Nine Northeast and Mid-Atlantic states and the District of Columbia announced this week a new regional initiative to cap and reduce greenhouse gas pollution from the transportation sector.  Much remains to be decided before the program takes effect, however.

Connecticut, Delaware, Maryland, Massachusetts, New Jersey, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington D.C.[1] aim to cap carbon emissions from combustion of transportation fuels, and invest the proceeds into low-emission and improved transportation infrastructure, including by aiding electric vehicle adoption, and increasing public transit and biking opportunities.

The initiative is yet another example of state governments aggressively moving to regulate climate change issues, while the federal government has sought to reverse the prior administration’s signature climate policies, proposing to roll back fuel economy standards and ease power plant regulationsCalifornia and New York are the largest states that have announced aggressive emission reduction and clean energy goals.  Among the signatories to the new transportation initiative, Massachusetts and Connecticut have adopted goals, and the District of Columbia’s clean energy legislation is awaiting the Mayor’s signature.

By choosing to address transportation emissions, the initiative expands the regional coordination that several of these states have demonstrated in reducing emissions from the power sector through their participation in the Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade program for power plant emissions in northeastern states.  RGGI has had a relatively limited impact upon power sector emissions, however, such that its members have had to seek to better align market incentives with their own decarbonization goals through other means, such as establishing a separate cap upon power plant emissions within the state, or proposing an additional carbon price on electricity generators equivalent to the social cost of carbon.  The RGGI member states could have followed the lead of California’s economy-wide cap-and-trade program that includes emissions from both the electricity and transportation sectors by expanding RGGI to include transportation emissions. By choosing instead to establish a separate cap for the transportation sector, these states are charting a new path in seeking to address carbon pollution in the absence of federal leadership.

Many critical details remain to be decided:  The states agreed only on the shared goal of negotiating a cap-and-reduce policy proposal for transportation fuels, to be completed over the next year.  The level at which emissions will be capped, monitoring and reporting mechanisms, timelines for adoption, and even what industry is regulated under the system, are all to be determined.  States would then have to formally join the initiative through their internal political processes before any restrictions would take effect.

Notwithstanding the remaining steps, however, the initiative is a major announcement.  The participants represent roughly 17.5 percent of U.S. GDP, and would on their own be the fifth largest economy in the world, ahead of the United Kingdom.  The decision to tackle the transportation sector is also significant, as it has in recent years eclipsed the power sector as the largest U.S. source of greenhouse gas emissions.


[1] New York State, despite hosting two of the stakeholder sessions in the lead-up to the announcement, has not yet joined the initiative.