The Transportation Climate Initiative Marches Forward; It’s Not Going to Be Easy.

On March 1, the Transportation Climate Initiative jurisdictions released a draft “model rule” that would provide a template for individual state rules governing the operation of the TCI Program.  Although only three states and the District of Columbia committed in December 2020 to implement TCI-P, the announcement on Monday indicated that the model rule “was developed by twelve” TCI jurisdictions.”  I guess that eight states like the model rule – just not enough at this point to commit to implementing it.

All of which emphasizes that getting TCI-P off the ground is not going to be easy.  Here’s just one piece of evidence.  The model rule contains two separate reserve prices.  The cost containment reserve price, or CCR, is intended to prevent price increases that are “too high.”  The reserve price for the initial year, 2023, is set at $12.00/ton in the model rule.  If you have followed recent debates over the social cost of carbon, you’ll be aware that $12.00/ton is a pretty low number when compared to the costs imposed by carbon emissions.

The second reserve price is the emissions containment reserve, or ECR.  The ECR pulls emissions out of the auction if the demand is too low.  The ECR trigger price in the initial year of 2023 is $6.50.

What these two numbers tell me is that state officials are much more worried about the political fallout from implementing TCI-P than about the program not being sufficiently stringent to get the transportation carbon emissions reductions that we need.  I totally get that approach.  Let’s get TCI-P up and running, show that it works, and then tighten down as necessary.  Of course, if that’s the approach, then TCI may want to avoid setting the CCR and ECR prices now for the out years.  It will be difficult to ratchet those prices up once they are written into regulation.

TCI has requested comments on the model rule by April 1.

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