Costs and Benefits Debated as Connecticut Moves Toward Carbon Caps for Gas and Diesel

The Transportation and Climate Initiative will almost certainly cost owners of gasoline- and diesel-powered vehicles more at the pump if lawmakers sign onto the multistate agreement. The program will require fuel suppliers to purchase emissions allowances for the fuels they sell in participating states. The Office of the Governor estimates that the program will generate annual revenues of up to $89 million by 2023, and as much as $117 million by 2032.”

How much TCI will cost consumers — and whether those costs are outweighed by the benefits of the program —  is a matter of debate. 

Each year under the program the number of emissions allowances are expected to decline, which supporters of the program say will lead to cleaner air.  And an agreed portion of the revenues will be directed toward investments intended to further reduce pollution.

Backers of the plan within the Lamont administration cite estimates from the Georgetown Climate Center that the program will cost drivers an additional 5 cents at the pump in the first year, planned for 2023, and an additional 9 cents in the program’s tenth year. They say the health benefits of cleaner air, and the benefits of $1 billion in infrastructure projects over a decade, will more than compensate for the cost.

Those estimates are not shared by opponents, including Senate Republican Leader Kevin Kelly, who recently pegged the cost at 17 cents a gallon. Kelly warned that the cost would also be added to products transported by truck.

The most alarming estimates — as much as 38 cents a gallon in year one, and 61 cents in year ten — based on a Tufts University Center for State Policy Analysis report, were cited by former State Sen. Len Suzio, in a recent op-ed for the Record Journal.

But Evan Horowitz, the author of that report and the executive director of the Tufts center, tells CT Examiner that those estimates made last November are likely no longer accurate given changes to the program since the fall.

“Would I stand behind, in a precise way, the numbers in the report? I would say no,” Horowitz said. “We were modeling something different than what TCIP has turned out to be.”

Horowitz explained that when the center released those estimates, several other states were involved in the discussions. The program also now includes a cap that should prevent the added cost to gasoline from rising above 9 cents in the first year – a feature that hadn’t been finalized at the time of the Tufts report. 

While shying away from the report’s original cost estimates, Horowitz said he does stand behind the center’s methods for making those estimates, and behind the basic trade-offs of the program, which have not changed – the program will reduce emissions, and will increase the cost of gasoline for consumers, he said.

The 17-cent estimate suggested by Kelly, and groups including the Yankee Institute, is based on a 2019 estimate by the Georgetown Climate Center — but the center has more recently estimated first year costs at about 5 cents a gallon. 

Regardless of the exact cost per gallon, Kelly said that the plan will amount to a significant tax increase.

“No matter the breakout by gallon, the Governor says this remains a $100 million tax increase on consumers in the first year,” Kelly explained in a statement to CT Examiner. “This is a large tax increase on the middle class. It is by no means ‘small’ as the Governor suggests. And that tax will only rise year after year.”

Balancing costs and benefits

Testifying at hearing on the legislation, Robert Bolduc, CEO of the Pride chain of gas stations and convenience stores, warned lawmakers that the fuel industry is too competitive for the costs not to be passed on to consumers.

But Katie Dykes, commissioner of Connecticut’s Department of Energy and Environmental Protection, told CT Examiner that the plan has been designed to cap those added costs, in part by releasing additional allowances if the cost to consumers reaches 9 cents at the pump — effectively raising the cap on emissions and lowering the price of the allowances.

If the auction price reaches that point, Dykes explained, it means the program isn’t working as intended — not only loosening the emissions cap, but also triggering a full review of the program, and discussions with the other states involved on how to loosen the cap to keep the price impacts in control.

Dykes said that the opposite could be true as well, and allowance prices could be much lower than expected, meaning Connecticut gets the same emission reductions at a lower cost to consumers. In that case, the state could tighten the cap and push for even more emissions reductions. That’s what ended up happening with the 12-year-old Regional Greenhouse Gas Initiative – a cap and trade program similar to TCI, but aimed at reducing emissions from power plants.

According to Dykes, simply implementing RGGI sent a signal to power producers that the participating states were serious about reducing emissions, and spurred investments in energy efficiency. Dykes said that the price of solar panels ended up falling faster than expected, and fossil-fuel burning plants shut down sooner than expected – driving emissions down faster than expected. The same effect could happen with the TCI, said Dykes.

“A month after Gov. Lamont joined with [Massachusetts Gov. Charlie Baker, Rhode Island Gov. Gina Raimondo, and District of Columbia Mayor Muriel Bowser] to sign the memorandum for the TCI program, we saw major automakers making commitments to the Biden administration that they’re gonna phase out production of internal combustion engine vehicles,” Dykes said.

The possible benefits 

Administration officials insist not only that the cost of the TCI program will be much lower than detractors have claimed, but also that those benefits will outweigh the costs.

According to Dykes, climate change and pollution impose hidden costs on Connecticut residents that are less obvious than the price of gasoline posted conspicuously on electronic signs. Even the costs of repairing damage from storms like Tropical Storm Isaias reflect the increasingly volatile weather patterns resulting from climate change, she said.

According to estimates released by the department, the state is on track to see five times as many days above 90 degrees in 2050 as in the 1980s and 90s, and that hotter days will worsen the health effects of local air pollution. Reducing that local air pollution could limit the impact those hotter days have on people living in Connecticut, according to state officials.

Particulate matter and ozone emissions from cars, trucks and buses can lead to lung and heart disease. Particulate matter in particular can be deadly. A Harvard study released in February estimated that exposure to particulate matter from fossil fuel emissions accounted for nearly one in five deaths around the world in 2018.

And the Asthma and Allergy Foundation of America ranked both Hartford and New Haven among the 15 worst cities in the country to live with asthma, based on factors including the prevalence of asthma, asthma-related emergency department visits and deaths. Nearby Springfield, Massachusetts was ranked the worst in 2019.

But critics like Lou Pugliaresi, president of the Energy Policy Research Foundation, told lawmakers that policies in small states like Connecticut, Massachusetts and Rhode Island will have no effect on global climate change without national and international cooperation from major polluters like China.

Critics of the TCI program also say there is little the state can do to improve local area quality because pollution drifts from the west into the state.  But Dr. Mark Mitchell, former director of the Hartford Health Department and associate professor of Climate Change, Energy and Environmental Health Equity at George Mason, said that local emissions have the most effect on public health. The amount of particulate matter in the air drops dramatically as you move away from major highways, Mitchell said.

“We’re talking about how many feet you are away from a highway, not miles away, that the death rates and asthma rates go down dramatically,” Mitchell said.

According to Mitchell, capping the amount of carbon emissions from fossil fuel burning vehicles and investing in infrastructure for electric cars, and especially diesel-burning buses and trucks, could go a long way to help limit those emissions – and the result could be lives saved, and millions of dollars saved for taxpayers who subsidize the majority of asthma-related hospital visits through Medicare or Medicaid.

But will it work?

Kelly questioned how a program that only has a five cent price impact could have a meaningful impact on fossil fuel emissions, when modeling from Tufts estimated an added cost of at least 24 cents a gallon.

“That’s how it works,” he said. “Capping a per gallon cost in the first year does not change the fact that the program by design seeks to make gas too expensive for people to afford.”

As Kelly sees it, the program is designed to price people out of driving fossil-fuel burning cars, and that forcing them into cleaner modes of transportation is how the program will limit emissions.

Horowitz, the author of the Tufts report, agreed that TCI “can’t have it both ways” — a low impact to the price of gasoline and significant emissions reductions. 

“These are connected, you can’t have one without the other,” said Horowitz.

But Dykes disagrees, explaining that the Tufts report did not fully account for the emissions reductions stemming from the roughly $1 billion in investments the program is expected to generate over 10 years. By investing in electric vehicles and bicycle and pedestrian-friendly streets, the program can reduce emissions even further than the cap alone, said Dykes.

Horowitz agreed that the more effective the investments, the less the price of gasoline would need to rise to meet the same emissions goals. He said the point of the center’s report was not to discount the TCI, but to give policy makers a sense of the tradeoffs between cost and emission reductions.

“This is a real problem that needs a real solution, and this is a real, possible solution. This is a genuine solution to a genuine problem,” Horowitz said. “That’s not an endorsement, I’m not saying this is the best solution or the only solution, but this is a real policy approach to a real problem, and it has meaningful public health benefits that should be counted alongside whatever concerns people might have about gas tax increases.”

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