Northeast States Tap the Gas Pump for Carbon Emissions Cuts

From Environment & Energy Report

December 21, 2017

By Gerald B. Silverman

Motor fuel could be the next target for controlling greenhouse gas emissions in the Northeast, as seven states that have already clamped down on power plants train their sights on the transportation sector.

The states are considering a new cap-and-trade program modeled after the Regional Greenhouse Gas Initiative, which has capped carbon emissions in the power sector since 2008.

The vehicle fuels program would have a significant environmental and economic impact throughout the region. The transportation sector amounted to 43 percent of total carbon emissions for the seven states and the District of Columbia in 2014, according to the most recent data from the U.S. Energy Information Administration analyzed by Bloomberg Environment.

Supporters of the program, which is still in its early stages, hope that a memorandum of understanding could be signed by the end of 2018, with state-by-state legislative and regulatory actions in 2019.

Listening Sessions

The Georgetown Climate Center, which is helping along the effort under its Transportation and Climate Initiative, will be holding several “listening sessions” throughout the region next year.

The states have been laying the groundwork for a regional transportation initiative for years. The effort got a significant boost in November when seven states—Connecticut, Delaware, Maryland, Massachusetts, New York, Rhode Island, and Vermont—and the District of Columbia announced that they would formally pursue a regional effort.

“While the federal government continues to shrug off its responsibility to address the threat of our changing climate, we are accelerating progress toward a cleaner and more resilient transportation system,” Basil Seggos, commissioner of the New York State Department of Environmental Conservation, said in a statement.

New York and other states in the effort declined to comment further on the discussions.

The initiative is designed to reduce greenhouse gas emissions and provide a source of revenues to improve transportation infrastructure. A cap-and-trade model such as RGGI would require that proceeds from allowance auctions be used for clean transportation, improved public transportation, and zero emissions vehicles.

The initiative is being driven by the states’ long-term greenhouse emission reduction goals, which many believe can’t be met without tackling the transportation sector.

TCI Report

The policy framework for the program was laid out in a report from the Transportation and Climate Initiative, which outlines the key options and the benefits and drawbacks from different approaches. The report didn’t make a specific recommendation but favored a cap-and-trade program that covers a minimum of gasoline and on-road diesel fuels.

The greatest benefits would come from requiring prime suppliers of gas and diesel—which are already defined by the U.S. Energy Information Administration—to purchase carbon allowances, according to the report.

There are about 30 suppliers in each state, according to Daniel Gatti, a clean vehicles policy analyst for the Union of Concerned Scientists.

The report identified two other options for the program: Use existing tax structures through revenue and tax departments or require refineries and fuel importers to acquire carbon allowances.

Every 100 gallons of gas or diesel emits roughly 1 ton of carbon, Jackson Morris, director of the Eastern Energy Project at the Natural Resources Defense Council, told Bloomberg Environment. So, theoretically, one allowance purchased in a transportation cap-and-trade program would allow the entity to emit 1 ton of carbon.

Challenges

The initiative faces a number of potential obstacles, including opposition from the fuel industry, the political challenge of gaining approval from the seven states, and the logistics of regulating a mobile source of emissions.

Representatives from the American Petroleum Institute and Petroleum Marketers Association of America didn’t respond to phone calls and emails for comment.

Kenny Stein, policy director for the Institute for Energy Research, a free-market advocacy group that opposes cap-and-trade programs, said a transportation sector cap-and-trade program would amount to a “not-so-hidden gas tax” that will raise the price of gas at the pump.

“The states should be repealing or rolling back their greenhouse gas caps and reduction goals, rather than imposing economically distortive policies,” he told Bloomberg Environment.

Stein denied that carbon pollution was a problem, saying regulators should focus on “actual pollutants.”

The states should focus on other strategies to meet their long-term greenhouse gas emissions goals, Darren Suarez, director of government affairs at the Business Council of New York State, said. He said the states should provide greater support for electric vehicles and the necessary infrastructure, rapid transit, and new battery technologies.

Switching to power plants from coal to natural gas and not the trading program was the main reason greenhouse gas emissions fell in the RGGI region, Suarez said.

“We need more innovation, not additional regulatory programs,” he told Bloomberg Environment.

Power Sector

The electric power sector in the northeast, which has been subject to RGGI requirements for nine years, is eager to share the burden of meeting greenhouse gas reduction goals and is touting the trading program as a model.

The New England Power Generators Association and environmental groups have jointly urged the states pursue a trading program for transportation, seeking a model rule by the end of 2018.

“If market-based policies are applied to transportation,” they said, “we believe that RGGI’s benefits would be replicated.”

The transportation proposal was also applauded by the Business for Innovative Climate and Energy Policy network at green investor group Ceres. The network includes 45 companies, including Fortune 500 companies such as Adobe Systems Inc., Gap Inc., eBay Inc., General Mills Inc., Starbucks Corp., and Nike Inc.

‘Long Time Coming’

A great deal of groundwork has already been laid at the staff and agency level for the transportation program. “It’s been a long time coming,” Morris of the NRDC said.

However, setting up the program will be politically challenging given the clout of the oil industry, Gatti said.

“To actually overcome the interests of the oil industry, agency officials are going to need to have a clear signal from their governors that they are ready to move forward on clean transportation,” he told Bloomberg Environment in an email.

A regional transportation program would raise costs for regulated parties, just as RGGI raised costs for electric power generators, according to Gatti. But he said RGGI has also saved consumers money through energy efficiency investments and the transportation program would do the same through cleaner transportation options.

Emil H. Frankel, a senior fellow at the Eno Center for Transportation, told Bloomberg Environment that states will not only face opposition from the fossil fuel industry, but are likely to face challenges from the Trump administration, which he said could be “a force against actions by the states.”


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