STATES

Cap and trade for cars arrives in the Northeast

Nine Northeastern states and the District of Columbia committed yesterday to forming a cap-and-trade system for the transportation sector, embarking on one of the most ambitious regional programs ever undertaken to cut carbon dioxide.

The move underlined liberal-state frustration with the Trump administration, which has committed to rolling back fuel economy standards. It also marked a new chapter in state climate action. Up to now, states have mostly focused their climate efforts on power plants. They've been helped by a wave of coal plant closures in recent years, which has produced a significant drop in power-sector emissions (Climatewire, April 17).

Yet many Northeastern states are still in danger of missing their carbon reduction targets, thanks to a rising tide of greenhouse gas pollution from cars, trucks and airplanes.

Yesterday's announcement represents the first major step toward curbing those emissions.

"As the transportation sector is the largest contributor to carbon emissions in the commonwealth, reducing transportation emissions is imperative to combating the causes of climate change and meeting Massachusetts' aggressive greenhouse gas reduction targets," said Massachusetts Gov. Charlie Baker (R), who has emerged as a leading champion of the program.

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The new effort contained echoes of a previous era, when Northeastern states, exasperated by former President George W. Bush's opposition to climate action, launched a regional carbon cap-and-trade program for power plants.

That program, the Regional Greenhouse Gas Initiative, has helped cut emissions from power plants in nine states by roughly 40 percent since its 2009 implementation.

RGGI will also serve as the template for the states' new transportation initiative, which counts as its members Connecticut, Delaware, Maryland, Massachusetts, New Jersey, Pennsylvania, Rhode Island, Vermont, Virginia and Washington, D.C.

The states said they will spend the next year designing a cap-and-trade program under the umbrella of the Transportation and Climate Initiative (TCI), a program housed at the Georgetown Climate Center.

"This is a great step forward for a region that desperately needs a more modern transportation system," said Jordan Stutt, the director of carbon programs at the Acadia Center, a Boston-based environmental group. "I think this is a reflection of the kind of process we want to see more of when it comes to climate and economic policy."

Others pointed to the additional benefits associated with cutting carbon emissions from cars and trucks, including cuts to other pollutants that are harmful to public health.

"I think it's a really important and positive step," said Paul Billings, national senior vice president for advocacy with the American Lung Association. "Many states in the region have ozone nonattainment areas, and some have [particulate matter] nonattainment areas, as well. So anything that can be done to reduce emissions that are driving nonattainment is a positive thing."

Many of the details of TCI remain to be worked out, but the states committed yesterday to a series of broad principles. Most importantly, carbon emissions from transportation would be capped and the revenue raised by the sale of carbon allowances returned to the states to invest in areas like public transit, biking infrastructure and electric vehicle charging stations.

TCI would be many orders of magnitude larger than RGGI. The states that have committed to the new program reported transportation-sector carbon emissions of 251 million tons in 2015, according to the most recent U.S. Energy Information Administration figures.

Power-sector emissions in RGGI that year totaled roughly 75 million tons. That figure would rise to 125 million with the addition of New Jersey and Virginia, both of which are expected to join RGGI in the coming years.

"I think it's significant because it tackles transportation in a new way that goes beyond relying on federal authority and California's approach, which other states have replicated and relied on," said Kate Larsen, who tracks the transportation sector at the Rhodium Group, a consulting firm. California has special authority under the Clean Air Act to set vehicle emissions standards.

"This gives states a new set of tools in a very different region of the U.S. to test out," she said.

Missing: N.Y.

But if transportation emissions are bigger, so, too, are the challenges in curbing them. Power plants are relatively limited in number compared to the millions of passenger vehicles on the road, and the prospect of raising fuel prices has scared many politicians off any suggestion of cutting emissions from the sector.

Notably absent from the list of states joining TCI yesterday was New York, which reported transportation-sector emissions of 71 million tons in 2015. The Empire State was a founding member of RGGI, and Gov. Andrew Cuomo (D) recently committed to making the state's power sector carbon neutral by 2040 (Climatewire, Dec. 18).

It was not immediately clear why New York was not among the initial list of states. The state played host to two listening sessions in the lead-up to the announcement, and environmentalists expressed hope that New York would ultimately join.

The state's absence nevertheless appeared to highlight the political perils of tackling transportation emissions. New York officials did not provide a reason for the decision.

"Last year, Governor Cuomo called for developing a regional approach to tackle emissions in the transportation sector and we will continue to work with other states on this priority," Kate Muller, a spokeswoman for the New York State Energy Research and Development Authority, wrote in an email.

Oil and gas interests reacted coolly to the news. Kyle Isakower, vice president of regulatory and economic policy at the American Petroleum Institute, noted that U.S. carbon emissions have fallen in recent years and argued that a long-term response to climate change should be based on innovation and technological development.

He highlighted the industry's attempts to invest billions in new technology, efficiency improvements and cleaner fuels, adding, "We will evaluate any proposal that comes out of this effort with an eye to balancing environmental progress with keeping consumer energy costs low in the region."

The proposal also faces potential opposition in climate circles. Massachusetts state Sen. Michael Barrett (D) said states could maximize emissions reductions and minimize economic costs by imposing an economywide fee on carbon emissions. Cap and trade is more difficult to administer and has a questionable history of cutting carbon, he said, pointing to the prices of RGGI carbon allowances, which are mired in the low single digits.

But most concerning is the potential lack of accountability for ensuring states fulfill their promises, Barrett said. The Massachusetts lawmaker said legislatures should hold hearings and demand that regular milestones be met.

"The reports on climate change are increasingly alarming. We're now being invited to step back as a group of chief executives meet behind closed doors," he said in an interview. "There are a lot of questions here. We are looking at the skeleton of a proposal that seeks to defer action on the part of everyone else."

It is unclear how states would formally join TCI once a year has passed. Vicki Arroyo, director of the Georgetown Climate Center, said in an email that those details still have to be worked out.

But Carol Lee Rawn, senior director of transportation with Ceres, said she thinks most states could join through administrative actions from their governor's offices, rather than through bills in state legislatures.

"I think in most cases, it can be done administratively," Rawn said. "And in some cases, it would have to be done legislatively."

RGGI was born in a series of conversations between state environmental officials. It ultimately took six years between the time RGGI was announced in 2003 and its launch in 2009.

But there is little reason to think a transportation program would take that long to establish, said Union of Concerned Scientists President Ken Kimmell. RGGI was a groundbreaking program at the time. Now, it offers a model for states to follow.

At the same time, California and Quebec have moved forward with a cap-and-trade program that includes transportation, offering further evidence for how to proceed.

"Getting these nine states plus D.C. to make significant cuts to emissions in transportation sector will be huge and transformative," Kimmell said.

A 'bridge' to more action

Still, questions remain. Setting a cap on carbon emissions that ensures states achieve deep reductions is likely to be the most pressing challenge facing the TCI coalition, analysts said.

Also to be determined: what industry is regulated under the system. Many observers said the cap would most likely fall on fuel suppliers, which are already regulated and required to keep information on their sales.

Noah Kaufman, a researcher at the Center on Global Energy Policy at Columbia University's School of International and Public Affairs, said the move represents an important step in state climate policy. Even so, its overall climate impact will likely be limited.

Transportation emissions from TCI states accounted for roughly 5 percent of America's total energy-related emissions in 2015, according to EIA data.

The real value, Kaufman said, is in the broader lessons TCI provides for how to cut transportation emissions.

"The transportation sector is so interlinked throughout the country. It's hard to imagine any region going too far ahead of the rest of the country," he said. "It is a step forward, but it's got to be a bridge to broader, stronger action at the federal level to be successful in the end."

Twitter: @bstorrowEmail: bstorrow@eenews.net

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