The industry touts its environmental benefits, but it’s still reliant on diminishing coal revenues.
Earlier this month, the Association of American Railroads (AAR) released a paper outlining policy proposals aimed at combating climate change. This was nothing new for AAR and its member railroads: they have long claimed to be leaders in fuel-efficient transportation and in driving down greenhouse gas emissions. AAR’s website states that “preserving the natural environment is a responsibility railroads take seriously.”
King Coal Abdicates
But are the railroads really committed to tackling climate change, or is AAR’s paper merely window dressing?
A report published in The Atlantic in December 2019, found that four Class I railroads—BNSF, Norfolk Southern, Union Pacific, and CSX—have been major players in the climate-denial movement, having joined the American Coalition for Clean Coal Electricity, which in 2014 called climate change a “hypothesis” and claimed that carbon dioxide was more beneficial to humans than harmful. (BNSF and UP are no longer members of that group.) The AAR doesn’t get off the hook either, having been found by the Atlantic to have participated in eight “toxically regressive” and “really harmful” climate-denial groups.
While there is absolutely no excuse for abetting the dissemination of nonfactual information, the railroads’ support of the coal industry is understandable from a strictly business standpoint. Transporting coal, especially for the power generation industry, was, and still is, a major source of Class I railroad revenues, although it is on the decline.
In 2018, 70% of U.S. coal was shipped by rail, contributing $10.7 billion, or 14%, of rail carrier revenue. AAR’s website claims, to this day, that “coal remains an important commodity for railroads and for the broader economy.” On the basis of facts like these, the Atlantic report indicted the rail companies for having a “gargantuan,” “indirect carbon footprint.”
On the other hand, coal use in the United States has halved since 2005, and no new coal-fired power plants are under construction anywhere in the country today. According to the rating agency Moody’s, railroad revenue from transporting coal will drop $5 billion by 2030. This decline, thanks to the switch by the power industry to natural gas and renewables, have led the rail carriers to emphasize different, and, hopefully, cleaner, sources of business, like intermodal. (See sidebar on next column)
In defense of its reliance on coal, CSX has said that, as “common carriers,” railroads are required by law to move “all forms of energy.” BNSF has rejected the charge that it supported climate denial, saying, in a statement, that it “has never denied the science or existence of climate change.” Union Pacific said it has “acknowledged the changing environment and climate risk in public filings since 2007, while reporting fuel consumption and greenhouse gas reduction initiatives since 2009.” The AAR, for its part, has said that it’s been two decades since the association was a member of “the majority of the organizations” cited in the Atlantic report.
Zero Light
In the AAR’s newly released paper, the railroads encourage lawmakers to embrace market-based solutions capable of shifting the nation toward lower or-zero-carbon choices. Specifically, the railroads called on policymakers to enact “market-based” emissions reductions; a short-term gas tax increase followed by a transition to a vehicle-miles fee; and an emissions surcharge based on vehicle fuel efficiency. Consistent with the choice of words, “market-based,” the railroads also argue against any “prescriptive means,” meaning mandates, for reducing emissions. These proposals, much like their advocacy for coal, sounds like the railroads are advancing their business interests, especially at the expense of trucks, and not so much leading the environmental vanguard.
To their credit, the railroads are working to reduce their carbon footprints by investing in cleaner transportation technologies and taking other steps to lower their emissions. BNSF is using a 2018 grant from the California Air Resource Board (CARB) to develop a battery-electric locomotive, first tested in January of this year. Canadian Pacific (CP) announced in December that it will retrofit an older locomotive with a hydrogen fuel cell. Pacific Harbor Line (PHL), a short line that serves the ports of Los Angeles and Long Beach, will test a locomotive powered by lithium-ion batteries, being developed by Progress Rail, a unit of Caterpillar, later this year.
Railroads are also working toward reducing their emissions by carrying more freight per train and reducing unnecessary movements. They have also deployed fuel management systems that calculate the most fuel-efficient speed for trains over a given route, and zero-emission cranes for transferring containers between ships, trucks, and trains. Canadian National (CN) even ordered 50 electric trucks for customer deliveries and BNSF is testing electric vehicles for drayage and terminal use.
The trucking industry is also investing in low-emission and zero-emission technologies. Walmart, for example, which owns a fleet of 6,000 tractors and 5,600 refrigerated trailers, aims to eliminate emissions by 2040 by electrifying its transportation fleet and using low-impact refrigerants.
It’s arguable that the trucking industry is in a better position to deploy research and development funds in its quest to eliminate emissions. Also, because the use-life of trucks is much shorter than rail locomotives, the trucking industry can deploy environmentally-friendly technologies quicker and easier, leading to the possibility that rail’s carbon advantage over trucks may not last much longer.
It is probably too much to ask for any North American corporation or industry group to man the environmental barricades for motives other than profit. But the decline in coal use was foreseeable, and the railroads may have been too late recognizing that trend, so they ended up defending a moribund energy source at the expense of their green reputation. According to the Moody’s report, even with healthy growth in intermodal demand, the railroads are at risk that portions of their networks will become underutilized, and will have to embark on a quest for new sources of freight and revenue.
