Gasoline prices could increase by as much as 17 cents a gallon under an ambitious plan to reduce carbon emissions from cars and trucks that Massachusetts and nearly a dozen other states issued Tuesday.
Though the effort, called the Transportation & Climate Initiative, has been more than a year in the making, the draft agreement provides the first clear parameters of what motorists along a long stretch of the East Coast from Virginia to Maine, with some 52 million registered vehicles, could pay to fight global warming.
Massachusetts Energy and Environmental Affairs Secretary Katie Theoharides noted that motor vehicles are responsible for more than 40 percent of global-warming pollution in the region. The “fundamental purpose” of TCI, she said, “is to address the climate crisis that is already having increasingly large and damaging effects on every one of our communities.”
The proposal aims to reduce greenhouse gas emissions from tailpipes by 20 percent to 25 percent over a decade. A complicated measure with multiple moving parts, TCI could be more or less expensive for motorists depending on how aggressive states are in meeting those emission targets: anywhere from an extra 5 cents per gallon to 17 cents per gallon at the pump, officials estimated Tuesday.
Under the plan, wholesale suppliers of motor fuels would be required to buy pollution allowances through periodic auctions, with the proceeds going back to the states. Suppliers could then buy and sell those credits, and also decide how much of their costs to pass along to consumers.
Each state still has to make a final decision to participate in the compact. In Massachusetts, Governor Charlie Baker has been an enthusiastic promoter of TCI, and has pledged to use the proceeds — estimated to be around $500 million a year — for transportation projects starting as soon as 2022.
But there was at least one important dissent Tuesday: New Hampshire, where Governor Chris Sununu balked at the concept, issuing a statement contending that New Hampshire residents would end up paying to fix crumbling infrastructure in other states.
“This program is a financial boondoggle,” the Republican governor said.
Vermont Governor Phil Scott, also a Republican, has expressed concerns in the past. A spokeswoman for Scott said Tuesday that his administration is still analyzing the proposal.
The advent of the program also presents tricky politics for Baker in Massachusetts, as motorists could face not one but two increases in fuel prices. The state Legislature next year is preparing to debate a package of major transportation improvements that is widely expected to include an increase in the state gas tax.
On Tuesday, Senate President Karen Spilka hinted the Legislature will look at other revenue sources in addition to the possible gas cost increases tied to the climate change initiative.
Spilka said she is “keenly aware that the Transportation Climate Initiative alone is unlikely to solve all of our transportation woes or be enough to tackle the mounting effects of climate change. The Senate will consider solutions to tackling these issues in 2020 and ensure those solutions are supported with adequate resources.”
And the House chairman of the Legislature’s transportation committee, Representative William Straus, noted an increase in the gas tax would provide more immediate and definitive funding for transportation improvements.
“If you have a revenue stream that doesn’t begin for over two years, and the amount is presently unknown, you can’t even begin the planning and setting of priorities,” Straus said.
Baker has said he opposes an increase to the state gas tax. But he has also said TCI is not technically a tax, although it would function much like one. And his transportation secretary, Stephanie Pollack, has said a gas tax increase could undermine TCI’s prospects in Massachusetts.
Last week Baker gave a full-throated endorsement of TCI before business leaders and environmental advocates in downtown Boston, urging them to rally behind the program.
“This program obviously is designed both to support public transit initiatives as well as other carbon reduction initiatives that you can pursue,” the governor said then.
The administration has said that half of the new revenue from TCI would be dedicated to public transit, specifically on initiatives that would reduce carbon emissions: electrifying buses and commuter trains, for example, or adding more vehicles to increase system capacity.
The rest could be spent on biking and pedestrian infrastructure, electric vehicle rebates or charging infrastructure, or even improving broadband in rural towns to make telecommuting easier.
Elizabeth Turnbull Henry, president of the Environmental League of Massachusetts, said she doubts that the higher costs of driving from the TCI fee alone would get people to drive less — and pollute less. Instead, she said, the bigger impact would come from using the money from that fee to promote cleaner-burning alternatives.
“The main benefit from this is the revenue, the opportunity to be making investments we need to decarbonize and electrify,” Henry said.
Under TCI, the pollution allowances would decline over time, presumably making them more expensive. The system would be modeled after a similar regional cap-and-trade program that’s already in place for power plants and widely considered to be successful.
“The goal is that as the allowances become more scarce, their cost goes up, sending the signal that the market still needs to work on cleaner options,” Theoharides said.
But their direct impact on emissions could prove to be modest: Massachusetts officials acknowledged that carbon emissions from vehicles in the region might decline by 6 percent to 19 percent over the 10-year period even without TCI, largely due to increases in fuel efficiency and the growth of electric vehicles.
However, the administration stressed that TCI would lock in a decline of a minimum of 20 percent.
Groups that support TCI — including business associations such as the Associated Industries of Massachusetts and the Massachusetts Competitive Partnership — note the state is under legal pressure, thanks to a 2008 state law, to aggressively reduce its greenhouse gas emissions, with the transportation sector a major source of carbon pollution.
However, critics of the program have argued TCI is effectively a tax hike.
“Not only will commuters pay higher prices for gas, they’re going to be paying higher prices for goods and services because businesses can’t absorb those costs without passing them along to customers,” said Christopher Carlozzi, state director for the National Federation of Independent Business.
He added that businesses close to the northern border would face a competitive disadvantage if New Hampshire does not go along: “It’s already hard enough to operate in the Commonwealth.”
Two of the fuel industry’s main trade groups in the region — the American Petroleum Institute and the New England Convenience Store & Energy Marketers Association — have still not taken a stance on TCI. Instead, they prefer, for now at least, to share information with state regulators about their concerns and logistics.
“We understand the importance of good climate stewardship, but it must be balanced with the costs our citizens, businesses, and visitors can reasonably bear,” said Jon Shaer, executive director of the fuel marketers association.