The ground cargo industry is comprised of long-distance and local freight transport by truck and rail. Freight transport is part of the larger transportation and warehousing sector of the U.S. economy, which also includes the carrying of passengers, warehousing and storage of goods, scenic and sightseeing transportation, and support activities (Freedonia2 2010). This industry is comprised of over 200,000 companies and is expected to be valued at $910.9 billion by the end of 2015 considering a year-on-year growth rate of 4% (Datamonitor2 2010).
Physical Exposure Risk. The transport sector is vulnerable to the predicted increase in frequency and intensity of storms – wind, rain, snow (URS 2010).The long-term risks of climate change will threaten the infrastructure on which the industry depends such as roads and railroads. Real estate assets such as warehouses and service stations would also be at risk particularly in increasingly flood-prone areas. Existing infrastructure has been engineered and built for our past or current climate and may not be resilient to continued climate change in the long-term (URS 2010). The physical impact risk is high given the potentially disruptive effects of infrastructure failure.
Policy & Regulatory Risk. Government sees a strategic interest in procuring a sound domestic infrastructure that supports a vibrant transport sector. Major policy and regulatory risks are, respectively, inadequate investment in building resiliency within the current and future transport infrastructure – such as bridges, roads, railroads – and carbon emission policies that raise industry costs. The risks to the industry are low however. Policies, such as heightened fuel standards, most likely will be gradual and will allow industry players to adapt.
Reputational Risk. Ground cargo transport will for the most part be immune to reputational risks stemming from inaction on climate change. In general, however, the farther a sector is from the retail market, the fewer reputational risks arise (Llewellyn 2007). Consumers will continue to regard poorly sectors that have a particularly detrimental impact on the environment, such as trucking, but stakeholder pressure will be tempered until viable alternatives come online.
Competitive Risk. Key inputs for rail and road operators include fuel and electrical power. As a result the viability of the rail and trucking business model is tied to the price and availability of these inputs. Thus, there is an inherent business risk related to government policy or eventual international treaties that internalize the global warming impacts of fossil fuels. Sub-sectors with the highest emissions profiles are particularly at risk. Similarly, technological advances in the medium- to long-term – such as natural gas or electricity-powered long-haul vehicles – may yield an obvious better alternative to fossil fuel-powered ground transport. Despite the above, the competitive risk is moderately high because pressure will likely come from domestic policy rather than a more forceful consumer response. Despite dramatic increases in fuel prices over the past few years, there is little evidence of any significant effect on demand which suggests that changes in consumptive patterns, if any, are likely to be gradual (Llewellyn and Chaix 2007).