Transportation is the largest source of emissions in the states engaged in these discussions, and one that has been rising in recent years. | Getty Images Governors eye regional cap and trade plan to fund transition from fossil fuels

Governors from several northeastern and mid-Atlantic states may have found a way to reduce pollution from cars and trucks and buck the Trump administration, which is trying to weaken auto emissions standards and gut efforts to curb climate change.

Under a regional cap-and-trade plan that a dozen states still are developing, drivers would pay more at the pump through higher prices for gas and diesel. The revenue would be invested in mass transit, electric-vehicle charging and other transportation infrastructure. Republican and Democratic governors and state lawmakers will have to decide whether to back the plan to address the largest source of carbon emissions — and pass on the costs to consumers in what opponents of the proposal are already calling a gas tax.


The coalition of a dozen states and the District of Columbia is hammering out a draft agreement to cap carbon emissions from gasoline and diesel, charging for the emissions and gradually lowering the limit over roughly a decade. The program is modeled on the Regional Greenhouse Gas Initiative, which has reduced emissions in the power sector for several of the states mulling the similar program for vehicles.

The states engaged in the plan, called the Transportation and Climate Initiative, are Connecticut, Delaware, Maryland, Massachusetts, New Jersey, Pennsylvania, Rhode Island, Vermont, Virginia, New York, Maine and New Hampshire. Eight are led by Democratic governors; four have Republicans.

As hopes for federal action on climate change remain dim, state officials see the regional approach as a way to have a significant impact in reducing emissions from the transportation sector.

“In the face of continued inaction and all out climate denial from the Trump Administration, regional, cooperative efforts … are critically important to reduce the pollution that causes climate change and build a robust clean energy economy,” said New York Department of Environmental Conservation Commissioner Basil Seggos in a statement, citing the regional transportation effort, RGGI and the U.S. Climate Alliance.

Support for the idea is not universal. In Maine, a nonprofit group linked to former Republican Gov. Paul LePage issued an alert about the proposal, warning it would raise gas and diesel prices. A flood of comments opposed to the framework from Maine residents poured in. Negative opinion pieces have also been published by daily newspapers in Massachusetts.

For the average consumer, the program will function fundamentally as a gas tax, as fuel wholesalers paying for emissions allowances pass on those costs. But policymakers prefer the term "cap-and-invest," and argue that the benefits of greening the transportation system will limit the cost impacts and keep energy dollars in the region. What's more, they say, avoided emissions will improve public health.

Transportation is the largest source of emissions in the states engaged in these discussions, and one that has been rising in recent years. Environmentalists and policymakers say that reducing emissions from the sector is particularly challenging, in part because sales of electric vehicles have been relatively slow.

Besides meeting their own goals, states with smaller economies see a chance to have a bigger impact by engaging in the regional initiative.

“In the grand scheme of things, Vermont’s emissions are negligible on the global scale but we want to act and we want our action to help instill action across the region and across the country,” said Peter Walke, the deputy secretary at Vermont’s Agency of Natural Resources. “We have a lot of force and effect as a region.”

Advocates hope that state officials and the public will back a plan that promises to invest in clean energy transportation alternatives, which will lead to health benefits from lower emissions.

“It’s not entirely being driven by a climate lens, it’s being driven by a crisis that we’re having in the transportation sector,” said Natural Resources Defense Council’s Jackson Morris. “Taxes are not a winning narrative but reinvesting in a cleaner transportation system that serves your constituents better is a winning narrative.”

While the states have made some effort to engage industry and environmental advocates in discussions, the initiative has been mostly low profile.

At an Albany meeting of large New York energy consumers, including companies with substantial trucking operations or needs, only a couple of hands were raised when a business lobbyist asked who was aware of the TCI effort.

The states involved should do more to make the public aware of the initiative and its potential costs, said Jon Shaer, the executive director of the New England Convenience Store & Energy Marketers Association. He represents gas stations and some fuel suppliers in the region.

“There has to be transparency on this as soon as possible so that the citizenship has an opportunity to weigh in — if they want it, how much they’re willing to pay and where the money goes,” he said. “We are the ones who are going to be collecting this money from the motoring public and we’d like them to know what they’re being charged for.”

There’s no final agreement on the structure of the program. The states released a framework on Oct. 1 laying out some major pieces of the plan, including what fuels the cap would apply to, what entities would have to buy allowances and prioritizing equity for low-income and environmental justice communities.

The framework also focuses on the flexibility for states to use the funds from sales of emission allowances as they see fit.

“States are different and a lot of states have very important rural transportation needs so we need to make sure there’s a balance between urban and rural, and a flexibility for states to customize their programs consistent with the model rule,” said Maryland Department of the Environment Secretary Ben Grumbles in a phone interview.

One major issue that must still be worked out: how the states will divide up the money raised from the sale of the emissions, given that gas sold in one state might be used in another — particularly in metropolitan areas like New York City. That’s a potentially sticky issue because it deals with what share of money each state will ultimately receive if the program moves forward.

Modeling is being undertaken by consultants to quantify potential costs and benefits, including public health impacts. Governors and, where legislative approval is required, state lawmakers will have to decide whether to move forward with the program after spring of 2020 when a final memorandum of understanding is expected.

State officials are waiting to see what the potential for emissions reductions from vehicle fuels is beyond the forecasted base case where they drop about 20 percent from 2022 to 2032. That will help them determine whether the program is going to achieve the intended goals of lowering emissions more quickly.

The modeling will also shed light on how different cap levels would play out. Several state officials said the priority should be to negotiate caps that keep as many states interested as possible, ensuring a larger size of the market.

“The more states that are involved the greater opportunity there is for carbon reductions and to make a real and lasting impact that’s positive for the environment,” Grumbles said.

All of the TCI states except Virginia and Pennsylvania are part of RGGI. (New Jersey is about to rejoin the initiative.) Democratic governors in both states are seeking to join the regional power sector cap-and-trade program.

“We expect to be able to take care of that,” said Virginia Department of Environmental Quality Chief Deputy Director Chris Bast of removing the restriction on participating in RGGI.

Bast said state officials have seen the value of early engagement as they’ve worked to join RGGI. “The path to officially launching a program from TCI is still several years away, but we’re just glad and excited to be at the table to be a part of that from the very beginning,” he said.

Bast said he’s excited about the “transformative” potential of the program for Virginia’s transportation economy. He said they haven’t conducted public polling but that the public is increasingly recognizing the importance of action to reduce emissions.

“It’s going to cost us a lot less to transition now and reduce climate pollution now than it’s going to cost us to deal with the impacts of climate change in the future,” Bast said. “People are supportive of programs where they see the benefit of internalizing the external cost of pollution. For too long we have allowed oil companies to throw away their waste for free and that has a cost to everybody.”

Pennsylvania’s legislature is also controlled by Republicans who have balked at Gov. Tom Wolf’s effort to join the regional cap-and-trade scheme for power plants.

“We’re committed to being a part of the TCI conversations and are looking forward to reviewing the modeling when it’s ready,” said Pennsylvania Department of Environmental Protection spokesperson Beth Rementer. “But we will not make any decisions until the program is fully designed, modeling results are complete, and we get input from interested communities, businesses and other stakeholders.”

While some state officials are very supportive of the TCI process and see great potential, others have been more reserved. The latest push to develop a framework kicked off last December with a statement from all the jurisdictions, excluding New York, New Hampshire and Maine, committing to developing one by the end of 2019.

Despite not signing on in support, officials from all three states are engaged in talks about the development of the program. New York’s Department of Environmental Conservation has scheduled public hearings to gather input on the proposed framework starting later this month.

New York's ambitious economy-wide emissions reduction targets require substantially lower emissions from transportation, and consideration of the most efficient and least cost ways to achieve reductions. The program would be one of a suite of tools to drive lower emissions in transportation, with other policies helping to keep the costs of emissions low and insulating consumers, said a New York state energy official.

New Hampshire’s Craig Wright, director of the Department of Environmental Services’ Air Resources Division, said the state is not committed to anything. Officials there are engaged in part to understand what the impact would be if the program moves forward and New Hampshire decided not to participate.

“We’re taking a cautious approach,” Wright said. “At this point we as an agency haven’t made any recommendations to the governor's office ... We haven't committed to anything but we want to follow the process."