0:00:09.29
Marc Jonathan Douanla Fotseu: Hello, welcome to this podcast, which is one of the series of podcasts by SLOCAT, titled Tough Questions, Smart answers on All things Transport People and Planet. Through this podcast we hope to bridge voices across generations of changemakers over critical issues in sustainable low-carbon transport. My name is Douanla Marc Jonathan, based in Paris. I am a SLOCAT-VREF young leader in sustainable transport. This episode is titled and written about low carbon, sustainable and resilient flight, transport and logistics. 

We are honoured to have Dr. Jan Hoffmann, who is chief of Trade Logistics Branch and Division on Technology and Logistics of the United Nations Trade and Development (UNCTAD). Welcome Jan. We are happy to have you today in order to hear your insights on what it takes to accelerate the transformation of freight transport and logistics and to learn how our economies and societies can tackle climate change while staying competitive, equitable, and resilient.

0:01:12.07
Jan Hoffmann: Good. Thank you for the invite. Thank you for having me, and and very, always very happy to collaborate with SLOCAT, or have been our partner. So we have been partners together for quite some time working on these topics. And you also joined us in Barbados at our global supply chain forum where we launched the manifesto, which is something I think you can be particularly proud of, and we were proud that we could launch this during our forum. So yes, thank you for having us here.

0:01:42.78
Marc Jonathan Douanla Fotseu: Yeah, thank you very much, Jan. The pleasure is fully shared. So, as we know, the transport sector had the highest increase in global emissions with a 10% growth from 2010 to 2019, thereby being the laggard among sectors. And in the meantime freight transport emissions comprise a rising share, accounting for 42% of global transport CO2 emissions in 2019.

Moreover, the COVID-19 pandemic, geopolitical tensions, energy supply pressures, inflation, increased volatility of shipping costs and extreme climate events are revealing the increased vulnerability of flight systems and their workforces, and how this impacts on food security and on the capacities for emergency response and economic recovery of countries. And this leads to our 1st question, Jan, at a time like this, where global supply chains are faced with the polycrisis of multifaceted challenges. What are the responses necessary to navigate these obstacles and ensure a resilient global supply chain?

0:02:45.32
Jan Hoffmann: Yeah. Easier said than done on the numbers. You just shared the global increase in transport emissions.

We had assessed this, specifically for the maritime part, and I must say most of what I will share with you, and my thinking is based on our analysis of the maritime transport which moves about 80% of the volume of international freight. So for maritime transport, in our last review of my time transport.

We yeah, we found data that is in line with what you just presented. In spite of all the efforts to reduce emissions, actually emissions over the 10 years from 2012 to 2022, increased by more than 20%. And this was really bad news. On the positive side, trade has actually grown even more, which, in our view, is good. We believe it’s positive to have a trade driven development. So a straight grew even more. You can also say, well, the emissions per ton of trade up a ton of miles. They have actually gone down. So that is the good news.

But now I’m afraid I have to spoil the good news again, because our research also found that half of the improvement of the reduction of emissions per ton of cargo, per ton. Half of that improvement was due to economies of scale, of ships getting bigger and bigger. So on the sea side. This saves  emissions, energy. Already Adam Smith and Alfred Maffer in the early economics book they used actually shipping as an example of economies of scale. Now you double the volume, but you only increase the energy you need by, I think, the square root of 2 or something, but it’s clearly an example. But that does not mean that we are fans of big trips, which would be another long discussion here. The impacts on the total door to door logistics cost on markets, peak demand in the ports, but we have to acknowledge that there has been some improvement. But if we now want to continue the improvement at some point in time, what ships cannot get even bigger, we have to actually do something different. More operational improvement. And in the end, ultimately, we need to use alternative fuels. And in that sense I shared this a bit as a response to your introductory remarks. So your question about the current supply chain challenges issues.

It’s fascinating. It’s.. You think you learned something, you understood what happened during COVID. And then comes another crisis which is not quite the same. During COVID we saw real bad news searches in freight rates and costs which had an impact on inflation, especially on the small island developing states. And I think we discussed this a little later. This SIDs. 

So, when you look at the causes for the problems during COVID, an important part. There was the logistics problems in the ports and hinterland. So ships spend 20% longer in ports than before COVID. This reduces the effective capacity. And this is demand supply. You mentioned that what we learned in microeconomics is that the demand curve and the supply curve is very steep, so this reduction of supply capacity was a core component, core explanation of the search and freight rates. What do we see today? Today we also have actually a similar situation. It has not been that much in the news yet, but the freight rates are again, surging horribly, I mean very high. They are already today. The container spot rates, at 2 thirds of the peak during the COVID. So they are again much higher than they were ever before COVID.

And the underlying reason is somewhat similar, because again, we have a shortage of capacity. But this time it is not that the ship spent more time in the port. But this time it is because the ships spent more time at sea because of the Red Sea crisis. So I find it fascinating. I hope I can transmit this here in a podcast normally. I would like to have a Powerpoint where I can show demand and supply curves or maps with ships going around South Africa. But I hope the listeners can imagine this. So during Covid we had certain freight rates because demand went up, but also the supply went down because ships spend time in port. Today we have demand, normal growing. But the supply actually went down because ships have to go longer distances and at least at the beginning, and and still a bit today, to compensate for the longer distance, ships always are going faster. And again the combination of longer distance and going faster, leads to a continued increase in emissions. We don’t have the data yet, the annual compilation, the measure data. But it is definitely bad news. Yeah, emissions continue. So the negative impact of the supply chain crisis, which was your questions and why you also asked what we can do about it.

And if I just keep talking and thinking about it, what can we do about it? Overall the transport providers, the importers, exporters, the companies. The more we can depend on a larger number of different suppliers. That is generally the idea, you also don’t want that deep supply chains like a supply into a supplier, like a ship that goes into the component that goes into a bit and another piece. So you have up to 9 deep supply chains, 9 levels. So while there’s really no easy solution. But the individual players, the actors: I am a company, I am a shop, I’m a producer. I’m a shipping company. The more I can try and depend on more different companies, wider geographic areas, more different goods and substitutes, different transport providers, different routes, the less I will be impacted if all of a sudden there’s a big change, and there has been talk about nearshoring, like, with costs going up depending less or far away. In fact, what we observe is the opposite. Distance is actually going up for all main cargo, so we don’t have any nearshoring. What we do see, and I really have to thank my UNCTAD colleagues from the Trade Division here. They have done a very nice work looking at friend-shoring. 

So if you analyse who votes with whom in the United Nations Security Council, you really see who are friends objectively like you, you and I may have different opinions on who are friends or who are not friends, but who votes together a little bit like what Huntington did for his book, the Clash of Civilizations. So the UNCTAD did find out that the trade among friends is increasing more than trade as a whole. Yeah, this is not necessarily.. This is not nearshoring, but it is some beginning of friend-shoring, which I find quite fascinating. And it’s part of the wide area of what we can do to reduce our dependence on a small number of specific suppliers. How to diversify, how to.. Yeah. I’m gonna stop here because I could go on talking about Panama and the Black Sea and the Red Sea, I’ll think about it. But I hope I have given some thoughts in response to your 1st question.

0:11:02.62
Marc Jonathan Douanla Fotseu: Thank you. Thank you very much, Jan can’t agree more, can’t agree less. Yeah. And as you have said, I find it really fascinating. And I was at the International Transport Forum, and one of my best quotes was, which was from the Minister of Transport of Lithuania, who was the acting president of the ITF Forum, was that: every conflict, disruption gives us certain lessons that we need to have alternatives in the transport system. And I think you’ve kind of mentioned that in your.. What you’ve said previously. So yeah.

0:11:38.24
Jan Hoffmann: Yeah. Yeah. And if I can, just as a follow up on this, and you’re, you’re absolutely right there. So what we see currently is unfortunately a combination of crises. There’s still the Black Sea crisis which reduces options for especially some drive by the cargo. But the combination of less de facto capacity of the Suez Canal, because carriers are afraid of going through the Suez Canal and the de facto reduced capacity of the Panama Canal, which is, I mean, difficult to really pinpoint. But overall our assumption and belief is it has to do with climate change. Yeah, there’s less water available. There’s also more need for water with an expanded canal, and so on. But overall the number of transits of ships that have gone through the canal has gone down, and and this, then the combination really leads to fewer options for the shippers.

If I want to go from China to New York, in the past I had 3 options. I could go through the Suez Canal and maybe combine the shipping route with a stop over the Mediterranean, or even in Northern Europe, Singapore, Sri Lanka. So that’s a somewhat longer route, but not much longer, or I would cross the big Pacific Ocean. Go through Panama and go to New York. That’s option number 2. And the 3rd option is, I go with my container ship up to Los Angeles or Long Beach, and then I use the so-called land bridge. So you had 3 competing options and they helped reduce prices because there were choices and competition.

Currently 2 of these 3 options are severely limited. So we actually have data that shows that the traffic that uses the land bridge is going up and prices, freight rates between China and Los Angeles have also gone up. And in the end some alternative could still go around South Africa. So there you have a longer distance and more emissions on the seaside. Or you go to Los Angeles, and you actually go a little shorter distance. But the land transport is less energy efficient than the oil water route. So again, we have more emissions. So again, if it’s, I think it’s a fascinating example, where these logistics problems are linked to higher prices. So economic difficulties, less trade, higher trade costs and less sustainable transport systems.

0:14:30.77
Marc Jonathan Douanla Fotseu: Yeah, exactly. And we have equally seen that these frequent extreme weather events, and there are both challenges that we have all mentioned. They inflict huge financial losses through direct damage to freight transport assets, and to a greater extent through freight transport disruptions. Furthermore, some countries are more vulnerable to these challenges, such as small island developing states, landlocked developing countries and least developed countries. In light of this, as you earlier mentioned in the beginning, recently, from the 21st of May to the 24th UNCTAD and the government of Barbados organised the 1st United Nations Global Supply Chain Forum in order to advance the global dialogue on trade and development and identify concrete actions and recommendations regarding resilience, climate change, connectivity, digitalisation and inclusiveness of vulnerable country groups.

More so, A manifesto for intermodal, low-carbon, efficient and resilient freight transport and logistics was co-initiated by SLOCAT and the Kühne Foundation, together with other partners. And this was launched, as you rightly said, during the Global Supply Chain Forum. We invite everyone to have a look at the manifesto. 

Hence, we would like to know, Jan. Vulnerable countries, like small island developing states, are the worst affected victims amidst climate disasters and their other challenges. How can resilient fight transport and logistics help mitigate the vulnerability?

0:16:04.06
Jan Hoffmann: Yeah, yeah, no, you’re, you’re absolutely right. And if I may again get one step back to give some background data information, we have done really a lot of hard data research on what explains transport costs, especially maritime transport costs. And each one I could now present a lot of detail. But there are 6 main determinants, we call it, and then econometric studies. What explains? Why do some countries pay more than others? 1st, there’s distance. 2nd, there’s economies of scale. 3rd, there’s competition, more competition leads to lower prices. 4th, there are imbalances. If you have to go full one way and got empty in the other direction, total costs go up. There’s a type. And yeah, what type of goods is it? Is it Refa or valuable goods? And 6th, and last, but not least, is, of course, the port, infrastructure and services, the customs, the trade safe in the infrastructure.

So on. All 6 of these determinants. Unfortunately, small island developing states tend to be on the losing end. Yeah, many SIDs are further away. Not all, but many are further away. By definition, the S in SIDS is small. There’s this economies of scale. And that is linked to less competition. Very often they have only one port. It’s difficult to privatise a monopoly. So it’s really difficult. On the port side, on the shipping side, imbalances. There’s no wider hinterland. So you import containerised and maybe export tourism services. It’s very imbalanced. And then, of course, the lack of infrastructure of port services. So there are some areas where we cannot do much. The distance, I mean, we cannot move the islands, it’s a bit difficult. 

There are some things that can be done through transparency to shipping markets and global regulation, to have, yeah. At least transparency and competition. But the main area where we can do something is in the ports and the digital solutions and the efficiency in the infrastructure, right? It doesn’t solve the whole thing. But if you look now, if you link this now to the climate change discussions, many SIDs, especially many SIDs in the Pacific, I must say, have been really very positively, very constructively, engaged at the negotiations, at the International Maritime Organization. I really want to thank them, congratulate them because they have understood that shipping, it’s very difficult. I won’t say it’s impossible, but it’s very difficult to have exceptions or different markets. In other industries, you could say in cement production or beer breweries, or whatever you may say, some countries under the Paris agreement like “okay, I give you a little more time, you can decarbonise a little later, a little less”. In shipping, this doesn’t work. Everybody, I mean ships go all around and it’s the same ships and the same fuel, so overall, there’s an agreement. We have to have a multilateral agreement.

So what do we do now with those who are more negatively affected by, for example, higher freight rates? Because if we decarbonise shipping, let us not cheat ourselves. We don’t yet have the exact numbers, but there’s no doubt, from the literature, from previous impact assessments done by UNCTAD that the shipping costs will go up. Yeah, and SIDs already pay more than any other country group. Yeah, there’s a.. We have the latest data now, a new transport cost data set with a collaboration with the World Bank and UNCTAD, a very great data set. We are very proud of it. It confirms that in maritime transport, importing freight rates are highest for SIDs among main country groups, so they already pay more. If freight rates go up, SIDs will also be more negatively impacted, because they depend more on maritime transport, and they already pay more. So if it goes up, they will be more negatively affected. And one could have expected that. Maybe some SIDs then say, “no, no, I don’t want it. I don’t want to increase my costs. I’m already negatively impacted”.

But the SIDs have understood that, well, they would be among the 1st to be negatively affected by climate change. So they see we must do something, including in maritime transport, which contributes to about 3% of global greenhouse gas emissions. So the several countries Marsh Islands among them have been, in my opinion, very positively, constructively, saying, “yes, we do want to decarbonise maritime transport, however, and there we are with them logically, if there’s an economic measure”.

Let’s call it a levy. I mean, we are not allowed to call it a tax, so we don’t call it a tax but it was called an economic measure. It used to be called a market based measure. But having an economic measure that makes traditional fuels more expensive and at the same time makes alternative fuels more competitive. It will achieve two things. First, It will advance the energy transition, make it faster. Yeah, because there’s an economic incentive to use alternative fuels and to invest in ships and port facilitators in energy distribution and bunkering for the alternative fuels. So the economic incentive is there, and the good thing there is. It does not prescribe any specific solution of you. It would just say, Dear private sector, we don’t know the technology of the future yet, we don’t know the operations, the shipping networks, the demand. So it will be the private sector that will benefit. So that’s one advantage of an economic measure. The other is that it can generate the funding or some of the funding that we can then use and invest in the SIDs, make it really again simple.

We cannot exclude SIDs, we cannot say. Oh, you know you do not need to decarbonise, not possibly. But then there must be something, because they are more negatively affected. They did not cause climate change. We need their votes to agree on an ambitious goal at the IMO. So in a way, we have to say, okay, we will help you. We will help you comply with future IMO regulations investing in the alternative fuels and the usage, and maybe the provision as providers or bunkering. But also, if shipping costs go up because of the more expensive, less energy-dense alternative fuels, shipping costs will go up. We should, we must help the SIDs and least developed countries in other smaller, vulnerable to invest in their ports and reduce shipping costs through other means. So the shipping costs on the ship side with fuel, it will increase. But I can help reduce total shipping costs by investing in new cranes, in new digital solutions, in climate, and smart trade facilitation in climate change, adaptation in seaports, that the next time the hurricane comes, becomes solutions that not all container cranes fall down, I mean. So that is really the logic here that SIDs do pay more for the reasons that I explained. They will also be even more negatively affected if freight rates go up. I sincerely don’t see any other way than an economic measure that helps mitigate the negative impact of climate change mitigation. See what I mitigate, I reduce the negative impact of the higher freight costs.

0:24:40.27
Marc Jonathan Douanla Fotseu: Thank you very much. Thank you very much, Jan. That’s very well understood, and I hope you had a great time and enjoyed your stay in Barbados. In the meantime I’d like to..

0:24:49.20
Jan Hoffmann: Yes, and we missed you there! And we have coordinated with the Internet Transport Forum that never again will we have our two meetings at the same time. That was really a.. We tried, we spoke, we coordinated, and somehow, yeah, it. It could not be avoided on this occasion. But for the next global supply chain form in two years in Saudi Arabia, we will guarantee that the International Transport Forum and the UNCTAD Global Supply Chain Forum will not take place at the same time, and we will work together.

0:25:20.60
Marc Jonathan Douanla Fotseu: I’m happy to hear that I’m happy. So I would like to know to end up. What were your key takeaways from the Global Supply Chain Forum? And how can the forum’s legacy help break and to foster low-carbon, sustainable and resilient freight transport and logistics worldwide.

0:25:41.86
Jan Hoffmann: We were really, really, very, very happy and proud. How this turned out. And I have to again thank the Government of Barbados for forcing us to do it, and then also for hosting us for collaborating. We started about two years ago with an empty sheet of white paper and no budget, and no, nothing. And in the end we’re overwhelmed by the response. It is, I have to say I thank it. It does reflect UNCTAD’s convening power. Here we are well connected, and we have to thank all the partners, including SLOCAT. But we were 100 partners. I don’t want to start listing specific ones, but we had 100 partners there who jointly organised 60 sessions on a wide range of topics.

We started planning, thinking. If we are lucky, we have 150 in person participants. In the end we had more than 1,000 in person participants.

0:26:46.34
Marc Jonathan Douanla Fotseu: Wow.

0:26:46.81
Jan Hoffmann: So it was really big, and this in itself is already an outcome. And so we’d like to say, it was not a one off Forum. But we have started not one movie, a blockbuster but we started a Netflix series. And we already have thanked the Mawani, the port authority of Saudi Arabia. They’ve agreed to host the next one. They’ve also supported us for Barbados. So for me, that’s already one outcome that confirms this topic will remain on the agenda with many important partners, the areas, the topics we covered and we are still working on our 150 page summary report. But the areas where we worked on maritime transport and ports, of course, were very strong. They’re including decarbonisation, of course, but also, yeah, shipping networks, connectivity, and so on.

Digitalization and innovation was another topic, very much on the agenda, and also with growing needs and demand. We had an innovation challenge which was one of the outcomes. Trade facilitation we had in parallel a forum for national trade session committees, and we are planning to do this from now on again every two years, together with the Global Supply Chain Form, we had private sector participation, a large company, a smaller company. We looked at inclusivity agenda issues, smaller companies, and a lot of cross cutting issues. And then this year was, of course, very much on, on SIDs in Barbados. They proposed this, and we happily agreed. So we made a special effort to also connect SIDs from the different offense. So we were able, with the financial support of several partners, to bring Pacific Island High Level representatives and ministers to Barbados, who then had, SIDs ministerial statement, which was one of the outcomes. So among the outcomes, yes, we launched this World Bank-UNCTAD data set I mentioned. We also consider the manifesto that you presented as one of our outcomes. It’s a bit cheeky that we take your manifest as one of our outcomes. But we appreciate that, and we think we could help by getting the momentum and the stakeholders towards the manifesto.

And yeah, I don’t know where we have to continue. I’m probably speaking too much already. You asked this thought question about what were the main outcomes again for me. The main outcome is that we brought together different stakeholders from different angles, private sector, public sector, Pacific SIDs, Caribbean SIDs, and different approaches. When we look at these decarbonizations in maritime. But we also had speakers there from the development banks. We had speakers there, linking what is happening at the IMO with what is happening at COP. So it was really a forum. It was not an UNCTaD conference, but a forum which brought together 100 partners, and the.. We already received complaints from some other agencies who were not there, “why we have not been invited”. And I have to say this here, so please don’t delete this from this podcast. So everybody was invited. We had official notifications to all UNCTAD member States and stakeholders. Nobody could say they were not invited. But next time we will even more proactively reach out. But to everybody listening to this, you are invited to the next Global Supply Chain Forum in 2026 in Saudi Arabia.

0:30:25.80
Marc Jonathan Douanla Fotseu: Thank you very much, Jan. Well said. So, we have reached the end of this episode. And we really thank you for your contributions and for your resources and insights. And I’ll equally ask our dear listeners to stay tuned for other episodes of the podcast series by SLOCAT. Today. It was me, Marc Jonathan from Paris, and Dr. Jan Hoffmann from Geneva. Goodbye for now.