Environmental Sustainability and Freight Transport Performance in the EU – An Autoregressive Conditional Heteroscedasticity (ARCH) Model Analysis

Transportation, which is a significant facilitator of global trade and development, faces a serious problem with respect to sustainability. Firstly, there is the need to minimise greenhouse gas emissions while maintaining profitability and social responsibility. Transportation will be totally decarbonised by consistently moving towards a more sustainable, diverse and resilient range of transportation modes with advanced vehicle technologies. However, what impact this will have on the economic performance of transport service providers remains a big question. The aim of this study is to examine the short-run relationship between environmental sustainability in road freight transportation and the economic performance of the road freight transport sector in the European Union using an autoregressive conditional heteroscedasticity (ARCH) model. The analysis was conducted using annual data spanning from 2008 to 2021. The results indicate that energy taxes on transport and storage, biodiesel consumption and vehicle capacity utilisation have a positive and significant impact on freight transport performance (FTP). The findings suggest that policymakers could use energy taxes and incentives to promote the use of biodiesel in the transportation sector to increase FTP. Additionally, efforts to improve vehicle capacity utilisation could significantly increase FTP and have positive environmental implications such as reducing traffic congestion and emissions.