By Jay Strother, President & CEO, International Warehouse Logistics Association

California regulators and policymakers face a stark choice: Adopt climate and air-quality policies that produce measurable environmental benefits, or double down on a regulatory experiment that saddles the logistics sector with steep costs while delivering little-to-no verified reductions. The independent Ramboll review of the South Coast Air Quality Management District’s (SCAQMD) Indirect Source Rule (ISR) for warehouses in California, commissioned by the Supply Chain Federation, makes that choice plain. The findings are damning: ISR-style programs do not credibly deliver the emissions gains claimed. In fact, they dramatically understate compliance costs, create administrative chaos, and — critically — punish third-party logistics (3PL) warehouses for truck activity they do not control.

Let’s start with the core problem: SCAQMD’s ISR treats a warehouse as an “indirect source” of emissions and then holds that facility responsible for reducing the pollution associated with every truck visit. That idea can sound tidy on a slide deck, but it breaks down in practice for one simple reason: Most 3PL warehouses do not own the trucks that call at their docks. They do not control carrier routing, driver behavior, or fleet purchasing decisions. Many 3PLs don’t even own their buildings. Yet under ISR these neutral service providers are forced to pay mitigation fees or make expensive investments because non-zero-emission trucks visited their site. That is both unfair and ineffective.

Ramboll’s analysis confirms why. The report shows that much — if not most — of the apparent emission improvements in the South Coast were driven by statewide rules and market forces long before ISR came online: CARB’s Truck and Bus Regulation, the Low Carbon Fuel Standard, Advanced Clean Trucks mandates, and related programs produced the bulk of near-zero and zero-emission vehicle adoption. In other words, ISR is taking credit for gains it did not cause.

Moreover, SCAQMD’s ISR (and many copycat proposals) refuse to credit or “grandfather” pre-existing investments — solar arrays, near-zero/zero-emission yard hostlers and trucks, charging stations, and other early clean-tech steps — meaning operators who led on emissions reductions get no compliance credit. That penalizes early adopters, undermines the very private-sector leadership policymakers say they want to reward, and creates a perverse incentive where pioneers shoulder the bill while latecomers avoid the cost.

Ramboll goes further and identifies multiple, specific flaws in SCAQMD’s accounting. The ISR’s claimed benefits from “near-zero” truck visits rest in part on engine standards (0.01 g/hp-hr) for which no certified engines currently exist — making some of ISR’s highest-value credits practically unattainable. The program also double-counts benefits in certain categories (for example, ZE yard hostlers are counted as both yard equipment and truck trips), and it uses average trip lengths and baseline assumptions that overstate the real-world emissions avoided by electric vehicles, which are often deployed on shorter, localized routes.

Solar panels, another frequently touted compliance action, likewise provide little if any local NOx benefit in the way the ISR assumes. Ramboll’s review notes that solar generation does not directly displace local natural-gas electricity generation in the South Coast as SCAQMD staff imply; day-night charging patterns and regional grid dynamics can even increase reliance on higher-emitting generation at certain hours. In short, the ISR’s points-and-credits architecture looks impressive on paper but does not survive operational scrutiny.

On the cost side, Ramboll’s findings are stark. SCAQMD’s own socioeconomic assessment understated the burden. Using realistic scenarios, Ramboll estimates compliance costs that are 2.4 to 9.4 times higher than SCAQMD’s projections. The practical mitigation-fee pathway — the only real option for many 3PL warehouses that cannot control visiting fleets — produces modeled costs of roughly $0.81 per square foot per year on average. That translates to almost $100,000 annually over the next 10 years for a 100,000-square-foot facility, and approaches $300,000 for larger operations. Leasing or purchasing Class 8 zero-emission trucks and installing charging infrastructure requires even larger up-front capital outlays. This is unrealistic for many regional, family-owned, and multi-tenant facilities.

Those costs don’t vanish. They cascade through the supply chain: Higher operating expenses for warehouses raise costs for shippers, which raise prices for retailers and consumers. These costs also threaten local jobs in communities that rely on logistics employment. And critically, Ramboll documents the risk of emissions leakage: When regulatory burdens make operating in a jurisdiction economically unfeasible, operations often relocate to less-regulated regions and freight gets rerouted — producing longer trips and, potentially, more total emissions.

Implementation woes compound the problem. SCAQMD allocated a multi-person staff and new software to administer the rule, yet reporting tool failures, data integrity issues, and a backlog of enforcement actions remain. Ramboll notes that 60 percent of warehouses subject to the rule had not even submitted annual reports at one point, and hundreds of Notices of Violation were issued as staff worked to bring facilities into compliance. That sort of administrative drag demonstrates that ISR is not a nimble pilot — it is a heavy, ongoing bureaucratic program that demands sustained public resources to run.

To be clear: We want cleaner trucks and cleaner air. IWLA and our members have invested billions in cleaner equipment, pilot programs, and energy-efficiency measures — and we support incentives, grants, and standards that actually move the needle. But policy must be honest about cause and effect. Ramboll’s review shows that ISR-style mandates, as currently designed and implemented, fail the causation test. They ascribe emissions reductions to actions that were mostly driven by other state programs while imposing large economic harms on operators who often lack the authority to make the changes ISR demands.

Worse, the SCAQMD ISR is not an isolated curiosity. The California Air Resources Board (CARB) recommends expanding ISR statewide, and copycat proposals are circulating in other districts and in other states.

“IWLA cautions that the risks extend well beyond California,” I have said. “With ISR-style bills introduced in New York, Colorado, and New Jersey — and CARB recommending statewide expansion — policymakers nationwide are looking to California’s program as a model. If other jurisdictions follow California’s flawed path, the costs and economic damage will spread nationally, undermining supply chains that families, businesses, and communities rely on every day.”
If policymakers truly want cleaner air — as we all do — there is a smarter path than the ISR. We urge regulators and legislators to:

• Require independent validation and EPA crediting of any ISR-style program before it is expanded or used as a model elsewhere.
• Prioritize incentives, grants, and public-private financing to accelerate fleet turnover and charging infrastructure rather than relying on mitigation fees that function as a de facto tax on logistics activity.
• Align regional rules with existing statewide vehicle and fuel standards to avoid duplication and double-counting.
• Fund targeted pilots that produce operational data on truck types, routing, charging behavior, and grid impacts before scaling a program broadly.
• Design compliance frameworks that do not penalize facilities for truck trips they cannot control and that provide transitional support for smaller operators.
  

The Ramboll report is a clear warning flag: ISR — as implemented in the South Coast — does not deliver the clean-air benefits it promises and it risks creating economic harm and pollution leakage instead. IWLA stands ready to work with policymakers, environmental leaders, and community stakeholders to design real, measurable solutions that reduce pollution where people live and work — without destroying the competitiveness and jobs that underpin those very communities. Let’s use the Ramboll evidence as the pivot point to get policy right, rather than replicate a model that has failed the test.

Jay Strother President & CEO, International Warehouse Logistics Association