TCI Regional Policy Design Stakeholder Submissions

Dear Honorable Governors, Mayor Bowser and Transportation & Climate Initiative Workgroup Members,

As organizations representing Vermont’s leading low income, business, environmental, public health, and faith organizations, we thank you for the opportunity to comment on the draft Memorandum of Understanding for the Transportation and Climate Initiative (TCI), and for your continued leadership in exploring and advancing the development of a robust and equitable regional clean transportation policy.
The science could not be more clear: Our collective combustion of fossil fuels is warming our planet, and we risk severe costs and consequences from delayed or insufficient climate action. Swift, strategic solutions that reduce emissions in the transportation sector in particular – the largest source of our region’s carbon pollution – are imperative. There is a tremendous opportunity before us to design and implement a strong, equitable TCI cap-and-invest program.

As you embark on crafting a final MOU, we offer the following comments for consideration as critical components of a well-designed program that drives down climate-warming pollution, while also protecting and prioritizing underserved communities and other communities that are disproportionately burdened by vehicular pollution, the costs of the current transportation system, the lack of access to clean transportation options, and at highest risk for experiencing the negative impacts of a changing climate.

We offer the following comments and recommendations on the draft TCI MOU:
• Time is of the essence. We support the launch timeline outlined in the draft MOU, with the first compliance period for a regional TCI policy commencing no later than January 1, 2022.
• Ensure the program aligns with the science. We strongly urge the adoption of a regional transportation carbon emissions cap that requires at least a 25 percent reduction in carbon pollution over 10 years, starting with the program launch in 2022. Current climate science makes clear that serious pollution reductions are required, swiftly. Considering the urgency, we also urge considering more ambitious cap reduction levels that would provide even greater greenhouse gas reduction results, as well as other economic, equity, and public health benefits beyond those calculated in the modeling scenarios thus far.
• Enable strategic state-by-state investments and ensure equity. The ability for participating jurisdictions to have significant responsibility for determining how auction revenues are expended based on their unique needs is critical. Vermont is a very rural state. The needs of rural-living Vermonters are very different than for those living in Burlington or Boston. The ability for states to direct auction proceeds to support investments in transportation efficiency solutions that serve particular constituencies – such as rural Vermonters, low-to-moderate income earners or constituencies with unique transportation challenges – is essential. This kind of flexibility is important to help ensure equity and access to clean transportation solutions for everyone, which could range from direct incentives for vehicle electrification to innovative micro-transit pilots, bike and pedestrian investments, housing in and around our transit hubs and far more.
• Design for program performance. To ensure the program works well with a minimum level of performance and generation of auction proceeds in the early years of the program – affordably reducing transportation emissions – a minimum reserve price, or a price floor, is critical. We recommend setting a price floor consistent with allowance prices modeled in the 20 percent cap scenario, beginning at $6 per ton in 2022.
• Incorporate opportunities for program review and adaptation. Regular, rigorous program reviews are essential to maintain a strong program that enables flexibility and adaptability that considers current science, as well as other potential indicators that might warrant adjustments to the program design. We recommend that the first program review take place within three years of the program start, which, if commencing in 2022, would mean a program review in 2025 and every three years thereafter.

The Need for Complementary Policies
While a well-designed TCI program could help reduce the region’s collective carbon emissions significantly, far more work will be required. Identifying and implementing other complementary policies will be essential to aligning our emissions with what the science says is needed for a safe, habitable planet. We look forward to continuing to work with other TCI states, diverse and key constituencies, and all Vermonters to identify and advance that suite of additional strategies to complement TCI, finally putting us on the path to meet science-based climate pollution reduction targets we so desperately need to meet.

Conclusion:
Ongoing climate inaction puts our economies, public health, and quality of life at significant risk. TCI offers one of the most promising opportunities to make much needed pollution-reducing progress in the transportation sector. We thank you for considering this input and for continuing your work to refine and advance a strong, equitable, and flexible program that puts this region on a path to a 21st century, clean, affordable transportation system.

Sincerely,


Audubon Vermont
Capstone Community Action
Conservation Law Foundation
Lake Champlain Committee
Toxics Action Center
Vermont Businesses for Social Responsibility
Vermont Climate and Health Alliance
Vermont Conservation Voters
Vermont Interfaith Power and Light
Vermont Natural Resources Council
Vermont Public Interest Research Group
Vermont Yankee Decommissioning Alliance

On behalf of Environment America, I am submitting the attached comments from 1,834 of our members and supporters across the jurisdictions considering this regional climate policy.

The Transportation and Climate Initiative is an opportunity for the region to reduce fossil fuel emissions and invest in clean transportation, like electric cars and buses, charging infrastructure, sidewalks/bike lanes, and regional rail.
We urge you to move forward with TCI and require that the revenue generated by the program is used to expand clean transportation. There are simply too many cars on the road contributing to our warming climate, not to mention our asthma rates and traffic congestion problems.
In particular, we’d like TCI funds to go towards zero-emission electric buses, EV charging infrastructure, expanded and improved bike lanes and regional rail, as well as tax rebates toward private EV ownership.

I feel that further taxing fossil fuels is very counter productive. I think the US and the world would be much better served if we simply eliminated incentives and tax cuts for the production and exploration of fossil fuel.

I’m a young person. I’m afraid of climate change. It’s time to do something.

The Transportation Climate Initiative (TCI) is Vermont’s chance to do just that: take a meaningful stance against climate change. It is great to see that Green Mountain Power will have 100% renewable energy in the next decade. This, in and of itself, however, is not enough. According to the TCI webinar hosted on December 17, 2019, 43% of the carbon dioxide emissions from the TCI region come from transportation. That is almost twice as much as from electrical power. Most Vermonters cannot afford an electric car, with or without subsidies from the government. That means the 43% of our emissions that come from transportation will continue to be emitted even if we have a carbon-free electrical grid.

But TCI is more than just a way to do something. It has the potential to be an effective policy. As per the executive summary, the TCI locks us into making a significant reduction in emissions. While these reduction goals are theoretically feasible without TCI, the initiative would eliminate any uncertainty. Given the volatility in our federal government, it is important that Vermont takes a stand and does not rely on federal policy to make these changes.

Additionally, by entering into TCI with an entire region of states, Vermont significantly reduces the potential for a harm to the economy. Look no further than the Regional Greenhouse Gas Initiative (RGGI) a similar cap-and-trade program which Vermont is already involved in. RGGI has already contributed 44,700 years of additional full-time employment, $5.7 billion in public health benefits, and saved customers a combined $773 million in energy bills, according to a report by economists at Analysis Group. RGGI, however, does not cover the emissions from transportation. As mentioned above, 43% of carbon emissions in the region come from transportation, making TCI an effective plan to address emissions not captured by RGGI.

As per the TCI Memorandum of Understanding (MOU), the program will invest its proceeds into a variety of programs such as “air quality, public health, resilience, and more affordable access to clean transportation alternatives.” Investments in these sectors all have the potential to positively impact the community and economy. Pollution from cars can contribute to asthma attacks and other health issues. Healthier people have lower medical bills and miss fewer workdays, which can help bolster Vermont’s economy.

All of this is not to say that TCI is perfect. There is a completely valid fear that gas companies will simply offload the increased cost of operation onto the consumers. The MOU mentions the importance of ensuring that the program benefits those who “disproportionately bear the costs of the current transportation system” or “impacts of vehicular pollution and climate change.” Still, without more concrete plans for benefitting these communities, I fear that TCI will only be an additional burden on those who are already struggling with climate change. As such, when Vermont agrees to sign on to TCI, it is critical to have a robust plan to help these communities, including provisions such as rebates and investments in public services. There are ways to make sure that TCI is equitable and given that equity is a listed priority (3b) of the MOU, I do not think fear of increased gas prices should be an impediment to joining TCI.

Like many of my peers at Middlebury College, I was drawn to Vermont for its beautiful scenery and landscape. Climate change has the potential to change our state forever through warmer weather and increased flooding. I hope that when I have children, they will have the opportunity to see Vermont as I see it: vibrant and full of natural beauty. TCI is Vermont’s chance to act on climate before it’s too late, protecting our state for the next generation.

I recommend that Vermont join the Transportation Climate Initiative (TCI) that is being developed for states in this northeast region of our country.

We now know that climate emissions in Vermont have been increasing in the last two or three years despite a clear legislative and policy commitment to reduce these emissions. We also know that climate emissions from transportation account for the largest share of recent climate emission increases. We also know that transportation is an activity that may be addressed most effectively on multi-state, regional basis. And we have seen that the Regional Greenhouse Gas Initiative has proven to be an effective tool for reducing climate emissions from electricity generation.

I am a member of a church in South Burlington that sees the climate crisis as a moral crisis for all mankind and that we all have a responsibility to do what we can to reduce climate emissions. We have been at work for several years to walk our talk by reducing the climate emissions we contribute. Our church has with its own resources taken steps which, with help from Efficiency Vermont and Vermont Gas, enables us to reduce our carbon emissions associated with natural gas and electricity use by more than 50 percent. We want to address climate emissions from driving our personal vehicles but this requires support, just as Efficiency Vermont and Vermont Gas helped us with improving the energy performance of our church building and our individual home.

The TCI offers Vermont a potential source of revenues to support steps to reduce transportation emissions and to do so in way that will help most the people least able to afford newer, more fuel efficient, lower emission cars and trucks.

I ask that Vermont join in the emerging new TCI and to endorse actions by the TCI program that will help all Vermonters to reduce climate emissions resulting from our transportation activities.

It is now obvious that climate change is happening and causing very big impacts that include significant increases in annual rainfall in Vermont, warmer winters in Vermont which threaten the future of skiing in Vermont, accelerate the incidence of lime disease, and threaten the long term viability of our maple syrup industry. These impacts are the obvious ones that confront us in easy to observe ways. Scientists tell us that the Vermont forests, lakes, and wildlife communities are all being transformed by these changes in very negative ways.

It is also important to recognize that the TCI program can make big positive contributions to the State's economy. This has happened with energy efficiency activity, which is now a big Vermont employer, and the solar industry, which had until recently been a fast growing business in Vermont that provided jobs and produced income for Vermonters across the State. The Vermont Clean Energy Development Fund finances annual economic assessments of the clean energy sector and has with these annual studies has documented the large direct employment and income benefits of these clean energy businesses. The TCI can and should be harnessed to build upon this progress.

I urge that Vermont sign the TCI memorandum of understanding and commit the policy and program leadership needed to build an effective program. Such new programs require hard work to make them work and to avoid pitfalls. I plead for the Governor and the Legislature to do the hard work of negotiating an effective TCI program that will benefit Vermont and serve Vermont's stated commitment to achieving the Paris Climate Goals, which will benefit all mankind.

Thank you for this opportunity to comment.

Sam Swanson

IETA SUBMISSION TO TRANSPORTATION & CLIMATE INITIATIVE (TCI)
The International Emissions Trading Association (IETA) appreciates this opportunity to share input on the Transportation & Climate Initiative (TCI) Draft Memorandum of Understanding (MOU) (the MOU). On behalf of our 130+ multi-sector business membership worldwide, we believe that flexible market instruments – including trading, broad access to natural climate solutions, and cross-border cooperation – must form the backbone to any jurisdiction’s successful climate policy effort. We welcome the TCI’s climate leadership, cooperation, and support for flexible market instruments.

IETA's comments are a result of deep experience and lessons learned across North American and international carbon markets. Our policy and market insights are a testament to the iterative – yet increasingly robust and aligned – nature of carbon pricing system design; an evolutionary process where jurisdictions are not only identifying best practices, but also seeking to embed and operationalize these elements into new or modified program improvements.


OVERVIEW & COMMENTS
IETA’s comments are structured around the sections in the MOU, with detailed comments on: program design elements; applicability; compliance and enforcement; flexibility, allowance allocation and stringency; regional program administration; and additional program design elements.


1. Goals and Schedule
IETA commends TCI’s ambitious objective of releasing a regionally coordinated Model Rule by 31 December 2020, with the intention of commencing the first compliance period as early as 1 January 2022.


2. Model Rule for Establishment of the TCI Program
2A. Affected Fuel.
IETA agrees that the fuels proposed to be covered by TCI’s proposed program, on-road diesel and motor gasoline, are the appropriate ones. In general, IETA and its membership believe the program should cover as much of the fuel in the region as possible while taking account of the renewable components.

2B-C. Regulated Entities & Other Entities.
In order to make the TCI program as efficient as possible, the compliance point should be set such that compliance entities can take full advantage of existing tax and tracking systems. IETA members support the proposal to set the compliance point at the terminal rack, with an alternative for any fuel that moves into the region directly. While there is not a directly comparable pricing and tracking system already in place, the terminal rack is the point from which most of the fuel is distributed in the region; it also upstream of the smallest distributors and allows for a manageable number of entities. IETA recognizes that there are suppliers that import fuel directly into the TCI region and believes that those imports can be incorporated into the program without creating an undue burden on small suppliers.

2D-F. Regional Emissions Cap, Budgets & Scheduled Reductions.
IETA supports a system that sets strong science-based caps on emissions reductions, in line with meeting domestic and international climate targets. IETA generally supports the MOU’s approach to setting the regional emissions cap, and we strongly support a regional base annual emissions cap that declines over time in a transparent and predictable manner to allow for medium and long-term planning by facilities and stakeholders. IETA supports the apportionment of the regional base annual CO2 emissions budget to the participating jurisdictions annual budgets, along with the revision of budgets as jurisdictions enter into or withdraw from the program.

2G. Stability Mechanisms.
IETA strongly supports the potential inclusion of a Cost Containment Reserve (CCR) and Emissions Containment Reserve (ECR) in the TCI program. We look forward to more details as the program continues to develop and encourage TCI to look to other regions for examples of successful CCR and ECR mechanisms.
We are encouraged by the framework’s consideration of price-based flexibility mechanisms, including linking as a mechanism to add flexibility and contain costs. Moving forward, the TCI must look beyond its borders to ensure that the rules and systems are complementary and readily adaptable to the world’s quickly changing carbon landscapes. We urge officials to closely track developments that may affect both regional or global “stringency” acceptance of TCI’s approach to carbon rules, pricing and trade. Now is an ideal time for the TCI to be aware of, and account for, any challenges that could emerge down the line. IETA is well-positioned to support this information exchange with TCI and state officials on carbon policy and trade developments and outlooks. We welcome the opportunity to help ensure that the TCI regularly has access to this latest policy information, analyses and outlooks.
Final regulation should see more prescriptive, enabling language to more easily recommend and adopt future market linkage opportunities. For example, international market programs under development (e.g., Article 6/ITMOs, voluntary, international aviation etc.) and existing domestic market programs (e.g., Quebec-California cap and trade programs).

2H. Emission Reporting Requirements.
The proposed requirement for covered facilities to submit a report and supporting information in an electronic emissions reporting system appears sound and defensible. We also support independent third-party verification of the report, recognizing the importance of transparency and verification in ensuring environmental integrity of the system. IETA strongly supports drawing upon lessons and standards from existing greenhouse gas programs in the design of the monitoring reporting and verification (MRV) requirements.

2I. Regulated Entity Compliance and Flexibility.
IETA strongly supports the framework’s inclusion of allowance banking, multi-year compliance periods, and offsets. These instruments should be available to compliance entities to meet full regulatory obligations across these jurisdictions. We hope to see these principles of flexibility and cost containment continue as core principles, guiding the finalization of TCI regional program rules and frameworks.

2J. Auctioning and Alignment.
IETA encourages the TCI jurisdictions to use auctions as the primary method of distributing allowances. Auctioning allowances and allowing a strong market-based approach will incentivize reductions and allow for appropriate price-setting. IETA encourages TCI to collaborate closely with near-term jurisdictional linkage partners (i.e., RGGI, and Quebec and California). Harmonizing and aligning core design rules, standards, joint market infrastructure (e.g., auction platforms, tracking systems etc.) across priority partners are foundational steps towards building broad, linked markets. Cross-border collaboration also allow business, particularly those with regulatory exposure across multiple regions, to more efficiently and cost-effectively plan and invest.


3. Investments and Equity
3A. Investment of Proceeds.
Proceeds from a pollution pricing program can play a dramatic role in supporting TCI jurisdictions’ climate mitigation actions over time. Other jurisdictions – in North America and internationally – earmark and disburse revenue from their pollution pricing programs to support clean technology, innovation, and emissions reductions initiatives. IETA is pleased to learn that the TCI is considering a range of options for investing auction proceeds, and encourages further examination of existing successful programs, including the New York Green Bank, the Australia ERF, and the UK Low-Carbon Innovation Fund (LCIF). In particular, we support investments made towards helping TCI jurisdictions reach their climate policy objectives while supporting regional businesses and consumers to transition to carbon constraints and economic decarbonization.

3B. Equity Shared Priority.
IETA strongly supports the goals of equity, environmental justice, and non-discrimination – and encourages TCI to continue to pursue these goals, including working with disadvantaged communities to assess the impacts of the program.


4. Regional Organization
IETA supports the proposed structure of the regional organization, including its functions, authorities and limits on authorities.


5. Addition or Withdrawal of Participating Jurisdictions
IETA supports the TCI’s approach to new participating jurisdictions and withdrawal from the TCI program. We are pleased to see that the participating jurisdictions will encourage other jurisdictions to the program with the goal of expanding the geographic reach of the regional program. IETA believes that the expansion of this program will benefit all participating jurisdictions by expanding the market. IETA also supports the approach to withdrawal, and that the program can be adjusted based on jurisdictions leaving and entering the program.


6. Program Monitoring and Review
IETA strongly supports continued monitoring of the progress of the program. We urge TCI to undertake ongoing and frequent reviews. Frequent reviews, which are clearly defined and communicated to all stakeholders, will ensure that program parameters remain relevant and reasonable within the context of changing industries, trade and broader macro-economic conditions.


CONCLUSION
Transportation stands out in the TCI region – not only because the sector is now the number one source of carbon emissions, but also because those emissions are increasing. Once again, we applaud the TCI for moving forward – in a cooperative, transparent manner – to harness the power of markets to tackle this challenge in practical and cost-effective manner.
IETA appreciates this opportunity to record our comments on the TCI’s MOU. Our community looks forward to close engagement with the TCI through 2020. If you have questions or follow-up regarding this submission, please contact Justin Johnson at johnson@ieta.org.

Please see the attached program design input, resubmitted from 2/27 with updated signatories.