Compact Could Add Nickel to 17 Cents to Gallon of GasMatt Murphy12/17/19 11:00 AM

STATE HOUSE, BOSTON, DEC. 17, 2019.....[Story Developing] The pact being developed by Massachusetts and other East Coast states to cap carbon emissions from vehicles could add up to 17 cents to the price of a gallon of gas, according to the newest estimates, but could also generate more than $500 million in revenue for state government in Massachusetts.

Leaders from a coalition of eastern states, including Massachusetts, have been working for over a year to develop a regional "cap-and-invest" program to reduce carbon pollution from cars and trucks. They plan to release a draft memorandum of understanding on Tuesday that states would be asked to sign onto next spring once it is finalized.

The officials involved in the effort, known as the Transportation Climate Initiative, are eyeing a reduction in emissions of up to 25 percent by 2032, but it will come at a cost.

The draft will put forward three scenarios for capping emissions from motor fuel, with a final cap proposed after a public comment period ends on Feb. 28.

The plan to reduce carbon emissions from vehicles by 25 percent would add an estimated 17 cents to the price of a gallon of gas at the pump starting in 2022. If states elected for a smaller reduction goal of 22.5 percent, the cost per gallon, based on the group's modeling, would drop to 9 cents. The third option presented in the memo is for a 20 percent emission reduction by 2032 at a cost to drivers of 5 cents per gallon.

The Baker administration, with Energy Secretary Kathleen Theoharides leading the negotiations between the states, has been pursuing TCI since late 2018 as a central component to its transportation and climate agenda.

TCI has significant backing from many of the major employer groups in Massachusetts, including Associated Industries of Massachusetts and the Greater Boston Chamber of Commerce, but has been coming under increasing fire from a small group of Republican legislators and small business groups.

The National Federation of Independent Business in Massachusetts, the Massachusetts Fiscal Alliance and Citizens for Limited Taxation signed on to a multi-state letter released Tuesday opposing TCI because of the additional cost it will add for employers. It considers the program to be akin to a gas tax increase.

A MassINC poll released Wednesday found that a majority of registered voters in Massachusetts, Connecticut, Maryland, New York, New Jersey, Pennsylvania and Virginia -- the largest states in the coalition - strongly or somewhat support their home state's participation in the Transportation and Climate Initiative.

In Massachusetts, 68 percent of the 629 respondents said they support the program, compared to 21 percent who oppose it and 11 percent who are unsure, according to the poll, which was sponsored by the Barr Foundation and conducted before the latest estimated impacts on gas prices were known.

Theoharides said that unlike a gas tax the price per gallon is not fixed and would depend on how the market responds to the caps that get adopted on pollution and how much of the expense suppliers pass on to consumers.

The program would set a limit on emissions from fuel, and hold auctions at which fuel suppliers that transport gasoline into Massachusetts and other states could purchase allowances for every ton of carbon dioxide that the fuel they are carrying would emit when burned.

The states estimate that the program could generate $7 billion a year across the region in proceeds from these auctions, sending $500 million or more back to Massachusetts to be reinvested in clean transit options.

"One of the big pieces for us is getting as many states on board as we can," Theoharides said. The secretary said that while there does need to be a "critical mass" of participation for the program to work, she did not think all 13 jurisdictions would need to sign on for the program to be successful.

Theoharides said the coalition has also estimated $10 billion in public health benefits through the program from reduced cases of conditions like asthma and $892 in avoided costs due to climate change.

Twelve states and the District of Columbia have been working with the Georgetown Climate Center to put together the Transportation Climate Initiative since late 2018.

The cap-and-invest program is modeled off the Regional Greenhouse Gas Initiative, which focused on driving down emissions from power plants, but Theoharides said it has the potential to reduce carbon emissions by three times the levels achieved through RGGI.

The TCI coalition states represent 72 million people and 52 million registered vehicles, with a gross domestic product larger than the economy of California at $5.3 trillion.