The implementation of a Northeast regional cap and trade system for gasoline distribution took a step forward today when the Transportation and Climate Initiative released a draft memorandum of understanding with participating states, including Connecticut.
The TCI plan would essentially raise the cost of gasoline by imposing an emissions cap and forcing gasoline distributors to purchase carbon allowances at auction. Although the exact price increase will vary from state to state, a similar program in California increased the cost of gasoline by 12 cents per gallon and diesel by nearly 14 cents per gallon, according to a report by the California Energy Commission.
TCI would then continually lower the cap year-over-year, forcing gasoline distributors to purchase more allowances and potentially increasing the cost of gasoline further.
The funds raised from the cap and trade program will be distributed to participating states to invest in mass transit, electric vehicles and potentially reduce vehicle usage by increasing the cost of driving in an effort to combat climate change.
Proponents of the TCI cap and trade model say 40 percent of greenhouse gas emissions are due to transportation and believe that increasing the cost of gasoline will push people to use more environmentally friendly alternatives.
Gov. Ned Lamont has indicated support of the initiative along with governors Andrew Cuomo in New York, Charlie Baker in Massachusetts and Gina Raimondo of Rhode Island.
But the imposition of higher gasoline prices in Connecticut may be difficult for Lamont, who has already exhausted much political capital trying to pass various tolling and transportation plans.
The imposition of a new gasoline tax might prove even less popular with the public.
According to TCI, the MOU is scheduled to be signed in spring of 2020, but signing on to a multi-state compact to increase the price at the pump may be difficult for Lamont and the legislature as it moves into the 2020 election cycle.
Connecticut currently has two taxes on gasoline: a 25-cent gasoline tax and a gross receipts tax on petroleum companies that is passed onto the consumer, increasing the overall cost per gallon. Connecticut has the seventh highest gasoline taxes in the country.
Those fuel taxes go into the Special Transportation Fund to fund road repair, the Department of Transportation, transportation debt and mass transit in the form of buses and trains. Funding for public transportation has grown significantly over the past eight years, according to a review of the STF.
Coinciding with TCI’s release of its project plan, a coalition of 18 organizations along the Atlantic coast, including state chapters of the National Federation of Independent Businesses, American for Tax Reform and the Institute for Energy Research, released an open letter opposing the plan and labeling it a regressive “sin tax” on gasoline.
We do not believe that driving to work, driving for work, transporting children to school, transporting goods, going to the grocery store, and all the other necessary activities that generally require a vehicle should be treated by governments as a sin. These are not activities people can, or should be forced to, avoid.Authors of open letter opposing the TCI plan
“Make no mistake, this is a tax. A carbon tax being implemented through a gas tax,” the authors from fifteen states wrote. “But unlike motor fuel taxes levied in order to pay for roads, bridges, and transportation infrastructure (a reasonable fee for use), TCI would be the equivalent of a ‘sin tax’ – a penalty for engaging in bad behavior. We do not believe that driving to work, driving for work, transporting children to school, transporting goods, going to the grocery store, and all the other necessary activities that generally require a vehicle should be treated by governments as a sin. These are not activities people can, or should be forced to, avoid.”
Gov. Dannel Malloy signed on to the original idea in 2018 and the issue is being handled by the Connecticut Department of Energy and Environmental Services. Former DEEP Commissioner Robert Klee also indicated his support for the proposal in 2018.
“By signing onto the TCI commitment, Connecticut and the region are taking an important step forward to help protect the health and safety of our residents,” Klee wrote in his endorsement the TCI plan. “Over the next year we will work closely with our regional partners to design a proposal that can be adopted by our states and implemented regionally.”
But how Connecticut would engage in the TCI compact – whether it will be through a legislative vote or through executive action by Lamont – remains to be seen.
Massachusetts Governor Baker has already indicated that he will take unilateral action through executive order, although most other states will likely go to their legislatures.
Connecticut currently participates in the Regional Greenhouse Gas Initiative, that imposes a similar cap and trade framework on energy companies to help fund Connecticut’s quasi-public Green Bank, which then uses the funds to subsidize solar energy investments.
According to CT DEEP’s website, the program has raised $193 million since 2008. The Green Bank is also funded by a charge on consumers’ electric bills, and the fund has been raided by the legislature in the past to help fill budget gaps.
Connecticut residents pay the highest electricity costs in the continental United States.
Although the TCI plan would increase the cost of gasoline, those funds would likely not be used to fund projects to benefit drivers. The goal, rather, is to lessen the use of single-occupancy vehicles and shift more commuters toward mass transit and electric vehicles.
“Signatory Jurisdictions will establish in the final memorandum of understanding (MOU) a regional carbon dioxide emissions cap that will decline over time, to reduce emissions from on-road diesel and finished motor gasoline, and an objective methodology for apportioning proceeds to each Participating Jurisdiction, to invest at each jurisdiction’s discretion to support the goals of the program,” the MOU says.