Jonathan Shaer

The Rhode Island House and Senate are considering bills that would authorize the state to enter the Transportation Climate Initiative Program (TCI-P), a cleverly designed program that raises the price of gasoline and diesel every year without the legislature ever having to take a vote. It’s a revenue-generating program disguised as pro-climate policy (of course) that every Rhode Islander should look upon with suspicion and disappointment.

TCI-P requires distributors of motor fuels to purchase allowance credits for every gallon of gasoline and diesel they sell to retailers, who, in turn, would pass the cost of those allowances on to motorists. Each year, the number of available credits falls by three percent, thereby reducing the number of gallons that can be sold and raising the price of those that remain. Make no mistake, every single cent of the fee will be passed along to motorists just as with every product supply chain.

Once promoted as a 13-state regional coalition, when the time came to commit, only Rhode Island, Connecticut, Massachusetts and the District of Columbia signed on. The other nine states either dropped out completely or have more work to do convincing their respective legislatures to participate. Governor Raimondo, on the other hand, willingly assented to charge Ocean State residents and businesses more for a product everyone depends on. But at what cost?

The former Governor was an early cheerleader for the program, but it was the recent passage and signing of the Act on Climate that has put Rhode Island in a bind. The law establishes aggressive greenhouse gas reduction targets, but is silent on specific plans to achieve them. Now some say without TCI-P they won’t be able to get there. Can you say fire, aim, ready?

There isn’t any doubt TCI-P will raise the price of fuel, but as the association representing the regulated community of retailers, our concerns go much deeper. The distribution system for motor fuels is hyper-complex, liquid and efficient. Most would be shocked to learn the number of times product changes hands before it ends up in a car’s gas tank. TCI-P is an unnecessarily burdensome and risky plan that threatens to disrupt this complicated supply chain.

They say it will increase the price five-to-nine cents per gallon in the first year, but that’s just the beginning. If allowance credit availability falls faster than consumption, then expect to see price spikes and/or localized supply outages. In fact, Energy Information Administration (EIA) demand projections show just a six percent reduction over the next 10 years. By those estimates, we could see supply disruption by 2025 – just two years into the TCI program.

One might think they could just release more allowance credits to Rhode Island. But that is not possible because the TCI-P allowances are regional and not state-specific. So, if companies that own allowances are either using them elsewhere or choose to hold them for appreciative value, then obligated distributors will be faced with paying through the nose, resulting in higher prices at the pump, or closing down certain gas stations until they acquire allowances at reasonable prices.

Nobody denies the need to reduce greenhouse gas emissions, nor does anyone deny the need for transportation infrastructure revenue, but the risk, expense and bureaucracy associated with TCI-P is completely unnecessary. Instead, Rhode Island should work with neighboring states and stakeholders to pass a reasonable, transparent, regional carbon tax to defray costs of climate change programs. It may be a tougher vote in the legislature, but at least the good people of Rhode Island will have a say unlike with TCI-P.

Jonathan Shaer is director of the New England Convenience Store and Energy Marketers Association.