Multistate carbon tax scheme on gasoline collapses
Director of the Center for Energy & Environmental Policy
November 19, 2021
A dozen states have been considering a tax on carbon dioxide emissions from gasoline and diesel fuel, starting at about 10 cents a gallon and rising to perhaps 40 cents over time. The idea was higher prices would discourage driving, and the revenue would be used to promote electric vehicles (EV) and public transportation. Last December, only three state governors signed onto this project (Rhode Island, Connecticut, and Massachusetts). This week, two of the three state governors (Connecticut and Massachusetts) abandoned the project, effectively ending it.
On Wednesday, Connecticut Governor Ned Lamont threw in the towel in the face of high gasoline prices and no likely legislative support. Massachusetts Governor Baker, facing a ballot initiative banning their participation with the Transportation Climate Initiative (TCI) and, with no support from other states, withdrew support for TCI on Thursday.
TCI faced an aggressive opposition campaign led by a coalition of State Policy Network affiliates and fuel distributors in each state considering joining TCI. Historically gas taxes are unpopular, and an informed public rose up against the tax and its inequities. The Caesar Rodney Institute had a significant role in building the coalition that eventually included 60 members, providing research analysis uncovering the flaws in the TCI plan, and devising opposition strategies.
BACKGROUND: States from North Carolina to Maine participated in planning this project led by a non-profit called the Georgetown Climate Center. The Transportation Climate Initiative was modeled after the Regional Greenhouse Gas Initiative that forces coal and natural gas electric generators to buy allowances to emit carbon dioxide. The number of allowances available is reduced each year, and the allowance price increases over time. With TCI, the allowances would be purchased by fuel distributors.
TCI had inherent flaws. It is a regressive tax that would hurt the rural poor the most who live further from jobs and often drive older, less efficient vehicles. Subsidies for electric vehicles would primarily help wealthier families that can afford the high upfront cost of an electric vehicle. Additionally, EV owners pay less to fuel their vehicles, avoid highway taxes paid at the fuel pump, and often get to drive alone in high occupancy vehicle lanes during rush hour. Fuel distributors in non-TCI states would still have to buy allowances if they delivered fuel to a TCI state, creating enforcement issues.
Most people drive out of necessity, and slightly higher prices don't result in less driving. However, the number of allowances was to fall on a rigid schedule, potentially leading to gasoline shortages and disruptive lines at service stations.
In the end, nine out of twelve states passed on signing the project onto TCI. Massachusetts Governor Baker, who chaired the project, was its most vocal supporter, and Massachusetts donors provided most of the funding for the Georgetown Climate Center. He had legislative authority to sign on without further legislation. Connecticut and Rhode Island governors signed initially on but needed legislative approval, which was withheld in the last legislative session in both states when gas prices were a dollar less per gallon.