Trucking Says CARB’s Cap-and-Trade Plan Would Result in More Volatile Diesel Prices

This story appears in the Jan. 25 print edition of Transport Topics.

Trucking industry officials have filed comments opposing the California Air Resources Board’s plan to initiate a statewide cap-and-trade program to reduce greenhouse gas emissions.

The proposal, endorsed in a draft report earlier this month by a panel of economists, is aimed at reducing greenhouse gas emissions 30% by 2020.

The state’s cap-and-trade system is still in the development stage but currently is scheduled to begin in 2012. It might closely parallel a federal cap-and-trade program envisioned in the Waxman-Markey climate-change bill that passed the U.S. House last summer, but it now is stalled in the Senate.

Under a cap-and-trade system, large emitters of greenhouse gases are required to buy carbon al-lowances at auctions if they exceed a cap on the amount of greenhouse gases they could emit in a year.

Although mobile sources would likely not be directly included in the plan, they would be affected significantly, said Michael Tunnell, director of environmental affairs for American Trucking Associations.

Tunnell said the plan would cause the price of diesel to rise by as much as 88 cents a gallon because refineries would be required to purchase carbon allowances that would be passed on to fuel users.

“Cap-and-trade will not only increase the price of diesel fuel, it also will increase the volatility of diesel prices, as a fluctuating carbon price is added to an already volatile fuel price,” Tunnell said. “Volatile fuel prices make it very difficult for trucking companies to accurately predict their future expenses as they sign freight delivery contracts.”

ATA also said cap-and-trade would not reduce motor carrier diesel emissions because truckers are not discretionary fuel consumers.

Eric Sauer, vice president of policy development for the California Trucking Association, noted in a CTA letter commenting on the situation that the notion of fleets easily passing on costs to their customers is a myth.

“The reality is that many companies face heavy resistance from customers when attempting to recover higher operating costs,” Sauer wrote.

Sauer also said truckers are working hard to increase fuel efficiency through an array of new technologies, low-roll resistance tires and other measures approved by the U.S. Environmental Protection Agency’s SmartWay program.

“The idea that further price increases from a potential upstream cap would result in reduced consumptive behavior from commercial motor carriers is a terribly misguided assumption,” Sauer said.

Likewise, the Western States Goods Movement Alliance, which calls itself a group of “trade sensitive transportation entities,” warned that cap-and-trade rules would devastate freight movement within the state, drive businesses away and actually result in increased emissions.

“The cumulative impact of these regulations on California’s goods-movement sector will create job loss, distribution center relocation and increase miles traveled by heavy-duty trucks into California from bordering states,” the group said.

The state’s largest farm and ranch groups also said cap and trade would not be good for their members or California’s economy.

The California Farm Bureau Federation and California Cattlemen’s Association said in a joint comment letter that farmers and ranchers would be hurt because they use the products and services of many entities subject to the mandatory emissions reduction.

The increased cost of energy would cause farmers to pass along “even more exorbitant price increases than previously anticipated,” said the letter, which was signed by Cynthia Cory, the farm bureau’s environmental affairs director, and Justin Oldfield, director of regulatory affairs for the cattlemen’s group.

The California League of Food Processors said some members would not have the financial resources for the purchase of emissions offsets, retrofits and increased energy use.

“Some firms may not survive this transition,” said a comment letter written by Rob Neenan, the league’s vice president of government affairs.