We’ve covered a number of regulatory efforts to force the transition to lower logistics-related emissions. First there was the Federal emissions reduction program started by the Biden Administration to regulate heavy duty trucks. Then there was the lawsuit brought by the state of Nebraska against California’s Advanced Clean Fleets, which would have forced any fleet entering the state to lower their emissions. Nebraska AG Mike Hilgers joined us to talk about the state’s victory in that case after California withdrew their waiver application from the EPA.
California always plays a unique role in debates about emissions regulation. They have the most air pollution in the country and also the toughest emissions regulations. The California Air Resources Board predates the EPA, so in the past they have been allowed to make their own rules, only requiring waivers when their standards are tougher than Federal standards.
On May 22, the Senate voted to strip California of several waivers that would have allowed it to have tougher standards than the Federal government for passenger cars and heavy duty trucks. CARB plans to fight back, but that could take years according to Chair Liane Randolph.
California may be down, but they are certainly not out. And they are trying new and creative ways of regulating logistics-related emissions.
The Indirect Source Rule
California’s Indirect Source rule, established and enforced by the South Coast Air Quality Management District, regulates emissions from vehicles operating at ports, warehouses, and shopping malls. That’s what makes it “indirect” the rule doesn’t affect fleet owners directly, but through the locations they stop at.
Warehouse owners and operators have to calculate the number of truck trips their operations generate. They can earn points to offset their pollution-causing activity, such as by prioritizing zero-emissions trucks or installing solar panels or EV chargers. If their efforts don’t earn enough points, they pay a mitigation fee.
The South Coast Air Quality Management District covers all of Orange County, the non-desert portions of Los Angeles, Riverside, and San Bernardino counties. The district includes the ports of Los Angeles and Long Beach, so having an indirect source rule in this district will have a huge impact on logistics costs.
The more trucks - especially Class 8s - that visit a warehouse, the more mitigation fees a warehouse operator has to pay. California has already collected $1.3 Million in penalties for late filings across 220 citations, and $54 Million in fees.
Creative Emissions Policymaking
Agencies like the South Coast Air Quality Management District have the legal ability to establish and enforce indirect source rules as a way to reduce emissions. They have stood up to legal challenges, and now other districts in the country - including in New York - are considering their own indirect source rules.
The information required in reporting, and the investments required to avoid paying fees, will require warehouse owners, operators, and 3PLs to work together to find an optimal way to comply, not to mention to handle the added costs.
Given the volume of freight entering the country through the ports at Long Beach and Los Angeles, any increases in cost will be passed along to all consumers. It may only lead to a small increase, but it will be there nonetheless.
I have questions about whether the indirect source rule will actually reduce emissions, and how the funds from late and mitigation fees will be used. At the same time, you have to admire the creativity of it.
California is clearly determined to drive down emissions and regulations are their chosen method. If they are blocked from regulating the vehicles and fleet owners themselves, the state will drive the same change indirectly - through the facilities they visit.
