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New clean energy initiative could increase gas and diesel prices for Maine consumers

In June 2010, under Governor John Baldacci, eleven states and the District of Columbia began collaborating on the Transportation and Climate Initiative (TCI). The goal of TCI is to reduce carbon emissions from the transportation sector and develop the clean energy economy in participating jurisdictions. According to a report from the Maine Interagency Climate Adaptation Work Group, the transportation sector was responsible for 52 percent of all Maine greenhouse gas emissions in 2015. Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia are currently participating in the TCI, though Maine has not formally joined the arrangement

This month, the TCI released the draft framework for a regional policy proposal that would specifically target and cap carbon emissions from fuel destined for final sale or distribution in TCI jurisdictions. Fuel imported from outside the TCI region or removed from a storage facility within the region are subject to the cap. Public comments on the draft framework will be accepted by the TCI until Nov. 5. and can be submitted here.

How will they enforce this policy, you might ask? Proponents of the proposal call it a “cap-and-invest” (cap-and-trade) program whereas opponents see it as a new tax or fee on consumers. Here’s how it works:

A cap-and-trade program artificially limits the amount of carbon emissions allowable in an industry or the economy. Over time, the volume of “allowable” carbon emissions would be artificially decreased by the governing entity to reduce the volume of emissions that are released into the atmosphere. 

Once a cap is in place under the proposal, fuel suppliers would be sold “allowances” for every metric ton of carbon for which they are responsible. By doing this, an artificial market is created because the emissions cap limits the number of allowances that can be distributed at any given time. In this case, these allowances would be auctioned off to regulated fuel suppliers and the proceeds would be used to fund other programs that are aimed at reducing carbon emissions and improving access to transportation. The regulating entity would be responsible for administering and setting aside some allowances to facilitate flexibility and to accomplish other priorities. According to the TCI proposal, this could begin as early as 2022 and reach a target level by 2032. 

This cap-and-trade program is almost certain to increase fuel prices for individuals who reside within TCI jurisdictions. Because fuel suppliers will be required to purchase allowances at auction to stay in business, they will likely pass the expense onto customers who purchase gasoline or diesel fuel. In addition, as the supply of these allowances is reduced, the demand for them will increase, thereby further increasing the price. 

While this isn’t a new “gas tax” by definition, it will result in increased costs for suppliers that are passed onto consumers at the pump. 

“All states [in the TCI] raise their gas tax the same amount at the same time and agree not to call it a gas tax, but I think the public is smarter than that,” Massachusetts State Representative William Straus, a chairperson on the Joint Committee on Transportation, recently said about the TCI

While some of the details of the TCI proposal are still being debated, a 2018 study of California’s cap-and-trade program said it adds about 13 and 14 cents per gallon to the cost of gasoline and diesel, respectively, when the allowance price is $15 per metric ton. Depending on the auction price set for allowables under the TCI, the added cost could be more or less than the California program. 

Nonetheless, any added cost to diesel or gasoline would be costly to Maine residents. After all, the average Mainer spent $1,234 on gasoline and the state ranked 12th for gasoline expenditures per person in 2017, down from $1,343 in 2016. By implementing the TCI, state government would simply increase this costly annual expenditure on Maine citizens. 

Assuming someone uses 400 gallons of gasoline annually (almost 7.7 gallons per week), an increase of 13 cents per gallon would require a consumer to pay approximately $52 more annually for gasoline. For low-income Mainers, this new expense would be burdensome and represent another government regulation that artificially inflates the price of goods and services. 

Additionally, the US Census Bureau’s 2013-2017 American Community Survey shows that more than 88 percent of Mainers commute to work by car, truck or van and the average travel time is nearly 24 minutes. While it is easy to ask people to switch to electric vehicles to reduce carbon emissions, the reality isn’t that simple. According to a 2018 survey from the Natural Resources Council of Maine, approximately 1,300 people owned electric vehicles in Maine — less than one percent of all passenger vehicles registered in the Pine Tree State. Also, electric car sales made up just 1.13 percent of total car sales in the state in 2018. Therefore, the new expenses as a result of the TCI would nickel and dime the majority of hardworking Mainers that rely on their gas-powered vehicles to travel from point A to point B. 

What does the state intend to do with those funds? Well, the answer isn’t very clear from the proposal. According to the TCI framework, Maine would be independently responsible for deciding how those proceeds are spent. For instance, those funds could be used to “increase public transit and make it better and cleaner, build safe places for people to walk and bike to where they need to go, encourage electric vehicles, and more” according to documents from the TCI. Massachusetts Governor Charlie Baker proposed to use half of his state’s share of the funds to pay for an $18 billion transportation bond. Regardless of how state government intends to allocate the proceeds, they would be better spent by the individuals who earned the funds in the first place. 

What’s that old adage about putting lipstick on a pig? This policy certainly fits that criteria. Dubbing the TCI a “cap-and-invest” program, big government bureaucrats want to make the idea sound as positive as possible, dressing it up as an “investment” without mentioning it would directly involve a new tax or fee (whatever they’re calling it these days) that consumers will be forced to pay.

The TCI is anti-free market and anti-consumer, and its regressive nature would hurt Maine’s most vulnerable. Governor Mills should not force this burden onto Maine businesses and consumers.