East Coast Considers Plan to Hike Gas Prices to Mitigate Climate Change

"A coalition of mid-Atlantic and Northeastern states and the District of Columbia on Tuesday [Dec. 17] released a draft plan for an ambitious cap-and-trade program to curb tailpipe emissions from cars, trucks and other forms of transportation, tackling what has fast become the largest source of planet-warming gases," writes Hiroko Tabuchi, a climate reporter for The New York Times. The plan "sets a cap, to be lowered over time, on the total amount of carbon dioxide that can be released from vehicles that use transportation fuels, like gasoline and diesel fuel."

The 12 participating states in the Transportation and Climate Initiative (TCI) are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia.

Under the program, which could start as early as 2022, fuel companies would buy allowances from the states, either directly or on a secondary market, for every ton of carbon dioxide their fuel will produce...The effort, if it passes, is likely to add to prices at the pump as fuel producers pass on the added costs to consumers, a big point of contention that is likely to arise as individual states debate whether to commit to a final version of the plan.

This is a politically formidable undertaking on a regional level – essentially asking motorists to pay more for gasoline in order to fight climate change. Push-back occurred immediately from one of the TCI member-states.

New Hampshire has already pulled out of the effort, with Gov. Chris Sununu posting on twitter Tuesday that his state “would not force Granite Staters to pay more for their gas just to subsidize other states’ crumbling infrastructure.”

That's not how the program works, as each participating jurisdiction determines how to invest the auction proceeds generated in their state to support TCI program goals, whether it be for electric vehicle recharging infrastructure, which is more likely to be non-existent than "crumbling," or improving public transit, to name two likely investments.

Three options

"Under the plan, the jurisdictions would agree on how much emissions must be cut over a decade," according to Michael Laris, a transportation reporter for The Washington Post. 

Among the options being considered are 20 percent, 22 percent and 25 percent. That would be overseen on the state level through a system requiring large fuel distributors to pay varying amounts to support a transportation investment fund, depending on how much pollution their fuels would produce.

The new requirements could prompt distributors to use cleaner-burning biofuels or innovate with new technologies, backers said. Or the gas and diesel distributors could potentially hike prices, adding perhaps 5 cents to 17 cents per gallon at the pump in 2022, organizers said, citing modeling done as part of the initiative.

Initial annual proceeds from the so-called “cap and invest” plan [pdf] would range from $1.4 billion for a 20 percent cut to $5.6 billion for a 25 percent cut, organizers said.

Been there and doing that

The proposal is similar to two ongoing programs operated by the California Air Resources Board (CARB) since 2015 and 2009. Launched in November 2012, California's cap-and-trade program initially covered the state's largest stationary source polluters, including the state's 15 oil refineries. Three years later, transportation fuel was added to the program, essentially bringing an end to the carbon externality for motor vehicles.  According to a CARB fact sheet [pdf], "[f]uel suppliers are required to purchase pollution permits to cover the carbon pollution produced when the fuel they supply is burned."

To the extent that the carbon content of fuels will be considered by TCI, the other California program is the Low Carbon Fuel Standards program, adopted by CARB in 2009 based on landmark legislation passed three years earlier. It assigns a "carbon intensity" to every transportation fuel sold in the state based on comprehensive lifecycle emissions, similar to the lifecycle analysis done by the U.S. EPA for its Renewal Fuel Standard.

Tabuchi notes that transportation is the largest source of emissions in each jurisdiction except Pennsylvania, accounting for 40 percent of the region's transportation emissions, according to the Energy Information Administration, nearly the same percentage as California, where transportation emissions have increased for the last five years, notwithstanding the fact that more than half of the nation's electric vehicles are registered in the Golden State.

Next steps

According to TCI's design process, a final memorandum of understanding, based on the draft [pdf] released on Dec. 17, is "expected in the Spring of 2020, following additional public input and analysis. At that time each of the 12 TCI states and the District of Columbia will decide whether to sign the final MOU and participate in the regional program, which could be operational by 2022."

“If designed well, this can be the most significant sub-national climate policy ever," Jordan Stutt, carbon programs director at the Acadia Center, a research and public interest group in New England that is pushing for cleaner energy, told the Times. Now it remains to be seen how many of the 13 jurisdictions adopt the plan.

Related in Planetizen:

• Reducing Transportation Emissions by Targeting Fuel Suppliers, October 5, 2019
• An East Coast Cap-and-Invest Approach to Reducing Transportation Emissions, December 20, 2018
• Paying for Climate Change Mitigation at the Pump in California, August 13, 2018
• "Another California First: the End of the Carbon Externality for Motorists," March 3, 2015