Effect of carbon emission regulations on transport mode selection in supply chains

Policy-makers are developing regulation mechanisms to drive down carbon emis- sions resulting from among others transport. We investigate what the effect of two regulation mechanisms is on the transport mode selection decision. We analyze the situation in which a single transport mode is to be selected by a decision-maker to conduct all transport (for one item). A faster transport mode typically results in lower inventory (or a higher service) at the cost of higher emissions and transport costs. We consider two possible emission regulation alternatives: an emission cost and an emission constraint. We use an accurate calculation method to determine the carbon emissions and incorporate them explicitly in our model. Our results show that the emission cost is only a small part of the total cost and we conclude that introducing an emission cost for freight transport via a direct emission tax or a market mechanism such as cap and trade are not likely to result in significant changes in transport modes and hence will not result in a large reduction of emis- sions. If policy-makers aim to reduce carbon emissions by a large fraction, they should implement a constraint on freight transport emissions.