The Transportation Climate Initiative (TCI)—a collection of Northeast and mid-Atlantic states and the District of Columbia—is considering a carbon price on transportation fuels, with revenues to be invested in modernizing the transportation sector. The TCI seeks to expand safe and reliable transportation options, lower transportation costs, improve overall air quality and public health, as well as mitigate climate change.
Three organizations—Resources for the Future (RFF), Environmental Defense Fund, and Duke University’s Nicholas Institute for Environmental Policy Solutions—organized a two-day virtual workshop to inform conversations among the states about how this effort can be most effective. The workshop was held under the Chatham House Rule, but many speakers granted permission to post their presentations, which we do below, along with the agenda.
The summaries and notes included below reflect the perspectives of workshop attendees, and do not necessarily reflect the views of RFF researchers or staff. RFF does not take institutional positions on specific legislative proposals.
Panel I: Effectiveness and Behavioral Responses to Carbon Pricing and Vehicle Regulations under Existing Policies
The first session highlighted that future trends with respect to transportation sector emissions are highly uncertain. They depend on vehicle miles traveled—which have been strongly affected by COVID-19, at least for now—and by vehicle type. Uncertainty about vehicle attributes, including the cost and uptake of electric vehicles (EVs), is substantial.
Changes in fuel prices can influence driving behavior and vehicle choice, but modest changes in fuel prices have only modest changes in behavior. Taxes on gasoline are more stable and persistent than fluctuations in oil prices and appear to have a greater effect in reducing fuel use. This may be an encouraging sign for a carbon price under TCI if cost management features in the carbon market limit price fluctuations. Behavioral responses to changes in fuel prices thus far have been less influential for transportation sector carbon emissions than a variety of performance standards affecting vehicle characteristics. If performance standards are flexible, they can be reasonably cost effective. Performance standards complement rather than crowd out the emissions reductions that might be achieved with carbon pricing.
The influence of vehicle efficiency standards hinges on turnover of the vehicle fleet. Vehicle scrappage programs can accelerate the turnover rate, but they are saddled with the problem that cash incentives to retire a vehicle will be most compelling to owners of vehicles that have the least remaining useful life, which are subsequently replaced with vehicles that are driven more. This dilemma might be partially remedied by providing greater incentives for vehicle scrappage in the form of transportation alternatives, such as subsidies for public transit. This approach also will have different distributional outcomes. In general, policy should address multiple needs and goals simultaneously. Envisioning transportation policies from a community perspective is key to building coalitions to support transformational change, and every local situation is unique and involves different communities of interest. To achieve policy success in these communities requires engagement, which takes time and commitment—go slow to go fast. A carbon price overcomes price barriers, but price may not be the most important barrier in transportation planning and decarbonization.
Panel II: Distributional Effects of Transportation Policy
Transportation pollution exacerbates existing environmental injustices, as poorer, minority communities face greater exposure to diesel pollution than their richer, white counterparts. This is due to decades of inequitable and racist transportation and housing practices, which have resulted in these communities being more likely to live near transport corridors and industrial zones.
Fixing this great environmental injustice requires coordinated action and a holistic approach to understanding the problem; any solution alone will not be enough to achieve this goal. Instead, TCI must adopt a broad policy portfolio, uniquely designed for each region’s specific needs, targeting housing, land use, and transportation solutions.
The second panel in the workshop discussed the opportunity for the northeast region to leverage clean transportation policies for achieving improvements in these environmental inequities and injustices. In order to achieve these improved outcomes, speakers at this workshop recommended that TCI employ the following:
- A strong, data-driven understanding of which communities are most affected by transportation pollution and existing inequitable transportation and housing policies;
- Active engagement with community and environmental justice groups when setting and structuring policy;
- Research to identify which actions/policies can have the greatest benefit to these communities, in terms of environmental, health, and economic outcomes; and,
- An understanding that this is a complex issue that requires a policy solution portfolio, though interactions across these solutions may have unintended impacts on frontline communities.
Panel III: Investments on Carbon Revenue: Efficacy and Impacts across Groups
The third panel opened with a discussion of the policy context for investments. Once set, this context can be hard to shift, particularly when benefits that would result from a change are diffuse or hard to perceive. Yet, context can and should be adjusted to improve investment conditions and to ensure larger benefits from expenditures. Changes in zoning could facilitate transit, for instance. Pricing transportation to include its social (congestion, access) and environmental costs could also reshape the context. Mandates for EV sales can create market certainty and drive private sector innovation. Finally, regulatory frameworks can change a utility’s incentives and better align those with public policy goals.
Not all investments are alike. Investment design can change the overall cost-benefit analysis, as well as the policy’s distributional effects. For instance, if a “clean cars” proposal introduced by Senator Schumer were separated into two programs (a subsidy for purchasing EVs regardless of the vintage of the internal combustion car being replaced, and a scrappage subsidy even if someone doesn’t purchase an EV), the same level of investment could drive larger emissions reductions. Moreover, regional consistency in investment strategy is important for creating clear market signals driving decarbonization. The VW Settlement Appendix B framework—which provides guiding but not prescriptive direction to investment strategies—could be a good model.
Panelists emphasized that reducing emissions from transportation means more than electrifying personal vehicles; it should encompass non-motorized travel, micro-mobility planning, and transit. Investments explored included those to:
- Compensate frontline communities;
- Deploy charging infrastructure;
- Move people from cars to other transportation modes;
- Purchase heavy-duty and medium-duty commercial EVs;
- Reduce air pollution at shipping and airports;
- Build out electric freight corridors;
- Integrate vehicle-grid policies (so EVs may contribute to grid reliability and create a revenue stream for EV owners); and,
- Educate on EV benefits.
Funding is the limiting factor, so prioritizing investments will be critical, perhaps through considerations like “bang for the buck” (tons of carbon reduced per $1 spent), spillover effects (labor-intensive projects that create jobs), and political feasibility.
Panel IV: Changing the Rules: State and Local Policies and Potential Interactions with Carbon Pricing
A carbon price on transportation fuels could provide incentives to reduce emissions and generate revenue that can fund complementary policies. These policies should be scaled to the magnitude of the challenges facing the transportation sector to promote an efficient, clean, and equitable transportation system. Complementary market-based policies can potentially minimize compliance costs, but they must be properly designed to do so. For example, a low-carbon fuel standard (LCFS) can incentivize long-run innovation of fuels with lower emissions intensities than conventional gasoline or diesel fuel. Combining an LCFS with cap and trade requires some care, however, to make sure that emissions reductions in one program aren’t double counted in the other program.
A second example of a complementary policy is congestion pricing, which New York City is preparing to introduce. Over the last few decades, several cities around the world have introduced congestion pricing, typically by charging vehicles fees to enter the central city at certain times of day. After the congestion prices were introduced, overall traffic levels fell, traffic speeds increased, and pollution dropped. The success of congestion pricing hinges on having viable public transportation options besides vehicles, such as buses or subways. New York City will be the first US city to implement a congestion price, and it appears to be following a similar approach to what other cities have done.
The need for complementary policies extends beyond the transportation sector, particularly as transportation is expected to become increasingly electrified. Replacing a gasoline- or diesel fuel–powered vehicle with an EV reduces liquid fuel consumption and increases electricity consumption. This creates challenges for reducing emissions and integrating those vehicles while maintaining low costs and reliability in the electricity sector. Electricity sector policies must minimize the extent to which electricity sector emissions increase as a result of the higher consumption (i.e., emissions leakage). Moreover, electricity infrastructure must be able to handle intense needs of charging medium- and heavy-duty vehicles, and rates must be designed to incentivize charging to occur when and where it places the least stress on the grid (e.g., at night, when demand is otherwise relatively low).
- Martin Ross (2019). “Emissions Benefits of Electric Vehicles: Influencing Electricity Generation Choices”, Working Paper, Nicholas Institute for Environmental Policy Solutions. Link to paper here.
- For Kathy Fallon: TRECH project website https://www.hsph.harvard.edu/c-change/news/trechstudy/
- Gatti, Daniel, and Maria Cecilia Pinto de Moura. 2018. “Rural Drivers Can Save the Most From Clean Vehicles.” December 13, 2018.
- M.J. Bradley, and UCS. 2018. “Decarbonizing Transportation: The Benefits and Costs of a Clean Transportation System in the Northeast and Mid-Atlantic Region.”
- Pinto de Moura, Maria Cecilia, and David Reichmuth. 2019. “Inequitable Exposure to Air Pollution from Vehicles in the Northeast and Mid-Atlantic.”
- Regional Planning Association, The Fourth Regional Plan (NY-NJ-CT)
- Senator Chuck Schumer, Clean Cars for America Proposal
- Clean Transportation NY, Beneficiary Mitigation Plan (“using the VW settlement to drive clean transportation in New York”)
- Multi-State Medium- and Heavy-Duty Zero Emission Vehicle MOU (July 14, 2020)
- Key Environmental Initiatives at the Port of New York and New Jersey
- Iyad Kheirbek et al., The contribution of motor vehicle emissions to ambient fine particulate matter public health impacts in New York City: a health burden assessment, Environmental Health 15:89 (2016).
- CalSTART, Global Drive to Zero
- Volkswagen Settlement Appendix B, Vehicle Recall and Emissions Modification Program
- Werner Antweiler and Sumeet Gulati, Scrapping for clean air: Emissions savings from the BC SCRAP-IT program, JEEM (2015)
- Kate Konschnik, Vehicle Electrification: Coordinating Transportation and Power Sector Policies to Maximize Air Quality Benefits, Policy Brief, Nicholas Institute for Environmental Policy Solutions. Link to paper here.
This workshop was supported by the Energy Foundation and the Merck Family Fund and RFF’s Research Policy and Engagement Program.