Analyzing the Transportation and Climate Initiative Program Using an Integrated Assessment Model

Abstract

The Transportation & Climate Initiative (TCI) is a cap-and-invest program that is designed to help the thirteen participating states reduce CO2 emissions; however, the anticipated electrification of the transportation sector can potentially interact with the Regional Greenhouse Gas Initiative (RGGI) market, a cap-and-trade system for CO2 emissions from electricity generation. Potential impacts include an increase in electricity prices and leakage of CO2 emissions to other sectors and states. This study utilized a human-earth systems model to investigate TCI’s regional emissions reduction potential and to quantify the impacts of the program under alternative assumptions. The results show that TCI would lower regional net CO2 emissions and increase market penetration of both heavy- and light-duty electric vehicles through 2050. The emissions reduction and changes in transportation fuel mix would be accompanied by an increase in the RGGI CO2 allowance price, as well as increases in the costs of electricity and on-road travel. In the freight sector, this resulted in a demand shift from trucks to trains and marine vessels. A portion of the CO2 reduction from on-road transportation was offset by the increases in emissions from non-road transportation and electricity generation. Pennsylvania, the only TCI state that does not currently belong to RGGI, experienced the highest increase in CO2 from the electric sector as well as the lowest percentage reduction of NOx emissions, reflecting its own additional electricity demands and higher electricity exports to RGGI states. Extending the declining RGGI and TCI cap trends through 2050 leads to higher CO2 and other air pollutant emissions reductions. In addition, it further facilitates the energy transition from carbon-based fuels to electricity in the on-road transportation sector. These results suggest that while TCI is effective at reducing regional CO2 emissions, additional measures may be needed to avoid regressively burdening low-income households with the added costs. This is one of the goals of the TCI reinvestments, an aspect of the policy that was not modelled here.