A report for the dual ports of Los Angeles and Long Beach last month backed implementing a Clean Truck Fee (CTF) at a modest level, calling it "the most prudent course of action" to bring new clean vehicles into the system and provide a fund to help with the goal of that transition.
On Monday, the ports did just that, approving a fee on containers of $10 per twenty-foot equivalent unit (TEU). That is the number that the two ports adopted in response to the report's warning against setting the levy too high.
The wording on the resolution approved by the ports took chunks of the report almost verbatim.
And in keeping with the goal of incentivizing clean trucks, the resolution states that the new levy "shall not apply to zero emissions trucks, which shall be exempt for the duration of the program."
The report published last month spelled out the balancing act that officials needed to consider: "Both Ports have already experienced a steady reduction in market share for more than a decade," it said. "A high added cost may have the potential to accelerate that trend."
The report and the resolution both note that putting a rate up at $70 per TEU would divert 1.4% of cargo from the two ports. Even at $18, it is expected there would be diversion to other ports. The port staff's recommendation published in February estimated up to a 17,000-TEU diversion if the CTF were set at $5, and up to 241,000 TEUs at the $70 level. That 241,000 would represent the 1.4% figure.
Another part of the analysis estimated that a 1% increase in the cost difference between LA/Long Beach and other gateways would result in a 0.29% increase or decrease in the region's market share.
That may be why the resolution also calls for other ports to do the same as LA and Long Beach. The resolution says LA/Long Beach will "work to convene additional Port authorities to encourage similar Clean Truck Programs at ports in the United States and around the world."
Though a higher rate would divert an increasing level of traffic, the report said it wouldn't spur conversion. "Charging a high CTF rate has no more impact on turning over the truck fleet than charging a low CTF rate," the report said.
Weston LaBar, the CEO of the Harbor Trucking Association, which represents drayage companies, said his association did not have its own numbers on the size of a potential diversion from the CTF but was critical of the new levy. "We have heard from many [business capacity owners] that enough is enough," he said in an email to FreightWaves. "Costs keep rising and they are starting to make plans to move volume elsewhere. This is just the most recent example of fees that are not going to operational efficiencies or providing a value add to the customers who use our twin ports."
Ironically, the report said some trucking companies wanted a higher rate because they foresaw a bigger pot of funds from CTF collections that would enable the purchase of a greater number of clean vehicles. "Other stakeholders seek a higher rate as an incentive to push truckers into newer equipment," the report said. "On the other side of the discussion, some stakeholders are worried about diversion, while still others argue that such a rate might not be lawful."
There's another factor at work: Older trucks are more economically competitive than newer vehicles, even if they're dirtier (or maybe because they're dirtier). Even with a big CTF, the report said, they won't get trucking companies to divest themselves of existing vehicles, the report said. "None of the considered rates will cause the drayage trucking industry to divest of their current trucks to purchase [low-emission vehicles] because of the high cost differential to purchase low [nitrous oxide or zero-emission] technologies," the report said.
Instead, money from the collection of CTF funds should be used to help drayage drivers buy cleaner trucks, as has been done previously in other initiatives by the port. "The best way to get the drayage trucking industry to divest of their current trucks … is to provide incentive money toward the purchase of those trucks," the February report said.
How much money is going to be raised and how can it be used? The ports' estimate is that the levy will raise $90 million annually. At a rate of a $100,000 incentive per new clean truck, up to 900 vehicles per year could be replaced, the report said.
That doesn't sound like much. The resolution approved by the board concedes that availability of the vehicles the ports would like to promote is limited. "This limit on availability will affect how many trucks can be purchased and deployed using incentive funds," the report said.
LaBar, in his email, said there was a better way of putting money in the hands of companies to acquire new power units: boost the volume of business. "Our desired approach would be to focus on driver productivity," he said. "By increasing the number of turns per shift, companies and drivers alike would be in a better position to afford new equipment."
The rate is fixed for a year. The resolution approving it calls for an annual review of its size to determine if the number was too high or too low in its impact on volumes.
"A low CTF rate that is shown to have no competitive impact on the ports could safely be incrementally raised," the resolution said. "Conversely, it may be impossible to undo the damage of a CTF rate that is initially set too high."
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