Is it hutzpah or hot air? CSX’s CO2 goal could be a difficult goal!

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Implications

CSX announced that it will reduce CO2 emissions per revenue ton-mile by 8% by 2011; a neat trick considering its fuel efficiency as measured in revenue ton-miles per gallon fell by 2% from last year’s average efficiency during the first quarter and is expected to fall even more in the second quarter. Before the recent decline in traffic however, CSX had achieved a remarkable record of improving its fuel efficiency.

Between 2003 and 2008, it averaged an annual 2.7% improvement, raising its fuel efficiency from 395 to 452 revenue ton-miles per gallon during the five year period. However, during the first quarter of 2009, its efficiency slipped to 444 and may have fallen even further as traffic declined in the second quarter. It will be a stretch to achieve an 8% gain over the 452 record, but then again, CSX may measure its success against the less efficient numbers that will be posted for 2009.

Analysis

Rising traffic levels always mean higher fuel efficiencies, and the huge growth in tonnage between 2003 and 2008 pushed railroad fuel efficiencies to record levels. Between 1980 and 2008, the average fuel efficiency of the U.S. Class I railroads rose from 235 to around 440 revenue ton-miles per gallon as revenue ton-miles increased from 919 million to 1,800 million. The prime reason for the gain in efficiency however, has been the steady rise in fuel efficiency of new locomotives since diesel electrics first began to replace steam locomotives. During the past 5 years, U.S. carriers have added record numbers of new engines that have been specifically designed to boost fuel efficiencies even higher.

Before anyone starts to nominate this industry for an award for saving the world, it would be well to remember that figures don’t lie but liars sometime figure; and such may be the overblown case for fuel efficiency improvements. During the past 30 years, the Class I railroads either abandoned many branch lines or shed them to shortline operators who do not report ton-miles and fuel consumption to the AAR.  During the same period, railroads also lost much of their merchandise traffic which required a lot of intermediate switching (which burns fuel but records no ton-miles). So much of the AAR Class I improvement in efficiency was either the result of not reporting some low efficiency operations anymore or not moving less efficient traffic anymore.

Toby Kolstad