Policy Institute for Energy, Environment, and the Economy

The purpose of this whitepaper is to summarize research regarding how much freight might be diverted from California ports if port costs increase due to policy, especially environmental regulations. Although no publicly available study that examines the precise research question was identified, there is scientific literature examining freight diversion in response to generalized increases in costs. Findings suggest that freight diversion is unlikely to be a major consequence if California imposes port requirements designed to reduce greenhouse gas (GHG) emissions from maritime shipping, if such requirements result in modest cost increases (around $30/TEU1 or below) for shipping companies. However, this statement is based on studies of port demand elasticity that have not been recently updated.The potential diversion effect of proposed environmental policies should be examined on the basis of costs (in terms of dollars per TEU ) and elasticities of demand for specific ports. Future research could update elasticities (which have been observed to change over time) and address the specific question more directly.