Why speed matters to carbon emissions

A simple piece of physics, on the trade-off between speed of travel and fuel used, could help reduce near term emissions, once it is understood by consumers and policymakers.

While we still have a large fossil fueled transportation fleet, the actual emissions from that fleet are most impacted by the speed at which the system is operated.

The reason involves simple math about the fuel used at different speeds to cover the same distance, and how this relates to time-savings made up elsewhere.

The physics involves air-resistance, or water-resistance, versus speed.

We don't need to go into too much detail, as the physics is explained well elsewhere.

The problem for any truck, aircraft, or ship moving through air, or water, is that the force of drag, due to the fluid displaced by motion, goes up as the square of the speed.

If you go 10% faster, other things equal, the drag is a little over 20% greater.

This is because 1.1 x 1.1 = 1.21 which is a 21% increase.

If you up the speed to go 20% faster, the same math gives 44% greater drag.

Of course, if you go 10% faster, you need 1/1.1 = 0.909 less time, which is 9.09% quicker.

Now, you see the tradeoff in play.

When is it worth going 10% faster, and would it help to simply save that time in some other way, possibly by reducing time for stock spent in inventory? 

How much time could we save through better logistics management, and sharper processes for procurement?

Even more importantly, would better visibility on the overall logistical supply chain provide some assurance to customers that by ordering earlier in their needs cycle they may happily wait longer between the order and the arrival?

These are tricky questions, but they have a direct impact on fuel consumption and carbon footprint. The kicker is that to overcome an increase in drag, by moving faster, we need to supply more motive power. The power relates to the fuel consumption rate. This increases as force times speed. The fuel burn rate goes as the cube of speed.

This is just the physics in play. 

Go 10% faster and the rate of fuel consumption is 33.1% higher. 

Go twice as fast, and you burn fuel eight times faster.

This is the scaling relation for power, not that for the total work, which is fuel consumed.

The one saving grace of higher speed is shorter travel times. 

Obviously, when we burn fuel at the faster rate, the higher speed, over a fixed distance, means we do so for a shorter time. The travel time taken is inversely proportional to speed. 

Once we account for this wrinkle, the final result is:

Go twice as fast, over a fixed distance, and you use four times the fuel.

The simple way to understand that wrinkle is that the work done, which is the same as the energy used, or total fuel burned, is proportional to the force times distance.

When distance is fixed, frictional losses from fluid resistance to forward motion increase as the speed squared. When multiplied by a fixed distance, the fuel used goes as speed squared.

Even so, that is pretty arresting math, so you might wonder how we got away with it for this long. The answer is that ship design, truck design, and aircraft design, emphasize the reduction of drag effects per unit speed, through streamlined shapes, and dense cargo loading. The actual drag force also depends on the surface area presented by the vehicle.

Contemporary design innovations, like winglets and narrow gracefully swept wings do help to improve fuel economy, but for a fixed design, lower speed also helps.

Once you understand these interactions, it is clear that we can do three basic things:

• Slow down, when this is possible, and use less fuel.
• Pursue more efficient designs for new transportation systems.
• Save time elsewhere to buy time to move freight slower.

The last one brings us to our new sustainable investment stock idea.

WiseTech Global and Efficiency in Freight Forwarding

There is no shortage of technology firms claiming to make the world a better place, but very few whose products and services make any direct impact to emissions reduction. 

Obviously, there are some firms that are directly involved in providing plant and equipment for renewable generation, like solar panel makers or wind turbine manufacturers. However, almost none of this happens in Australia. Those firms are mostly located in Europe, China or the USA.

In other areas of opportunity, like energy storage systems, we do have battery materials firms that have figured prominently in our Australian Critical Minerals strategy.

However, within other developed areas of activity, such as demand response, and systems to convert or otherwise manage electricity in power transmission, there is very little.

There is one name we have recommended previously, Genex Power Ltd GNX.AX, which has pumped storage hydro facilities under construction. However, the stock has struggled to overcome local investor indifference. Having the recent takeover bid pulled by interests associated with Atlassian billionaire Scott Farquhar seems to have hurt confidence.

While we believe that this project will overcome the near-term obstacles of proving up the pumped storage hydro concept, there will be some project delays.

With this in mind, we do seek out other exposures, in a limited market opportunity set, that may provide investors with more immediate confidence. We have argued elsewhere that a mainstream Environmental and Social Governance (ESG) approach, to simply avoid any emissions intensive sector, is not likely to help reduce overall emissions.

The problem is that sectors like transportation are essential to our economy and will take some considerable time, capital and effort to full decarbonize. There are no electric airliners, and the early prototypes of electric light aircraft are short haul with little passenger capacity.

The same goes double for merchant shipping fleets, which are predominantly operated on a mix of fuel oil and or Liquified Natural Gas (LNG). New fuel standards are coming, and these could be based on ammonia and/or hydrogen, which are clean burning.

However, since ocean travel times are already long, sometimes six weeks or more, the idea of reducing emissions through slower fleet travel times is more viable. Saving 20% on fuel, over a sixty-day journey time, would add just under 10%, or six-days travel time. 

The challenge, at the level of the system, is to achieve one of two goals:

Provide offsetting time-savings in the logistical supply chain to pay for slower speeds.

Provided more consumer transparency on the climate benefits of a slow-boat option.

Either of these two options, and doubtless there are more angles than this, lead us to conclude that freight-forwarding, customs clearance, and warehouse logistics management, likely have a significant hidden component of emissions mitigation opportunity.

I have often been skeptical of technology firms claiming that their software systems might help with these sorts of problems. It has worked, in some cases, but mostly these were problems solved by existing carriers like UPS and Fedex, with routing solutions.

The most famous example is when UPS figured out that by avoiding left-hand turns, when operating in US cities, they could save millions of gallons of fuel. These are the simple ideas which can actually help, supported by appropriate route planning software.

Similarly, any consumer nudge to wait longer for delivery, suitably supported by transparent supply-chain software, could help save a lot of fuel, and reduce emissions. This is likely the easiest to do for cases like global ocean shipping, where other options are limited.

The CargoWise Value Proposition

WiseTech Global is an Australian logistics software and process solutions firm, which has a growing footprint in serving global freight forwarders and logistics operations. The firm will be well-known to most readers, having been in business for over twenty-five years. 

The strategy of the firm has been to grow by acquisition, to find existing operators with an established customer solution to an important problem, and to merge these onto a single unified platform. This approach has not been without controversy, from time to time, as investors have sometimes questioned the scope for successful integration.

However, the success of WiseTech Global in expanding their business through the pandemic supply chain disruptions, along with the financial stress of that period, has perhaps nullified such criticism. It would be hard to imagine a more difficult stress-test than COVID-19.

Revenue growth for the group remains high at 30% plus, with attractive gross margins that remain at around 86%. The expends 30% of revenue on R&D and is heavily invested in provision of customer training and certification programs.

While this firm does trade on a high valuation multiple, the combination of business roll up with proven internal R&D translation to CargoWise product upgrades suggests that there remains a significant path to further sustain growth and embed their position.

We are adding WiseTech Global WTC.AX to our Australian Sustainable Portfolio (ASP).

In order to keep our stock numbers to eight names, we are removing the worst performer over the six months since inception. That is Genex Power GNX.AX.

The attached report contains our usual stock-screening tables and performance report.

Picture credit: Anticipation: faster is always better, if you are a dog. 

Photo by Priyavrat Uniyal on Unsplash

Never miss an insight

Enjoy this wire? Hit the ‘like’ button to let us know. Stay up to date with my content by hitting the ‘follow’ button below and you’ll be notified every time I post a wire. Not already a Livewire member? Sign up today to get free access to investment ideas and strategies from Australia’s leading investors.