California Sustainable Freight Strategy

On July 16, 2015, Governor Brown issued Executive Order B-32-15, which calls for the development of an integrated freight action plan that will improve freight efficiency, transition to zero-emission technologies, and increase the competitiveness of California’s freight system.  Under the Executive Order, the Secretary of the California State Transportation Agency, the Secretary of the California Environmental Protection Agency, and the Secretary of the Natural Resources Agency will take the lead in an integrated and collaborative effort to identify state policies, programs, and investments to achieve these goals.  Working with additional state departments – including the California Air Resources Board, the California Department of Transportation, the California Energy Commission, and the Governor’s Office of Business and Economic Development – and other public and private stakeholders, the Secretaries are tasked with producing an integrated action plan by July of 2016.

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CAPA supports the development of an integrated freight action plan and appreciates the Governor’s SFS. Improving freight movement efficiency is at the forefront of the maritime industry as port leadership across our membership is working with stakeholders to optimize supply chains. Member ports believe that improving goods movement system efficiencies should be the paramount priority within the SFS as the ability to move goods at a quicker pace from ships to warehouse to destination not only reduces emissions, but also provides economic benefit for everyone within the supply chain due to reduced operational costs and the potential of more activity along the supply chain resulting from reductions of congestion. Investments in these efforts are important for leveraging private funds and federal monies for maintaining our competitive position in international trade, and balancing additional costs associated with doing business in California. The additional costs stem from California’s current efforts of transitioning towards a zero-emission future, as CAPA member ports are already the “greenest” in the entire world.

California’s ports urge the following considerations during development of the Integrated Sustainable Freight Strategy: 

California Ports are Among the “Greenest” in the World 

California’s public port authorities are very proud of the environmental improvements – especially the air quality improvements – that the freight industry has achieved over the last decade. In partnership with the ARB, our local air quality management districts, and our industry partners, our ports have been extremely focused on improving air quality.  That focus has led to very significant reductions in emissions, and real as well as lasting transformations in our goods movement system.  Our large ports for example, the Ports of Oakland, Long Beach and Los Angeles, report reductions on the order of 80% in particulate matter, nearly 90% in SOx emissions, a 50% reduction in NOx emissions, and significant reductions in greenhouse gas emissions. While we are proud of these accomplishments, they have come at significant expense to the freight industry – in the billions of dollars – an expense that is not borne by other states and nations that compete directly with California on a daily basis.

International Trade And the Economy 

International trade is a critical component of our regional, state, and national economies.  More than 40% of the total containerized cargo entering the United States arrives at California ports; and almost 30% of the nation’s exports flow through ports in the Golden State. Port activities employ more than half-a-million people in California and generate an estimated $9 billion in state and local tax revenue annually. Nationwide, nearly 3 million jobs are linked to California’s public ports.

International trade is also a highly competitive sector of the economy, now more so than ever.  With unprecedented competition from Canada and Mexico, which enjoy significant federal investment, and the expansion of the Panama Canal, California is under real pressure to keep freight transportation costs as low as possible in order to remain competitive.  Although cargo volumes are projected to increase modestly, California is currently losing market share to other states and nations. As we continue to move toward a low carbon transportation future, our efforts to develop a truly sustainable freight system must assure that economic and competitive elements of sustainability are included as co-equal goals with environmental sustainability.

The freight industry has invested billions of dollars in air quality-related improvements over the last decade even as the industry suffered one of the most significant economic downturns in modern times.  We believe it is appropriate and important to consider these very significant previous investments, and assure that those investments do not end up creating stranded assets as we continue the development of sustainable freight strategies.  The freight community has invested perhaps more than any other sector of our economy in improved air quality technologies.  We must allow for the appropriate amortization of related costs to assure that continued investments occur.

Robust Economic Analysis is Necessary 

A full and complete economic analysis must inform the state’s development of sustainable freight strategies.  While we recognize that ARB’s principle purview is air quality, the Discussion Draft does not address any other aspects of developing a truly sustainable freight system, such as transportation infrastructure and economic development. CAPA recommends that the ARB work closely with other state agencies, including the California State Transportation Agency (CalSTA), the Governor’s Office of Business and Economic Development (GoBiz), and the California Energy Commission (CEC), as well as other stakeholders, to develop a more comprehensive approach to sustainability.

We suggest that a comprehensive economic analysis is necessary as the pursuit of zero and near-zero emissions technologies will necessarily include balancing environmental and economic trade-offs, especially as we pursue short-to-mid-term strategies.  As we balance the longer-term desire to introduce zero and near-zero emissions technologies we must also determine how best to meet our needs for transitional improvements in the shorter-term.

System Efficiency and Transformation 

The Discussion Draft provides very specific near-term actions with a timeline for introducing zero emissions technologies.  However, the Discussion Draft falls short in declaring any specific actions and a timeline for system efficiency improvements, citing “many of these opportunities fall outside the purview of ARB”.  We believe that improving goods movement system efficiency should be one of the top near-term priorities for any and all of the plans within an integrated California sustainable freight strategy.  The ability to move goods more quickly and efficiently from ship to warehouse to destination reduces emissions, but also provides an economic benefit for everyone within the supply chain due to reduced operational costs and potentially more activity along the supply chain with reduced congestion and delay.  The economic benefits would then allow equipment owners to pay down recent capital improvement costs – for new, cleaner trucks and equipment – sooner, and allow for the introduction of new zero or near-zero emissions technologies sooner as well.

Perhaps a good example to further analyze in detail is the use of extended gate hours at container terminals (p. 49).  Extended gate hours can be effective in reducing congestion during peak hours, but there must also be a fine balance between the demand for off-peak gate hours and the ability to effectively fund the terminal labor to handle the containers.

Facilities Emissions Caps 

One proposed strategy that is particularly problematic is the potential use of a facility cap.  Port authorities are landowners, leasing land to companies that perform terminal operations.  Furthermore, the ports do not have direct agreements with shipping lines or ocean-going vessel owners. Port authorities don’t own or operate the equipment and therefore the ability of the port authorities to mandate certain emissions reduction strategies or controls is very limited. The port authorities throughout California have worked in cooperation with the Air Resources Board on the implementation of regulations that apply to mobile sources used for goods movement throughout the state. We believe this approach can continue to be effective for controlling emissions from goods movement activities.

At-Berth Regulations

CAPA has worked with the ARB for a number of years as the At-Berth Regulations have been implemented and revised.  Additional revisions to the current regulations are still needed.  We would suggest that amending the current regulations to assure they are workable should be an important priority even as the expansion of the At-Berth program is contemplated.  We believe it is also necessary to assure that agreements related to Proposition 1B funding for shoreside power are appropriately considered to reflect changes to the regulations and assure state funding for this important infrastructure is not diverted.

Emissions Inventory Growth Projections 

CAPA believes that the growth projections included in the Discussion Draft should be reviewed and revised to better reflect trade activity over the last several years, current volume projections, international trends, and existing as well as planned operational efficiencies.

State Investment and Incentives.

We believe it is critical that the state expand its financial investment in freight-related transportation infrastructure, environmental stewardship, and economic development efforts.  Additional state contributions toward these interests are important for leveraging private funds and federal monies and well as for maintaining our competitive position in international trade and balancing additional costs associated with doing business in California.  We were surprised that the Discussion Draft did not directly contemplate potential state funding sources for sustainable freight efforts such as Cap and Trade auction proceeds.

Review of Technology Assessments 

CAPA believes that the technology assessments are an important consideration in the development of sustainable freight strategies.  We believe that before further action is taken, the ARB should complete the assessments and engage in related discussions with stakeholders.

Land Use 

Land use planning is very complicated in California.  Local jurisdictions generally serve as lead agencies during the California Environmental Quality Act (CEQA) process that accompanies development.  We are concerned that changes to land use authority, which appear to be contemplated in the Discussion Draft, might undermine local land use authority and further complicate an already very difficult project development process.

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Executive Order B-32-15 | Governor’s Order requiring completion of an integrated freight action plan by July 2016

Sustainable Freight Discussion Draft 

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Grant workshop set for sustainable transportation | Daily News, August 26, 2015

California leaders try to fix freight system, once again | Sacramento Bee, August 11, 2015

California agency leaders meet with Freight Advisory Committee | EP News Wire Report, July 29, 2015