Further evidence on the financial impact of environmental regulations on the trucking industry

Abstract

The Environmental Protection Agency has been increasing its regulatory oversight of the trucking industry since 2002. Dugan et al. (2017) detailed the financial impact of the 2002 and 2007 environmental regulations. This study provides further evidence on the financial impact of the 2010 environmental regulation. In 2007, the Environmental Protection Agency required all diesel engines to run on ultra-low sulfur diesel and followed this up in 2010 by requiring a reduction in engine emissions targeting NOx and particulate matter (PM). Diesel engine manufacturers achieved the reduced emissions by Selective Catalytic Reduction (SCR) and Exhaust Gas Recirculation (EGR) engines. The objective of this study was to discover how the financial performance of less-than truckload (LTL) carriers and truckload carriers (TL) was impacted by these environmental regulations. Our findings show that while the 2007 environmental regulations led to reduced profitability, the 2010 regulations increased profitability and efficiency when measured by operating ratios. There are also differences between the way the environmental regulations impacted the LTL and TL carriers. Finally, we find that fuel surcharges were not able to fully recover the effect of changes in fuel costs and the cost of environmental sustainability.