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New Jersey Holds Off Signing On To Regional Emissions Deal

Dec 23, 2020

New Jersey joined seven other Northeast, Mid-Atlantic and Southeast states (Delaware, Maryland, New York, North Carolina, Pennsylvania, Vermont, and Virginia) earlier this week, choosing not to sign on to a regional cap-and-trade plan for emissions. The Transportation and Climate Initiative (TCI) is developing a framework to limit emissions from 11 Northeast and mid-Atlantic states. Massachusetts, Connecticut, Rhode Island and Washington, D.C. were the only signatories to a Memorandum of Understanding (MoU) to participate in the program.

Under the cap-and-trade program, gasoline and diesel fuel suppliers will be required to purchase “credits.” These credits could be traded, similar to the multi-state Regional Greenhouse Gas Initiative for power plant emissions. The funds raised by auctioning the credits would be divided among the participating states and each state would determine how best to invest its share in programs to reduce emissions.

The TCI program is expected to cut greenhouse gas pollution from motor vehicles in the region by as much as 26% by 2032 and generate more than $3 billion dollars over the next decade that can be invested in efforts to boost adoption of electric vehicles (EVs), which still account for only 2-3% of all New Jersey vehicle sales.

New Jersey’s cautious approach doesn’t mean New Jersey won’t eventually sign on to the program. Governor Murphy, facing re-election in 2021, is concerned about the potential political fallout from backing a massive new environmental program that would likely result in an increase in gas prices as much as 5 cents per gallon. Many automakers have publicly backed TCI, in large part because they see it as preferable to other potential strategies that government regulators have considered to encourage consumers to move away from fossil fuel vehicles to battery electrics. “Fee bates”, for example, which would impose massive increases on vehicle registrations for popular trucks and SUVs, could impact new car sales by exacerbating an already growing affordability problem in the automobile marketplace. New Jersey Department of Environmental Protection (NJDEP) has also proposed new rules on medium and heavy-duty trucks.

The four current TCI program participants are estimated to generate $276 million annually from the sale of emissions credits when the program launches fully in 2023, rising to about $366 million in 2032.  If all of the states currently in discussions with the TCI choose to implement the Program, total proceeds could reach $2 billion or more annually. Automakers, auto retailers and new clean car buyers could benefit from the program, if those funds are channeled in to new or existing cash-on-the-hood incentive programs and infrastructure development.

NJ CAR will continue following developments regarding the TCI program and pressure State government officials to “put their money where their mandates are” if the TCI eventually materializes as a new source of clean funding.