The way logistics businesses keep products cold on the move is changing – fast. The pressure is coming from taxation and regulation on the one hand, and exciting technological innovation on the other. With a range of options available, it is vital that any business with a stake in the cold chain is making plans to get ahead of the curve.
It was invented in the 20s and used by the military in the 40s, but it wasn’t until the 50s and 60s that the modern refrigerated van, truck and trailer became a cold chain mainstay. It was a technological revolution that transformed food and pharmaceutical safety, reduced waste and was foundation for the modern trade, manufacturing, and retail. As the world starts to get serious about net zero carbon, we are on the cusp of the next cold chain revolution.
Robust, reliable, refrigerated vehicles are of vital to how the UK’s supply chain is organised. Without them we would not have had the supermarkets, convenience stores and food service growth of the past three decades, nor would we be able to service the exponential growth in demand for home delivery that has been cemented during the covid crisis.
This fundamental good, can sometimes feel a bit lost in the growing scrutiny of the impact of vehicle refrigeration on air quality and carbon emissions. Nonetheless, as vehicle engine innovation has ramped up, the fridge has been somewhat left behind. This innovation lag is about to be corrected and my sense is that the next five years will be a period of dramatic change.
The main driver of this change, as ever, is cost, and unfortunately, we are in for a shock.
The Chancellor of the Exchequer announced in Budget that refrigerated hauliers will no longer be permitted to use subsidised ‘red’ diesel. The Cold Chain Federation estimates that this will mean c. £100m a year in direct additional costs for refrigerated hauliers.
Ministers have been convinced that this tax hike is justified because ‘subsidised’ diesel has held back the shift to non-diesel alternatives. Technologies like hybrid power (using power from the main engine to power the fridge), battery electric, and cryogenic fuels (i.e. nitrogen) have been available for some time, but take up has been limited, especially for the larger HGVs. The argument is that the diesel ‘subsidy’ prices out the more expensive technologies over whole life. That theory will now be tested.
Operators remain sceptical. Cost is a major factor for sure, but there are also questions about reliability, range, infrastructure and the complexities of managing a mixed fleet of different technology types. For all its promise of support with transition, we are still to see anything the genuinely reduces the cost or risk from Government.
Taxation is not the only driver of change. There are also strong pressures for tougher action to regulate the equipment and restrict movement in urban areas. Advocates for new rules point to the fact that the regulations governing a diesel fridge allow them to emit significantly more nitrous oxide and particulate matter than a EURO VI diesel HGV. Others argue that councils should have the power to include diesel fridges within existing or dedicated clean air zones raising prospect of daily charges for accessing some urban centres.
It is easy to get caught up in the details of all these policy ideas, each one having clear flaws and inconsistencies that the Cold Chain Federation will continue to challenge, but it’s also important to see the big picture.
All of these pressures require logistics businesses to consider two responses. The first is to open minds to the genuine potential of diesel alternatives. Scepticism is healthy, but only to a point. Innovation in diesel alternatives is fast paced, and concerns over things like reliability need to be fairly compared to the existing familiar technology. The focus is on emissions, but other benefits in areas like noise reduction and marketing potential should also be considered, and of course, as take up increases so will affordability.
The second is to consider the challenge from first principles. The cost of operating vehicles on the road is only going to increase. The restrictions on what can operate where (especially in servicing cities) is only going to get tighter. Finding ways to reduce the amount of vehicles on the road to drive efficiencies within and between supply chains will be as important as investing in equipment that allows the continuation of business as usual.
The fridge makes a small contribution to logistics emissions and is a fraction of the overarching challenge of decarbonising the UK economy. But it is knotty problem with far reaching implications. The way we manage the changes ahead is a test of business and government in how we go about managing a necessary transition in a way that turns a problem into a genuine business opportunity.
Throughout the rest of 2021 and beyond, we will work with members, external experts and Government to make progress towards the development of the realistic, intelligent and multi-dimensional roadmap for decarbonising refrigerated transport that cold chain businesses need.