Introduction

Robust options for modal choice enable supply chains to be more resilient while also enhancing efficiency for shippers. Commercial shippers make mode choice decisions by considering the tradeoff between time and cost of each mode and the value of their products. Ideally these economic decisions could drive efficiency and value in the freight sector, however shippers may also face constraints in infrastructure availability and shipping capacity as well as friction between modes, which limits their modal choices and increases inefficiency. Supply chain disruptions can exacerbate inefficiency, as was demonstrated during and after the pandemic, when small deficiencies in the supply chain, such as availability of shipping containers, led to global-scale delays and increased shipping costs.

The current capacity of our freight network faces numerous constraints. The highway trucking network experiences significant bottlenecks and congestion constraints caused by highway capacity gaps as well as crash related congestion. Trucking workforce shortages pose further challenges for commercial trucking, and limited truck parking and work hour regulations constrain long haul shipping. In the freight rail network, shippers face constraints in intermodal terminal capacity and the shortage of commercial spurs to access freight terminals, industrial parks and distribution centers.

These constraints, which are already demonstrated on the existing freight networks, will become more severe as freight volumes grow. Future trends, per estimates from the Freight Analysis Framework (FAF), indicate that freight volumes are expected to increase to 8.2 trillion ton-miles by 2050, which would be a 58 percent increase from the 2020 figures. Even if these estimates prove only half correct, this projected growth means that the freight network capacity will need to grow significantly. At the same time, disruptions related to natural disasters and extreme weather are also anticipated to increase over this period. Disasters that affect a specific geographic location can still result in cascading impacts throughout a network or supply chain. As natural disasters become more frequent and severe, it will become more urgent to strengthen the efficiency of the freight network and create a resilient, cross-modal network that sustains commerce by avoiding the risk of a single point of failure.

To accommodate the growth in freight shipping volumes, mitigate supply chain disruption risk, provide economic opportunity for businesses and consumers, and increase the efficiency of the freight network, this paper intends to examine ways to reduce areas of friction that may prevent modal shift, and identify the areas of greatest opportunity to facilitate that shift. Given the projected need for investment to expand freight network capacity, this paper will evaluate the costs and benefits of investments that would expand freight rail movements, including the significant fuel and cost savings.

As another factor, a significant portion of rail volumes today are composed of fossil fuel products including coal and natural gas. Weakening demand for coal in particular has the rail industry adapting to backfill this gap. Rather than allow this economic shift to undermine the economic resilience of freight rail, policy makers may consider how to support the use of that excess capacity for the movement of other goods.

Enabling shippers to more readily choose freight rail will also have benefits for transportation emissions and safety. The freight transportation sector’s contribution to overall greenhouse gas (GHG) emissions has increased steadily over the last few decades, rising from 24 percent in 1990 to 32 percent within the transportation GHG emissions by 2020. However, among the freight modes, railroads contribute much lower levels of emissions. While medium and heavy-duty trucks emit nearly 24 percent of transportation emissions in the United States, railroads contribute only about two percent. Today, rail is the most fuel-efficient form of surface transportation and as the industry continues to innovate, it can play a significant role in reducing the transportation sector’s emissions. Therefore, as an available, sustainable surface transportation option, shifting freight to railroads presents a key opportunity to reduce carbon emissions, given that railroads are about four times more fuel-efficient and eight times more energy efficient than trucks.

As this paper shows, a robust and reliable freight rail system can play a vital role in addressing multiple policy goals—improve supply chain resilience, ensure that goods continue to move efficiently even in the face of increasingly regular climate disruptions, reduce transportation emissions within the freight sector, and expand efficient and economical choices for shippers. To achieve these goals, it is crucial to analyze the current state of freight transportation in the United States and explore the potential market growth for freight rail, particularly in shipment types and travel distances where railroads compete most directly with trucks.

The paper will begin with a section analyzing the current and future freight movements using the latest FAF dataset and the factors that influence mode choice for shippers. The following section examines opportunities to expand freight rail shipping, focusing on strategies in modal shift, infrastructure development, planning, and innovation efficiency. The final section evaluates the costs and benefits of modal shift, including impacts on emissions, fuel consumption, and safety.

The primary objective for this report is to bring together various proposals and ideas for improving freight rail policy with the intention of improving efficiency and resiliency, while also reducing carbon emissions and improving safety. This report is developed for policymakers and transportation professionals seeking a better understanding of the primary issues facing railroads in the 21^st century, and practical advice on how to position freight rail to help address challenges of shipping costs, fuel consumption, safety, and emissions.

We reviewed freight data from various public and private sources, including a robust analysis of available freight data published by the Bureau of Transportation Statistics and Federal Highway Administration. We also conducted an extensive literature review of the past and existing freight policies implemented inside and outside the US to improve freight rail mode share and increase energy efficiency. Our research was supported by interviews with industry and issue area experts from diverse sectors. Finally, we relied heavily on the guidance of a panel of experts representing federal and state transportation agencies, railroad companies, shippers, and electric vehicle manufacturers.