This One Policy Would Provide Billions to Protect Massachusetts from Climate Change

As Massachusetts residents dig themselves out of the fourth Nor’easter in the past three weeks, policy leaders on Beacon Hill are beginning to dig in to some of the critical questions that will determine the future of the Commonwealth in an era of climate change.

Questions like:

• How do we protect ourselves from the impacts of more intense storms, sea level rise, and increasing flooding from storm surges that are certain to continue to plague our state over the coming decades?
• How do we build a transportation system that is clean, resilient to the impacts of climate change, fiscally and ecologically sustainable, equitable, and capable of handling the exploding growth in the Boston metro area?
• And bottom line: how are we going to finance the kind of investments in infrastructure and technology that will be necessary to protect our state and achieve the requirements of Massachusetts climate law?

The good news is that there is a bill in the Massachusetts legislature that has a lot of great ideas for how to move the Commonwealth forward. Many of these ideas have already been covered well by others, including our own John Rogers, as well as David Ismay at Conservation Law Foundation and Ben Hellerstein at Environment Massachusetts.

In this post, I want to talk about one of these ideas, a policy that if enacted could represent one of the most profound changes in Massachusetts climate policy in a decade. That is the requirement that the state enact “market-based compliance mechanisms” to address climate change.

If you’re like most people, you are probably asking yourself: what the heck does that mean?

It means cap and invest. And this provision could unleash over $750 million per year in funding to address some of the state’s critical transportation, energy, and infrastructure needs.

A brief overview of the GWSA

Let me explain.

In 2008, the Massachusetts legislature unanimously passed a law called the Global Warming Solutions Act (“GWSA”). This law requires the state to reduce emissions by at least 80% of 1990 levels by 2050. It also required the state to set a limit for 2020: in 2009 the state set a limit of 25% from 1990 levels by 2020.

The GWSA, which clocks in at about six pages, does not specify exactly what policies should be enacted to reach these limits. Instead, the GWSA requires executive agencies to figure it out. This strategy, known as cap-and-delegate, is a common approach to addressing climate change. It allows executive agencies to take advantage of their superior technical knowledge and expertise in crafting energy policy. Indeed, Massachusetts’ GWSA is very similar to California’s cap-and-delegate statute, also entitled the Global Warming Solutions Act, although California’s law is more commonly referred to by it’s Assembly Bill number, AB 32.

One obvious question that has dogged the GWSA from the beginning is: what happens if our plan isn’t good enough, and we fail to achieve our limits? This question is particularly vexing because given the speed at which this information becomes available, we will not know whether we made the 2020 limit until 2023. And it’s important to address, because as we look to 2030 we are going to need to make progress in areas such as transportation and heating that have proven challenging thus far.

Market-based compliance mechanisms

The GWSA provides one tool that could help ensure compliance with the statute: the state could enact market-based compliance mechanisms. That means doing three things:

• Establishing a limit on pollution;
• Requiring companies that pollute to purchase allowances from a limited pool made available by the state; and
• Investing the money we generate from these auction sales in efficiency and clean energy.

This is the strategy that the GWSA calls “market-based compliance mechanisms”, the world calls “cap-and-trade” and we call, most accurately, cap-and-invest. It represents a simple, elegant solution to the challenge of reducing aggregate emissions from across broad sectors of our society. It has been used all around the world by countries, states, and provinces looking to reduce emissions and raise money for climate solutions.

We have a cap-and-invest program in Massachusetts. It’s called the Regional Greenhouse Gas Initiative, or RGGI. It’s the funding source for many of our most popular and important climate programs, such as MassSave and the Green Communities Act. It has helped save consumers $600 million on their energy bills, produced over $1 billion in health benefits for our state, and created over 2,000 jobs.

But RGGI only applies to power plants. Today, the largest source of emissions in the state is transportation, with heating homes and businesses close behind. Other jurisdictions, including California, Ontario, and Quebec, have expanded this cap-and-invest model economy-wide, and the result has been billions in new funding for clean transportation and energy projects. It’s time for Massachusetts to do the same.

What would economy-wide cap-and-invest do for Massachusetts?

The bill in the legislature would allow the administration to consider a couple of different approaches to expanding cap-and-invest to transportation and heating.

One possibility, suggested in a recent op-ed by Senator Stan Rosenberg, would be to create a “state-based, market-driven approach to the use of carbon.” Another possibility is that the state could join with the other RGGI states in launching new cap and invest programs modeled after RGGI covering transportation and heating fuels. A third possibility would be for Massachusetts to join with California, Ontario, and Quebec’s program covering transportation and heating fuels.

But either way, cap and invest could be a funding source for climate solutions on a scale that we have never seen before in Massachusetts.

For example, if Massachusetts were to take the California-Ontario-Quebec path, at current auction values it would raise over $750 million that we could invest to reduce emissions and protect the state from climate change. Over $450 million of that would be from transportation fuels, which we could use to fund projects that improve public transportation, encourage electric vehicles, and make our transportation infrastructure more resilient. $300 million would be from heating fuels and other industrial uses, which could be invested in efficiency and new technologies such as heat pumps.

By the way, we could do this without legislation

The proposal in the legislature would require the administration to enact an economy-wide cap and invest program. But if executive agencies want to move forward with market-based solutions to climate change, there is no reason to wait for new legislation: the GWSA already provides the authority for the administration to implement market-based solutions, either on our own or in partnership with our partners in RGGI states and Canadian provinces.

Achieving the limits of the GWSA means ending an era where fossil fuel companies can produce unlimited quantities of pollution for free. Bringing all pollution sources under a market-based cap is a critical next frontier of climate policy in Massachusetts. With the state increasingly focused on how we can make investments in infrastructure to support our transportation system and protect our state from climate impacts, now is the time to take this step and protect the Commonwealth from climate change.