Virginia and Other States Pass on Carbon Tax Pact

by Steve Haner

The organizers of the Transportation and Climate Initiative announced Monday that only four of the twelve jurisdictions involved have agreed to move forward and implement the carbon tax on motor fuels, and Virginia is not one of them.  Not yet.

The 2021 Virginia General Assembly could consider legislation to join the interstate compact in 2022, but the memorandum of understanding as it stands now only includes Massachusetts, Connecticut, and Rhode Island, which are contiguous, and the District of Columbia.

New York, New Jersey, Maryland, and Pennsylvania were conspicuously absent along with Virginia.  One surprise that emerged, however, is that North Carolina is now part of the planning group.  The states that didn’t sign anything yet issued a statement of “next steps” that leaves the door open for the future.  Even those that did sign pushed the implementation back one year to 2023, reducing the need to act now.

The Governor Ralph Northam Administration has been silent so far on its plans or reasoning.  His apparent decision to at least delay a year on acting is prudent but leaves the issue alive for debate among 2021 candidates for statewide or legislative offices. 

This effort has been going on for more than a decade now, with Virginia a late entry. To have only one-third of the states sign, and to have the largest states staying on the sidelines, has to be considered a setback.  Organizers did their best to create a positive spin in their release.

The goal of TCI was to create a large region coordinating efforts to cap and then ration the amount of gasoline and diesel fuel available for sale. Motor fuels are a major source of atmospheric CO2 blamed for climate change, and a growing percentage source since other sources (like power plants) are declining. Advocates also claim that reducing tailpipe emissions will lower rates of asthma, heart disease and other ailments.

The MOU also calls on participating states to commit 35 percent of the carbon tax revenue to serve the “population of overburdened and underserved communities” and ensure they “benefit equitably from clean transportation projects and programs.”

But individual states have final control over spending their carbon tax revenue. The intention is to encourage or subsidize alternatives to internal combustion vehicles, including mass transit, electric or low-emission vehicles, walking trails and even broadband internet. Just how much revenue Virginia might extract from its families and businesses should it join will become clearer as the four jurisdictions going forward develop the fuels auction marketplace.

The regressive nature of the program, raising prices with both a gasoline tax and rationing, was noted by some advocates for low-income citizens. Environmental justice advocates who objected loudly in New Jersey, as previously reported, may have knocked New Jersey out of the compact.

Just yesterday I reported on a Tufts University analysis that identified fairly high carbon taxes and resulting gasoline price increases in Massachusetts. Today’s announcement discusses $300 million in potential revenue among the four jurisdictions, a substantially lower figure than Tufts projected. Modeling done by Georgetown University also pointed to higher tax amounts.

The Thomas Jefferson Institute sponsored a study that predicted the TCI carbon tax in Virginia would be 33 cents per gallon or would need to be that high to actually dent consumer thirst for fuel.