Funding Transportation through Carbon-Based Revenue Sources. What Works? What Doesn't? And Why? Ella Claney, Associate Consultant WSP | Parsons Brinckerhoff Washington, D.C. APTA Sustainability & Public Transportation Workshop July 25, 2016

Overview Introduction Why consider carbon based revenues for transportation? Cap & Trade v. Carbon Tax What's the difference and what do we use? U.S. Examples: How they operate and do they work? California Cap and Trade Regional Green House Gas Initiative (RGGI)

U.S. Carbon Based Revenues For Transportation As of 2014, Transportation made up 26 percent of all U.S. GHG emissions American Clean Energy and Security Act (ACES) 2009 Called for a regulated national cap and trade system – dedicating 3% of proceeds to transportation Passed through the House in 2009 but was killed in 2010 by the Senate Opposition Political concerns regarding negative impacts on consumers from taxing big business

One Objective, Two Mechanisms Cap and Trade Carbon Tax Allows you to set the limit “cap” on emissions that is estimated to lower global temperatures Requires an entity to oversee auctions Price of CO2 emissions adjusts in real time with the market Does not guarantee the amount of proceeds a program will generate Current examples RGGI California Quebec, Canada Assumes the carbon tax will incentive polluters to reduce emission, but you cannot confidently predict an outcome Is collected like any other tax The tax rate is subject to any administrative procedures required to raise or lower the rate as per any other tax Allows you to estimate amount of proceeds based on historical emission data Current examples British Columbia, Canada Mexico Portugal

Cap and Trade – How it Works Limits amount of GHG that can be released by certain sources or industry sectors. “Allowances” (typically 1 metric ton of CO2 equivalent) are distributed/auctioned by the state to polluters until the cap is reached. The cap is gradually lowered each year to continually reduced statewide emissions. Companies are incentivized to use less than their allowance through new clean technologies, giving them the opportunity to trade, sell, or bank unused allowances. Companies that need additional allowances must purchase additional allowances. Policy makers determine the uses of revenues from allowance auctions.

Cap and Trade in Action Topic California RGGI Boundaries 9 Northeast States: CT, DE ,ME ,MD, MA, NH, NY, RI, VT GHGs Covered CO2, CH4, N2O, SF6), PFCs, Nitrogen NF3, and other GHGs CO2 Only Sectors Covered Electricity generation, industrial sources, distributors of transportation fuel, natural gas, and other fuel (85% of all California GHG emissions) Large Power Plants Year Established 2006 2005 Year Auctions Began 2012 2008 Cap Levels Set in 2013 at 2% below 2012 levels, decreases annually by 2% in 2014, and 3% per year until 2020 15% below 2013 levels by 2020 Total Revenue Generated $3.5 billion $2.4 billion ($895 million for New York) Share for Transportation Over 60% Varies among states (0.04% for New York) Price Floor in 2015 $12.10 per metric ton $2.05 per ton

California Cap and Trade Benefits for Transportation Prior to the program, transportation was responsible for 38% of all GHGs in California 60% of revenues dedicated to transportation The Air Resources Board has held 13 auctions since 2012 totaling $3.5 billion in revenues Issued free allowances to electric utilities, industrial facilities, and natural gas distributers up to 90% (decreasing annually) of emission to keep consumer cost low BREAKDOWN OF CAP AND TRADE REVENUES TO FUND TRANSPORATION

California Cap and Trade Sample Project Winners in 2015 Low Carbon Transit Operations Program $120,000 to Kings County Area Public Transit Agency for solar panels to power its transit center $1.2 million to Golden Gate Bridge HTD for electric buses Housing and Sustainable Communities Program $9.2 million for the Westside Infill Transit Oriented Development Transit and Intercity Rail Capital Program: $24 million to Antelope Valley Transit Authority for the Regional Transit Interconnectivity & Environmental Sustainability Project

California Cap and Trade The Future of the Program Program uncertainty Last auction raised $2.5 million instead of the anticipated $150 million Allowances were sold at the price floor Arguments that it is too similar to a tax Continued commitment to the program Lawmakers looking toward a 2030 program extension

Regional Greenhouse Gas Initiative (RGGI) Ten northeastern and mid-Atlantic states have set a GHG cap and aim to reduce CO2 emissions by 10% in 2018 New Jersey was a founding member but opted out of the program in 2011 Raised $2.4 billion to date No set asides for transportation New York is single largest recipient of proceeds over the life of the program ($895 million)

Thank You Ella Claney, Associate Consultant claneyec@pbworld.com WSP | Parsons Brinckerhoff Washington D.C.