Guest post by Roger Caiazza
On October 1, 2019 the Georgetown Climate Center announced that the framework for a draft regional Transportation Climate Initiative policy to reduce greenhouse gas pollution from the transportation sector was available. I encourage residents of the participating jurisdictions to comment on the draft framework because it will surely impact your transportation options and costs.
According to the distribution email: “This high-level framework represents an important milestone in the jurisdictions’ bipartisan regional collaboration this year, and reflects extensive public engagement, technical analysis and consultation. A draft memorandum of understanding (MOU) building on the framework is anticipated in December of 2019. After considering further public input, a final MOU is expected in the Spring of 2020, at which point each jurisdiction will decide whether to sign the final MOU and participate in the regional program. TCI jurisdictions encourage all interested parties to provide input and feedback on the draft framework in writing via the online portal on the TCI website. Feedback on the draft framework is most helpful if received by November 5.”
The distribution email describes the Transportation Climate Initiative as follows:
“Pollution from transportation accounts for the largest portion of climate-changing carbon emissions in the Northeast and Mid-Atlantic region (more than 40% region wide). Recent reports by the Intergovernmental Panel on Climate Change found that ambitious reductions are needed within the next decade to avoid dangerous impacts to public health, infrastructure, and the environment. At the same time, people and businesses across the region are calling for cleaner, more efficient, more equitable, and more resilient transportation options. Transportation and climate issues don’t stop at state borders, and regional challenges call for regional action, in addition to efforts undertaken by individual states.”
“Thirteen jurisdictions, including states led by governors from both parties, participate in TCI: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia, and the District of Columbia. With facilitation from the Georgetown Climate Center, the TCI jurisdictions work together toward two overarching goals:
· Making significant reductions in greenhouse gases and other harmful air pollution from transportation across the region; and
· Delivering modern cleaner, more resilient transportation systems that benefit all our communities, particularly those underserved by current transportation options and disproportionately burdened by pollution.”
The purpose of the framework is to “foster an informed public conversation”. The draft is a high-level regional policy proposal for public input. It “reflects progress to date on several key elements of a proposed program, informed by public and expert input received so far”. The input report claims that more than 1,000 people have participated in workshops and webinars and that “Online submissions have come from individuals, non-governmental organizations, associations and
businesses, and from coalitions of organizations”.
I have not participated in the regional meetings, but did attend two New York transportation workshops. The participants do not represent a cross-section of society. Instead attendees were the usual suspects of advocacy organizations, environmental activists, and crony capitalists. It is obvious where the framework is going based on the biased input.
There are six program design elements: equity; applicability; compliance and enforcement; flexibility, allowance allocation, and stringency; regional program administration; and additional program design elements. I will address each below. Note that the overall plan is to control emissions by setting a cap on emissions and then developing a market trading program which, theoretically, is an efficient way to implement emission reductions.
Equity is a common element in all recent environmental initiatives. According to the framework draft: “TCI jurisdictions embrace the goals of equity, environmental justice, non-discrimination and meaningful public participation. TCI jurisdictions have committed to working with people and communities to develop and implement a regional policy that addresses the urgent need to reduce greenhouse gas (GHG) emissions and other harmful pollutants generated by the transportation system, while seeking to improve equity, mobility and community engagement.” Is there anyone who disagrees with those goals? Cynic that I am, I suspect they are prominently included to cater to a particular demographic who might, upon serious review of the plan, realize that this kind of program will significantly impact those who can least afford the inevitable extra costs and become opponents of the initiative.
There are two components to the applicability design element: affected fuels and emissions and regulated entities. The proposed program would “cap emissions of carbon dioxide from the combustion of the fossil component of finished motor gasoline and on-road diesel fuel in the region”. The regulated entities would include “owners of fuel at terminals within the TCI jurisdictions and owners of fuel delivered into the jurisdiction for final sale or consumption in the state from a facility in another jurisdiction. Owners and operators of fuel supply infrastructure (terminals, pipelines, distributors, etc.) may also have reporting or recordkeeping obligations.” One of my big concerns about this program is that it is flying under the radar of all but a few. I have been active in the Regional Greenhouse Gas Initiative (RGGI) since its inception and was part of an organized industry response that had extensive experience with this kind of pollution control program. I suspect that the proposed regulated entities for the TCI are not nearly as experience or organized and may not be able to provide meaningful comments on the plan even if they are aware of this initiative. The general public will likely only be aware of this when the costs shoot up and then will blame the evil fossil fuel industry.
There also are two components in the compliance and enforcement design element: emissions reporting requirements and monitoring and verification. Fuel suppliers would be required to “report emissions to TCI jurisdictions, plus supporting information” and compliance obligations would be calculated based on the emissions that occur when the affected fuel is combusted, using standard emission factors developed by the United State Environmental Protection Agency (US EPA), California, or other similar sources”. Based on my experience with electric generating sector emissions reporting it would be much easier for the affected sources to report fuel quantities and let the jurisdictions calculate the emissions. EPA emission monitoring reporting requirements spawned a niche industry that was much more complicated than it had to be and the authors of the initiative appear to want to emulate that approach. The draft framework proposes that TCI jurisdictions would “establish an electronic emissions reporting system informed by existing reporting requirements for fuel suppliers”. I worry that the pre-disposition of the developers of the framework to require reporting emissions rather than simply using existing reporting requirements for fuel suppliers will unnecessarily complicate reporting.
The flexibility, allowance allocation, and stringency design element is complicated and skeptical concerns are usually overlooked. As is the case with RGGI and New York’s carbon pricing initiative for the electric sector, the authors of the draft framework rely heavily on economic theory. However, in my opinion, reality is different for these programs. The draft says that the program will incorporate “allowance banking and multi-year compliance periods and include price-based mechanisms for cap flexibility and cost containment based on examples from RGGI.” This flexibility approach is based on the premise that the affected sources will somehow treat the allowances as a storable commodity and make long-term plans for complying with the rules to efficiently reduce emissions. In reality, the affected electric generating sources in RGGI and, I can almost guarantee in this program, will treat this added expense just like a tax. It is just an added cost to doing business and the planning horizon for costs is the short-term compliance period. I believe that disconnect will eventually cause unanticipated problems.
In the successful EPA acid raid program, sulfur dioxide (SO2) allowances were allocated based on past operations. Future allocations were initially set in 1990 at half the historical rate by 2020. Affected sources installed control equipment or switched to lower emitting fuels and sources that did not have cost-effective options purchased the excess allowances from the facilities that over-controlled their emissions. The resulting reductions ended up costing much less than initially expected and were implemented sooner than the deadline. However, reductions came primarily from fuel switching to lower sulfur coal which was economic, in no small part, due to the de-regulation of the railroad industry. This was not anticipated when the rule was enacted.
The authors of this program are basing this program on RGGI’s auction allocation approach. RGGI auctions its allowances so that the affected sources have to buy allowances to operate. This “cap and auction” approach is supposed to invest the auction proceeds in emission reduction programs. On the surface it appears that this worked in RGGI because the CO2 emissions cap has gone down from 188 million tons per year in the initial 2009-2011 compliance period to 62,452,795 tons in 2017. In 2020 the cap will be 56,283,807 tons. However, the observed reductions in RGGI are primarily due to fuel switching to natural gas which is now cost-effective because of the hydraulic fracturing natural gas revolution. When you look at the reductions that can be traced back to the auction investments, those investments are not a primary driver of observed reductions. In New York, $558.9 million auction proceed investments have only reduced CO2 emissions 1,116,587 tons compared to 2009 to 2018 emission reductions of 10,074,794 tons so the investments are responsible for only 11% of the observed reductions. Investment reductions for all of RGGI range from 24% to 4% depending on the assumptions made concerning displaced fuels.
There is an important difference between cap and trade programs for SO2 and nitrogen oxides (NOx) emissions and cap and invest programs for GHG emissions. There are add-on control options for SO2 an NOx whereas there isn’t any cost-effective options for CO2. As a result, the only options for CO2 trading programs are to switch fuels or run less. For the TCI that means replacing vehicles to hybrids or electrics or switching to public transit. One would hope that the stringency of the proposed program will be based on reasonable expectations of transportation alternative changes but the key point is that the stringency is a major factor affecting costs If they get too ambitious the costs will soar.
In the regional program administration design element, a regional organization would be “used to conduct carbon market monitoring, auction administration and allowance tracking. This would include the establishment and maintenance of a system to collect and manage reported emissions-related data from regulated entities and track allowance accounts. Emission allowance and transportation fuel markets would be monitored on an ongoing basis regional program administration”. In the past some of the loudest advocates for this type of program ended up in the regional organization and I have no doubts that the same will be true for this program.
The additional program design element includes investment of proceeds and complementary policies. While these are necessary, they also are opportunities for cronyism. Obviously there has to be a bureaucracy set up to invest the proceeds and the complementary policies offer all sorts of opportunities to feather the nest of connected advocates for this program.
This initiative has operated without general public knowledge for several years. Although the advocates for this program probably believe that they are doing the will of the people the limited audience involved so far has biased the approach. For starters the basis of the program is “the urgent need to reduce GHG emissions and other harmful pollutants generated by the transportation system”. Most people who have bothered to wade through the documents believe that so are ready for this kind of program. Advocates also believe “people and businesses across the region are calling for cleaner, more efficient, more equitable, and more resilient transportation options”. Again in their echo chamber that may be true but I believe the majority of people are pretty happy with what we have available. The disconnect between aspirational goals and the real world will inevitably become obvious.
The reality is that Roger Pielke Jr.’s Iron Law of Climate Policy is an inevitable outcome for the changes envisioned for the TCI. His “iron law” states that “while people are often willing to pay some price for achieving environmental objectives, that willingness has its limits”. I have been unable to find any mention of costs in the publications. However, at the meetings I have attended conversations with attendees have talked about dollar and more adders to the cost of fuel. I imagine that amount will exceed the willingness of the public.
In the introduction I encouraged residents of the participating jurisdictions to comment on the draft framework because it will surely impact your transportation options and costs. It is completely fair to ask for cost estimates now before they proceed any further. You can also ask how this is supposed to work in a limited area of the country. Will you get taxed if buy gas across the state line? If nothing else submit a comment saying how much you are willing to pay and why. TCI jurisdictions encourage all interested parties to provide input and feedback on the draft framework in writing via the online portal on the TCI website by November 5. Please take them up on that.
Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York. This represents his opinion and not the opinion of any of his previous employers or any other company he has been associated with.