On 17 December 2019, the ten participating jurisdictions of the Transportation and Climate Initiative (TCI) released a draft Memorandum of Understanding (MOU) for a transport sector ETS (cap-and-invest program) starting in 2022 as well as economic modeling results for an initial cap level and different cap reduction factors.

The draft MOU follows the release of a draft framework on the basic design features of the system in October 2019. The MOU contains policy design elements as well as a timeframe for the implementation, and is consistent with the draft framework in terms of scope, allocation of allowances, flexibility instruments, MRV, and revenue use. It also details design elements such as compliance periods, governance and program evaluation. The MOU will be open for public comments until 28 February 2020. Further details on the cap, on reduction factors and on possible regulations for offsets will be contained in the final MOU.

The modeling assumes as business-as-usual scenario (BAU) that CO2 emissions from on-road transportation fuels are decreasing by 19% by 2032 compared to 2022. Based on the projected transport sector emissions of the participating states in 2022, an initial cap would be set at 254 MtCO2e. The modeling also estimates the impacts on various factors at reduction levels of 20%, 22%, and 25% between 2022 and 2032. According to the results, the impact of each reduction level on regional gross domestic product (GDP), disposable personal income (DPI), and jobs is minimal, with modest increases projected for all three. Gasoline prices are projected to increase by 5 cents/gallon for the 20% scenario, 9 cents for the 22%, and 17 cents for the 25% option.

The current timeline foresees that the final MOU will be released in spring 2020 after considering further public input in January and February 2020. At this point each jurisdiction will decide whether to sign the final MOU and participate in the regional program. Between spring and fall 2020 the participating jurisdictions will develop a “model rule” establishing final regulations for the system to be released by 31 December 2020. Finally, over the course of 2021 jurisdictions will conduct rulemaking processes to adopt regulations aligned with the model rule on the state-level and start implementing the program as of 2022.