How Amazon and e-commerce may be harming the environment and what to do about it.
E-commerce hit new records during the 2019 US holiday shopping season. Online shopping grew by nearly 19% relative to 2018 based on early data reported by Mastercard. The sound of a delivery truck’s engine shutting down, its sliding door opening as a package is retrieved, then the engine starting up again has become one of the most familiar sounds of the holidays. This isn’t just a holiday phenomenon. E-commerce retail sales are steadily growing as a share of total retail sales. They recently climbing past 10% of overall retail sales. That’s a significant fraction, but there’s still a lot of room for growth.
Not only is e-commerce growing, but it’s arriving more quickly and is split up into more packages. Amazon has led this trend, providing its 100 million US Amazon Prime subscribers with free one-day delivery for many items with no minimum order size.
The ways in which ships, planes and trucks deliver goods to consumers is rapidly evolving. This impacts transportation energy demand and the environment in complex ways. Whether this impact is positive or negative has emerged as an active debate. I want to explore what we know and whether policymakers need to get more involved. I’m going to focus in particular on how e-commerce has affected the last-mile, getting retail goods to our doorsteps.
Rapidly Eliminating Car Trips
Several years ago, some were arguing that e-commerce could reduce energy demand and cut greenhouse gas emissions. In the world before e-commerce, consumers had to get themselves to brick-and-mortar stores to purchase items and bring them home, often in single-occupant vehicles. The pro-environment argument for e-commerce is that a large number of trips in single occupant vehicles are replaced by a smaller number of trips in delivery trucks. An estimate from Walmart shows that for single item purchases, the greenhouse gas emissions from shipping the item to someone’s home are less than the emissions from a dedicated trip in a personal vehicle to purchase the item.
Speeding up e-commerce deliveries could eliminate even more trips to the store. I think of my unanticipated, but common, late night drives to the grocery store to pick up a gallon of milk for the morning as an example of a short-notice trip I could replace with a faster delivery to my door.
However, the Walmart estimates also show that in many realistic scenarios, the greenhouse gas benefit of e-commerce goes away. For example, if someone’s brick-and-mortar trip combines multiple stops and they purchase multiple items then greenhouse gas emissions per item drop below emissions from home deliveries.
These rough estimates don’t consider how e-commerce could be impacting how much stuff people buy. Just as autonomous vehicles could increase vehicle miles travelled by lowering the cost of driving, falling shipping costs could be increasing the number of items being purchased and shipped.
Without studies based on real-world data, we don’t know how consumer behavior is actually being impacted by e-commerce. I’m concerned that e-commerce has become a major driver of transportation energy demand and pollution, and that major public policy gaps are making matters worse.
Cleaning Up E-Commerce
What really worries me about e-commerce is that many of its costs aren’t paid by sellers or buyers. Instead, society pays the costs. This includes climate change, the health effects of air pollution and traffic congestion. Government hasn’t put in place the sorts of policies that would require the buyers and sellers engaged in e-commerce pay these costs.
Fortunately, there are many options to make things better.
Government could engage consumers by making sellers share emissions estimates for each shipping option. Last time I ordered an item through Amazon I was presented with three shipping options. All free. I went with the quickest one without considering when I really needed the item. (Ironically, I was purchasing energy-saving LED light bulbs for my refrigerator.) I would have liked more information about the environmental impact of my decision. Research has found that altruistic appeals are not very effective in aggregate, but perhaps this sort information could raise public awareness that the convenience of e-commerce comes with an environmental cost.
Carbon pricing, an approach popular with economists, could be a powerful part of the solution since it would raise the cost of fossil fueled transportation. This could drive a shift to lower carbon transportation options and reduce wasteful trips.
Another approach, particularly for congested, urban areas, is to ban or tax delivery traffic at certain times of day. London is a great example of this. In 2019, the city complemented its inner city congestion pricing with a new ultra low emissions zone. Vehicles that don’t meet specified emissions standards must pay a fee to enter the zone. This includes all diesels made before 2015. The policy is aimed at improving local air pollution, but could also produce greenhouse gas co-benefits if trips into the zone by older cars and trucks decrease.
Finally, government can more aggressively regulate the sorts of medium- and heavy-duty vehicles that are used in e-commerce. The California Air Resources Board is pursuing this option with a proposed Advanced Clean Trucks program – a zero emissions vehicle standard for truck manufacturers. The policy is so-far relatively low profile, but could be very significant, especially if other states follow suit.
Governments have a lot of work to do to limit the harms of e-commerce, and they have lots of options. Governments should act urgently, before the remaining 90% of retail sales enter the e-commerce network.
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Suggested citation: Campbell, Andrew. “The Environmental Cost of Convenience” Energy Institute Blog, UC Berkeley, January 13, 2020, https://energyathaas.wordpress.com/2020/01/13/the-environmental-cost-of-convenience/
Andrew Campbell is the Executive Director of the Energy Institute at Haas. Andy has worked in the energy industry for his entire professional career. Prior to coming to the University of California, Andy worked for energy efficiency and demand response company, Tendril, and grid management technology provider, Sentient Energy. He helped both companies navigate the complex energy regulatory environment and tailor their sales and marketing approaches to meet the utility industry’s needs. Previously, he was Senior Energy Advisor to Commissioner Rachelle Chong and Commissioner Nancy Ryan at the California Public Utilities Commission (CPUC). While at the CPUC Andy was the lead advisor in areas including demand response, rate design, grid modernization, and electric vehicles. Andy led successful efforts to develop and adopt policies on Smart Grid investment and data access, regulatory authority over electric vehicle charging, demand response, dynamic pricing for utilities and natural gas quality standards for liquefied natural gas. Andy has also worked in Citigroup’s Global Energy Group and as a reservoir engineer with ExxonMobil. Andy earned a Master in Public Policy from the Kennedy School of Government at Harvard University and bachelors degrees in chemical engineering and economics from Rice University.