Economists say California’s new climate standards that would require railroads to switch to zero-emission locomotives could reduce market competitiveness and increase food costs, significantly affecting the Midwest.
The California In-Use Locomotive Regulation, which still needs approval from the Environmental Protection Agency, was analyzed by economists from North Dakota State University and USDA's Office of Chief Economist in a report posted on farmdoc daily, which is managed by the University of Illinois.
The regulations, approved last year by the California Air Resources Board, ban diesel-powered locomotives more than 23 years old starting in 2030, while requiring certain new models to adopt zero-emission engines. The goal is to transition all locomotives to zero-emissions by 2047.
For the two largest railroads operating in California — Union Pacific and BNSF — new switch engines, the smaller locomotives that pull freight throughout rail yards or for short distances outside railyards, would have to be zero emission by 2030.
The authors of the analysis of the regulations include USDA Chief Economist Seth Meyer and two colleagues from his office. The report includes a note that the "findings and conclusions in this article are those of the authors and do not represent the U.S. Department of Agriculture."
The report noted that the regulation's impact on agriculture products could include increased transportation costs, shifts in logistic strategies, lower prices for agricultural producers, and higher costs for their customers worldwide.
This regulatory impact will extend beyond California, affecting other states, the report said. It noted that soybeans, which rely on rail for coast-to-coast transport before export, account for 30% of Midwest farm and food product export value, with corn contributing 17%.
The growth of the United States exports, “depends on efficient and cost-effective rail transportation to move agricultural commodities to West Coast ports,” the report added.
Before the regulation can proceed, the EPA must grant California a waiver because it differs from existing federal emission standards set by the Clean Air Act.
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CARB has estimated the regulation will cost $13.8 billion from 2023 to 2050 for new equipment and labor. Compliance is expected to increase operational costs, leading to higher freight charges.
The EPA accepted comments on the rule change in April, and although the agency has yet to decide on the waiver, three issues are supposed to guide the decision: Is California's decision arbitrary and unfair? Does the state need the standards to address unique air quality and public health conditions? Do California's standards conflict with federal law?
Environmental and public health organizations support the regulations, while transportation, trade, and agriculture groups, including the Agricultural Transportation Working Group, oppose it.
Of the 2,400 comments submitted, many voiced concerns about the regulation’s potential nationwide impact on agriculture markets. Economists cite Propositions 2 and 12, with free-range eggs and sow farrowing crates, respectfully, as similar instances where compliance costs and differing regulatory systems have confused the supply chain.
The report by the NDSU and USDA economists indicates that alternative transportation methods, such as trucking, lack the capacity required for transporting agricultural products effectively.
The economists say the rail and export data demonstrate a “high dependence of Midwest agriculture on rail lines leading to West Coast states.” They warn that California's rail regulations could significantly hinder the competitiveness of U.S. agricultural products.
They also say that the locomotive rules would have a broader national impact than California's regulations on egg and pork production.
Under propositions 12 and 2, "costs have fallen mainly on California consumers ... California is now proposing a change to locomotives operating in the state with uncertainty regarding railroad operational changes and the scope of potential impacts," the report says.
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