Transportation and Climate Initiative Would Ratchet Up Cost of Living

The Transportation and Climate Initiative (TCI) is a regional collaboration of politicians from 11 Northeast and Mid-Atlantic states and the District of Columbia to reduce carbon dioxide emissions from the transportation sector.  The participating states are: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia. (New Hampshire was originally a member but pulled out so as to not add a financial burden to its residents from higher gasoline and diesel prices to help other states pay for their crumbling infrastructure.) TCI’s goal is to reduce carbon dioxide emissions from the transportation sector by up to 25 percent. The program is modeled on the Regional Greenhouse Gas Initiative, the goal of which is to reduce carbon dioxide emissions in the power sector for several of these states that participate in the program.

TCI sets a regional cap on the amount of carbon dioxide emissions from gasoline and diesel, with the cap decreasing each year. Placing a cap on these emissions essentially increases the price of gasoline and diesel in order to get the public to use less of these fuels. According to projections, a 20-percent reduction in carbon dioxide emissions over the next 10 years would increase prices by 7 cents per gallon by 2032; a more aggressive emissions cut of 25 percent would increase prices by 29 cents per gallon by 2032. The proceeds from auctioning allowances and the added tax on the fuels—estimated at up to $7 billion annually—would be used to support public transit and/or zero-emission vehicles, among other transportation uses.

Public comment on the draft TCI will close February 28, 2020, and its finalization is expected in the spring. The program is expected to begin by 2022. Each jurisdiction will decide whether to sign the initiative and participate in the program after the agreement is finalized by the spring of 2020.

The Tax Means Higher Costs

One trucking company noted that even modest changes in gasoline and diesel prices can have a sizeable impact on the company’s operating costs—a fleet of 100 trucks burned about 1.3 million gallons of diesel last year. So, at 10 cents a gallon, it is $130,000 a year and at 20 cents a gallon, it is over a quarter of a million dollars a year in additional fuel costs. That would add another 2 percent to 3 percent onto every freight bill. That cost gets added onto grocery and other merchandize bills, making it more expensive to live in these states, which, in many cases, are already high cost of living areas. Apparently the concerns of working people and small businesses are not a concern of politicians in these states.

Further, uniformly higher gasoline prices would disproportionately affect citizens in rural areas who must drive to work and school. The program is a cost burden to citizens and lacks program equity, especially for low-income citizens, many of whom live in rural areas.

The States Will Divvy Up the Funds

The states will divide up the money raised from the sale of the emissions allowances and the tax on gasoline and diesel. But, given that gasoline sold in one state might be used in another, particularly in metropolitan areas like New York City, exactly how the funds are divided is an issue to be resolved. Generally, politicians with the loudest voices receive the most funding, so it is quite likely that rural states may end up transferring their already limited revenue to larger, more wealthy states.

Conclusion

Under this regional cap-and-trade plan for the transportation sector, drivers will pay more at the pump through higher prices for gasoline and diesel. The revenue would be invested in mass transit, electric-vehicle charging, and other transportation infrastructure. Governors and state lawmakers will have to decide whether to back this plan to address the carbon dioxide emissions from the transportation sector—now the largest source of those emissions—and pass on the costs to consumers in the form of a new tax. New Hampshire has already withdrawn from the initiative due to its unfairness. Other states should follow suit. This type of levy on less urban areas can spark significant social unrest, as the yellow vests in France and in other European countries have demonstrated.

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