East Coast states outline carbon pricing plan

OFFICIALS FROM MASSACHUSETTS and Maryland on Tuesday laid out in broad strokes their plans for a forthcoming program across the East Coast to reduce harmful tailpipe emissions and fund greener transportation alternatives by pricing the carbon contained in gas and diesel fuels.

The proposal would mimic a gasoline tax from the perspective of consumers, but it is distinct from a traditional tax in a few ways, as a Baker administration official noted on Tuesday.

Known as the Transportation Climate Initiative, or TCI, it is an ambitious effort involving a dozen states from Maine to Virginia that are collectively trying to cut down on planet-warming emissions from cars and trucks, which have increased in recent decades despite global efforts to halt climate change.

“By working together on this we can really deliver a better, cleaner, more-resilient transportation system that benefits all of our communities, particularly those who are underserved by current transportation options and also disproportionately affected by pollution,” said Massachusetts Energy and Environmental Affairs Secretary Kathleen Theoharides, one of the leaders of the effort, in a conference call. “This also gives us the opportunity to make significant reductions in greenhouse gases and other harmful air pollution across the region.”

The program could be up and running by 2022, and the aim is to reach a target emissions level by 2032. Once the framework of the program is more fully developed, states should decide next year whether they want to participate in the regional endeavor. The plan calls for the establishment of a regional organization that could monitor carbon, and track credits.

The cap-and-invest program that is the heart of TCI has polled well in recent months, proving more popular than a simple gas tax increase among Massachusetts voters, but the particulars of TCI are still largely undetermined.

On Tuesday, Theoharides, Maryland Deputy Transportation Secretary Earl Lewis Jr., and Vicki Arroyo, executive director of the Georgetown Climate Center, outlined the thrust of the program, and announced a framework that has been agreed to by the participants.

The proposal would put a price on the carbon content of motor gasoline and diesel destined for final sale or consumption in the region. The participants have not yet agreed on how to treat biofuels.

The proposal would mimic a gas tax in that it would raise the price of gasoline. But officials said a price on carbon is distinct from a gas tax in two key ways – the ultimate price at the pump would be influenced by market factors and the overriding focus of the program is reducing emissions instead of establishing a set tax rate on fuel.

“One of the things that distinguishes this from a gas tax is the way the program has been designed,” Theoharides said.

Unlike the per-gallon metric for taxing fuels at the pump, the TCI program would require state fuel suppliers to purchase allowances for the emissions contained in their fuels, and those allowances could be auctioned off and traded by the suppliers, said Theoharides.

Setting a cap on emissions from gas and diesel, which would decline annually, would strongly influence the cost of allowances and ultimately the price at the pump. The cap has not been set yet.

Another distinguishing feature of the cap-and-invest proposal is that it is focused on the environmental outcome of putting a cap on emissions rather than simply affixing a set price to a unit of fuel, said Arroyo.

The precedent for the transportation policymaking is the Regional Greenhouse Gas Initiative, which has successfully reduced carbon emissions from the electricity sector, and used the proceeds from carbon credit sales to finance the Green Communities program and Mass Save. The premium price placed on the dirtiest fuels helped drive coal plants out of business in Massachusetts, and overall the cap-and-trade program enhanced economic value, according to studies by the Analysis Group.

Even though the carbon-pricing effort would raise costs for its customers, the petroleum industry has so-far maintained a neutral stance and even helped with the design of it.

“We do want to be a partner with them on trying to design a program that makes sense, even if at the end of the day we don’t end up supporting it,” said Steve Dodge, executive director of the Massachusetts Petroleum Institute, in an interview last week. “We’re not saying, ‘Heck no, we’re opposed to everything.’ We want to be a responsible party and work with them on it. At the end of the day it’s very complicated, and we want to see what the program looks like.”

The bipartisan effort, which was announced last December, cuts against the approach taken by President Trump, who has tried to relax fuel efficiency standards for motor vehicles and even challenged California’s authority to impose its own more stringent standards.

In addition to Massachusetts and Maryland, the other jurisdictions that signed on last December are Connecticut, Delaware, Maryland, New Jersey, Pennsylvania, Rhode Island, Virginia, Vermont, and Washington, DC. New York, New Hampshire, and Maine are all participatory observers and will have the chance to sign onto the final memorandum of understanding expected to be ready next spring.