Transportation is among the major sources of greenhouse gas emissions in the U.S. In 2023, the federal government announced an ambitious plan to eliminate nearly all greenhouse gas emissions from the transportation sector by 2050. Rail, a carbon-efficient mode of ground transportation, is not exempt from regulatory pressure to decarbonize.
This article evaluates the case for a zero-emission rail network—particularly for Class I railroads—through a cost-benefit lens. I quantify current emissions, assess the value of those emissions, and analyze whether full or partial zero-emission transitions make economic and operational sense.
While I do not focus on a particular technology, the analysis assumes that operators will choose the best-fit solution, whether battery-electric, hydrogen, or overhead electrification.
Rail Emissions: By the Numbers
In 2022, Class I railroads burned 3.144 billion gallons of diesel. About 90% of that fuel powers linehaul locomotives (long-distance freight), while the remaining 10% is used in switching operations (sorting and rearranging cars in yards). Each gallon of diesel emits approximately 10.19 kilograms of CO₂, yielding an estimated 32 million metric tons (MT) of CO₂ annually (see Table 1).
Emissions of nitrogen oxides (NOx) and fine particulate matter (PM2.5), two key criteria pollutants regulated by the EPA, are measured from engine power output rather than fuel volume. To convert gallons to emissions, I used weighted brake horsepower-hour per gallon (20.24 bhp-hr/gal) and federal emissions factors (6.05 g/bhp-hr NOx and 0.116 g/bhp-hr PM2.5) based on Tier 2 linehaul and Tier 1 switcher locomotives. The resulting emissions estimates were 384,989 MT of NOx and 7,382 MT of PM2.5 annually.
The Price Tag on Pollution
While current guidance from the Department of Transportation suggests that cost-benefit analyses should not include a monetary value for CO₂ reductions, carbon markets and previous guidance suggest $50 per MT is reasonable. DOT’s current values for criteria pollutants are: $19,000 per MT of NOx and $928,000 per MT of PM2.5.
Using these figures, the total annual pollution cost of Class I rail operations is approximately $15.8 billion, with switching operations alone responsible for $2.3 billion of that total.
Is Full Electrification Worth It?
Catenary electrification—the use of overhead wires to power electric locomotives—is often cited as the cleanest option. But electrifying the entire U.S. freight rail network would cost between $870 billion and $1.1 trillion, with a payback period of 55 to 63 years based solely on avoided pollution costs. That assumes no discounting or inflation and no operational disruption.
Given that other sectors can reduce CO₂ emissions at much lower costs, this approach appears economically inefficient. Resources would be better directed to emissions abatement strategies with a quicker return and lower capital intensity.
Switching Locomotives: A Better Bet
Transitioning switcher locomotives—of which there are 4,854 on Class 1 railroads, accounting for 10% of diesel consumption and $2.3 billion in annual pollution costs—is a more promising option. Switcher locomotives often operate in rail yards near dense population centers, where NOx and PM2.5 emissions have disproportionate public health impacts.
Unlike linehaul electrification, switcher conversions can be incremental, allowing railroads to phase in new technologies over time without network-wide infrastructure changes. Moreover, switcher operations are relatively isolated from the broader freight network, reducing risk and complexity.
Battery-electric switchers are currently being tested. Assuming a cost of $5 million per zero-emission switcher, a full conversion would cost about $24 billion. Manufacturing capacity will take years to scale, but the emissions cost savings justify meaningful investment today.
Smart Policy, Not Mandates
California has considered a mandate requiring all locomotives operating in-state to be zero-emission. This approach risks driving freight off rail entirely and increasing overall emissions by shifting to trucking. A federal mandate for full rail electrification would be similarly misguided, with a price tag near $1 trillion and limited return.
A smarter policy would encourage phased adoption of zero-emission standards in switcher locomotives, only after the technology matures and production scales: 5% of switchers to zero-emission by 2040, 10% by 2045, and so on
This structure would offer flexibility for railroads to choose technologies, adapt operations, and retire aging switchers gradually. It would also align public health and climate goals with industry investment cycles.
The Way Forward
The rail sector remains a leader in freight efficiency. But the costs of diesel emissions, especially in NOx and PM2.5, can no longer be ignored. Electrifying the entire rail network is not cost-effective, but targeting switcher locomotives presents a pragmatic opportunity for decarbonization.
Class I railroads, regulators, and policymakers should prioritize this segment. It’s where the costs are concentrated, the benefits are local, and the pathway forward is both technically and economically viable.
Alex Scott is an associate professor of supply chain management and the Gerald T. Niedert Professor in the Haslam College of Business at the University of Tennessee, Knoxville, and a founding member of GSCI’s Transportation and Logistics Collaborative. He has spent the past two decades researching and working in the transportation industry. If you have inquiries about his research, contact him at ascott79@utk.edu.
