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Transport Sector Draws Ambitious Plans To Cut Its Massive GHG Emissions

March 3, 2021

The transportation sector -- which EPA says is the single largest source of greenhouse gas emissions -- is facing some of the most ambitious climate change policy proposals.

For example, senators from both parties are moving quickly to craft legislation that will likely provide billions of dollars to states to “support projects” that reduce emissions, encourage officials to conduct certain emissions planning and finance electric vehicle and other zero-emission infrastructure.

And it’s not just the transportation systems that are facing an overhaul, but the fuels and vehicles that populate them too.

A group of East Coast states earlier this week floated a model rule for creating a regional cap-and-trade system for transport-related GHGs that would target emissions from transportation fuels.

Also, Bill Gates’ Breakthrough Energy group is providing funds for a newly launched National Academy of Sciences (NAS) study to help develop methods for assessing the lifecycle GHGs from transportation fuels, an effort aimed at advancing the group’s call for a national low carbon fuel standard.

In addition, top officials in the U.S. and Canadian governments are pledging to develop “ambitious” and aligned new emissions standards for light-duty vehicles.

At the same time, environmentalists and California lawmakers are urging the Biden administration to adopt strict new limits that would go beyond those in a voluntary deal the state struck with five automakers as it works to replace Trump-era rules.

While such efforts will likely result in significant changes to the transportation sector, they also face significant hurdles.

For example, while senators are moving quickly to advance their multi-billion dollar legislation, they have yet to find a new financing mechanism to replace the gas tax -- a diminishing funding source given vehicles’ increased efficiency.

And they also face political hurdles as some Democrats favor packaging the transportation provisions into a broader infrastructure package the Biden administration is developing to address energy, telecom and other sectors, and advancing it on a party-line vote via the streamlined budget reconciliation process.

The states’ cap-and-trade plan faces opposition from environmental justice advocates who oppose use of such trading mechanisms; in addition, only four states have so far signed up for the program though others have pledged to join.

And environmentalists’ push for strict new vehicle standards faces likely opposition from industry and labor groups.

Despite such hurdles, supporters of the various efforts are moving ahead.

On Capitol Hill, senators held their first hearing of the new Congress to begin work on their upcoming transportation funding legislation, where they pledged to emulate the process -- and in some cases the substance -- of a landmark 2019 bill that included nearly $11 billion to help reduce greenhouse gases.

The 2019 measure won unanimous support in the Senate Environment & Public Works Committee (EPW) but never received a floor vote in large part because senators could not agree on a way to pay for the bill’s total costs.

Their current effort -- which they hope to complete before Memorial Day -- is beginning with a bipartisan process in the face of looming uncertainties.

For Now, Senators Seek Bipartisan Transportation Bill, But Hurdles Loom

Senators developing a transportation funding bill with multiple climate provisions say they are working in a bipartisan fashion, though Republicans are warning they may drop their support if the legislation is bundled into a larger infrastructure package and advanced via streamlined reconciliation procedures as some Democrats are suggesting.

GOP lawmakers are already raising concerns that the transportation funding provisions may get rolled into the broader infrastructure package and approved via the reconciliation process, bypassing a potential filibuster threat and allowing Democrats to approve budget-related legislation on a party-line vote.

“There is strong bipartisan support for a surface transportation bill,” Sen. Shelley Moore Capito (R-WV), the committee’s ranking Republican, told the hearing. “That should not extend to a multi-trillion-dollar package that is stocked full with other ideologically driven, one-size-fits-all policies.”

Senators also signaled they are still grappling with a series of other hot-button issues, including how to create a sustainable funding mechanism to pay for new spending as federal gasoline taxes become an increasingly less stable funding source for the highway trust fund due to more electric vehicles (EVs) entering the fleet.

Meanwhile, the Transportation Climate Initiative Program (TCI-P), a group of four East Coast entities, this week released a model rule that is a first step for legislative and regulatory processes that officials say will be necessary by participating states, in advance of the expected 2023 start of the program’s cap-and-trade compliance regime.

State Officials Float Draft Model Rule For State Transportation GHG Cap

State officials who are crafting a regional cap-and-trade program for transport-related greenhouse gas emissions are proposing a draft model regulation that defines entities subject to compliance or reporting requirements, lays out price thresholds for triggering cost or emissions safeguards and includes environmental justice provisions.

The draft model rule lays out a structure for a regional cap-and-trade program targeting “covered emissions” from gasoline and diesel fuel, generating an estimated $300 million that states can use to fund an array of potential GHG reduction strategies.

The draft model rule specifies requirements for regulated entities under the program, with “jurisdiction fuel suppliers” required to purchase allowances to cover their CO2 emissions under the program, according to a summary.

Separate reporting requirements apply to terminal operators and certain distributors, though the latter may also be subject to compliance credit requirements under some circumstances, state officials indicated.

Terry Gray, deputy environmental protection director in Rhode Island’s Department of Environmental Management, noted during a webinar last week that the TCI-P reduces emissions both in its “top down” cap-and-trade program imposing limits on fuel suppliers, and “bottom up” local strategies to limit transportation emissions that the program also helps finance.

So far, only Massachusetts, Rhode Island, Connecticut and Washington, D.C. have joined TCI-P, which aims to cut transport emissions within its jurisdictions by 26 percent within its first 10 years. But at least eight other states are considering joining.

Others are also looking at ways to reduce emissions from transportation fuels.

NAS Launches Study On Lifecycle GHGs From Transportation Fuels

The National Academy of Sciences (NAS) is beginning a study to assess the lifecycle greenhouse gas emissions from transportation fuels, an effort that could influence future low-carbon fuels programs at the national level, in additional to ongoing or planned state policies on the issue.

According to NAS, the project is sponsored by the Energy Innovation Fund, which is funded by Breakthrough Energy, the think tank created by former Microsoft CEO Bill Gates. Breakthrough Energy has long advocated for creation of a national low-carbon fuel standard (CFS), based on the California approach, which would require producers to lower the carbon intensity (CI) of transportation fuels.

“Providers of low-carbon fuels generate credits by attaining a certified CI. Credits are calculated relative to the annual CI benchmark and are verified by a third party,” according to a recent paper.

Credits can be generated through actions that reduce GHG emissions in the petroleum supply chain, including carbon capture using direct air capture (DAC) and deployment of zero emissions vehicle infrastructure.

But the group says, “The federal government must estimate the lifecycle GHG emissions of all transportation fuels in the U.S. Third-party experts should verify these estimates to make sure the CFS is successfully reducing CI and emissions.”

A sharper focus on the lifecycle emissions from transportation fuel comes as the Biden administration is ramping up discussion of climate change and infrastructure investments, and it also coincides with the looming end of congressional biofuel blending targets for the renewable fuel standard (RFS) after 2022.

The Biden administration is also seeking to overhaul federal vehicle emissions standards and realign them with those developed by the Canadian government.

U.S., Canada Realign On Auto GHGs, Boosting Push For ‘Ambitious’ Rules

The Biden administration is pledging to work with Canadian officials to develop “ambitious” vehicle fuel efficiency and greenhouse gas standards, an effort that could boost the political constituency for federal rules that are far stronger than the Trump administration’s standards at EPA and the Transportation Department (DOT).

Following bilateral friction on the issue during the Trump administration, key leaders of the two countries are signaling renewed cooperation, including in a joint “roadmap” of various policy actions signed by President Joe Biden and Canadian Prime Minister Justin Trudeau, as well as Canada’s recently completed “mid-term evaluation” of its own auto GHG standards.

The Biden administration is working to meet a July 2021 deadline for a proposal to overhaul the Trump administration’s rollback of Obama-era vehicle standards through model-year 2026 issued jointly by EPA and the National Highway Traffic Safety Administration (NHTSA).

But as officials work to develop new standards, they are facing pressure from environmentalists and California lawmakers to adopt requirements stricter than those California adopted in its voluntary deal with BMW of North America, Ford, Honda, Volkswagen Group of America, and Volvo.

As Biden Weighs Standards, California Bill Seeks Big Cuts In Vehicle GHGs

A group of California lawmakers is pushing a bill that seeks to strengthen the state’s landmark voluntary deal with five automakers setting greenhouse gas standards for light-duty vehicles through model year 2026, adding to pressure on the Biden administration to adopt stricter limits than those spelled out in the deal as it crafts new federal rules.

California’s near-term requirements in the voluntary deal with the five auto companies seek to reduce GHG emissions by roughly 3.5 percent each year between MY22 and MY26. But the state legislation, AB 1218, requires manufacturers to meet per-mile standards for “passenger vehicles” for those years that are 10 percent lower than 2020 levels. And for “light-duty vehicles,” the legislation requires they be 30 percent lower.

Environmentalists are also pushing administration officials to go beyond California’s voluntary deal.

Groups Seek 60 Percent Stringency Hike In Vehicle GHG Limits By 2030

Major environmental groups are urging President Joe Biden to significantly tighten vehicle greenhouse gas and fuel economy standards, including requiring an ambitious 60 percent reduction in emissions by 2030 compared to current levels and setting a goal of making all new cars and light-duty trucks zero-emitting by 2035.

In a Feb. 25 letter to Biden, a coalition of 24 groups that includes the Natural Resources Defense Council (NRDC), Sierra Club and Center for Biological Diversity (CBD), among others, offers to work with the administration on “strong vehicle standards to boost the economy, create jobs and protect health.”

But one source says that environmentalists have been “trying to figure out how to best articulate concerns” over the California agreement, especially since Biden’s position on it is unknown, and he is facing strong pressure from other groups, including automakers and labor groups, to support it.

As such, sources say the letter was carefully crafted to balance a number of concerns. “I see it as an effort to head off adopting the California rule, others will see it as a signal to the unions that we want to work with them and to the President that we share his goals but need tougher standards to achieve them than the California rules,” Daniel Becker, director of the Safe Climate Transport Campaign at CBD, tells Inside EPA.

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