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Warehouse Tax Planned in Los Angeles Area

BY SCOTT DONALD, IRVINE, JUNE 2021

E-commerce has boomed during the pandemic with a growing number of warehouses and distribution channels to support them. A new clean-energy program targets warehouses and freight trucks in the California South Coast Air Basin.

 

The Warehouse Actions and Investments to Reduce Emissions (WAIRE) Points Compliance Obligation requires certain warehouse properties to make an investment in alleviating smog in order to earn compliance points that can be used as voucher credits.

 

How it Works

 

The South Coast Air Quality Management District adopted Rule 2305 to reduce local and regional emissions of nitrogen oxides and particulate matter by 10-15%.

 

The rule does not regulate emissions directly from warehouses but imposes requirements on facilities as “indirect sources” of pollutants because of the truck and other vehicle emissions that occur there.

 

Point-earning actions for compliance include:

 

  • Near zero emissions and/or zero-emissions on-road trucks

  • Zero-emissions cargo handling equipment

  • Solar panels or zero-emissions charging and fueling infrastructure

Compliance credits can be used to purchase replacement trucks and equipment. Alternatively, a regulated facility may opt to pay a mitigation fee of $1,000 per WAIRE point.

 

Possible Legal Challenges

 

Rule 2305 may be subject to a legal challenge. Environmental groups believe the Rule is not strict enough. There are also concerns that the mitigation fee included in the rule is an unlawful special tax.

 

Distribution warehouses subject to Rule 2305 should evaluate the program, prepare a compliance strategy with the help of an expert, and stay attuned to any legal action that could turn into a joinder. The first compliance reports will be due September 1, 2021.