The Transportation and Climate Initiative (TCI) on Monday released a draft model rule for a cap-and-invest program that Massachusetts, Connecticut, Rhode Island and the District of Columbia have agreed to launch for their regions.

Release of the draft kicks off a multiyear, multijurisdictional effort to define the framework for the TCI-Program (TCI-P) announced in December. TCI-P aims to cut transportation emissions by 26% from 2022 to 2032 in participating regions.

Initial emissions reporting under the plan is set to begin in 2022, with the first auctions and compliance requirements starting in 2023, Kate Johnson, chief of the Green Building and Climate Branch at the D.C. Department of Energy and Environment, said during a webinar Monday.

TCI released a corresponding update on proposed processes for public engagement to ensure the program focuses on equity. The draft model rule and the update on public engagement planning are available at TCI’s website, where stakeholders can find a portal to submit comments, preferably by April 1. TCI will publish a model rule after incorporating public input on the draft.

Once the official program launches, stakeholders will have an opportunity to engage in the TCI-P process through annual reporting that monitors program effectiveness, Johnson said.

The participating states also agreed to conduct comprehensive program reviews every few years.

Those reviews “will help ensure we’re achieving the goals we’ve set together, and that we’re making changes to stay on track and improve the program,” Johnson said.

How the Program Will Work

The draft model rule outlines how the cap-and-invest program will apply to the gasoline and diesel fuel supply chains within the program participants’ jurisdictions. Entities that hold a position at terminals that disperse transportation fuel for delivery will be required to purchase and hold emissions allowances and report emissions-related data to the jurisdiction in which they make deliveries, Megan O’Toole, an attorney with the Vermont Agency of Natural Resources, said during the webinar.

In addition, transportation fuel terminal operators will be required to report fuel shipment information to the jurisdiction in which they operate, she said.

Each supplier will use an emissions and allowance tracking system to report monthly the emissions associated with the fuels they disperse. Suppliers will purchase and then surrender allowances to cover the emissions that they have reported, O’Toole said.

An allowance represents the authorization to emit one metric ton of carbon dioxide pollution from transportation fuel. The allowances will be sold at joint, quarterly auctions by TCI-P participating jurisdictions. TCI originally projected allowance prices would begin at $6.60/metric ton.

“The number of allowances available for sale at auction each year is equivalent to the [program] cap, and the cap declines each year, meaning the number of allowances available for sale at auction will decline each year,” she said.

Participating jurisdictions will set and publish a reserve price prior to each auction and then publish the final clearing price and total allowances sold at auction, according to the draft rule.

Use of Auction Proceeds

Participating TCI-P jurisdictions will use the allowance auction proceeds to invest in clean transportation.

“It’s up to each individual participating jurisdiction … to determine independently how to invest those program proceeds in consultation with their citizens … and policymakers,” Garrett Eucalitto, deputy commissioner of the Connecticut Department of Transportation, said.

Examples of investments, according to Eucalitto, include:

• improving public transportation for unserved or underserved areas;
• investing in zero-emissions buses, cars and trucks;
• expanding electric vehicle charging infrastructure;
• developing interstate EV charging corridors;
• repairing existing roads and bridges; and
• providing alternatives for active transportation, such as protected bike lanes and accessible sidewalks and crosswalks.

TCI-P participants committed to establishing equity advisory bodies to help shape their investments, Johnson said, adding that participating jurisdictions will designate those advisory bodies “soon.”