Canadian National and Canadian Pacific, which are under investor pressure to reduce their greenhouse gas emissions, are exploring the use of alternatives to the diesel-electric locomotive.
The Canadian Class I railroads have been working with the Railway Association of Canada and Transport Canada on a range of ways to reduce emissions, including electrification and using hydrogen fuel cells to power locomotives.
Discussions on the prospects of electrification and hydrogen power are under way in Canada, Chantale Després, director sustainability at CN, told an investor conference last week.
It’s not yet clear what technology will ultimately replace diesel-electric locomotives, Després says, but CN aims to explore, pilot, and eventually adopt an alternative.
CP has evaluated liquified natural gas in the past and is now looking at hydrogen to power locomotives, Chief Financial Officer Nadeem Velani told the investor conference. “It’s something we’re starting to delve into to see what the art of the possible is on that front,” he says.
Any shift away from the diesel remains years away, Velani says.
For now, both CN and CP are working to reduce their carbon footprints by improving fuel economy of their current locomotive fleets, including use of fuel-saving systems such as Trip Optimizer and better matching horsepower to tonnage. CN, which leads the rail industry in fuel efficiency, also says it’s increasing the use of renewable blends in its diesel fuel.
CN has purchased Tier 4 ES44AC locomotives from Wabtec, while CP continues its program of pulling locomotives out of storage and modernizing them.
No new locomotives are on the horizon for CP. “I don’t think we’re going to need new locomotives, beyond our modernization program, for at least three years,” Velani says.
CN aims to reduce its greenhouse gas emission intensity 29% by 2030, compared to levels of 2015, Després says. The railway will introduce a new emissions reduction target next year.
CP aims to set a science-based target within the next year to reduce its emissions in line with the Paris Agreement, the international accord that aims to fight climate change.
Transport Canada estimates that electrification of the CN and CP main lines between Vancouver and Montreal would eliminate 43% of freight rail emissions in the country, while producing $520 million in annual cost savings.
In a report issued last year, Transport Canada recommended further studying electrification.
“Overall, the report recommended that an investigation of the barriers to electrification and the potential for different policy measures to overcome them should be undertaken. Since the report was finalized, Transport Canada has been exploring options to support electrification, and other means of reducing greenhouse gas emissions, in the sector,” spokeswoman Cybelle Morin says.
Last month TCI Fund Management — which is CP’s largest investor and the fifth-largest investor in CN — submitted climate-related shareholder proposals to both railroads. The TCI proposal would require the railroads to present climate action plans at their annual shareholder meetings in 2021 and allow investors to have an advisory vote on those plans annually.
TCI also is a major Union Pacific investor, and has made the same shareholder proposals at the largest U.S. railroad. The London-based firm has vowed to vote against boards of directors that do not publicly disclose their emissions and that lack a “credible plan” for reducing them.
TCI has encouraged all three railroads to “accelerate all viable biofuel, electrification, hydrogen fuel cell technologies and other de-carbonisation opportunities.”
As climate change concerns come to the forefront, the railroad industry has been touting its fuel efficiency. Freight trains are about four times more fuel efficient than trucks, and large companies that ship by rail have begun considering the carbon footprint of their transportation providers as part of their corporate environmental, social, and governance, or ESG, policies.
“First and foremost customers look at pricing and they look at service,” says Janet Drysdale, CN’s vice president of financial planning. “But increasingly they are adding ESG as a lens, particularly in the context of efforts to decarbonize their supply chain.”
Use of the carbon estimator tool on CN’s website has increased fourfold this year, Després says.
The CN and CP executives spoke at the BMO 2020 Growth and ESG Conference.
