Regional Carbon Pricing Approach Could Fracture

By Matt Murphy, State House News Service, November 18, 2019

Gov. Charlie Baker has said and repeated over the weekend that he thinks a regional approach to carbon pricing and curbing vehicle emissions makes “so much more sense” than putting a higher tax on gas just in Massachusetts.

But it’s not clear all his fellow governors will agree on the regional approach.

The coalition of 12 Northeast and Mid-Atlantic states exploring a regional cap-and-invest program to reduce transportation sector emissions is expected to release a proposed cap next month, which will lead to a better understanding of how much money could be generated for states through the sale of carbon allowances.

The participating states include Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia. A commission formed by Baker has estimated Massachusetts could net $150 million to $500 million new annual revenue for clean transportation programs from the sale of carbon allowances through the Transportation and Climate Initiative (TCI).

But in neighboring New Hampshire, the Legislature would have to okay the state’s final participation and Republican Gov. Chris Sununu would have to sign off, which is not a sure bet. And in Vermont, Gov. Phil Scott, another Republican, is sounding unconvinced. Maine, New York and New Hampshire are technically “observers” to the process at this point, and did not sign the same 2018 agreement that other states did committing them to the pursuit of a TCI pact.

Should the coalition start to splinter, the competitiveness argument made by Baker may begin to erode.

“Most of the states in the Northeast, and it’s a number of them, they have a seat at the table to learn more about the initiative — we have to be objective about this,” Scott said at a Thursday press conference, according to True North Reports. “But suffice to say, my feelings haven’t changed on a carbon tax. If that is all it is, a carbon tax, then I’m not supportive of that.”

WBZ’s Jon Keller asked Baker in an interview that aired on Sunday why the Republican would not just use some of his vast political capital to hike the state’s gas tax to generate additional funding for roads, bridges and public transit.

“I just think that doing this regionally makes so much more sense than trying to do it one state at a time,” Baker said.

The governor said by increasing the gas tax in Massachusetts he would be penalizing Massachusetts businesses that operate throughout New England and would simply encourage them to buy gas elsewhere. “I see no reason to disadvantage Massachusetts distributors at the expense of everybody else,” Baker said.

House Speaker Robert DeLeo cited the upcoming release of the TCI coalition’s memo of understanding as one reason he wanted to wait until January to have a debate over transportation revenue.

The Massachusetts High Technology Council and Associated Industries of Massachusetts have praised the decision to delay the debate on a revenue package that still appears likely to include a gas tax increase.

“Speaker DeLeo and his leadership team have made a wise decision to avoid any rush to revenue, which the Council applauds,” said MHTC Vice President Mark Gallagher. “The size of the tax, toll and fee proposals advanced by some advocates are too large and the scope of their potential impact is too broad to move forward in anything but a methodical and data-driven way.”

Associated Industries of Massachusetts, the state’s largest employer trade group, has been supportive of the TCI negotiations, but does not want to see an additional gas tax increase layered on top.

“We appreciate that the Speaker and his members are being thoughtful about this complex issue of transportation reform. Taking additional time to weigh all options is the best path forward for the Commonwealth,” said Brooke Thomson, executive vice president of government affairs at AIM.

The Massachusetts Fiscal Alliance is one of the organizations, along with the National Federation of Independent Business, that opposes TCI. The Fiscal Alliance has sent letter to all state legislators and elected city and town officials critiquing the fact that Gov. Baker can enter the regional pact without a legislative vote.

The group is also running ads on Facebook in select House districts. “Despite what Beacon Hill officials tell you, TCI is nothing but another gas tax. It’s already happened in California, but it doesn’t need to happen here,” the ad states.

Supporters note that the Global Warming Solutions Act explicitly authorized future gubernatorial administration to enter into regional market-based agreements to reduce carbon emissions, and dispute the characterization of the cap-and-trade program as a tax, though it is expected to add cost to the price of fuel.