If you want a glimpse of how “green” regulations (as well as “infrastructure” initiatives) could impact logistics operations in the near future, look no further than California. Several regulations are on the books or in the approval process that aim to improve the state’s air quality and reduce greenhouse gases. A noble cause, but it’s not one without costs, challenges, and tradeoffs.
Last Friday, for example, the Air Resources Board (part of California’s Environmental Protection Agency) adopted two regulations aimed at reducing truck emissions in the state. According to the press release, “Beginning January 1, 2011, the Statewide Truck and Bus rule will require truck owners to install diesel exhaust filters on their rigs, with nearly all vehicles upgraded by 2014. Owners must also replace engines older than the 2010 model year according to a staggered implementation schedule that extends from 2012 to 2022. The Heavy Duty Vehicle Greenhouse Gas Emission Reduction measure requires long-haul truckers to install fuel efficient tires and aerodynamic devices on their trailers that lower greenhouse gas emissions and improve fuel economy.”
The press release also mentions that “the greenhouse gas reduction measure applies to more than 500,000 trailers, while the diesel regulation applies to about 400,000 heavy duty vehicles that are registered in the state, and about 500,000 out-of-state vehicles that do business in California.” The state plans to offer over $1 billion in funding opportunities to help truck owners comply with these regulations (never mind that California faces a $41.8 billion shortfall for its combined current and next fiscal years).
I won’t comment on the details of these regulations (click on the links provided to read the documents), but aside from the cost issues, these regulations raise an important question: Should states take unilateral action on “green” initiatives that impact interstate commerce or should the federal government take the lead in crafting a nationwide policy? This question is part of the ongoing debate regarding state’s rights, triggered in large part by California’s past actions on auto emissions laws. The scenario the trucking industry wants to avoid (much like the automotive industry) is each state having different laws, requirements, and timetables. But since California’s policies are typically the strictest, and because the state is so important from a business perspective, whatever regulations California implements effectively become the de facto “nationwide” standard that trucking companies are forced to follow.
My view is that taking a holistic and integrated perspective is the only way to effectively address the environmental impact of industries like transportation, if only because state-level regulations do not exist in a vacuum. For example, what happens if (when?) the federal government passes carbon cap and trade legislation? Would the requirements of cap and trade conflict with state-level emissions laws? Would the overlap of implementation schedules place undue burden on transportation companies? Simply put, without a coordinated approach, you can legislate the transportation industry to death.
Why does this matter if you’re a shipper? Well, at the end of the day, you’re going to pay (directly or indirectly) whatever costs trucking companies incur as a result of these regulations. And California (well, the Ports of Los Angeles and Long Beach) will soon be charging you a Clean Truck Fee and Infrastructure Cargo Fee. The ports planned to collect the Clean Truck Fee starting November 17th ($35 per loaded twenty-foot equivalent unit and smaller; $70 for larger containers), but collection has been delayed due to legal action taken by the Federal Maritime Commission. The ports voluntarily delayed the Infrastructure Cargo Fee ($15 per 20-ft-long shipping container, $30 for a 40-footer) for six months because, in the words of Port of Long Beach deputy executive director J. Christopher Lytle, “extra time is needed to complete the planning and approval process for these many [infrastructure] projects.” Or in my opinion, the ports are concerned that shippers will say “enough is enough” and bring their business elsewhere.
Let me say it again: creating “green” supply chains that are truly sustainable will be costly and messy, and we’re all going to have to pay for it, one way or another. What happens in California matters, for better or for worse.