TCI looks a lot like a gas tax, but is it?
Backers call it a ‘market-based compliance mechanism’
GOV CHARLIE BAKER’S Transportation Climate Initiative looks a lot like a tax, but in legal terms it’s not.
The Transportation Climate Initiative, or TCI, would require automobile fuel distributors in states from Maine to Virginia to buy pollution allowances for the carbon dioxide their products generate. The initiative would cap the number of allowances, and ratchet the cap down over time.
The expectation of policymakers is that the cost of the allowances will be passed along to drivers at the gas pump, incentivizing them to use less, and the allowance money will be divvied up among the states and used to support public transit and deal with climate change. Baker wants to use half of Massachusetts’ share of the money to help pay for his $18 billion transportation bond bill, which includes major investments in the MBTA.
Boston Herald columnist Howie Carr thinks it’s a big charade. “Tall Deval and his minions call it a T.C.I., but what it really is is a T.A.X. – a gasoline tax,” he writes.
At a hearing on the bond bill this week, Transportation Secretary Stephanie Pollack acknowledged TCI will probably lead to higher gas prices, but she took issue with those who are calling it a tax. “It is not a gas tax,” she said. “It is a cap-and-invest program.”
The distinction is important politically and legislatively. Baker is an opponent of new broad-based taxes, so even if TCI acts a lot like a gas tax he can advocate for it with a straight face by calling it a cap-and-invest program.
Baker can also implement TCI by executive order. Under the authority of the Global Warming Solutions Act, the governor is authorized to take steps to meet the state’s carbon emission goals. One of the possible initiatives envisioned by the law is a “market-based compliance mechanism,” which is what TCI’s cap-and-invest program is.
Kathleen Theoharides, the governor’s secretary of energy and environmental affairs, said there are a couple of key differences between a gas tax and TCI. She said a gas tax is assessed right at the pump and paid directly by the consumer. TCI, by contrast, is assessed on the wholesale fuel distributor who may or may not pass it along to the customer.
The other major difference, Theoharides says, is that the money raised by the sale of the allowances is funneled into initiatives that would allow consumers to avoid any higher costs at the pump. Possible initiatives include improvements in public transit or financial incentives making it easier to shift to electric vehicles and avoid buying gas all together.
TCI is not the first market-based compliance mechanism to be tried by states in the northeast. The Regional Greenhouse Gas Initiative, which requires power generators to purchase allowances for the pollution their products generate, was launched in 2014. The money paid by power generators for their allowances is used to promote energy efficiency efforts, which can allow homeowners to reduce their electricity usage and thus avoid any price increases on their bill due to the original purchase of the allowances.Sen. Marc Pacheco of Taunton said he believes the point of TCI is not to drive up the price of gasoline but to raise money to combat climate change. He also noted challenges to the market-based compliance mechanism approach have been rejected by the Supreme Judicial Court
“Make no mistake: this is a very slippery slope for Massachusetts,” she wrote. “Although this is still in the early stages, lawmakers from other states in the TCI agreement are seeking legislative approval. Your administration, whether legally required or not, should also act in good faith and seek the same.”