The green case for Jones Act reform

From Grassroot Institute, March 6, 2020

When we talk about the costs of the Jones Act, we’re usually focused on how it results in higher prices for consumers and businesses and its overall effect on Hawaii’s economy.

But those are not the only costs imposed on us by the 100-year-old protectionist law that restricts goods carried between U.S. ports to ships built, flagged and primarily owned and crewed by Americans. There’s also an environmental cost.

It’s common sense, really: If you make one transportation method more expensive, people with goods to ship are going to choose less-expensive methods whenever possible. But those less-expensive options sometimes can have significant drawbacks that might not be fully recognized.

Which brings us to the pros and cons of ships, trucks and trains.

A new report from Timothy Fitzgerald of the Cato Institute makes clear that shipping goods by water is usually less expensive than transporting them by trains or trucks. Ships, especially newer ships, also are more energy efficient and have lower greenhouse gas emissions than trains or trucks, so if you are concerned about the environment, you’d want to see more goods being carried by water, in state-of-the-art ships. The Jones Act, however, makes shipping by water more expensive, thus incentivizing the moving of goods by train or truck.

According to Fitzgerald, greenhouse gas emissions generated by transportation increased between 1990 and 2016 by 20%, increasing its total share of U.S. greenhouse gas emissions from just under 24% to just over 27%. At the same time, water transport became less popular, dropping from 6.7% of all transportation use to 4%, even while transportation energy use was on the rise.

Then there is the fact that the average Jones Act ship is much older than its international competitor. If you exclude towboats and barges, more than half of U.S.-flagged vessels are over 25 years old. That means they are decades out of date when it comes to incorporating newer, more energy-efficient and cleaner technology. 

The upshot is that updating the Jones Act wouldn’t just cut costs for consumers and businesses in Hawaii and throughout the United States. It also would help the environment. 

Fitzgerald estimates that merely modernizing the existing Jones Act fleet to match international standards on emissions would save between $118 million and $3.9 billion in net environmental costs on climate and air pollution. Considering the state of the U.S. shipbuilding industry today, and how much it costs to buy an American-built ship, the only way to do that would almost certainly require a modification of the act’s U.S.-build requirement.

If reform led to a 10% increase in maritime transport away from truck and rail transport, the net savings in environmental costs could be as much as $4.1 billion. In a combined scenario, where both the Jones Act fleet were modernized and maritime transport expanded, the potential environmental savings would start at around $109 million but could reach as high as $8.2 billion.

Given the renewed attention to eco-friendly policy measures, it seems like common sense to start by updating the Jones Act. After all, this is a pro-environment regulatory reform that cannot be defeated by claims that it is too expensive to pursue. The great news is that the same updates that would benefit the environment would also benefit consumers and businesses, especially here in Hawaii.

It just goes to show that modernizing the Jones Act is one place where advocates of economic freedom and environmentalists can find common ground.

E hana kakou (Let’s work together!), 

Keli'i Akina, Ph.D.

President/CEO