The regional cap-and-tax scheme called the Transportation and Climate Initiative (TCI) is a bad deal for New Hampshire, the initiative organizers’ own projections show.
Modeled on the Regional Greenhouse Gas Initiative, the TCI would cap carbon emissions from transportation sources (vehicles) and force fuel distributors to buy carbon allowances. A declining cap would force distributors to buy more allowances annually. The hope is to compel a switch to non-fossil fuels or to discourage driving by making it uncomfortably expensive.
Naturally, the costs of buying the allowances would be passed on to consumers. In effect, the TCI imposes an additional fossil fuel tax on top of the state and federal gas taxes consumers already pay.
The cost to consumers would be enormous. On December 17th, the TCI organizers released the results of their own analysis of the program’s impact. They project that the carbon allowances would generate revenue of between $1.4 billion and $5.6 billion annually in the 12-state TCI region (plus the District of Columbia), which covers Mid-Atlantic and Northeastern states, including New Hampshire.
That would be a cost of between $14 billion and $56 billion over the decade spanning from 2022-2032.
But the TCI organizers’ own projections show that almost all of the carbon emissions reduction projected during that decade can be attributed to existing trends and not to the TCI scheme.
In August, they projected a baseline reduction in carbon emissions of “roughly 20 percent” without the TCI.
“Total gasoline and diesel consumption and CO2 emissions both fall by roughly 20% from 2022 through 2032 as a result of increased fuel economy in light and heavy-duty vehicles and increased LDV EV shares,” according to the organizers’ own analysis. (LDV EV = light duty vehicle electric vehicle.)
In a presentation released on December 17th, TCI organizers projected that the TCI would cause carbon emissions to fall by approximately 1-5 percentage points above the roughly 20 percent that will occur under existing policies.
The worst-case scenario projection was a 20 percent drop in carbon emissions from 2022-2032, which could be as little as a fraction of a percentage point above the baseline projection. The best-case scenario projection was a 25 percentage point reduction, which would be, at best, 6 percentage points above the baseline.
Understanding the baseline is critical because groups that support the TCI are already claiming it will produce up to a 25 percent reduction in carbon emissions in the region. That is false. Roughly 4/5ths of that reduction will happen anyway, the TCI organizers’ own projections show.
At best, the TCI would reduce carbon emissions of a little more than 5 percent in 10 years — at a cost of $56 billion in that best-case scenario. Without the TCI, carbon emissions are projected to fall by roughy four times that amount. If the TCI’s worst-case scenario occurs, the cost would be $14 billion to achieve an emissions reduction roughly 1/20th the size of what would happen anyway.
The TCI organizers projected that their initiative would cause gas taxes to rise by 5-17 cents per gallon if distributors passed the costs on to consumers (which they would). That seemingly small figure would extract billions of dollars from the economy, giving it to governments to distribute to projects that they favor but that consumers might not. In fact, the whole point is to replace consumer and investor choices with those made by government officials.
The program’s assumed effectiveness relies heavily on the premise that government officials will spend billions of dollars in ways proven to be effective at generating additional carbon reductions. Not only would those projects have to be effective on their own, they would have to be more effective than the choices that otherwise would have been made by business, entrepreneurs and consumers in the absence of the TCI.
Rather than forcibly extract billions of dollars from consumers in yet another heavy-handed attempt to control people’s behavior, governments should scrap this carbon tax scheme and let the market continue to generate solutions.