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The Transportation and Climate Initiative (TCI): Everything You Need to Know, Part II: How Will TCI Work?

In Part I of our series on the Transportation Climate Initiative TCI, we provided an overview of this innovative program. Here in Part II, we will delve into how the initiative will work. As a regional policy, TCI will provide a framework for each state jurisdiction to implement in its own way. The recently released Framework for a Draft Regional Policy Proposal provides important insights into the way that the TCI could be structured in each state.

The overarching structure of the TCI has been modeled on the highly successful Regional Greenhouse Gas Initiative (RGGI), a mandatory market-based program aimed at reducing greenhouse gas emissions from large power plants across the eastern United States. RGGI is the first program in the US initiated by a group of states to limit carbon dioxide emissions from any sector of the economy. The ten member states agreed to cap and reduce CO2 emissions at a declining rate each year. Participating states sell permits, known as “allowances,” to emit carbon through auctions through which carbon emitters must purchase allowances equal to their actual emissions. These allowance sales generate revenue that each state may invest in energy efficiency, renewable energy, and other consumer benefit programs. In the process, those investments create green jobs and spur innovation in new technologies. Since its creation RGGI has helped member states be successful in reducing CO2 emissions from the power sector by 10%.

Due in large part to the success and widespread popularity of RGGI, TCI, is similarly structured as a cap-and-trade program that uses market incentives, as opposed to command and control methods, to combat climate change. Under the program, carbon dioxide emissions from the combustion of gasoline and diesel fuel in motor vehicles would be capped each year. The program would begin with an initial emissions cap set at a level that would then decline each year at a steady rate. The initial cap, set using a combination of baseline emissions for three recent years, would be implemented as soon as 2022, with target emissions being reached in 2032.

All wholesale suppliers of transportation fuel to a state would be required to buy allowances for the emission of carbon that would occur as a result of use of their fuel. Fuel suppliers would be able to buy and sell allowances and would have control over how much of the allowance costs to pass on to consumers. In order to contain costs and create flexibility, the program would incorporate multi-year compliance periods and allow “banking” of allowances for use in future compliance years.

Suppliers would be required to report to each state participating in TCI their contributions to that state’s carbon emissions. The states would establish an electronic emissions reporting system, informed by existing reporting requirements for fuel suppliers. A regional organization would conduct carbon market monitoring, auction administration, and allowance tracking.

Each participating state will be free to choose how it will invest the proceeds from the cap-and-trade program. However, the proceeds will need to be invested in initiatives that reduce carbon emissions, spur clean energy production and innovation or increase affordable access to public transportation.

While the draft framework provides much of the outline that TCI jurisdictions will use to construct their independent proposals, each state’s involvement in the TCI will look somewhat different. In Part III of this series, we will illustrate the details of how such a plan might look in one state, Massachusetts, and the investment priorities that plan would seek to achieve.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume X, Number 36


About this Author

Member / Chair, Energy & Sustainability Practice

Tom Burton’s zeal for innovation and passion for energy and sustainability have shaped the clean energy industry. He created one of the nation’s first clean energy legal practices. Clients ranging from investors to entrepreneurs to Fortune 100 companies rely on him for creative and strategic legal solutions, and he has completed hundreds of venture capital and private equity financings, mergers and acquisitions, and IPOs. He guides the industry’s next generation of leaders through active involvement with start-up organizations and accelerators. The Northeast Clean Energy Council recognized...

Sahir Surmeli Energy & Sustainability Attorney Mintz Levin

Sa is a highly skilled and versatile business counselor who advises companies, boards, entrepreneurs, investment banks and venture and private equity investors, as they build and grow companies. He handles public offerings, 144A and private financings, acquisitions, joint ventures and strategic partnerships. Sa guides public and private companies and investors, primarily in the energy and sustainability, technology, materials science, hospitality, retail and life sciences industries. Known as a problem-solver, Sa executes transactions with creative structures to address new opportunities in finance and development of new markets by clients in partnership with global corporations. He also helps entrepreneurs secure financing, commercial agreements and partnerships.

Sahir represents emerging growth and established energy technology, information technology, life sciences and retail companies, investors and investment banks in public offerings, 144A offerings and other private financings, mergers & acquisitions, joint ventures and strategic partnerships. Sa is listed among the Top 100 Cleantech & Renewables Lawyers by Euromoney’s LMG Cleantech & Renewable Energy. He was also named a Massachusetts Super Lawyer in 2014, 2015, 2016 and 2017.

Sa is a senior member of the firm’s Securities Practice Group and Technology Practice Group and serves as Co-chair of the firm's Energy & Sustainability Practice. The firm’s Energy & Sustainability Practice has completed more than 500 transactions across energy sectors totaling over $8.5 billion since 2006. Serving more than 250 clients, spanning the ecosystem from emerging companies to large corporations, venture capital and private equity funds, investment banks, project developers, and family offices, the firm is recognized nationally as a leading law firm in the space.

Sa has worked on a wide variety of capital-raising projects, including equity, debt, syndicated loan, strategic investment and structured finance offerings, with aggregate proceeds of more than $10.6 billion. He has extensive experience in corporate finance and securities law as well as mergers and acquisitions. Sa represents issuers, underwriters, initial purchasers, and placement agents in public and private equity offerings, debt offerings (particularly high-yield, but also investment grade), bank financings, leveraged buyouts, securitizations, and related transactions as well as private equity funds in leveraged buyouts. He is also a key contributor to MintzEdge, an online resource for entrepreneurs that includes useful tools and information for starting and growing a company.

Sa has an MBA in corporate finance and focuses on adding value in complex financing structures and helping younger companies navigate the challenges of the public and private markets. He handles projects in a broad range of sectors, including energy and clean technology, information technology, telecommunications, materials technology, biotech, aerospace, semiconductor, retail and hospitality. He also has extensive international experience — he previously practiced in New York, Tokyo, and Hong Kong and now works from the Boston office of Mintz. He has represented clients in the United States, Australia, Canada, China, France, Germany, Japan, Korea, the Netherlands, Turkey, the United Kingdom, and elsewhere.