Reducing CO2 emissions through pricing, planning, and subsidizing rail freight

Abstract

Modal shift from road to rail is considered a promising way to reduce CO2 emissions from the transportation industry. To promote this modal shift, a profit-maximization model that integrates two dimensions is proposed. Internally, the competitiveness of rail freight is enhanced by dynamic freight pricing, backlog controlling, and flexible dispatching. Externally, a subsidy policy is considered to stimulate rail freight. Based on Lyapunov optimization, this multi-slot global optimization problem is converted into a series of low-complexity problems that only require knowledge of the instantaneous system state. The equivalence of this transformation is proved theoretically. Then Harmony search algorithm is used to solve these low-complexity models. A case study based on the transportation network composed of five central cities in China is conducted. Compared with the application of the actual fixed rail freight rates, a CO2 emission reduction of 3261 t can be achieved with the dynamic pricing strategy. Based on jointly optimizing rail freight price and service plan, an additional subsidy of 0.1–0.6 RMB/TEU-km to rail freight operators can achieve an 23.78–25.38% MS from road to rail, as well as a 24.08–26.12% CO2 emission reduction in this service chain.