Explaining shipping company participation in voluntary vessel emission reduction programs

Transportation Research Part D xxx (2017) xxx–xxx

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Explaining shipping company participation in voluntary vessel emission reduction programs Alison Linder ⇑,1 University of Southern California, Metrans Transportation Center and the Southern California Association of Governments, USA

a r t i c l e

i n f o

Article history: Received 26 June 2015 Revised 27 June 2017 Accepted 10 July 2017 Available online xxxx Keywords: Voluntary environmental programs Emission reductions Ports and air quality Vessel Speed Reduction

a b s t r a c t Ports are under increasing pressures to increase sustainability and reduce the local and global emissions impacts associated with their operations. Due to limits on their jurisdictional authority, ports may design effective voluntary programs and appropriately motivate participation from global shipping companies that visit their ports. This paper investigates the success of the Vessel Speed Reduction Program at the Ports of Los Angeles and Long Beach and uses qualitative methods to analyze the factors that contributed to the success of the program at reducing local air quality pollutants. In particular, why did individual private firms participate in a non-required, voluntary effort? This research found that external pressures such as community concerns about emissions and regulatory threats are important to motivating voluntary behavior and may even be more important than financial incentives. Furthermore, simplicity of program design, clear goals and presence of a monitoring mechanism are important in influencing participation. These findings broaden our understanding of the business strategy behind slow steaming and its applicability as an operational practice as much work to date is focused on how fuel prices and financial incentives influence the choice for shipping companies to slow their speeds. While the VSR program led to significant emission reductions, an additional lesson for voluntary programs is the need for them to evolve and strive for continuous improvement. Ó 2017 Elsevier Ltd. All rights reserved.

1. Introduction This paper analyzes the Vessel Speed Reduction (VSR) program, a voluntary program designed to improve air quality surrounding the Ports of Los Angeles (POLA) and Long Beach (POLB). The health impacts of port related emissions are an increasing concern and this program represents an early effort to curb emissions before regulatory measures could be put in place. The program began in May 2001 as the result of an MOU signed by 9 parties including both ports, three regulatory agencies and the Pacific Merchant Shipping Association (PMSA), a trade organization representing the shipping companies.2 As vessel emissions are proportional to speed, the program established a voluntary 20 nautical mile speed reduction zone on approach and departure from each port and set a threshold of compliance at 12 knots.

⇑ Address: University of Southern California, Metrans Transportation Center, 650 Childs Way, Los Angeles, CA 90089-0626, USA. E-mail address: [email protected] Present address: Southern California Association of Governments, 818 West 7th St. Suite 1200, Los Angeles, CA 90017, USA. 2 Other parties included Steamship Association, the Marine Exchange of Southern California, Environmental Protection Agency (EPA) - Region 9, the California Air Resources Board (CARB), and the South Coast Air Quality Management District (SCAQMD). 1

http://dx.doi.org/10.1016/j.trd.2017.07.004 1361-9209/Ó 2017 Elsevier Ltd. All rights reserved.

Please cite this article in press as: Linder, A. Explaining shipping company participation in voluntary vessel emission reduction programs. Transport. Res. Part D (2017), http://dx.doi.org/10.1016/j.trd.2017.07.004

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In 2005 and 2006 the POLB added publicity and financial incentives to increase participation in the program. Any vessel with 100% compliance in the program received a green flag and they along with operators participating at 90% or better were invited to a recognition ceremony. In 2006, a financial incentive program went into effect where any vessel operator who had 90% or higher compliance rate for all trips made to the port in a calendar year would receive a 15% rebate on their dockage fees. In contrast, the program at the POLA publicized program results but did not offer a financial incentive until mid-2008. All parties agreed that the MOU did not prevent additional measures from being passed to reduce vessel emissions, and they also agree that this MOU did not create a regulatory mandate. In 2008, the program changed to include incentive funding for operators to use a cleaner fuel in their main engines, however, in order to receive this incentive, they were required to participate in the VSR program. In 2009, the program changed again as now both ports provided a financial incentive for participation, in the form of a reduced dockage fee. Additionally, the reduced speed zone was expanded from 20 nm to 40 nm. Participation in the 20 nm zone led to a 15% dockage discount and at 40 nm a 25% (POLB) or 30% (POLA) discount. This research covers the participation changes in the program from its inception through 2007, with interviews conducted between 2008 and 2009 and a survey that focused on operators who called at the ports in 2007. Though participation in later years is beyond the scope of this analysis, these program changes are useful to document as they demonstrate how voluntary programs evolve over time. Participation in the VSR program differed slightly between the two ports, but increased greatly over time. Participation rates, measured as the percent of compliant vessel calls, began at 61.7% at POLA and 60.1% at POLB in 2001 then rose to 86.0% at POLA and 90.0% at POLB in 2007. The average compliance rate for operators changed from just over 60% in 2001 to 84.5% at POLB and 75.2% at POLA in 2007. Emissions reductions due to the program are estimated at 43% for SOx, 42% for NOx and 49% for PM as compared to a no-program scenario (Linder, 2010). This paper will use qualitative methods to analyze the reasons for participation in this program. As described below, these participation rates are explained primarily by increasing external pressures to reduce emissions and effective changes in program design. The literature described below was used to find previously tested explanations for voluntary that were then systematically evaluated using qualitative methods including interviews and a survey. The VSR program achieved significant emissions outcomes much sooner than regulation would have allowed, and the program strategically evolved over time to further improve outcomes. This paper helps understand the applicability of voluntary emission reduction programs in the port environment as well the question of business strategy. The intention of this work is to better understand motivations for participation in a voluntary environmental effort on a micro-level, and investigate how participation in a voluntary program can be a viable business strategy. Additionally, this research offers some findings about how ports may design and implement voluntary environmental programs to improve air quality. As the emission outcome of the VSR program was dependent on participation of the shipping companies, literature on motivations for firms to exhibit environmentally responsible behavior is briefly described.

2. Literature review As centers of economic activity, urban ports play an important function in supporting both global and local economies. Nevertheless, growing freight volumes have led to a variety of quality of life issues such as pollution and congestion. Many policies and programs such as Pier Pass and the Clean Air Action Plan (CAAP), have begun to address these problems, and this is reflected in the literature as various studies have begun to evaluate the effectiveness of these policies and associated regulation.3 Such studies document programs to reduce freight impacts, examine their outcomes, and explain the policies and actions taken (Giuliano and Linder, 2010).4 Moreover, research has been done to date on the effectiveness of Vessel Speed Reduction as a way to improve air quality. This research has evaluated the emissions reduction potential of vessels slowing down and has found that emissions reductions do in fact result (Cariou, 2011). Research has found that VSR can have a beneficial reduction in CO2 emissions, and due to the simplicity of the behavior, these actions can be taken immediately to create reductions (Lindstad et al., 2011). However, emission reductions depend on vessel characteristics and operational factors such as speed and load may influence performance (Khan et al., 2012). Other research has evaluated how vessel speed reduction polices may change the share of cargo that is moved by water (Psaraftis and Kontovas, 2010), while other studies look at how costs of fuel and other fees might impact participation, or have evaluated the economic efficiency of a vessel speed reduction program (Corbett et at, 2009). Many of these studies evaluate the benefits of vessel speed reduction at the global level for CO2 and other greenhouse gas reductions, however this paper looks primarily at pollutants that impact local health such as NOx, PM2.5 and SOx, as this is what the program at POLA and POLB was designed to address.

3 See Holguín-Veras et al. (2006), on off-hours deliveries in New York; Dablanc (2008), for clean vehicle certification programs; and Giuliano and O’Brien (2008), on extended gate hours. 4 Portions of this literature review and the events history below are adapted from previous work; see Linder (2010), Giuliano and Linder (2010, 2013).

Please cite this article in press as: Linder, A. Explaining shipping company participation in voluntary vessel emission reduction programs. Transport. Res. Part D (2017), http://dx.doi.org/10.1016/j.trd.2017.07.004

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2.1. Motivations for environmentally responsible behavior Participation in a voluntary environmental program is one of many ways for a firm to exhibit environmental behavior. In the literature the classification of a voluntary effort differs based on the extent of government involvement in the program. For instance, unilateral commitments are initiated by firms, public voluntary programs are designed by regulators, and negotiated agreements, or government challenge programs are decided between a firm and a regulator (Khanna, 2001; Lyon and Maxwell, 1999). The Vessel Speed Reduction Program would likely fit the description of a public voluntary program (Khanna, 2001) where the terms of the program were negotiated between industry and regulatory agencies with no commitment to participate. After reviewing the literature, the most relevant factors to explain industry participation in a public voluntary program were selected. The discussion below will briefly review these factors; social pressures, regulatory pressures and financial motivations for participation in a voluntary environmental effort. 2.1.1. Social pressures Social pressures for environmental responsibility can come from various stakeholders including consumers, investors or other businesses. Consumer demands may drive change as their business is easy to lose. Citizen groups, NGOs and other agencies can also influence change, primarily though law suits and local activism. Business parties and competitors such as suppliers and business to business consumers may also directly influence the behavior of firms (Esty and Williamson, 2006) and shareholders may exert influence via voting rights leading to greater publicity and education of other shareholders (O’Rourke, 2003). These pressures can impact a firms ‘‘license to operate” as explained by the theory of social legitimacy. In order to achieve and maintain social legitimacy, a firm must act within an established set of regulations, norms, values or beliefs (Salzmann et al., 2005) and conform to ‘‘institutionalized norms of acceptability” (Bansal and Roth, 2000, p 202). By deviating from what is socially accepted, a firms risks losing customers, business and profits. However, firms may take proactive steps to gain legitimacy, including communication and social and environmental initiatives (Salzmann et al., 2005). These actions can be thought of as broadening their license to operate (Howard-Grenville et al., 2008). Gains in social legitimacy can help a firm acquire a metaphorical ‘‘social license to operate,” or adequate approval to allow a company to stay in business (Gunningham et al., 2004). Perceptions of social legitimacy evolve with changing public beliefs. 2.1.2. Regulatory drivers for participation in environmental programs The desire to preempt or shape regulations (Lyon and Maxwell, 1999) or to improve relationships with regulators can be a strong motivator of environmental responsibility as a strategy. Environmental actions may preempt stricter regulations, weaken their requirements, reduce the extent of monitoring by agencies or allow for regulations to be manipulated such that they raise costs more for competitors and thus reduce competition (Lyon and Maxwell, 1999). Preemptive moves on the part of industry can take several forms. Generally, the threat of regulatory action leads to voluntary actions that can be accomplished in an attempt to be preemptive or increase competitive advantage (Schot and Fisher, 1993; Desimone and Popoff, 1997; Barrett, 1991). Being proactive with new technology can avoid delays and higher costs (Desimone and Popoff, 1997). Thus, firms that don’t track dynamic regulatory developments will be disadvantaged (Esty and Williamson, 2006). Going beyond compliance can also be a strategy to obtain benefits including recognition from government and communities, improving working relationships with regulators, gaining access to technical assistance and resources, and reducing regulatory transaction costs (Fiorino, 2006). Increased trust with regulators may also increase leniency (Howard-Grenville, 2005). The perception of the threat of future regulation may also become a factor in the firm’s decision and often makes programs more effective (Fiorino, 2006). Governments can facilitate or require change by creating new regulations, supplying assistance, providing funding and information, or creating incentives that lead to competitive advantage or requiring information disclosure. 2.1.3. Financial motivations, the business case, and eco-efficiencies The existence of a business case for environmental responsibility is widely debated in the literature (King and Lenox, 2001). Evidence indicates that a relationship exists between a proactive environmental strategy that exceeds regulations and greater profits, yet causation has been difficult to prove. Environmental behavior may reduce costs by leading to ecoefficiencies; however, it might also increase costs because environmental improvements require a high upfront investment and environmental challenges are quite complex. Vogel examines the profitability of an environmental investment and concludes that it does not universally increase or decrease competitive advantage. Rather, the business case for environmental responsibility must be evaluated on a case by case basis and each strategy must be evaluated on its own merits. For instance, investing in a new technology could create a new niche for a firm and lead to profits, but there are also risks involved (Vogel, 2005). Eco-efficiency describes a specific example of how environmental improvements can contribute to economic goals and improve a license to operate by making processes more environmentally acceptable. Eco-efficiency considers a life-cycle analysis in product design, reduces the material and energy intensity of goods and services enhances recyclability, product durability and sustainable use of renewables (Desimone and Popoff, 1997). However, skeptics question eco-efficiency, asking why these opportunities are just now being acted on and why all firms aren’t chasing the same profits (Andrews, 1998). Please cite this article in press as: Linder, A. Explaining shipping company participation in voluntary vessel emission reduction programs. Transport. Res. Part D (2017), http://dx.doi.org/10.1016/j.trd.2017.07.004

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On the other hand, many critique the business case for environmental responsibility. Either an environmental expense will lead to greater profits or it will divert resources away from other uses (Russo and Fouts, 1997) and by going too far, firms may ‘‘price themselves out of the market” (Buchholz, 1991). Although opportunities exist, not all firms take advantage of them, and there is also the potential for laggard firms to free-ride on others investments (Dentchev, 2004). Other theories explain why a firm may not take an environmental action, even if it would benefit the firm. For instance, businesses often operate with imperfect information and routine operating procedures that go unquestioned (Andrews, 1998). Bounded rationality, or the difficulty a firm has in understanding all aspects of a decision, and a need to cater to stakeholder desires can explain why its operation isn’t always efficient (Prakash, 2001). Nevertheless, firms may take proactive action to benefit from an eco-efficiency, seize new opportunities, create new technologies, get ahead of the competition, reduce waste, or attract new customers. In regards to Vessel Speed Reduction, several have tried to calculate a break-even price to justify shipping company’s reduction of speed (Cariou, 2011; Steimetz, 2014). By looking at contextual factors for participation, this paper suggests that other motivations may be incentivizing the behavior.

3. Methods As described above, previous studies on port responses to environmental impacts focus on the external context, however this study seeks to understand the motivations of independent firms in response to external pressures. In order to better understand firm motivations, this study was structured with respect to the three primary explanations discovered in the literature review. Examples of how these pressures might manifest in the port environment were brainstormed and then tested for in interviews and surveys and review of other data collected. In particular, focus was given to what vessel operators had to gain by participating or to lose by not participating. Table 1 shows potential evidence for each theory. Program characteristics and ease of participation were also investigated. Data from many sources was used in this study. Data included: seven interviews with vessel operators, regulatory agencies, and the ports; a survey of vessel operators (N = 41); an events history; and a review of related documents. Program compliance rates were calculated from program records obtained from each port covering 2001 thru 2007 and used to compare the survey sample to the larger population to determine representativeness. Interviews and surveys were conducted in 2008 and 2009. Though the program continued, the period from 2001 to 2007 represents an adequate study period to evaluate reasons for participation in this program. An overview of the continued evolution of the program to date will be provided in the discussion portion of this paper to extrapolate additional lessons learned for ports in designing and implementing voluntary air quality programs. The events history was a detailed timeline of key events compiled by the USC Metrans Center.5 Events included related legislative and regulatory efforts, releases of major studies, events that raise public visibility of the ports, changes in port operations and policies, and advocacy actions and lawsuits. Documents surrounding the VSR program were reviewed including the MOU, portions of the tariff implementing the program, and public relations materials. Key events were reviewed from prior to the programs start through 2009, when the survey and interview data collection was completed. Interviewees included employees of two vessel operators, a representative from each port, two California Air Resources Board (CARB) employees and a representative from the PMSA. Questions differed slightly based on the interviewee but the program’s creation, implementation and surrounding regulatory and social context were covered. Interviews were conducted between February 2008 and March 2009. The survey was first distributed in June 2008, with additional circulations and follow-up calls made thru June 2009. A list of operators was compiled who called at the port in 2007. Contact information for these operators was found from lists provided by the POLB and POLA, the 2008 Southern California Ports Handbook, and company websites. Of the 299 operators who called that year, an email contact was found for 165 operators. Forty-one respondents completed the survey in its entirety and were included in the survey sample. This represents 14% of the 299 operators who called at the ports in 2007 and a 25% response rate for those who received the survey. However, because the survey was primarily completed by frequent callers, the operators in the survey sample represents 48% of all vessel trips to the ports in 2007. Program data obtained from each port was used to compare the characteristics of the survey sample to the larger population of operators who called at the ports in 2007. The survey sample has an over representation of operators that primarily called at the Port of Long Beach and an over representation of frequent callers. The sample and larger population were both made up primarily of participants in the program, with participation defined as having at least one compliant vessel call in the year 2007. In 2007, 97% of operators in the larger fleet were participants and 100% of survey takers were participants. It is not surprising that frequent callers would have a greater interest in taking this survey as operations at the SPB ports are a greater part of their businesses. Though greater statistical analysis of the survey sample was originally intended, the small sample size and did not allow for comparisons between ports, participants and non- participants or between frequent and non-frequent callers. However, the survey still offers good information from a policy view point and enough descriptive detail to draw conclusions when combined with other evidence collected. Because frequent callers make up such a large share of the port’s business and 5

The timeline is an ongoing project of the METRANS Transportation Center. See http://www.metrans.org/timeline/.

Please cite this article in press as: Linder, A. Explaining shipping company participation in voluntary vessel emission reduction programs. Transport. Res. Part D (2017), http://dx.doi.org/10.1016/j.trd.2017.07.004

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Table 1 Examples of evidence to support explanations for participation. Explanation for participation

Examples of evidence to support explanation

Social pressure

Growing public perceptions that the goods movement industry should take more responsibility to address environmental externalities; Increasing actions taken by the community to demand cleaner air such as greater advocacy group engagement, negative press, legal challenges to Environmental Impact Reviews (EIRs) Growing attempts to regulate vessel emissions; regulator organized working groups and surveys, and new regulatory proposals Participation would reduce costs for operators or attract new business

Regulatory pressure Economic motivations/Ecoefficiency

therefore the associated air pollution, understanding the experience of these operators is critical in lessons learned for program design and air quality improvement. The majority of this research was conducted in 2008 and 2009, and this paper therefore focuses on the first six years of the Vessel Speed Reduction program. Though the program continues to date, there are several reasons 2007 was a strategic bookend for this research. First, participation rates changed throughout the program, but by 2007, the fleet compliance rate was at or close to 90% at both ports. Second, in 2008 and again in 2009 the program changed with additional requirements and incentives. In 2008 a temporary incentive was offered along with a fuel switch. In 2009, the length of the reduced speed zone was extended to 40 nm with different financial incentives being offered at both ports. Therefore, the time period of this case study provides a consistent set of requirements and allows for an evaluation of how participation has evolved overtime in response to program incentives and external conditions. High participation rates were achieved in this period.

4. Program background and events history As trade volumes at the POLA and POLB continued to grow up until the 2008 recession, several events occurred that raised the visibility of port externalities and also demonstrated increasing public intolerance of port related pollution. In response to public concern, regulatory agencies, local politicians and the ports took steps to reduce port related pollution. The extent that the vessel operators were aware of and responding to these pressures is more clearly illustrated through survey and interview results that follow. For more detail on the events described below, please see (Linder, 2010; Giuliano and Linder, 2010, 2013; Giuliano and O’Brien, 2007, 2008). The SCAQMD released its Multiple Air Toxics Exposure Study II (MATES) in 2000, showing diesel exhaust as a factor for increased cancer risk. The report contained a highly publicized map showing areas with high diesel emission concentrations that became referred to as the ‘‘diesel death zone.” Additional studies documented the emissions related health impacts and attracted extensive media attention and greatly raised the visibility of the air pollution problem (Giuliano and Linder, 2013). Public perceptions of port operations continued to worsen when the Alameda Corridor opened in 2002 and failed to meet public expectations for congestion reduction (Giuliano and Linder, 2013). Congestion impacts were further demonstrated to the public when both ports were shut down for nine days as a result of a longshore labor contract dispute (Giuliano et al., 2005). While the vessels idled, waiting to be serviced, researchers conducted air quality studies that quantified the high contribution of emissions from vessels in the harbor (Singh et al., 2005). The growing visibility of port related pollution and congestion led to greater community mobilization against port expansion. During the time period of the VSR program, several terminal development projects were challenged by community groups through legal means. For instance, the China Shipping terminal expansion was challenged in 2001 then settled in 2004. A lawsuit was initiated by a local homeowners group and joined by several non-profits, including the Natural Resources Defense Council (NRDC). The basis of the lawsuit was that the expansion would cause undisclosed and unmitigated harm to local residents and that impacts were not sufficiently analyzed in the initial EIR. A settlement was reached that included $60 million in environmental mitigations for emission reduction. Following this settlement, few EIRs were certified and when they were they often included extensive community mitigations. For instance, the TRAPAC EIR was certified in 2007 but was finalized four months later after a negotiated settlement preempted a lawsuit. The settlement created the Port Community Mitigation Trust Fund where funds would be used to pay for school air filtration systems, health care clinics, job training centers, and other mitigation projects in the surrounding communities of Wilmington and San Pedro. The fund was created with $12.04 million in startup funding with additional funding tied to future growth at the port as projected in the EIRs for terminal expansion projects. Similarly, the Middle Harbor Redevelopment Project was certified in 2009 by the POLB Board of Harbor Commissioners. The EIR included $15 million to mitigate emission impacts at schools, health care and senior facilities and to reduce greenhouse gases. As a result of these community pressures, both ports directed more attention to reducing emissions. In October 2001, the Board of Harbor Commissioners at the POLA announced a goal of a no net increase in emissions over a 2001 baseline (POLA, 2005). This activity intensified in 2004, when the Port of LA announced an Air Quality Mitigation Incentive Program, providing money for emission reducing demonstration projects and also released their measured 2001 emissions baseline. In 2005, the POLB announced its Green Port Policy and approved 33$ million dollars for Green Port projects included in a budget of Please cite this article in press as: Linder, A. Explaining shipping company participation in voluntary vessel emission reduction programs. Transport. Res. Part D (2017), http://dx.doi.org/10.1016/j.trd.2017.07.004

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474$ million (POLB, 2005a). On May 1, 2006, the POLB signed their first green lease with Matson terminals and shortly after this signed a second green lease with ITS. In November 2006, The Clean Air Action Plan was jointly released by both ports and included ambitious goals of cutting pollution port wide. The plan included five specific goals for ocean going vessels, including vessel speed reduction in the 20 nautical mile zone of the existing program and an expanded zone of 40 nautical miles. As landlords, the ports are unable to regulate air quality directly but do have some control over terminal operations through lease negotiations. In addition to community pressures and greening actions taken by the ports, regulatory pressure on the vessel operator industry to reduce emissions also increased during the length of this program. Vessels have traditionally been primarily regulated by the IMO, with EPA having some jurisdiction over US vessels. However, throughout the course of this program, the CARB became increasingly involved in regulating vessel emissions. Shortly after the VSR program started, a kick-off meeting was held for the CARB Maritime Air Quality Technical Working Group in December 2001. While several meetings of this group were held in 2002, it appears to have taken an 18 month hiatus from July 2, 2002 through December 3, 2003. During this time, CARB focused more on smaller local vessels called harbor craft. Regulatory action increased again at the end of 2004 when a series of public meetings were held to announce draft regulations for ship auxiliary engines, a ship demonstration project, and the intention to conduct a feasibility study for shore power. Throughout the year, CARB continued to work on these regulations, providing opportunities for public meetings and periods of public comment. On December 8, 2005, the Board approved a regulation to reduce emissions from auxiliary engines to become effective on Jan 1, 2007. This would require that within 24 nautical miles of the coast, vessels would only use cleaner burning distillate fuel or an equivalent emissions control technology. The PMSA sued the CARB on the grounds that the authority to regulate vessel emissions was reserved for the federal government, not state agencies. An injunction on the regulation was granted, then successfully appealed due to the pressing health problems caused by vessel related pollution. A second injunction held as the court ruled that the CARB regulation was in fact preempted by federal regulation. However, the state persisted in drafting legally binding regulations and in June 2009, they passed an updated and (more litigation-proof) set of regulations for auxiliary engines. The new regulation was reframed as regulating operational procedures which CARB has authority over in California waters (Interview with CARB staff). Additionally, a feasibility study for the use of shore power was released with plans moving forward to produce a regulation. The CARB Board voted to approve a regulation requiring that vessels turn off their auxiliary engines while at berth and plug into a source of shore side power in December 2007, to become effective as of January 2, 2009. Additional efforts were being made by the state to better measure and quantify emission from OGVs and several methodological reports were released during this time period. Despite resistance from the industry, persistence of the CARB in passing these regulations demonstrates the increasing pressures on OGVs to reduce emissions. 5. Participation explained by interviews and surveys As described above, the events history shows that community awareness of port related air pollution was increasing. The local community, the ports, and the regulatory agencies all began taking actions to address port emissions. Fig. 1a and b below show the change in participation rate at the two ports over time. Participation rates, measured as the percent of compliant vessel calls, began at 61.7% at POLA and 60.1% at POLB in 2001 then rose to 86.0% at POLA and 90.0% at POLB in 2007. The average compliance rate for operators changed from just over 60% in 2001 to 84.5% at POLB and 75.2% at POLA in 2007. Fig. 1a shows participation of the entire vessel fleet at each port, while Fig. 1b shows the average of percent of participation per operator at each port. Because frequent callers have higher operator participation rates, fleet wide participation rate is higher. The interview and survey responses described below help explain how vessel operators perceived these changes and how their response may have led to participation in the VSR program. In one survey question, operators were asked to rank reasons that contributed to their company’s participation in the program, ranked in order of importance from lowest to highest. The scores are shown below as the sum for each response, indicating that cleaning the air was reported as the most important reason to participate. At face value, a sincere desire to improve the environment could be a valid reason for participating in this program. However, participation in the program increased over time, so it is clear that operators are not intrinsically and automatically altruistic, otherwise they would have been participating consistently since the start of the program. A reasonable question is, ‘‘What caused the switch towards seemingly altruistic environmental behavior?” The order of the remaining reasons for participation is corroborated with additional survey, interview and contextual evidence, and this is reviewed in Table 2. Table 3 provides a summary of selected quotes from the interviews conducted and the open ended portion of the survey. 5.1. Public pressures and social legitimacy It appears from the survey and interviews that operators do believe that the local community has the ability to restrict their operations, and that law suits like those described above, offer a clear mechanism for doing so. Over 90% of operators surveyed felt that local public opinion on air quality issues affects their operations and over 80% of respondents perceived the importance of their company’s environmental performance to local residents as ‘‘very important.” Fig. 2 shows the survey responses to the question ‘‘What is the importance of your company’s environmental performance to the following groups?” Please cite this article in press as: Linder, A. Explaining shipping company participation in voluntary vessel emission reduction programs. Transport. Res. Part D (2017), http://dx.doi.org/10.1016/j.trd.2017.07.004

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Fig. 1. Program compliance at each port by fleet and operator.

Table 2 Ranked reasons for participation. Reason for participation

Score

Cleaning the air Program was easy to implement Wanted to prevent regulatory requirement Wanted to improve public image Wanted financial benefit

74 132 133 142 167

Most stakeholders were ranked as very important, indicating that vessel operators were aware of the pressures on them to improve their environmental performance. On the whole, Long Beach and LA residents ranked higher than other stakeholders with not a single operator selecting not important. Public image was important, with one survey respondent saying they participated because they ‘‘want to be recognized as an environmental frontrunner in clean transportation.” At least two operators specifically mentioned the local community. Another reported that ‘‘speed reduction costs more fuel and time for operator but to maintain the positive attitudes toward our communities, it is line’s social responsibility to participate in this program.” This last quote is interesting because rather than reporting that they have a social responsibility to reduce pollution, they may view participation as fulfilling their responsibility to the larger port community so that they can maintain a positive image. This coincides with several comments from the ports suggesting that operators may have participated to keep up with their competitors, or to not appear as laggards. Port officials reported that as participation results were publicized, participation increased. In 2008, one operator went so far as to donate a portion of their rebates from the VSR program to the City of Long Beach for recreational and education improvements. In explaining their motivations for the donation, a company representative acknowledged the community support of their operations and also reminded the community of the contribution the shipping industry and the port make to the local economy (POLB, 2008). From a publicity perspective, the company’s generosity was doubled by donating money that was earned due to their participation in a voluntary environmental effort. Respondents ranking of community perception as important might be explained by the public’s ability to delay or even prevent projects through the environmental review process. Operators want their associated terminals to obtain

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Table 3 Evidence from interviews conducted and open ended survey responses. Explanation for participation

Evidence from interviews conducted and open ended survey responses - selected quotes and open ended responses

Social pressure

‘‘It is not only shippers, but the entire industry that must respond to community needs, in particular for terminal improvements.” - PMSA Representative ‘‘They want to improve their facilities, they know that to improve their facilities they do need community support. They are somewhat captive to this market.” - Port official ‘‘Peer pressure form the media about being green.” - PMSA The Green Flag took up an importance that had been underestimated. Companies were putting it on their stationary, business cards. The trend caught on and this caused other companies to want to participate. - Port official (paraphrased) ‘‘Operators want to start building good will in the community” - Port official When comparative performance was shown participation rates increased. – Port official ‘‘(We) want to be recognized as an environmental frontrunner in clean transportation.” – Survey ‘‘company’s interests are best served if the public at large are well aware of such environmental programs and that the oil tanker industry is not all bad news” – Survey

Regulatory pressure

‘‘We would rather have a hand in shaping our future than let the feds come in and dictate to us.” Primary reason to participate was to ‘‘Keep a hand in our regulatory destiny.” - Vessel Operator ‘‘(We) served on several technical and advisory committees to build a relationship with the regulatory agencies.” – Vessel Operator A previous voluntary action had increased our trust with the CARB. – Vessel Operator Hopefully our participation will be recognized by state regulatory and federal agencies. – Survey Both operators interviewed said they would oppose making VSR a mandatory program due to ‘‘regulatory inflexibility.” ‘‘We are OK with setting a high target, but should leave a little wiggle room for extenuating circumstances.” - Vessel Operator The Coast Guard monitored vessel traffic, giving the program more clout. The Marine Exchange participated in informing approaching vessels about the program. - Port official Several operators were obligated through terminal leases. – Port officials and survey responses

Economic motivations/Ecoefficiency

Price and service primarily attracts new customers. - Survey and Vessel Operators ‘‘We lose customers and incur additional operational costs when we cannot maintain schedule reliability.” - Survey ‘‘Running ships at slower speeds increases transit times and reduces the number of trips a ship can make annually. This results in carrying less cargo. TIME = MONEY.” - Survey ‘‘We could increase speed in advance of the VSR zone or make-up for lost time.” – Vessel Operator ‘‘By careful planning and scheduling the vessel’s arrival, working and departure times have been kept up to the voyage schedules.” – Survey Fuel savings in the reduced speed zone were lost by making up speed on other parts of the voyage. – Survey and Vessel Operators ‘‘Reduction of speed equals rebate more or less.” Survey ‘‘Costs were minimal.” – Survey ‘‘The incentive is chump change to the shipping companies.” - Port official Program improved relationship with customers but no competitive advantage. – Vessel Operator

Fig. 2. Perceived importance of environmental performance.

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improvements and expansions, all of which require an environmental review to be done prior to construction. Interviewees from the POLA, POLB and the PMSA also suggested that the threat of lawsuits was a clear mechanism for restricting operations and the social license to operate. 5.2. Regulatory pressures Interview and survey data indicate that regulatory pressures were a factor in program participation. Several terminal leases were signed that required participation in this program, and at the state level, two regulations were passed, one for fuel type and one requiring the use of shore-side power. In an environment where regulatory pressures to reduce emissions were high, operators felt that several regulatory agencies had control over their operations and that their environmental performance was important. As shown in the figure above, all operators surveyed felt that regulator relationships were either somewhat or very important. Just under 50% of operators surveyed felt that participation in the program had improved relationships with state regulatory agencies. Operators report that they participated in the program to maintain some control over their regulatory destiny and to increase trust with regulators. In fact, one respondent reported that as a result of previous environmental efforts, CARB consulted them, allowed them to contribute greater input into future regulations and trusted them more. Additionally, a dip in participation between 2002 and 2003 corresponds with a shift in focus of the California Air Resources Board from ocean going vessels to commercial harbor craft and when regulatory activity picks up again in 2004, so do the rates of participation. 5.3. Economic motivations Economic motivations for participation in this program appear to be minimal. While operators believed that environmental performance was important to their customers and clients, 88% of those surveyed said that it did not impact their customers’ choice to use them over their competitors. Companies were concerned about their environmental image, but acknowledged that price and service primarily drive customer decisions. Similarly, eco-efficiencies did not occur as part of this program. Some operators reported a fuel savings in the reduced speed zone, however, this was minimal and likely made up for by increasing speed on other parts of the voyage. When asked if there were financial benefits to participation, 65% of respondents reported that there were not. This indicates that even if operators had a cost savings they did not think of it as a substantial benefit. Additionally, only 3 respondents mentioned the incentive as a reason for participation. While participation in this program may have improved operators overall image this did not lead to a direct financial benefit. It is worth point out that the research of Ahl et al. (2016), found that financial incentives did play a role in motivating participation in this program for certain types of vessels operating at the Port of Long Beach between 2009 and 2011. However, their work only considered participation in the expanded 40 nm zone, a change made to the program in 2009. The increased difficulty of the program, as well as the increased value of the incentive 25% compared to 15% may explain this finding. 5.4. Program characteristics The fact that the program was clear, straightforward and not overly onerous for operators, and got easier and even more enticing over time is likely to be the second most important factor influencing participation. Compared to other options for reducing emissions from ocean going vessels, such as new engines, engine after treatment, alternative fuels, or alternative marine power, the VSR program represented a simple and low cost operational change. An interviewee from the PMSA referred to the program as ‘‘low hanging fruit.” Some operators expressed concern about meeting schedules, engine inefficiencies in the reduced speed zone, extra costs for standby labor and the lack of flexibility in determining that 12k was the cutoff speed. On the other hand, respondents have said that the costs are minimal, that advance preparation is possible, and that the time lost in the reduced speed zone is such a small part of the overall voyage that it is possible to compensate. The largest reported program cost was the cost of the time delay and associated schedule constraints. However, other operators reported this was easy to avoid if prior planning was done. When asked about their participation, 85% of respondents reported that the program was either easy or very easy. Misinformation was reported as an initial problem yet understanding of the program increased with time. It was reported that it took some time to communicate goals and operating procedures of the program. Although survey results indicate that the program was clear and easy to understand, operators selected schedule constraints and internal communication and understanding as the factors most contributing to noncompliance. Interviews also indicate that internal training was difficult and local agents and changing crews needed reminders. An important obstacle that was addressed was the reassignment of labor from arrival at berth to 20 nm from the port, the point where the reduced speed zone begins. The ports made this change based on feedback from vessel operators. Prior to this change, labor was assigned upon arrival, so to prevent waiting for available labor, vessels would often race to dock. This change created a more even playing field for receiving favorable labor assignments and reduced costly vessel wait times. Monitoring and reporting on program results was also a feature of the program that improved over time. While the MOU required that each port provide $3000 to the Marine Exchange for start-up costs of software to monitor vessel speeds, over time, at least $80,000 was spent by the ports to automate the system and improve the accuracy of data collection. As of 2005, Please cite this article in press as: Linder, A. Explaining shipping company participation in voluntary vessel emission reduction programs. Transport. Res. Part D (2017), http://dx.doi.org/10.1016/j.trd.2017.07.004

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the POLB began reporting operator participation rates on its website. The evolution of the program overtime was also a likely contributor to its success as the ports devoted greater resources to it and responded to participant feedback. 6. Emission reduction outcomes As described above, the high participation rates of the VSR program led to emission reductions of 43% for SOx, 42% for NOx and 49% for PM as compared to a no program scenario (Linder, 2010). These reductions are significant and can be put into context by comparison to other possible reduction measures. For instance, use of a cleaner fuel in vessel main and auxiliary engines could reduce emissions from vessel transit. If a vessel switched from a fuel of 2.5% sulfur content to a fuel of 0.1% sulfur content, it would produce 96% less SOx, 83% less PM and 6% less NOx emissions (calculated by author using fuel correction factors described in POLB, 2005b). The VSR program has several advantages over a fuel switch. First, is the larger NOx reduction. Even with the lowest sulfur fuel, the NOx reduction would only be 6%. Second, the VSR program has a monitoring mechanism in place. Monitoring each vessel to ensure that a fuel switch was done would require more resources on behalf of the regulator. Third, the cost to operators of the VSR program is just the time cost of slowing down, but in order to participate in a fuel switch, operators must purchase the more expensive fuel. In evaluating the emission outcomes of this program, it is worth considering if reductions would be greater if the program had been more stringent or if it was the large number of participants making a relatively small effort that led to a collective environmental benefit. In the VSR program the main option to increase the difficulty level of the program and therefore the environmental benefits was to increase the distance of the reduced speed zone. When the program began, the ports did not have the ability to monitor speeds beyond 20 nm and it is not possible to know how much participation would have been deterred by the longer distance. Following this research the VSR program was in fact expanded to 40 nm and more financial incentives were added to the program. These changes were likely made possible by an increased understanding of program implementation among operators as well as continued external pressures for cleaner air. As operators became accustomed to the program, monitoring improved and initial obstacles were addressed, it became possible to set the bar higher for participation. Successful voluntary programs are able to encourage a cycle of continuous improvements and respond to external content. As of December 2012 participation rates in the VSR program are over 95% (POLA) and 96% (POLB) for the original 20 nm zone yet only 79% (POLA) and 85% (POLB) for the expanded zone (POLB and POLA, 2013). In 2016, participation rates were 96% (POLB), 92% (POLA) for the 20 nm zone, and 88% (POLB), 80% (POLA) for the 40 nm zone (POLB, 2017 and POLA, 2017). Future research could be done to reevaluate participation rates given these additional years of program data. A quantitative analysis may measure the impact of program ease, financial incentives and external events in predicting program participation. Preliminary results suggest that the incentives were less influential than other external factors in influencing participation (Linder, 2010). 7. Conclusion This research found that high compliance rates in the VSR program are explained primarily by increasing social and regulatory pressures and the ease of the program. In evaluating the importance of stakeholder pressures vs. economic motivations, stakeholder pressures, particularly those from the ports, the community and regulatory agencies, were more directly responsible for the increase in participation. This shows the important role of community action in generating environmental behavior. There is a great cynicism that corporations respond primarily to costs and financial gains, however the case of the VSR program shows that public perception is important to firms. In the port context, the public has a direct mechanism to impact a company’s ‘‘social license to operate” through the EIR process. Additional mechanisms exist for the public to influence a firm such as demonstrations, bad press, or law suits. If regulators are limited in their ability to require environmental changes, they still have the option to educate and mobilize the public about environmental problems. They can also make it easier for the public to get involved by disclosing information about environmental performance. This research offers several lessons for voluntary programs. For port authorities, it shows that voluntary programs can effectively address transportation externalities where the emissions source is not under the control of local authorities. The ports spent money on the program for monitoring equipment, publicity and incentives, but have also enjoyed publicity benefits associated with this program. Voluntary programs can also lead to improved relationships between a firm and a regulator which could lead to more information sharing and eventually better regulations that are guided by this input. The implication for ship operators is that they are no longer immune from pressures to improve air quality. If they have to take measures to improve, voluntary programs are often easier and more lenient than regulations and may have associated benefits in improving relationships and public relations. In this program, regulatory agencies had the opportunity to see the pros and cons of vessel speed reduction which would be useful in their consideration of a VSR requirement. Though a VSR regulation had been considered many times, at the time of this revision, no VSR regulation has been finalized. All costs of monitoring and enforcing the program went to the ports rather than to the CARB. Industry had the opportunity to improve their public image at minimal cost, and to improve their relationship with the regulators, earning them input into future regulations. Please cite this article in press as: Linder, A. Explaining shipping company participation in voluntary vessel emission reduction programs. Transport. Res. Part D (2017), http://dx.doi.org/10.1016/j.trd.2017.07.004

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Voluntary programs could be useful and have even begun to be implemented in other ports such as the Port of San Diego. The Ports of Los Angeles and Long Beach are unique however due to their large size and their desired location. The size of the ports is important as it is the volume of freight traffic that lead to the scale of the air pollution problem and the public awareness surrounding this issue. In smaller ports, the public and regulatory pressures may not be present to a large enough extent to influence firm behavior. Additionally, the favored location of these ports creates a great incentive for the firms to continue to do business here and therefore participate in a voluntary effort to maintain favor with the port officials, regulatory and local communities. However, as global trade increases, more ports are struggling to reduce emissions and well designed, low cost, easy programs will likely play a role. This paper demonstrates that once air quality improvement becomes a priority, there are multiple ways for stakeholders to exert pressure that can lead to meaningful change. The VSR program is an example of a simple program that resulted in significant emissions reductions.

Acknowledgements This research was supported by the Metrans Transportation Center at the University of Southern California.

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