Cap and trade for Maryland transportation?

Transportation Climate Initiative a lie?

It doesn't happen every day that transportation activists from the Central Maryland Transportation Alliance (CMTA) or the Sierra Club get drowned out by shouts from other activists. But that is exactly what happened yesterday at a press conference conducted by a transportation coalition of Maryland transportation advocates when CMTA's Brian O'Malley spoke about the the fledgling  multi-state Transportation Climate Initiative (TCI), a compact between 13 northeastern states and jurisdictions formed to combat emissions. Maybe that Maryland's Republican  Governor Hogan had signed on to the initiative was suspicious enough for the activists from the Climate Justice Alliance to shout "TCI is a lie" and consider the groups that had planned the press conference ill informed.

Climate Justice Alliance members taking over the press conference
(photo: Philipsen)

The Climate Justice Alliance had been founded in 2013 and acts on a national level including Puerto Rico. About half a dozen members used the press conference, which had no press present, except a brief visit from WBAL TV, to express their doubts about TCI. Only when Baltimore's Sam Jordan, spokesperson for the Transit Equity Coalition (BTEC) spoke was the reception friendly. Jordan, served up sound bites that CMTA or the Sierra Club wouldn't say: "No neo-Nazi in Charlottesville has eliminated 10,000 jobs. Larry Hogan has". (Jordan).  Finally the Alliance members filed out of the room, chanting “nothing about us without us” and the local coalition members were among themselves.

"Transit access is a strong predictor of job access. Its important to create jobs, but workers must be able to reach those opportunities quickly, efficiently and reliably. More highways are not the answer. Maryland must invest in maintaining and expanding public transit," Delegate Robbyn Lewis, MD District 46. 

The press conference (see press release here) took place before the official "workshop" of the TCI organizers at the University of Maryland. The workshop was intended to get public input about how TCI should be organized. The hostile position of the Climate Justice people highlighted that dealing with climate change isn't easy, considering that drastic measures of turning away from fossil fuels will always also have social implications. But even among those who don't deny the urgency to combat greenhouse gas emissions, opinions differ about the approach. Especially when it comes to market driven models as proposed in TCI.

TCI and RGGI

The TCI approach is market based in that it assumes a "cap and trade system". It is loosely based on the emissions trading scheme called Regional Greenhouse Gas Initiative known has RGGI or "Reggie" on power plants, also a regional concept in the Northeast of the country. Since it was implemented in 2008 as the nation's first cap and trade system, RGGI reports that states have seen a 37 percent decrease in emissions from electricity, while simultaneously decreasing consumer costs. However, critics maintain that the caps were too high to have resulted on emission reductions and that those reductions came for other reasons than the cap & trade system. Too loose a framework was also a problem for the European cap & trade system. Unlike the California cap and trade model, Reggie doesn't include transportation, i.e.  the nation's largest emitter of greenhouse gases (see my previous blog here). This makes addressing transportation and thus, TCI, of utmost importance. There is an opportunity to learn from Reggie and not set the cap so high again that hardly anybody is in need of trading in credits.

The idea of Reggie

The Regional Greenhouse Gas Initiative (RGGI) is the first mandatory market-based program in the United States to reduce greenhouse gas emissions. RGGI is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector. 

The Climate Justice activists called TCI  "Reggie on wheels". As in the case of the power generation emissions, the cap and trade plan intends to put limits on emissions and allows trading overruns for credits from those who stayed under the limits. The general market oriented approach is to put a cost on pollution instead of outright banning it. The idea is, that the cost will incentivize less polluting options and improve competition of the initially more costly environmentally friendly options.

The higher cost of energy caused by Reggie (or in the case of transportation: gas, diesel, vehicles etc.) has a high likelihood of eventually hitting consumers with the risk of increasing the wealth divide in the country. Or as a panelist put it, "the divide between the eco haves and the eco have nots". During the press conference Jordan said “We cannot depend on the market to solve the problem.”During the actual workshop event  positions that felt the market could be sufficiently managed prevailed. “There is a way to fight poverty, pollution and climate change at once” or “when we cut carbon we need to inequalities, too.”  TCI has been talked about for the last ten years. With public workshops it has now moved into public awareness and promises to emerge as a viable option.

The Baltimore Workshop 

At the workshop around 300 lawmakers, business leaders, transportation experts, and public figures met to develop low-carbon investment strategies and priorities for TCI, the regional partnership for clean transportation in Mid-Atlantic and Northeast states.

Baltimore workshop at the University of MD on Lombard Street

Since the conference fell right into the middle of the un-presidential Twitter storm about Baltimore, speaker after speaker expressed their love for Baltimore. Even Hogan's deputy MDOT Secretary Earl Lewis called the attacks deplorable and racists.

More to the point of climate change: panelists and speakers from all walks of life stressed the urgency for action to combat CO2 emissions but also recognized the need of concurrent actions which ensure that "Fenceline Communities" (Kamita Gray, Brandywine resident) get protected. "If not for cap and trade, we wouldn't have three power plants in Brandywine",  Gray contended, maintaining that cap and trade schemes can accelerate the already prevailing method of piling all polluters into disadvantaged communities.

The Georgetown Climate Center at the University of Georgetown is a convener and resource in the process, but many specifics of how TCI is supposed to be organized  still need to be worked out. Clearly governance of 14 Northeast states and jurisdictions will be much harfer than the single state management in California. In addition, local communities will have a voice in the process, if one can believe those speaking yesterday at the workshop. Plus, there was obvious disagreement on how the California cap and trade system, the only one in the US including transportation, has worked out so far.

The California precedent

California's Global Warming Solutions Act goes back 13 years and was augmented by a cap and trade system in 2013 that initially only covered power generation like RGGI but added in 2015 also distributors of transportation, natural gas, and other fuels.

The carbon free California future in a graphic

The passage of AB 32, the California Global Warming Solutions Act of 2006, marked a watershed moment in California’s history.  By requiring in law a sharp reduction of greenhouse gas (GHG) emissions, California set the stage for its transition to a sustainable, low-carbon future.  AB 32 was the first program in the country to take a comprehensive, long-term approach to addressing climate change, and does so in a way that aims to improve the environment and natural resources while maintaining a robust economy. 

The Cap-and-Trade Program is a key element of California’s climate plan. It sets a statewide limit on sources responsible for 85 percent of California’s greenhouse gas emissions, and establishes a price signal needed to drive long-term investment in cleaner fuels and more efficient use of energy. The program is designed to provide covered entities the flexibility to seek out and implement the lowest-cost options to reduce emissions.

Money collected from the cap & trade program, i.e. the  Greenhouse Gas Reduction Fund (GGRF) is appropriated by the California Legislature.  The agencies administer California Climate Investments programs that facilitate greenhouse gas (GHG) emission reductions and provide economic, environmental, and public health benefits. Four agencies receive a set portion of each quarterly auction through continuous appropriations enacted in Senate Bill (SB) 862. The investments made are reported annually. In 2017 policy changes  increased the focus on disadvantaged communities and directed additional investments toward low-income communities and low-income households leading to a stronger focus on “priority populations”.

Use of cap and trade revenues in California: Priority Communities

The 2019 report about investments made from proceeds in 2018 shows that "Priority Populations" played a significant role in where the money went.

Conclusion

The one day workshop in Baltimore, one of many that came before and are still to come, was certainly not able to settle the dispute whether the market can or cannot produce significant greenhouse gas reductions or sufficient funds to invest in the technologies needed to achieve them.

However, activists, politicians, Democrats, Republicans, Greens and representatives from across the entire Northeast agreed that urgent action is needed to avert catastrophe. The Sierra Club, which, as noted, is currently coordinating the various Maryland based transportation organizations, is cautiously optimistic that TCI could be a useful tool to reduce transportation emissions, create additional funding sources for transit investment and reduce the impacts on under-served communities.  The strong showing of community activists at the workshop will hopefully help to ensure that environmentalists will work closely together with equity activists to reconcile potentially conflicting goals.

Klaus Philipsen, FAIA

For an explanation how the California cap and trade system works see here
For a Georgetown paper about how TCI could work see here
For a related blog post on Community Architect about transportation pollution here

Cap in trade in the Georgetown paper is explained this way:

Under this kind of program, an implementing state would issue allowances equal to the emissions budget or “cap.” Allowances are compliance instruments that regulated entities are required to hold for a given quantity of pollution that is emitted within the compliance period; for example, one allowance for one ton of carbon dioxide. If at the end of a compliance period a regulated entity does not have sufficient allowances to cover its emissions, it is out of compliance and subject to a penalty or other sanction. Emissions from the regulated sector are therefore “capped” at the quantity of allowances issued by the state. Generally, the cap declines over time, reflecting the policy objective to reduce emissions from covered sources.7
In a cap-and-invest program, most or all of the allowances are distributed through sale at periodic auctions. Regulated entities may purchase the allowances at auction and they can buy, sell, or otherwise transfer allowances directly with other market participants. The price of the allowances is not fixed—rather the quantity of allowable emissions is set by the program, and the market determines the price. Some allowances may also be freely distributed by the state to regulated entities or other parties.
Since the emission budget (i.e., the quantity of allowances) is typically set at a level of emissions below what would otherwise occur under “business as usual,” a cap-and-invest program is expected to promote changes in behavior by regulated entities or consumers to reduce emissions. Some companies producing or supplying transportation fuels will find it cheaper to bring less carbon-intensive fuels to market than to purchase additional allowances. Investments of auction proceeds into emission reducing policies—for example electric vehicle incentives, additional transit service, multi-modal freight infrastructure, ridesharing, and pedestrian and biking infrastructure—will also reduce demand for fossil transportation fuels by promoting less carbon-intensive transportation options, thus mitigating costs for consumers and providing other benefits for residents. A price on emissions can also influence consumer behavior, reducing demand for fossil transportation fuels.
Cap-and-invest programs usually also include mechanisms to provide additional compliance flexibility to regulated entities, mitigate costs, and help ensure a stable and well-functioning allowance market. These can include:
 options to bank allowances for compliance in future years;
 cost-containment mechanisms that introduce additional allowances into the market when allowance prices reach a certain threshold;
 allowance price ceilings or price floors;
 offset credit mechanisms, which allow certified emission reducing projects in other, uncapped sectors to generate credits that can be used for compliance; and
 linking with similar programs in other regions or sectors, thereby allowing the most cost-effective emissions reducing actions to take place first across sectors or regions.
Cap-and-invest programs may also include provisions to address potential competitiveness and equity issues. This can include distributing allowances or investing auction proceeds in targeted ways, or choosing which sources of emissions are covered under the cap.