The Transportation and Climate Initiative, Explained

December 17, 2019

Cross-posted with the Union of Concerned Scientists and authored by Dan Gatti, UCS Policy Analyst.

Twelve states in the Northeast and Mid-Atlantic along with DC are proposing to invest billions every year for the next decade in clean transportation under a new policy framework released today by the Transportation and Climate Initiative (or “TCI”).

TCI is a collaboration of twelve states in the Northeast and Mid-Atlantic region, including Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Maryland, Delaware and Virginia. Together the states of the TCI region represent a population of 72 million people with a GDP larger than any country other than the United States and China.

These states are collaborating to solve some of the common challenges they face when it comes to climate change and transportation. Transportation is the largest source of pollution in most of the TCI states, responsible for 44% of global warming emissions in the region.  Our cars are trucks are also a leading source of particulate matter pollution that causes thousands of asthma attacks and preventable deaths each year.

Beyond emissions, our transportation infrastructure is old and vulnerable to climate change. Our public transportation systems, which are the lifeblood of many communities in the Northeast, are underfunded and overcrowded.  Moreover, traffic congestion is becoming a crisis in many TCI states.

The framework and accompanying modeling released by the states today indicates that the states are considering a program that could invest up to $68 billion over the next ten years to address the climate crisis and other challenges facing transportation. About half of this money would go towards electric vehicles, including not only cars but also heavy-duty vehicles such as transit buses and truck fleets. The program would also fund billions in improvements in public transportation and improved bike and pedestrian infrastructure.

The state would pay for this investment in clean transportation by imposing a market-based limit on pollution, a policy model known as cap and invest.

What is cap and invest?

Cap and invest is a strategy designed to enforce limits on emissions from a broad range of sources and invest in programs that transition our economy away from fossil fuels.

Enforcing limits on a range of sources as broad as transportation or power plants is inherently difficult. There are 52 million vehicles operating in TCI states. Almost all of these vehicles operate using petroleum-based fuel, primarily diesel and gasoline. That’s a lot of sources of pollution! We need a policy that can take on the challenge of addressing the aggregate emissions of all of these sources, and making sure the total amount emitted goes down every year.

Under the proposed TCI program, the states would set an overall limit of pollution, starting at around 254 million metric tons per year in 2022. Transportation fuel distributors would be required to purchase allowances based on their emissions in auctions run by the states. The total number of allowances offered would go down each year, which ensures that overall emissions go down.

The TCI proposal builds on a model that has been successful in reducing carbon emissions in the Northeast and Mid-Atlantic region from power plants. All of the states in TCI either participate in the Regional Greenhouse Gas Initiative (or “RGGI”) or are in the process of joining the program.

Together with additional policies and the transition away from coal, RGGI has helped Northeast states achieve dramatic reductions in pollution from electricity, putting the region on track for a 65% reduction in electricity emissions by 2030. In addition, RGGI has helped fund a wide variety of important investments in efficiency and clean energy. These investments have saved consumers money, reduced emissions and created new business opportunities in RGGI states.

TCI represents the effort by these states to expand and enhance this framework into transportation.

What does the Draft Agreement say?

The draft documents are the first look at how states are considering some of the central questions of cap and invest policy design: how stringent should the cap be, what will the price of allowances be, how much funding will we generate, and how should we use the resources.

The modeling indicates that states are considering a range of options for overall cap stringency. In the strongest scenario, the TCI states would aim for a cap that would limit emissions by 25% of 2005 levels by 2032. The states calculate that would require an allowance price of about $22 per ton in 2022, which would raise about $5.6 billion per year for the region. The weakest scenario calls for a carbon price of only $6 per ton and achieves far smaller benefits.

The overall impact on drivers will be modest. Even if fuel companies passed on the entire cost to consumers, the average driver would pay less than $10 per month in the most stringent scenario.

The TCI states are not contemplating a program that would impose such a high price on carbon that it would cause dramatic changes in transportation behavior. Instead, the TCI states are committing to the more modest goal of establishing a carbon price that would provide enough money to invest in clean transportation solutions. The TCI modeling clearly demonstrates that for the program to work effectively, TCI states must invest the funds from the program in clean transportation solutions that will efficiently reduce emissions.

Note that in all of these scenarios, states assume that transportation emissions will be higher than our economy-wide commitments to reduce global warming pollution. For example, all the New England states have committed to economy-wide reductions between 35 percent and 45 percent by 2030. Further, the fuels covered by this program do not include aviation fuels or marine fuel oil, which together contribute about 18 percent of overall transportation emissions. States will need to make significant additional progress in other sectors such as electricity to make up for the relatively slow pace of transportation.

UCS has conducted analysis that indicates that even greater emission reductions are cost-effective and technically feasible. Our analysis showed that an investment in clean vehicles and clean fuels alone could achieve a reduction in emissions in the region by 37% by 2030, with additional reductions possible through strategies to reduce total vehicle miles travelled.

Still, achieving a 25% reduction would represent a major improvement over the past ten years, which has seen transportation emissions growing in most Northeast states. We recognize the value of establishing a program framework now with the broadest possible set of states. The program we commit to today can be made stronger over the next decade during program review.

What are the benefits of the program?

The data released by the states shows that TCI would create a transportation system that is cleaner and more efficient.  This program could improve public health, increase personal disposable income, improve public safety and grow the economy.  Specifically, the states modeling shows that TCI could:

  • Improve public health by up to $10 billion per year. The public health benefits of TCI include reduced exposure to air pollution, improved physical fitness and greater public safety. Together these investments are expected result in over 1,000 fewer premature deaths per year, in addition to preventing over 1,300 asthma attacks and 1,700 fewer traffic injuries.
  • Save consumers a net of $4.85 billion. Clean transportation technologies such as electric vehicles provide significant cost savings compared to gasoline vehicles. Like RGGI and unlike a gas tax, TCI should produce significant net savings for consumers.
  • Increase regional GDP by $5.59 billion and create up to 25,000 jobs. Reduced spending on imported gasoline means more money for consumers to spend in the local economy. That means more jobs and a more resilient economy for the region.

Can cap and invest programs reduce emissions in environmental justice communities?

Transportation pollution impacts all of us, but some communities face a greater burden than others. People who live near ports or congested highways are exposed to high levels of particulate matter pollution that is harmful to human health. A UCS analysis this year found that communities of color in the Northeast are exposed to 66% more pollution from transportation than majority white communities.

One valid concern that has been raised about market-based programs like RGGI and TCI is that the cap mechanism can only limit total emissions. It can’t guarantee pollution reduction in any specific community. A cap on transportation emissions is not a sufficient strategy to protect environmental justice populations from transportation pollution. TCI states must consider additional approaches to ensure that pollution reductions occur in heavily impacted communities.

But the proposed program is more than a cap, and it’s the investments that can ensure reduced transportation emissions and can create more clean transportation choices in environmental justice communities if designed correctly. California law requires that 35 percent of all funds generated by their program to be invested in environmental justice communities. These funds have helped communities install electric buses, helped low-income Californians finance electric vehicles, improved rail and bus service throughout the state and built affordable housing near public transportation. If TCI states adopt a similar mandate, we could provide up to $24 billion for clean transportation projects in environmental justice communities over the next decade.

We encourage states to establish an open transparent process to determine how to best use TCI funds to ensure that environmental justice communities are prioritized as part of the transition to clean transportation. This will require states to think carefully about how we best define and target resources towards the communities that most need clean transportation.

Isn’t this just a gas tax?

Opponents of RGGI labeled it a tax from the beginning, and opponents of TCI are now making the same claim: that TCI is just a gas tax in disguise.

Courts have consistently rejected this argument. A gas tax is a user fee designed to require people who use our transportation system to pay for maintaining and improving the system. A gas tax often funds investments that help people drive more and use more gas.  The requirement that an oil company purchase an allowance from under a cap is a key strategy to enforce our climate laws. The funding generated from TCI is not meant to maintain the status quo but to make investments in a clean modern transportation system that moves away from petroleum-based fuels.

The public understands the difference between an environmental regulation and a gas tax. Polling released this week shows support for TCI at 66 percent, considerably higher than support for the gas tax. Separate polling focused on rural communities demonstrated support as high as 70 percent, with majorities of rural voters willing to pay up to $10 per month to support clean transportation.

What happens next?

The release of this agreement will set off an intense period of negotiation between the states.

Over the next two months, states will take public comment on the Draft MOU and the modeling results. They will then have to make a decision on where to set the cap, in addition to other critical program design questions such as a potential floor price for allowances, cost containment mechanisms, equity provisions and the process for program review.

After that, states will need to make final decisions about what states decide to participate. The current plan calls for states to decide whether they are in or out by the spring of 2020.

If you care about modernizing our outdated transportation system and moving towards clean transportation, and you want to see states make progress tackling this significant source of emissions, especially for those communities bearing the greatest pollution burden, this would be a great time to reach out to your Governor and say so.


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