The Transportation and Climate Initiative (TCI)

On December 17 the Georgetown (Law School) Climate Center revealed its long-awaited Transportation and Climate Initiative (TCI) draft Memorandum Of Understanding (MOU) (https://www.transportationandclimate.org). Gov. Phil Scott will soon be asked to sign Vermont into TCI, that advocates say is the most important climate change initiative of 2020.

TCI is a multistate regional agreement to drive up the price of motor fuel (gasoline and on-road diesel). It proposes to start at five, nine or seventeen cents per gallon, and escalate upward from that, with no declared maximum.

The backers of TCI believe that “climate change poses a clear, present, and increasingly dangerous threat to the communities and economic security of each [participating jurisdiction].”  The MOU says that the participating states will “need to implement bold initiatives to mitigate the impacts of greenhouse gas emissions from the transportation sector,” which produce 40% of human-caused emissions.

TCI will drive down those transportation sector emissions by driving up the price of gasoline and diesel fuel so that Vermonters will drive less, drive smaller cars, use electric vehicles, walk, ride bicycles, use public transportation, move closer to school and work, and so on.

TCI will accomplish this with what it calls a “cap and invest” system. TCI will set a cap, or limit, on carbon dioxide emissions from burning motor fuel. The cap will be tightened down year by year, requiring motor fuel to be made ever more expensive. Distributors of motor fuel – of which there are eighty in Vermont – will be required to purchase “allowances” in a TCI-managed auction market to match the motor fuel they have sold in each reporting period. TCI will create and issue as many “allowances” as it deems necessary to create higher fuel prices that will reduce fuel use and thus reduce CO2 emissions.

 Motorists, including those driving passenger cars, pickups, SUVs, vans, school buses, delivery trucks, contractor vehicles, milk tankers, ambulances, snowmobiles and motorcycles, will pay for the “allowances” when they buy the higher-priced motor fuel at the pump.

TCI will distribute the revenues raised from the sale of its “allowances”, after covering administration and legal costs, among the participating jurisdictions according to a formula not yet determined. The states are supposed to use these revenues to “strategically invest in programs to help their residents transition to affordable, low-carbon transportation options”. Paying people to buy electric cars, and building charging stations for them, is a recommended use of the funds.

By increasing gasoline prices by from 5 to 17 cents per gallon the first year, and higher amounts in succeeding years,, the TCI plan will clearly be regressive, hitting working people and the poor hardest, especially in Vermont’s rural areas. The MOU states that participating jurisdictions are “committed to investing in and mitigating the impacts [caused by the higher fuel prices] on low-income and disadvantaged communities…vulnerable to the impacts of a changing climate”, which suggests that the TCI revenues would be used to subsidize those persons.

The TCI’s “reference case” model projects that, without TCI, CO2 emissions from the 12 states will decrease by 19% from 2022 to 2032. If TCI is implemented, the model projects a 20% to 25% reduction over that decade. To achieve this, TCI would extract $56 billion from motor fuel users in the 12 states to reduce carbon dioxide emissions by a little more than 5 percent over those ten years. 

Because the idea of the carbon tax has become unpopular in Vermont, the TCI advocates declare that TCI is not a carbon tax. However, the mandated purchase of TCI “allowances” will indisputably add an increasingly punitive government-mandated cost, payable by motorists at the pump, on the carbon content of gasoline and on-road diesel fuel. That cost is a tax on carbon.

TCI expects that each state legislature and governor will enact legislation to enforce the TCI “allowance purchase” requirement on its motor fuel distributors.

An unresolved question is whether, even if Vermont does not join TCI, TCI can still impose the tax on fuel sold to Vermont distributors at regulated terminals in Massachusetts and New York, who would then pass the cost on to Vermont distributors and through them to retail customers at the pump in Vermont.

Another unresolved question is whether TCI can require Vermont distributors to buy allowances with respect to motor fuel brought in from Canada.  Quebec is a party to a cap-and-trade plan with California. The Federal government is suing to terminate it as beyond the power of a state government.

Finally, the composition of TCI’s governing body, and the formula for distributing allowance revenues among the participating jurisdictions, remain to be determined.

On December 17 New Hampshire Gov. Chris Sununu announced that his state would not participate in TCI, which he described as “a financial boondoggle” that would force drivers to “bear the brunt of artificially higher gas prices.” Massachusetts Governor Charlie Baker has supported TCI as a source of revenues for improving public transportation. Vermont Governor Phil Scott has adamantly opposed any carbon tax.

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