The decision to build a $57 million cruise ship terminal at White Bay in Balmain instead of at Barangaroo was a "serious error", a parliamentary inquiry has said.

Since it opened in 2013, the White Bay facility has been plagued by hundreds of complaints from residents, who argue emissions, vibrations and noise from ships moored at the terminal are making them sick.

Tied up: White Bay Cruise Terminal has attracted hundreds of complaints since its 2013 opening. Credit:Wolter Peeters

Cruise liners must keep their engines running while berthed at the White Bay Cruise Terminal because it lacks an on-shore power source. But Balmain residents, who live within metres of the White Bay terminal, say the consequent air pollution is damaging their health.

The operation of the terminal was one of several case studies considered by a NSW parliamentary inquiry into the performance of the Environmental Protection Authority. The report, release on Friday, recommended changes to how the terminal operates, to mitigate the environmental impact of the facility.