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UPS (NYSE:UPS), a shipping company that relies heavily on its boxy brown trucks, says it plans to buy up to 46 million gallons of renewable diesel fuel during the next three years in an effort to replace 12 percent of the fossil fuels.
The company, which announced the initiative on July 29, says the fuels it plans to procure from three producers are made from several organic-based sources, including animal fats and other waste oils, including palm oil. They also are virtually chemical twins of oil-based diesel and so can be used interchangeably with them both in pipeline and in engines.
In fact, the renewable diesel outperforms the conventional fuel it's meant to replace, according to Mike Whitlatch, UPS' vice president for global energy and procurement. "It's actually as good or even better from a performance perspective as traditional diesel," including quick engine ignition in cold weather.
Whitlatch said UPS hopes its plan will help encourage companies and investors to support the development of the technologies and raw materials to bring their costs down and make them more competitive with oil-based diesel.
Because renewable and conventional diesel are nearly identical, he said, they can be substituted for each other or easily blended without concern for the proportions of the two fuels. As a result, enlarging the market for the non-fossil fuel is "purely a function of how many bio-refineries are built and how much renewable diesel they can produce."
UPS said it will obtain the new fuel from Neste of Espoo, Finland, the world's top producer of renewable diesel; Renewable Energy Group (REG) (NASDAQ:REGI) of Ames, Iowa; and Solazyme (NASDAQ:TVIA) of San Francisco. REG and Neste use oils and fats to produce the new diesel, and Solazyme makes it from an oil it derives from microalgae.
The company has said previously that its goal is to have trucks that drive 1 billion miles in vehicles based on advanced fuel-saving technology, including those fueled by renewable diesel, by the end of 2017.
Mark Wallace, UPS' senior vice president, global engineering and sustainability, said the company has spent years experimenting with ways to reduce its carbon footprint, and now believes it is ready to move beyond testing. "Advanced alternative fuels like renewable diesel are an important part of our strategy to reduce the carbon emissions impact of our fleet," he said.
"We have used more than 3 million gallons of renewable diesel to date with positive results," Wallace said. "Renewable diesel has a huge impact significantly reducing life-cycle greenhouse gas emissions by up to 90 percent less versus conventional petroleum diesel."
Already, UPS says, it's been using renewable diesel for more than a year to fuel its trucks with pick-up and delivery routes in Texas and Louisiana. It said the initiative announced July 29 will lead to expanded use of the alternative fuel elsewhere in the United States and perhaps parts of Europe.
The use of alternative fuels isn't the only way UPS has been working to reduce its emissions. In the past 10 years it also has determined that even small efforts can be very effective. They include a program under which truck drivers are trained to avoid left turns, a practice that the company estimates already has saved about 10 million gallons of fuel.
By Andy Tully Of Oilprice.com. The Motley Fool recommends Solazyme and United Parcel Service. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.