managers? In the past, the fact that a shipment from your warehouse in Philadelphia got to its final destination in Tampa by way of Memphis, Louisville, and/or Indianapolis didn’t matter, as long as it got there in three days. Now, with the carbon cost of that shipment being tracked and accounted for by your company, you will need to pay attention. Not only will it require the Supply Chain/Logistics manager to take a second look at their routing guides, it will force the LTL and Small Package giants to rethink their hub and spoke routing methodology or invest in greener/more efficient transportation methods to drill down on the “carbon cost” concerns of their customers.

The freight industry as a whole hurting right now, and rumors are flying about who might fail. Needless to say, some carriers may find the additional stress put on them by customers restructuring their supply chain to account for carbon costs may be too much to bear. As cap and trade turns from talk to action, chance are some of these carriers may close up shop or break back up into regional carriers.
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Joe Payne

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