Impact of CR Express and intermodal freight transport competition on China-Europe Route: Emission and welfare implications

China Railway Express (CR Express) has been fast developed, offering an alternative to transportation of the containerized cargo between China and Europe. This paper examines CO2 emissions and social welfare implications of the intermodal competition between the emerging CR Express and incumbent maritime shipping. An analytical model is developed, which shows that the implications depend in general on the relative emission intensities of the two transport modes on a per-trip basis. The entry of CR Express and the resultant intermodal competition, while likely improving welfare, will increase emissions unless CR Express is sufficiently emission efficient. Such impacts on emissions and welfare are enhanced when there are more CR Express operators, or when there are fewer shipping carriers. The competition among Chinese local governments in supporting their own CR Express services also strengthens the impacts. The analytical model is further calibrated with real market and operational data on the route between China's Yangtze River Delta and Central Europe. Our numerical simulations show that intermodal competition leads to more emissions unless CR Express can achieve an approximately 90% reduction in emission intensity and that overall welfare is nonetheless improved. Policy and managerial implications are discussed.

Automated summary

China Railway Express (CR Express), as an emerging alternative to maritime shipping, has gained fast development in containerized cargo transportation between China and Europe. This paper examines the CO2 emissions and social welfare implications of the competition between CR Express and maritime shipping, showing that the impacts depend on the relative emission intensities of the two transport modes. The entry of CR Express and the resultant intermodal competition could increase emissions unless CR Express achieves sufficient emission efficiency. The study also highlights the influence of the number of CR Express operators, shipping carriers, and local governments' competition on emissions and welfare.