Guest post by Roger Caiazza

On December 17, 2019 the Transportation and Climate Initiative (TCI) hosted a public webinar that invited public input on “a new draft proposal for a regional program to establish a cap on global warming pollution from transportation fuels and invest millions annually to achieve additional benefits through reduced emissions, cleaner transportation, healthier communities, and more resilient infrastructure.” This is a follow up to my earlier post describing the initial draft framework for this initiative.

Overview

The TCI is a regional effort by thirteen jurisdictions, , Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia, and the District of Columbia, facilitated by the Georgetown Climate Center. There are 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 TCI’s Regional Policy Design Process 2019 web page provides links to the draft of the Memorandum of Understanding (MOU). If a jurisdiction agrees to pursue the initiative in the Spring of 2020, they will sign this document. It contains an appendix that describes the goals and schedule, the rules for establishing the program, rules for investing the proceeds, sets up another bureaucracy to implement the program, and defines a couple of other operating rules. There also is a link to a summary of the initial evaluation results.

The announcement encourages people, companies, organizations, and communities to provide their input on the modeling findings and draft MOU to inform the final program design. They say that “Feedback is welcomed on all aspects of a potential program, and TCI jurisdictions are highlighting specific topics on which public input is of particular interest. Those topics include:

· What factors should TCI jurisdictions consider when setting the starting level and the trajectory for a regional cap on carbon dioxide emissions from transportation fuels?

· How should the compliance period be structured to provide needed flexibility, while ensuring environmental integrity?

· What factors should TCI jurisdictions consider when designing mechanisms for managing uncertainty regarding future emissions and allowance prices?”

Observations

I believe that this process is operating in a bubble. The TCI started in June 2012 and since that time a small group of jurisdictions and people have been working on a plan to reduce GHG emissions from the transportation sector. The about web page notes that “The initiative is facilitated by the Georgetown Climate Center with support from its funders, including the Barr Foundation, Energy Foundation, Hewlett Foundation, John D. and Catherine T. MacArthur Foundation, John Merck Fund, New York Community Trust, Town Creek Foundation, and our core funder, Rockefeller Brothers Fund.” The supporters and jurisdictions are convinced that climate change is a threat and that we have to do something. I believe it is a major problem that while the folks running this show have convinced themselves that they are engaged with the public the fact is that the only segment of the public that is aware of this at this time are folks that believe that climate change is a threat and we have to do something. As a result, I worry that it will be a fait accompli by the time the rest of the public catches on to what they are planning to do.

Another issue for the general public is that the available documents are written in “regulatory speak” which is a chore for anyone to try to understand even if they have relevant background and experience. In order to sift through the documentation in order to make meaningful comments takes time and effort. Anyone who has a real job and family probably does not have the time to attend stakeholder meetings or try to understand what is going on, much less make comments. On the other hand, there are many non-governmental organizations that have the time to attend stakeholder meetings, are likely funded by the same organizations funding the TCI, and have the resources to develop comments to support their agendas. Unfortunately, the TCI folks believe or want to believe that they are engaged with all of society rather than just a motivated subsection.

TCI Recommendations

The draft MOU bases its recommendations on modeling future emissions, economic effects and public health outcomes. The key findings that provide the basis for the MOU recommendations are described in the summary of evaluation results:

· “Under all three cap reduction scenarios, the program is projected to produce positive overall environmental, health, economic and other benefits.”

· “A declining emissions cap could lock in decreases in carbon dioxide emissions that are expected through 2032 and potentially drive additional reductions.”

· “The program would enable the jurisdictions to work with communities and businesses to reduce carbon dioxide emissions through programs that expand access to clean mobility and other transportation options, spur economic growth, and improve the lives of residents.”

Everything sounds wonderful but the devil is in the details.

My only experience with the emissions and economic modeling was during the development process for the Regional Greenhouse Gas Initiative (RGGI). Despite their confidence in the modeling results common sense suggests caution. The documentation includes a graph of the historical variation of gasoline price relative to 2019 which shows that it has been up to $1.50 higher and $0.90 lower going back to 1999. They claim that the modeling shows that if emissions are reduced 25% that the price increase will only be $0.17. In order for me to have confidence in that claim I would have to see a model validation of gasoline prices projections relative to the observations. Based on my RGGI experience it is asking a lot of these models to adequately project the effects of a tweak in gasoline price taxes.

I had the impression during the webinar presentation that the TCI approach proposed is based on the RGGI approach because RGGI was “successful”. I see no reason to believe that the RGGI results provide a basis for TCI success. Last month I posted on this presumption. I showed that fuel switching was the most effective driver of emissions reductions since the inception of RGGI. That occurred because affected sources switched to a cheaper alternative and I don’t think you can make the argument that an electric vehicle is a cheaper alternative. Emission reductions from direct RGGI investments were only responsible for 5% of the observed reductions. This result cannot be over-emphasized in this context because barring a magical solution there is no reason to expect something like the reduction in natural gas prices due to a technological innovation. RGGI investments in emission reductions were not efficient at $897 per ton of CO2 removed. In the TCI all the emission reductions will occur as the result of investments and I have no reason to believe that the poor investment showing in RGGI will improve much.

I believe that the biggest issue is cost. I leave it to the reader to determine what price point would be unacceptable but I think that their first estimates don’t exceed that threshold. The summary states: “If the regulated entities in the petroleum industry choose to pass the costs of compliance with a cap and invest program on to consumers, our modeling estimates an incremental price increase in 2022 of $0.05, $0.09 or $0.17 per gallon in the 20%, 22% and 25% Cap Reduction Scenarios, respectively.” I believe that the regulated entities will simply consider this a tax and cannot imagine any scenario where the petroleum industry would not “choose to pass the costs of compliance with a cap and invest program on to consumers”. Even though these numbers don’t exceed my acceptability threshold I have to spend time evaluating the projections because they seem low.

I could devote an entire post to just these estimates but will only note that these modeling are relative to a reference or business as usual scenario. The summary notes that, in this scenario, they expect “that carbon dioxide emissions from on-road transportation fuels are expected to decrease by 19 percent by 2032 compared to emissions in 2022. This decline is largely the result of improving vehicle efficiency and greenhouse gas emission standards and a shift away from internal combustion engines and toward zero emission vehicles (ZEVs). The shift to ZEVs is achieved through implementation of existing federal and state regulations, shifts in consumer preferences, and innovation that lowers technology costs.” That means that their price increases really only represent a reduction of 1%, 3%, and 6% rather than the 20%, 22%, and 25% showcased values. The analysis admits that if things don’t work out as well as they think that the reference case could have reductions as low as 6%. For all intents and purposes the 19% figure presumes that one out of five new cars purchased in 12 years will be an electric vehicle. I do not find that credible based on my preferences and most people I have talked to. As a result, for those jurisdictions that have a 25% transportation sector emission reduction target I think the actual costs will be much higher.

Conclusion

This process continues to move ahead within a bubble of motivated agents of change. Even if I were confident that a groundswell of public input to the stakeholder process would be acknowledged, the fact is that developing comments beyond a simple “this is just another tax” is difficult and few people outside the bubble have time to do so. If there is interest expressed in the comments then I could provide some thoughts on potential submittal topics.

One final note. Before any estimates of costs were available the Barr Foundation sponsored a survey from MassINC Polling Group. Steve Koczela, president of The MassINC Polling Group, claimed that “Support was broad, stretching across demographic and party lines and throughout the region.” He also said that “This is a complex policy, and so we took the time to explain the basics of how it would work and how states might use the funds generated by it”. I believe that this poll is deeply flawed primarily because it asked whether people supported feel good measures without the context of what this might cost. I think there is a corollary to the concept that you can prove anything with statistics. In particular, you can prove anything with a survey poll. The Barr Foundation sponsored this poll to provide support for the TCI which they also fund. I believe they got what they paid for.

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.