Connecticut officials and gasoline trade associations squared off Monday over the Transportation and Climate Initiative Program (TCI-P) during a 12-hour virtual public hearing held by the General Assembly’s Environment Committee.

The hearing sought input on three bills, including one regarding climate change adaptation and another on environmental air quality. But S.B. 884, which would direct the Department of Energy and Environmental Protection (DEEP) to create rules implementing TCI-P, was the main event.

Passage of the legislation is a priority for Connecticut Gov. Ned Lamont. He joined Massachusetts, Rhode Island and D.C. in committing to the cap-and-trade program, aiming to cut greenhouse gas emissions from vehicles by 26% from 2022 to 2032 and invest $300 million per year in cleaner transportation choices and public health improvements. (See NE States, DC Sign MOU to Cut Transportation Pollution.)

DEEP Commissioner Katie Dykes said opponents of the bill want to “mischaracterize” it as a gasoline tax.

“You may hear from folks who will tell you that this bill is essentially a 17-cent gas tax, and that characterization is completely false and is based on misinformation,” Dykes said. “This is not a gas tax. It is an environmental program that will cap greenhouse gas emissions and require the [fossil fuel] industry to pay for the damage it is causing to public health and the climate.”

Dykes said there have been “several years” of modeling TCI-P to assess its impact on reducing emissions and potentially increasing retail gas prices in participating jurisdictions by 5 cents/gallon beginning in 2023, assuming fuel suppliers choose to pass down 100% of allowance costs to consumers. Multiple consumer protection safeguards, including a cost-containment reserve, are designed to limit the program’s impact on prices at the pump and would kick in at 9 cents/gallon.

Dykes said the reserve “acts like a guardrail” to prevent prices from exceeding 9 cents/gallon increase and “operates like the airbags in your car.”

“If we hit the [cost-containment reserve], we don’t just keep driving,” Dykes said. “Instead, we go into a review to adjust the parameters of the program, so that we can ensure that the consumer impacts are not staying at that CCR level.”

According to Dykes, the cost-containment reserve for TCI-P is based on a similar mechanism from the Regional Greenhouse Gas Initiative (RGGI). The “17-cent talking point” is based on studies that “exaggerate assumptions” about electric vehicle battery costs and fuel economy and “assume no cost-containment reserve.”

“So essentially, it’s like modeling that this program is going to be wildly more costly than what our assumptions have determined, and that there are no consumer protection mechanisms to prevent the program from exceeding those 9-cent costs,” Dykes said.

Deputy Transportation Commissioner Garrett Eucalitto said he wanted to clear up the misconception that TCI-P is “designed to price people out of driving or force them into electric vehicles. … That could not be further from the truth.”

Rep. Stephen Harding (R) asked Dykes if there is another way to reduce emissions without increasing gas prices, which he called “regressive.”

Dykes said that because TCI-P is a market-based program, fuel suppliers participating in a regional market will have competitive options to reduce compliance costs, such as blending in biodiesel that will lessen the number of allowances “for each gallon that they’re selling into the state.”

Gasoline Associations Respond

Michael Fox, executive director of the ‎Gasoline and Automotive Service Dealers of America, said his group represents “mom and pop gasoline retailers” who sell more than half of all the fuel in Connecticut and collectively oppose the bill.

“TCI is a gas tax called by a different name,” Fox said. “The cost of the carbon credits will be passed on as higher fuel costs to Connecticut consumers. TCI perfectly fits the definition of what a tax is or is not.”

Sen. Christine Cohen (D), co-chair of the committee, asked Fox how wholesalers would pass down gas price increases to consumers. Fox answered by comparing the program to a gross receipts tax, levied on goods at the wholesale level — instead of at retail, like a sales tax — which is then passed on to consumers through higher prices.

“So, if you force these distributors to purchase these carbon tax credits, they’re just going to pass those additional costs on to us,” Fox said. “I think this is something no one has addressed and needs to think about.”

Fox said carbon credits sold at auction “are not designed for the lowest price.”

“They are designed to bring in the highest price,” Fox said. “That would allow the big [fuel] distributors to keep bidding up the price of these carbon credits, and then the smaller distributors wouldn’t be able to afford them, thereby putting them out of business and eliminating competition. That is a huge problem under TCI.”

Christian Herb, president of the Connecticut Energy Marketers Association, said his group’s members “own, operate and distribute fuel” to more than 1,000 gas stations in the state.

“The families I represent are in their third and fourth generation where they have installed [and] invested hundreds of millions of dollars in their properties,” Herb said . “Let the EV industry pay for their infrastructure just like my members have.”

Herb said TCI-P “is a part of a bigger effort to electrify the entire economy in Connecticut.”

“You’re pursuing policies that further rely on monopolies like Eversource [Energy] and Avangrid, who deliver the highest rates in America, and they’ve just asked for another increase,” Herb said.

He added that TCI-P trades “tailpipe emissions for electric generation emissions.”

“The vast majority of electricity in Connecticut is generated with natural gas, which is, according to EPA, 87 times more potent at trapping greenhouse gases than carbon,” Herb said. “So, methane from natural gas is doing that damage more than what are we achieving by adopting this. The bill doesn’t move the environmental needle. DEEP testified earlier today that sea-level rise was a huge concern. This bill doesn’t fix that; it doesn’t change it, especially when most states aren’t even participating.”