Regional US Transportation & Climate Initiative Program Comes to an End

Latham & Watkins LLPA multistate cap-and-invest program to reduce carbon emissions from the transportation sector is dead after several participating states pulled out.

Less than one year ago, the governors of Massachusetts, Rhode Island, and Connecticut, as well as the mayor of the District of Columbia, announced that their respective jurisdictions would establish the Transportation & Climate Initiative Program (TCI-P) and released a memorandum of understanding (MOU) describing the agreed-upon principles for adoption and implementation of a regional program aimed at reducing carbon emissions from the transportation sector. But in the past two weeks, three of the four jurisdictions that signed the MOU have pulled out, effectively terminating the TCI-P.

The Transportation & Climate Initiative (TCI) was designed to address carbon emissions from the combustion of transportation fuels, with the participation of Connecticut, Delaware, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, and the District of Columbia. (See TCI Proposes to Reduce Carbon Emissions From Transportation in the Northeast and TCI Releases Framework for Draft Policy to Reduce GHG Emissions From Transportation.) But since 2019, the number of participating states has dwindled, and only four signed on to the MOU.

The TCI-P was intended to be a multijurisdictional cap-and-invest program, under which certain fuel suppliers would have been required to acquire compliance instruments called “allowances” to cover carbon emissions from specified fuels (i.e., fossil-based gasoline and diesel). Each participating jurisdiction would set a “cap” of allowable emissions that declined each year, and hold auctions for allowances that represented the capped emissions. The first reporting period of TCI-P was to start as early as January 1, 2022, and the first compliance period of TCI-P was to start January 1, 2023, or at such later time as at least three jurisdictions completed the legal processes required to implement their individual programs. (See TCI Program Established to Reduce Carbon Emissions From Transportation.)

The first domino to fall was Connecticut, where Governor Ned Lamont cited high gas prices as the reason he likely wouldn’t be able to persuade the legislature to move the TCI-P forward. Massachusetts followed suit, stating that it would move forward with the TCI-P only if multiple states committed. Those departures ended the TCI-P, since the MOU required at least three jurisdictions to implement individual programs to trigger the start of the first compliance period. Citing this fact, Rhode Island announced that it would no longer seek to implement the TCI-P and instead would explore other options in clean transportation.

All the states that pulled out of the TCI-P acknowledged that they would need to find another way to tackle the issue of carbon emissions from the transportation sector. Officials from Massachusetts and Rhode Island stated that they would look to funds available in the recently passed federal infrastructure bill to finance carbon emissions reductions programs, while Connecticut Governor Lamont’s communications director emphasized that “the governor still wants to de-incentivize gas-guzzling cars off the road and reduce consumption of fossil fuels. Those things haven’t changed.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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