Three states and the District of Columbia reached agreement on December 21 to combat climate change by reducing carbon dioxide emissions from the transportation sector via a cap-and-invest system.
Massachusetts, Rhode Island, Connecticut and the District of Columbia entered into a final Memorandum of Understanding (MOU) to launch the Transportation and Climate Initiative Program (TCI-P), a proposed cap-and-invest system for the transportation sector in the Northeast and mid-Atlantic. These four jurisdictions are part of the Transportation and Climate Initiative (TCI).
Following one year of emissions reporting in 2022, the TCI-P will be fully operational starting in 2023. A multijurisdictional base annual carbon dioxide emissions cap equal to the sum of the participating jurisdictions’ carbon dioxide emissions budgets will be established in 2023.1 Large gasoline and diesel fuel suppliers will be required to purchase allowances for the carbon dioxide emissions that result from the combustion of fuels they sell in the region over three-year compliance periods. The participating jurisdictions will sell the allowances. The primary regulated parties will be the owners of fuel at terminals. The total number of allowances available will decline each year through 2032. Participating jurisdictions will accept allowances sold by other participating jurisdictions. The TCI-P will also allow for banking of allowances for use in future compliance periods, and provide compliance alternatives, including the use of offsets.
Auctioning those allowances is expected to generate proceeds for the governments in the participating jurisdictions to invest in clean transportation projects that are in line with TCI-P goals, such as public transit improvements, zero-emission buses, cars and trucks, walking and biking infrastructure, and electric vehicle charging stations. The TCI-P is expected to curb emissions by up to 26 percent by 2032, generating more than $3 billion in investments.
The MOU requires a number of local government actions, including the implementation of a regulatory program in each jurisdiction to implement the TCI-P, a commitment to cut carbon dioxide emissions from on-road vehicles, the allocation of at least 35 percent of program benefits to disadvantaged communities, and the creation of advisory boards to ensure that overburdened and underserved communities provide input into decision-making within each jurisdiction.
The TCI is a long-standing collaboration among northeast, mid-Atlantic and southeast states and the District of Columbia to reduce greenhouse gases and other air pollution. Many advocates hail the agreement as a key development in state climate policy; however, several other TCI states refrained from joining the agreement, citing potential adverse impacts, such as the potential for increased gasoline prices if fuel suppliers pass compliance costs on to consumers. Absent from the MOU were nine other states that had participated in planning discussions for the program: Delaware, Maine, Maryland, New Hampshire, New Jersey, New York, Pennsylvania, Vermont and Virginia. However, in a statement released on Monday, eight states—Delaware, Maryland, New Jersey, New York, North Carolina, Pennsylvania, Vermont and Virginia—signaled that they will continue to work with the initial four TCI-P jurisdictions on the development of the details of the TCI-P.
1 The 2023 base annual carbon dioxide budgets for each jurisdiction will be: Connecticut: 13,497,957 metric tons; District of Columbia: 877,715 metric tons; Massachusetts: 24,467,216 metric tons; and Rhode Island: 3,291,658 metric tons.
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2020 White & Case LLP