February 12, 2021 by Callum Winstock
Southern California is home to a huge population, a vast transportation hub, and a booming economy, but it pays the price with some of the worst air quality in the region. This is felt disproportionately in disadvantaged, low-income areas. Large quantities of greenhouse gases as well as nitrous oxides and diesel particulate matter are emitted primarily from heavy-duty (Class 8) and medium-duty (class 2b-7) diesel trucks, which leads to exacerbated levels of smog and low-level ozone, detrimental to the health of residents.
To seek to address this, the South Coast Air Quality Management District (AQMD) has recently proposed a new set of regulations (Proposed Rule 2305) to reduce emissions from stationary sources of pollution, namely from large warehouses. This scheme hands the onus of emissions reductions to warehouse owners, even if they do not actually own a heavy-duty fleet as a further measure to mitigate poor local air quality. The Warehouse Actions and Investments to Reduce Emissions (WAIRE) Program will be a points-based scheme, and if accepted, warehouses with an area exceeding 100,000 square feet must participate. The program primarily aims to encourage the adoption of zero-emission vehicles (ZEVs) and near-zero-emission vehicles (NZEVs) as well as numerous other environmentally beneficial practices.
Participating warehouses must accrue a certain number of WAIRE points dependent on the yearly number of truck trips taken to and from the warehouse and its operating floor space. These points can be obtained by implementing a number of verifiable emissions reduction measures from a given menu. A few of these can be seen in table 1, but the options available are far more extensive.
Instead of electing to enact these specific measures, warehouse operators can choose to create a customizable suite of site-specific verifiable emissions reduction operations agreed with the AQMD. Some further options may be implemented but must show additionality to actions mandated in the approved Regional Transport Plan (RTP) and Air Quality Management Plan (AQMP). Proposed Rule 316 describes a plan in which the AQMD will charge warehouse operators to carry out a custom plan in order to reimburse the cost of an assessment to the AQMD. On the other hand, warehouse operators may instead opt to pay a $1000 mitigation fee per point, of which the revenue generated would be reinvested into promoting low-carbon transportation solutions in the region.
Table 1: table showing a selection of measures that may be implemented and the respective number of points they will generate.
|Acquire Class 8 ZEV Truck||126|
|Acquire Class 4-7 ZEV Truck||68|
|ZEV Class 8 Truck Visits / 365 Visits||51|
|ZEV Class 4-7 Truck Visits / 365 Visits||12|
|Install Level 5 ZEV Charging Infrastructure||118|
|Use Vehicle Charging Infrastructure / 165,000 kWh||42|
|Install Onsite Solar Panels / 100 kW System||23|
|Use Onsite Solar Panels / 165,000 kWh||1|
Each compliance period will last for one year starting July 1st with the schedule for required participants shown in table 2. Owing to the nature of the emissions reduction actions taken, these measures may continue to accrue points for the warehouse operator in subsequent compliance periods, easing the financial burden as well as promoting the continued utilization of clean freight solutions. Unlike the low-carbon fuel standard (LCFS) managed by CARB, the WAIRE points are not tradable, unless a warehouse owner operates multiple registered warehouses, in which case a discounted number of WAIRE points may be transferred. Should a warehouse operator accrue a surplus number of points in a compliance period, they shall be able to bank these points for use in any of the subsequent three compliance years.
Table 2: Schedule for compliance in the WAIRE program
|Warehouse Size / square feet||Initial Compliance Period|
|≥ 250,000||July 2021 – June 2022|
|150,000-250,000||July 2022 – June 2023|
|100,000-150,000||July 2023 – June 2024|
Based on CaliforniaCarbon.info’s proprietary vehicle and fuels forecast model, a graph of the total number of WAIRE points required that can be expected in the region can be seen in figure 1.
This graph shows the quarterly total number of credits required in Southern California under the jurisdiction of the AQMD that are forecast to be required in which approximately 3000 warehouses would be subject to compliance.
The jumps in WAIRE points required for compliance are a result of the entry of new warehouse compliance categories as described in table 2. After full stringency of the compliance requirements come into effect post 2026, the steady increase in WAIRE point demand stems from the increased expected demand of warehouse space and heavy-duty vehicle capacity and operation.
To gain a sense of perspective on these figures, an example of a warehouse with 150,000 square feet of utilised space at full capacity would be required to obtain approximately 140 points per year. This could equate to a maximum of $140,000 per year but savings can be achieved in the ongoing use of adopted ZEV infrastructure which will pay dividends in the long run.
The implementation of this scheme may have far-reaching implications for other programs, such as the LCFS. An increased adoption of low-carbon fuels and the electrification of trucks may promote investment in the development of low-carbon fuel and EV infrastructure. This may lead to an increase in credit creation, a decrease in deficit generation and may accordingly reduce the price of LCFS credits in the long-term.
The next stages for the implementation of the WAIRE program will be a series of public workshops and community meetings in mid-February, followed by a ruling on PR316 and PR2305 by the South Coast AQMD Governing Board on April 2nd, 2021.
The WAIRE program works in conjunction with the Advanced Clean Trucks (ACT) Regulations which were approved by the California Air Resources Board (CARB) in June 2020. In contrast to the proposed WAIRE scheme, this program will address emissions from mobile, rather than stationary sources.
These regulations seek to reduce the greenhouse gas, particulate matter and nitrous oxide emissions from medium- and heavy-duty fleets by mandating an increase in the annual percentage of ZEVs sold from 2024-2035. By 2035, 75% of heavy-duty Class 4-8 trucks sold will have to be ZEVs, while 55% of Class 2b-3 and 40% of tractors sold must be ZEVs. The schedule can be seen in figure 2. Like the LCFS, the ACT will lead to the creation of a credit market in which automobile manufacturers will accrue deficits should they not sell sufficient numbers of ZEV trucks and generate credits, which can then be sold or banked for future use should they sell over the required level. In addition, operators of large fleets (50 or more vehicles) will be required to provide information on their fleet composition and operation, in order to aid the development of future low-carbon transportation strategies.
In addition to the two programs mentioned in this article, there are a number of further incentives to encourage to adoption of medium- and heavy-duty ZEVs, such as the Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project which provides rebates to offset the cost of ZEV-truck adoption. Owing to the rise in online shopping and deliveries, partially as a result of the pandemic, the rate of heavy-duty truck and warehouse usage is only expected to grow, and so the WAIRE program is a crucial weapon in the AQMD’s armoury to combat air pollution and climate change. Despite the increased upfront capital cost of ZEV trucks, policies like these may go some way towards the promotion of developing sustainable freight transportation solutions in the coming years.
AQMD Proposed Rule 2305 Documentation (Accessed 8th Feb 2021)
AQMD Proposed Rule 316 Documentation (Accessed 8th Feb 2021)
CARB Advanced Clean Trucks Regulation – Final Regulation Order (Accessed 10th Feb 2021)
CARB Advanced Clean Truck Fact Sheet (Accessed 10th Feb 2021)
Industrial Warehousing in the SCAG Region; Task 2 – Inventory of Warehousing Facilities (Accessed 9th Feb, 2021)
Industrial Warehousing in the SCAG Region – Final Study (Accessed 9th Feb, 2021)
Linking transportation and electricity emission in California: driven by EV penetration sc...
February 9, 2021
Weekly Commentary: CCA prices close lower with selling pressures on Auction...
February 22, 2021
Weekly Commentary: Large OI creation, pre-auction points to a bullish CCA m...
February 15, 2021
California Carbon Allowances: A New Asset Class?
February 8, 2021