Cost of Mandate to California Businesses Will Top $5.5 Billion

(December 18, 2008) The California Air Resources Board (ARB) voted last week to adopt a controversial new regulatory scheme that will require the retrofit and replacement of privately owned and commercially operated diesel trucks.

The regulation, which the ARB estimates will cost more than $5 billion, was approved by a unanimous vote of the board despite protests that the cost will hit small businesses during hard economic times.

Strong Opposition

The board listened to nearly two days of public testimony from supporters and opponents of the proposed regulation. At one point, ARB Chairman Mary Nichols, in an effort to count those in support and opposition, asked the two groups to stand and be counted. When it came time for the opposition to stand, it became clear that nearly the entire auditorium was filled with opponents of the regulation.

Opponents of the proposed regulation argued that the economic impact of the regulation would put hundreds of companies out of business and cause thousands of Californians to lose their jobs.

Many opponents argued that the scientific basis for the proposed rule was questionable because the ARB staff made incorrect assumptions that impacted the result of their emissions inventory and economic analysis.

Driving Toward a Cleaner California (DTCC), a coalition of business interests from across California’s diverse economy, including the California Chamber of Commerce, has been advocating adoption of an alternative regulation that balances the need for clean air and economic stability.

The DTCC alternative proposal and testimony by DTCC members led a number of ARB members to voice concern about the regulation being proposed by the ARB staff.

Minor Changes

As a result of the concern expressed by the ARB members, the staff suggested some minor changes to the rule that would provide increased flexibility to the regulated community.

Among the changes to the rule are:

• A credit for early retirement of vehicles that is retroactive to July 2008. 
• A one-year delay in the compliance schedule for small fleets (three or fewer vehicles).
• A promise to revisit the rule in one year in order to review the economic situation and the availability of financing for trucks.

The proposed rule was ultimately adopted with some changes that will have a minor impact on the cost of the rule. Those impacted by the regulations will have an opportunity to come back in one year and argue for more changes to the rule.

Staff Contact: Jason Schmelzer