consequences are an increasing volatility of natural disasters, a polarisation of climate effect and a raise of the level of water reducing habitable land. A problem which is significant when coastal areas are attractive for mankind, indeed 100 million people living within one meter from the sea level (Zhang, Douglas and Leatherman, 2004). Another consequence of global warming is the increasing aridity in low precipitation area. Severe draughts’ impact on crops yields in certain region will be too negative to be countered by improving agricultural process (Cook et al., 2014). Effects on ecology will also be dramatic “A large fraction of species faces increased extinction risk due to climate change during and beyond the 21st century”. (IPCC, 2015).
Consequences of global warming will be too violent and significant to be countered by mere reaction and adaptation. A proactive approach is required to effectively mitigate the risks.
However, the reasons of global warming are known. Greenhouse effect is caused by the emission of different gases. Carbon Dioxide (CO2), which is responsible at a level of 76%, Methane (CH4), 16%, Nitrous Oxide (N2O), 6% and Fluorinated gases (F-gases), 2%. (IPPC, 2015). Carbon Dioxide equivalent or CO2e regroups the Greenhouse gases to a single unit.
“For any quantity and type of greenhouse gas, CO2e signifies the amount of CO2 which would have the equivalent global warming impact.” (Brander, 2012). The global warming impact is not the same for the different greenhouse gases. The global warming potential of greenhouse gases takes as index the increase of temperature caused by CO2 emission over 100 years.
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Figure 1: Greenhouse gases and their Global Warming Potential (Adapted from IPCC, 2007)
As observed in Figure 1, an emission of 1 kg of Methane will be computed as 25 kg of carbon dioxide equivalent (CO2e) because an emission of 1 KG methane will have 25 more warming impact on the next 100 years than the one of 1 kg of CO2. The other environmental issue where results are more immediate is air pollution, which is a local issue caused by other gases. Its consequences are disastrous, “Polluted air was responsible in 2015 for 6.4 million deaths worldwide” the biggest factor after tobacco which was responsible of 7 million deaths.
(Landrigan, 2017). Pollution through logistics affects more global warming with the greenhouse effect than air pollution, as distribution centers, plants and most of goods transportation and transformation are done in remote area. Pollution brought by factories and industrial center is one of the reason for their relative reclusive position. To counter the pollution brought by logistics operations, new practices such as Green Logistics, in relation with the global warming issue awareness, emerge.
Green Logistics as defined by Dekker et al. (2011), “is the study of practices that aim to reduce the environmental externalities, mainly related to greenhouse gas emissions, noise and accidents, of logistics operations”. As the issue of global warming is very large, a unique solution to mitigate its risks does not exist, there are many. A specific approach must be taken to tackle the problem little by little. The idea of the project is to create a useful tool for logistics
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project implementation in the business field. This tool using the Net Present Value (NPV) will give a financial evaluation and a CO2e emission measure of the project. This measure will be in kg emitted and in dollars. While NPV measures the economic sustainability of a project, an environmental layer will be added. The environmental aspect is measurable and can be priced mixed with the economic one. Still, showing the emission of pollutant will be an environmental criterion in decision making. A weighted decision criteria can also be reviewed to help people choose the best project for the company and for curbing the global warming.
While there are many different possible Green Logistics projects, for illustrations purposes, only the solar panels installation on warehouses’ or plants’ roof will be considered in the cost model. The choice of a solar panels installation was motivated by the following reasons.
Installing solar panels on a warehouse is a simple concept and a talkative example. Moreover, it is feasible economically and technically. Figure 2 shows a prototypal example of how solar panels installation has been successfully implemented on a national refrigerated distribution center for an international dairy company in Ospedaletto Lodigiano, Italy. By doing so, the distribution center reduces its environmental impact by reducing its emissions of CO2e and may reduce its expenses on energy.
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Figure 2: Solar Panels on the Logistic base of Galbani, Group Lactalis Italy
Nevertheless, implementing solar panels as energy supply has a cost, even though the cost is decreasing. The Figure 3 shows its decreasing cost trend from 1998 to 2015 for residential photovoltaic (PV) systems. In addition to decreased costs over time, the benefits from the installation are the savings on the energy bill thanks to the supply of energy by the company itself. In addition, solar panels offer an energy almost free of CO2e so the company will be able to avoid a certain amount of Carbon Tax, if one is implemented in the country the firm is operating in.
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Figure 3: Installed Price, Module Price Indec, and Implied Non-Module Costs over time for Residential PV systems
(Adapted from Barbose and Dargouth, 2016)
In response to the emergence of Green Logistics initiatives, and particularly the practical need for assessing cost-efficiency of solar panels installation, the following research questions have been developed: What is the impact of the price of energy, its variation, project duration, and the level of Carbon Tax on the NPV of solar panels installation? Under what conditions will the installation be economically viable?
To answer the research questions, the study consists of a literature review in Section 2 and a in depth discussion of Carbon Tax in Section 3. A cost model that has been developed is presented in Section 4. Created in a professional environment in the first place, the model has been rearranged, modified, and enhanced to fit research purposes. After obtaining estimates of the NPV Model variables and parameters, a comprehensive analysis will be performed to answer
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the research questions in Section 5. Finally, the results, limitations and contributions will be discussed in Section 6.
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present value method. Its definition, application and its relevance in this article will be covered.The second aspect, operational, is Green Logistics.
2.1. Net Present Value
The NPV “returns the net present value of the investment based on a series of periodic cash flows and a discounted rate.” “NPV is derived by discounting future net cash flows” by the discount rate r, “summing them over the life of investment, and deducting the initial investment related to the proposal”. (Lin and Nagalingam, 2000). NPV is a commonly used technique for evaluating investment options and projects. If the NPV is positive, then the project is economically acceptable. This condition is compulsory for most of the business decisions for a company to be sustainable financially.
Even though NPV is easy to use and relevant, it has potential limitations. NPV Value is qualified of “suboptimal investment decision” under two conditions, if sunk costs are included and time length of the project is not set and too flexible (Doraszelski, 2001). The value option of waiting is not considered in the NPV but investment timing is important, a sub optimally adopted project can lose from 10 to 20 percent of its value (McDonald and Siegel, 1986).
However, the option of waiting has also costs. Firstly, waiting delays the receiving of cash flow generated by the project. Secondly, in the case of a Green Logistics project, the cost of waiting is beard by the environment because CO2 emissions reductions are also postponed. The level of