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Modal shift in freight transport

Modal shift in freight transport
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The modal split for freight transport varies greatly by region, and is largely determined by geographical and economic factors. However there is a common trend towards more use of road transport, at the expense of rail and water transport. The latter modes have a substantially better environmental profile, but are limited by longer delivery times and the necessity of pre- and post-haulage by truck, i.e. inter-modal transport. In the logistic chain used nowadays, there are small local stocks and fast on demand delivery is required. Inclusion of social cost in freight prices, improved energy efficiency of ships and substantial investments in rail infrastructure are required to induce a modal shift.


The demand for freight transport is strongly coupled to economic activity, and in many countries growth of demand outstrips GPD growth (Essen, 2009). Freight can be transported by several modes, including road, rail, water, air, pipeline and non-motorised. In 2005, the freight transport sector was responsible for 2.8 GtCO2-eq including international shipping (IEA, 2009), i.e. for more than 10% of global fossil-fuel based CO2 emissions. This article focuses on modal changes for national/regional freight transport between road, rail and domestic (river-based and coastal) shipping.

Feasibility of technology and operational necessities

Rail, road and ship transport are all mature technologies. For specific developments of the technologies please refer to the specific articles on the different modes of transport.

Looking at modal shift between different modes of transport, one has to consider that, to a certain extent the different transportation modes serve different transport markets. The average distance for cargo travelling by ship is much larger than for road and rail, while the value per tonne of cargo can be a order of magnitude lower (NTC, 2010; Mao, 2009). The preference for road transport for certain goods can also be explained by the need to be flexible and the trend towards ‘delivery on demand’. Rich et al (2009) investigate this so-called structural inelasticity, i.e. the cases where substitution between modes is not possible, and conclude that particularly for origin-destination pairs below 500 km this inelasticity is very significant.

However, due to the environmental and social benefits of rail and water-based transport compared to road, many countries are adopting policies to induce a modal shift. For example the EU is prioritising ‘motorways of the sea’ and international freight rail connections (DG-TREN, 2009).


Figure 1: Trans-European transport network: priority axes and networks (DG-TREN, 2009)

One of the basic barriers for a modal shift is the lack of direct access of companies to the railway network or to waterways. Thus direct train or ship services are rare. Pre- and post-haulage by truck is needed to provide a door to door freight transport service. This is also called multi-modal or combined transport, and access to multimodal terminals and their connections to other terminals are major aspects in the discussion on modal shift.

Besides the access to terminals, other supply side indicators like the trip duration, reliability, flexibility or transport prices are also relevant for the mode choice decision.

In general a modal shift towards water borne - and railway transport gives rise to longer transport times and thus the necessity of bigger local stocks. In addition, the need for pre- and post-haulage for water borne- and railway transport can lower the environmental benefit of these transport modes, depending on the distance over which the road transport has to take place.

The current trend in transport is the principle of “delivery on demand”, which requires fast road transport. In combination with the fact that fuel makes up only a relatively small fraction of the transport costs, there are not many incentives to increase the amount of combined transport. To successfully induce a modal shift towards waterborne- and rail transport, a different system of supply needs to be adopted, the majority of the goods need to be ordered well in advance and only accidental shortages of products in the stores must be “supplied on demand” by road transport. However, the current strategy is to minimize the local stock of goods at the store.

In addition, freight rail can face a significant set of capacity problems and so rail has only a limited ability to expand market share. However, this largely depends on the availability of infrastructure e.g. the number of tracks.

Policies and measures to incentivise modal shift include (TEMS, 2008; Essen, 2009; NTC, 2008):

  • Speed limits for trucks
  • Spatial planning
  • Transport pricing: inclusion of external cost in freight transport, e.g. by emission trading
  • Investments in road-rail-water intermodal infrastructure
  • Improved energy efficiency of ships

Status of the technology and its future market potential

The modal split in freight transport varies greatly by region. In North America, China, India and the former Soviet Union, large countries moving large amounts of raw materials, the majority of transport (measured in tonne-kilometres) takes place by rail, while in most other regions its share is relatively modest (IEA, 2009). In the EU and Japan water-borne freight has a comparable share to road, while in China its share has decreased from 4.4% in 1978 to 1.4% in 2005 (Larsson, 2009; Mao, 2009).

Contribution of the technology to protection of the environment

Heavy duty diesel engines can have relatively high NOx and PM10 emissions. However, the introduction of Selective Catalytic Reduction (SCR) and closed particle filters in trucks can reduce these emissions substantially. Freight trains still have a considerable lower emission of NOx, SO2 and PM10 than road transport.


Figure 2: Air pollutant emissions by transport mode in the EU (Essen et al., 2003)

Other benefits of modal shift away from trucks include increased road safety, reduced congestion and noise, and reduced road maintenance (VTPI, 2010)


On average the CO2 emission for ships and trains are about a factor of two lower (in grams CO2 per ton-kilometre) than road transport (Figure 3)


Figure 3: CO2 emission factors by freight transport mode (Essen et al., 2003)

There is, however, no agreement on the overall potential for GHG reduction by freight modal shift, with estimates for the EU in the range of 4 – 23%, mostly on the lower end (Essen, 2010). Rebound effects including increasing emissions of road transport due to lower load factors should be taken into account. Freight traffic modelling in Belgium revealed an energy consumption decrease of 23%, mainly by shift from road to rail and water, in a scenario where the marginal social cost of transport would be internalised in freight transport (IPCC, 2007).

However, transport by rail or ship is always accompanied by pre- and post-haulage by truck. Trains and ships need to follow the track or river, which often is not the shortest route, thus in combined transport the overall transport distance is longer.  Policy measures in the US show that the overall CO2 reduction from combined transport (i.e. including pre-and post haulage) can reduce the emission by about 25%. However, it is difficult to induce a substantial modal-shift with mild economic penalties. While the road user charge increased in the US, adding costs to road transport, the demand for combined transport services increased only by about 2%, and the accompanying emission reduction is just about 1% (TEMS, 2008).

Financial requirements and costs

On a per tonne-km basis water and rail are often competitive with road-based transport and net benefits for society would accrue (VTIP, 2010; Walker et al., 1999). However the there are no GHG abatement costs for freight modal shift available in the environmental-economic literature, and no marginal abatement cost curve that includes this option has been found.

As of March 2010, there are two small-scale CDM projects in the pipeline that reduce emissions by shifting freight transport for industries from road to rail. Both of them are in India and together are projected to reduce CO2 emissions by 79,000 tonnes per year (UNEP/Risø, 2010). This indicates there are some low-cost opportunities for modal shift.

A couple of factors influence the relative competitiveness of different modes of transport:

  • perception of decision makers: Shingla and Fowkes (2002) for example concluded that for the freight transport between Delhi and Mumbai there was a dislike for rail services even if it would match the service quality of road transport. Therefore a discount of between 15 to 30 in transportation costs would be required to induce a shift to rail.
  • investment costs: One important financial barrier for modal shift is the high investment required for (rail) infrastructure and intermodal facilities (NTC, 2008).
  • fuel costs: Movements in oil prices have a significant impact on the relative competitiveness of rail transport and inland shipping versus road transport. Currently, at an oil price of about $72 per barrel, the costs for road transport in Western Europe are dominated by the wages of the personnel, and about 20-30% of the costs can be attributed to fuel consumption (Groot, 2008). The relative fuel costs for waterborne transport are slightly lower at this oil price (10-25%). But transport by ship is slow compared to transport by road. To compensate for the time loss the top speed of the ships has been increased to better compete with road and rail transport. However, this increase of speed has almost doubled the fuel consumption per unit of freight in the last 15 years (TEMS, 2008). This increased fuel consumption has decreased there economic competitiveness with the other two modes of transport and decreased the environmental benefits of shipping. Road transport is also a lot more sensitive to oil price increases as rail services that run on electricity. In Europe rail can economically compete with other modes of transport when transport distances are greater than about 300 kilometres (EIBC, 2009).


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  • EIBC (2009) Waardevol Transport, De toekomst van het goederenvervoer en de binnenvaart in Europa 2010-2011. Expertise- en Innovatie Centrum Binnenvaart, April 2009.
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  • UNEP/Risø (2010) CDM pipeline, 1st March 2010.
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