Exact and heuristic approaches for the Modal Shift Incentive Problem

Abstract

It is widely acknowledged that freight transportation in general, and road freight transportation in particular, contributes significantly to greenhouse gas and pollutant emissions. In response, many countries have implemented incentive schemes to divert freight traffic from roads towards more environmentally friendly transportation modes (e.g., rail, maritime). However, incentive-based policies to promote modal shift are often sporadic and uncoordinated across non-road modes, thus preventing full leverage of dedicated budgets. In this study, we present a strategic problem encountered by national and supranational entities aiming to reduce emissions from the freight transportation sector, referred to as the Modal Shift Incentive Problem (MSIP). The problem involves designing incentive policies in the form of subsidies aimed at reducing the cost of eco-friendly transportation modes, with the aim of minimizing the volume of freight transported via less environmentally friendly modes. These incentive policies must satisfy various constraints, including a limited budget for incentives, equity requirements, and compliance with regulations pertaining to competitiveness and free-market dynamics. To address the MSIP, we propose an original mathematical formulation on the basis of a deterministic threshold modal choice model used to simulate the shipper behavior in selecting the transportation modes. Then, we develop a two-phase solution method, able to determine good solutions with a small computational burden based on the generation of a subset of promising incentive schemes. Finally, we solve real-world instances generated utilizing data derived from a comprehensive case study in Italy. The results on different instance types, in terms of number of shipments, budget, and costs, show the relationship between these factors, the complexity of the MSIP, and the modal shift.