Climate initiative could push gas prices higher than forecast
Analysis projects increase of between 13 and 24 cents a gallon
A REGIONAL EFFORT led by Gov. Charlie Baker to reduce greenhouse gas emissions by putting a price on the carbon in vehicle fuels is likely to drive up the price of gasoline higher than earlier projected, according to a report by the Center for State Policy Analysis at Tufts University.
Under the so-called transportation climate initiative, participating states would set a limit on total carbon emissions from vehicle fuels and then sell rights to market gas and diesel fuel equal to that amount. The center’s analysis assumes the cost of those rights would be incorporated into the price of gasoline and the revenues gained would be used by states to reduce emissions further.
Assuming moderate growth in the economy, the center’s analysis estimates the price of gasoline would rise 24 cents a gallon in 2022 if the goal is to reduce emissions by 22 percent. The increase would be 13 cents a gallon to attain the same result under a low-growth scenario.
Both estimates are higher than numbers modeled by the coalition of states exploring the so-called transportation climate initiative. The coalition estimated a 22 percent emissions reduction would drive up the price of gasoline by 9 cents a gallon in 2022.
The center’s analysis differs from the projections used by the transportation climate initiative in another key respect – the center modeled how revenues gained from the sale of carbon would be spent using California’s real-life results as a guide while the transportation climate initiative modeled their estimate on a basket of initiatives.
The center’s analysis estimates the sale of carbon rights would generate $775 million for Massachusetts in 2022 under the moderate-growth scenario, $406 million under the low-growth scenario.
Actual gas prices and emission results could be lower, the center said, if the transportation climate initiative caps how much gasoline prices could rise. If prices rise above the cap, the states could sell more emissions allowances to drive down prices, which would have the impact of increasing emissions.States are expected to decide this year whether they want to participate in the transportation climate initiative and then next year fully design the program if they choose to proceed. The program has been slated to start in 2022.
Baker has been a strong advocate of the transportation climate initiative, but earlier this week he said circumstances have changed considerably since it was first proposed last year. “We’re living at a point in time right now that’s dramatically different than the point in time we were living in when people’s expectations about miles traveled and all the rest were a lot different,” Baker said Tuesday during a press conference at the State House, according to the Boston Herald.