The governors of Massachusetts, Connecticut, Rhode Island and the mayor of Washington, D.C., have formally agreed to create and participate in a 10-year regional transportation-focused carbon market.
Under the memorandum of understanding the officials signed on Dec. 21, the cap-and-invest program, which is another name for a cap-and-trade market, would aim to curb emissions from motor vehicles in participating jurisdictions by about 26% from 2022 through 2032 and generate more than $3 billion in revenues.
The signatories also agreed to dedicate at least 35% of the revenues to helping communities that are "overburdened by air pollution, vulnerable to the impacts of a changing climate, underserved by the existing transportation system, and disproportionately impacted by the COVID-19 pandemic."
While several more steps must be taken for the Transportation and Climate Initiative Program, or TCI-P, to take effect, the overarching plan is to require large gasoline and diesel fuel suppliers to purchase allowances for the emissions associated with the combustion of the fuels they sell. Each participating jurisdiction would decide how to use the funds from those allowance auctions.
The program would also put a cap on those transportation fuel emissions that would ratchet down over time starting in the second year of the program. But the program would allow jurisdictional entities to bank allowances and comply over a period of years to add more flexibility and reduce the initial cost impact.
State officials noted the revenues from the auctions will fund new jobs and infrastructure after state coffers have been depleted by the COVID-19 pandemic. "We need that shot in the arm to our economy," Janet Coit, Director of the Rhode Island Department of Environmental Management, said in a press call about the MOU.
In addition, states such as Massachusetts that have set aggressive decarbonization goals need a program like TCI-P to meet those goals, said Kathleen Theoharides, secretary of the Massachusetts Executive Office of Energy and Environmental Affairs. "We can't get there without tackling transportation emissions," she said. The three states that signed the MOU are collectively responsible 73% of all emissions in New England.
Similar to how the Regional Greenhouse Gas Initiative for electric generation emissions, or RGGI, was launched among New England and mid-Atlantic states in 2005, the TCI-P related MOU will be followed up with the creation of a model rule in 2021. After that, states legislatures may need to pass laws enabling participation in the program.
What about the eight other states?
The four jurisdictions that signed the MOU are a fraction of the dozen or so states that have participated in TCI-P talks in recent years. But Vicki Arroyo, the main coordinator for the TCI-P initiative and executive director of the Georgetown Climate Center, expressed confidence more states will sign on to the program down the road as they see the environmental and financial benefits of the program and as the rules around it take shape.
Connecticut Department of Energy and Environmental Protection Commissioner Katie Dykes noted that RGGI started off with a core group of states and has since expanded. She said she expects the same will happen with the TCI-P.
Theoharides also pointed to a statement made by the 13 jurisdictions that have participated in the talks, including the eight that did not sign the TCI-P MOU, in which all parties agreed to work together to shape the program "to reflect the evolving needs of the region" and enable other jurisdictions to join at any time.
Other states that signed the statement but not the MOU are Delaware, Maryland, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont and Virginia.
The program is estimated to create about $260 million in annual health and safety benefits, such as fewer premature deaths and traffic-related injuries. That amount could increase to $3 billion if all 13 states join the program, according to slides presented on the press call.
But some officials from states that have not participated in the effort have also raised concerns that the program would disproportionately raise the price of gasoline. On the press call, Theoharides said the price increase would be only a few cents and equivalent to the price difference that exists among individual gas stations on any given day.