Environmental Goal Misalignment between Logistics Service Providers and Shippers: An Analytical Perspective

Two critical questions arise in the context of mounting pressures to reduce carbon emissions from freight transportation. Is it possible to reconcile the emissions reductions goals of shippers and logistics service providers (LSPs)? How do factors such as consumer preferences, eco-efficiency, carbon tax policy, and sharing of green investment cost affect target emissions levels? We address these questions using game theory to model shippers and LSPs as economic agents, thereby gaining insight into how the carbon intensity of freight delivery operations can be reduced. Our novel contributions include (1) models that consider both the shipper’s and the LSP’s interests, and in particular the gap between their preferred environmental performance levels; and (2) a methodologically rigorous explanation why, as empirical studies suggest, LSPs and shippers rarely agree on how to share responsibility for environmental initiatives, or who should pay a carbon tax.