The East Coast Rail Link (ECRL)’s Green Proposition: A Hard Chug

With pressing climate change concerns, Malaysia is pushing the concept of green transportation to reduce carbon dioxide (CO2) emissions from petrol and diesel, thereby improving the quality of air and health of the people. The challenge, however, is that the two dominant modes of freight transportation — rail and road — have issues implementing green options.

For freight transport, rail transportation generates less carbon dioxide (CO₂) emissions per unit weight compared to road transportation. Rail transportation is also deemed to be more efficient and cheaper as it can carry more, larger, and heavier cargo than trucks.  

A major project is the East Coast Rail Link (ECRL), a 665-kilometre electric railway line which links Port Klang on the west coast of Peninsular Malaysia to Kota Bahru in Kelantan on the east coast, including Kuantan Port in Pahang. According to Malaysia Rail Link Sdn. Bhd. (MRL), the project owner of ECRL, the revenue ratio projected from the rail line is 70 per cent freight and 30 per cent passenger. The ECRL is thus designed primarily for cargo. It is being promoted as a green mode of transportation in the hope that this will drive up its revenue and improve its commercial viability, which is deemed doubtful by some.

ECRL’s other advantage is the use of renewable energy to power its electric trains. In February 2024, MRL announced that it awarded an exclusive contract to a consortium to supply electricity to ECRL trains. The consortium, which comprises Citaglobal Bhd and Reneuco Bhd, plans to have an energy mix of 30 per cent renewables. This will help to reduce the carbon emissions from ECRL trains, making it an even greener mode of transportation than rail powered by diesel. There is a problem here, however. Tenaga Nasional Bhd (TNB), the peninsula’s sole electric utility, is aiming that renewable energy will make up 40 per cent of its capacity by 2025. On paper, the ECRL should have chosen TNB over the consortium.

But the ECRL faces key challenges in pushing greener modes for transporting freight cargo.

The ECRL is scheduled for completion by the end of 2026 and its rail services will only be launched in January 2027. But listed companies, including logistics firms, cannot wait till 2027. They are hard pressed to disclose their sustainability measures (including carbon emissions from transportation) under the new environmental, social and governance (ESG) rules in Bursa Malaysia’s 2022 enhanced sustainability disclosure requirements. Based on a study by Standard Chartered, listed companies are also driven to hasten ESG compliance because about 78 per cent of multinationals plan to remove about 35 per cent of their suppliers that can endanger their planned carbon transition by 2025.

As 2025 looms nearer, greener modes of truck transportation are already fast emerging to meet the sustainability requirements for large firms, ahead of ECRL’s planned launch in 2027. Notably, the Malaysian Green Technology and Climate Change Corporation (MGTC), under the Ministry of Natural Resources and Environmental Sustainability (NRES) has partnered with Volvo to promote electrical vehicles (EVs). MGTC is mandated to drive the country in green growth, climate change mitigation and green lifestyle. This partnership allows companies buying Volvo Electric Trucks, estimated at RM2 million each, to be eligible for green technology incentive programmes such as the Green Technology Allowance (GTA). In 2023, Swift Haulage Berhad, which is one of the fastest growing fully integrated logistics providers in the country, was the first to adopt Volvo EVs as part of its fleet. The company is a certified Multimodal Transport Operator (MTO) and Petronas license holder.

In Malaysia, road-based modes of freight are generally favoured over rail options, as there is good road infrastructure and subsidised fossil-fuels. Private road hauliers are also more efficient, and they have convenience and flexibility in scheduling.

Other than EVs, trucks with lower carbon emissions are also being offered as alternative solutions for logistic players. Volvo trucks, for example, have other types of engines which use renewable diesel, such as hydro-treated vegetable oils. Another solution is to offer trucks that use less polluting fuels. UD Trucks, a leading Japanese commercial vehicle solutions provider, has unveiled a new range that will also lower the environmental impact of heavy duty and medium duty trucks.

In Malaysia, road-based modes of freight are generally favoured over rail options, as there is good road infrastructure and subsidised fossil fuels. Private road hauliers are also more efficient, and they have convenience and flexibility in scheduling. In 2017, it was estimated that road freight accounted for 97.5 per cent of all freight.

The adoption of green transportation for road-based freight is hindered by the availability of subsidised diesel fuel. The government’s plan to shift towards targeted subsidies for diesel fuel in 2024 will not affect freight cargo. Current subsidies have capped diesel at RM2.15 per litre for vehicles carrying goods, thereby shielding them from increases in global diesel prices. While this aims to protect consumers from price hikes, it will inevitably prolong the use of diesel-based transportation for goods, especially for smaller logistics players.

For smaller companies, MRL plans to develop logistics hubs and cargo-oriented development along the ECRL corridor. This will enable small cargo shipments to be grouped together at different collection points before loading them on the train. Cargo consolidation and accumulation will provide the necessary economies of scale to make rail transportation viable. For this to work, MRL will have to work with the private sector. Notably, it will need to collaborate with logistics companies to facilitate the shift from road to rail.

It is likely that only the smaller companies with lower volumes will turn to ECRL to enable cargo consolidation and aggregation. However, ultimately competitive pricing will determine the choices of these potential clients. Concurrently, the government should progressively remove diesel subsidies for trucks. This will raise the logistics costs for road transportation and push smaller companies to consider rail transportation instead.

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