TCI Update: Final Model Rule Addresses EJ, but Political Will May Be Lacking

Foley Hoag LLP - Energy and Cleantech Counsel
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Foley Hoag LLP - Energy and Cleantech Counsel

On June 10, 2021, the Transportation Climate Initiative Program (TCI-P) states released a final model rule creating a regional cap-and-trade-program to reduce carbon emissions from the transportation sector. We wrote about the draft model rule and its implementation challenges when it was released at the beginning of March. Now, after a two-month stakeholder engagement process, the jurisdictions working to implement the program ask stakeholders to weigh in on the guidance documents, plans, and strategies necessary to implement the TCI framework while a vast majority of the member states sit on the sidelines, leading many to question whether TCI-P can actually make it over the finish line.

The final model rule keeps the overall regulatory structure intact from the draft model rule, but provides additional guidance around the use of auction revenues and emissions reporting requirements. The program would require that at least 35% of allowance auction proceeds be invested in overburdened and underserved communities, and that member states create an Equity Advisory Body to guide future decision-making and assess the impacts of the program. These updates are a result of stakeholder feedback that the program should be responsive to the specific needs and preferences of the people and communities within each participating state. These comments reflect the environmental justice initiatives underway in many of the member states.  The bottom line concern is that, if not carefully designed, TCI-P could function as a regressive tax on consumers with a disproportionate impact on disadvantaged communities.

While supporters of the TCI-P tout the public health benefits associated with reduced carbon emissions in from one of the highest greenhouse gas emitting sectors of the U.S. economy, it’s not clear at this point whether enough member states will participate for the program to have a meaningful impact. TCI-P was initially comprised of thirteen member states. Membership fell to twelve when New Hampshire dropped out in 2019.  To date, only Massachusetts and Washington, D.C. have made formal commitments to participate in the TCI-P market. It remains uncertain whether Vermont, Delaware, Maryland, New Jersey, New York, North Carolina, Pennsylvania, and Virginia – all of whom are credited with collaborating on the model rule – will join Massachusetts and Washington, D.C. Industry and environmental advocates remain strongly in favor of these states’ participation, including in New York, which many consider a lynch-pin to the success of the endeavor. Anne Reynolds, Executive Director of the influential Alliance for Clean Energy New York (ACE-NY), stated in December 2020 when New York and the other Eastern states committed to continuing discussing and developing the initiative,

There is broad recognition that New York will need serious investment in public transit, electric vehicles, and charging infrastructure in order to meet our mobility and climate goals, especially in underserved communities. TCI will be an effective regional structure for making those investments, and it makes sense for New York to act in concert with other states in the region.

While Connecticut and Rhode Island continue to support the program, their legislatures recently adjourned without voting on the bills that would enable the respective states to join the TCI-P next year. Stay tuned for the next legislative sessions.

In the meantime, the public may submit comments on the draft guiding principles for public engagement, model implementation plan, and proposed strategies for regional collaboration that accompany the final model rule until August 13, 2021.

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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