CARB v. Ports

By Jock O’Connell

Last month was International Trade Month, a commemoration historically crowned by well-attended luncheons, dinners, and receptions at which business people and public officials mingle while reveling in the virtues of free trade and globalization. In few places had the celebrations been more upbeat than along the West Coast, the crossroads of America’s trade with the burgeoning economies of East Asia.

This year, however, things were understandably a bit different. After six decades of a policy consensus in Washington that favored trade liberalization, the inauguration of Donald Trump has most certainly set the cat amongst the pigeons, an expression our British friends are fond of using.

But uncertainties about what the next presidential Twitter might imply for America’s relations with our trading partners was not the only reason this year’s celebrations seemed more restrained.

Here on the West Coast, port officials have been growing increasingly fretful about their ability to maintain their competitiveness in light of what seems to be an almost relentless erosion of West Coast market share. Although container numbers have been edging up, more of the nation’s containerized trade has been heading away from West Coast ports. (See PMSA vice president Thomas Jelenić’s thoughts elsewhere in this newsletter.)

Although diminishing market share appears to be coastwide, ports in California face an additional challenge posed by the nation’s most aggressive air quality regulators.

As maritime journalist Chris Dupin observed earlier this month in American Shipper: “California is setting ambitious new environmental goals, but questions remain about whether truckers, marine terminals, and other links in the supply chain will be able to reach those goals, let alone at a price that keeps the state’s ports competitive.”

Two years ago next month, Gov. Jerry Brown issued an executive order calling on state agencies to develop “an integrated action plan that establishes clear targets to improve freight efficiency, transition to zero-emission technologies and increase competitiveness of California’s freight system.”

That sounded good. Or at least the rhetoric sounded the right notes: Collaboration with the transportation industry stakeholders; more empirical research to underpin future policy options; a transparent deliberative process.

There then ensued many months of meetings and workshops at which the relevant stakeholders debated the costs and benefits of the plan. Some in attendance held out hope (albeit fading) for a revised plan that might more optimally balance environmental goals and economic realities. But in the end (this past March 23), CARB unilaterally decided to proceed full-throttle with its clean-air objectives, suggesting that its models had no room for dollar signs.

So how much improvement in air quality does the administration hope to gain by saddling the state’s seaports with such huge costs? Not very much, as it turns out.

As PMSA president John McLaurin pointed out in a recent Long Beach Press-Telegram op-ed: “The equipment that is used at California’s ports to move cargo on and off ships, trucks and trains contributes approximately 0.0747 percent of California’s total greenhouse gas emissions. To convert this equipment to zero emissions, as recently advocated by the California Air Resources Board, is estimated to cost between $23 and $36 billion. This raises the question of how much CARB feels should be spent by other businesses and individuals to reduce California’s remaining 99.9253 percent greenhouse gas emissions.”

And what overall gains would be achieved in reducing greenhouse gasses globally? Probably none, at all. Indeed, if the state’s regulatory fervor drives up the cost of moving cargo through California’s ports and importers/exporters decide to take their business to East and Gulf Coast ports, vessels will be at sea for another two weeks, burning fuel and releasing tons of greenhouse gas emissions into the atmosphere.

Despite these concerns, LA Mayor Eric Garcetti and Long Beach Mayor Robert Garcia just this week signed a joint declaration that sets ambitious goals for the Ports of Los Angeles and Long Beach to make the transition to zero emissions in their Clean Air Action Plan (CAAP). The mayors also affirmed that the CAAP will include new investments in clean technology, expanding at-berth emission reductions, and launching a zero-emissions drayage truck pilot program in the next few years. No details were immediately provided on the amounts and sources of those new investments. The Ports of Los Angeles and Long Beach reportedly will release a detailed timeline and process for CAAP within 15 days, and fully complete the update by November. But it’s unlikely we’ll know anything more about how the path to zero-emissions will be financed.

Such posturing inspired leadership has serious consequences for a lot of folks in Southern California who worry about keeping a roof over their heads. A new study from the Los Angeles Economic Development Corporation finds that the trade and logistics industry cluster employed 580,450 workers in Southern California in 2015. That was an increase of 9.7% since 2005, driven by the 55.1% increase in warehousing and logistics jobs. Many, if not the majority of those jobs are directly linked to the continued flow of goods over the docks in San Pedro Bay.

Who knew that public policymaking was so tough?

The commentary, views, and opinions expressed by Jock O’Connell are his own and do not reflect the views or positions of the Pacific Merchant Shipping Association. PMSA does not endorse, support, or make any representations regarding the content provided by any third party commentator.