Assessing Mechanisms for Integrating Transportation-Related Greenhouse Gas Reduction Objectives into Transportation Decision Making (2010)

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NCHRP Project 20-24(64) Final Report 1 1. INTRODUCTION This report is the product of research conducted by ICF International and supported by the National Cooperative Highway Research Program. (NCHRP) The objective of NCHRP Project 20-24(64) was to provide a factual basis for judging the merits of alternative methods that state departments of transportation (DOTs) and metropolitan planning organizations (MPOs) can use for managing GHG emissions from transportation. The project was undertaken to help policy makers to understand (a) how these alternative approaches to GHG emissions would affect states and metropolitan areas, (b) what approaches may be most effective for evaluating mobile-source GHG emission-management strategies, and (c) what particular tools are available to support implementation of these alternative approaches. 1.1 Background Given widespread concerns about the risks of climate change, momentum has been growing within the United States for policy actions to address greenhouse gases (GHGs), including reduction of GHG emissions from the transportation sector. At the state and local level, more than 30 states have developed climate action plans and more than 1,000 mayors have signed on to the U.S. Conference of Mayors Climate Change Protection Agreement pledging to reduce carbon dioxide (CO2) emissions below 1990 levels by 2012.5 At the federal level, legislative efforts are now underway in Congress and new initiatives being taken by the Obama Administration to tackle global climate change. The House of Representatives has passed legislation (Waxman-Markey HR-2454 American Energy and Security Act of 2009 (ACES)), and legislation was recently introduced in the Senate (Boxer-Kerry Clean Energy Jobs & American Power Act), which both include development of a national cap and trade program. Since the transportation sector contributes 28 percent of U.S. GHG emissions (see Exhibit 1-1), serious attention is being given to the role that transportation might play in reducing GHGs. At the federal level, President Obama announced a new coordinated GHG and fuel economy program that would apply to light-duty vehicles and result in a combined fleet average standard of 35.5 miles by gallon by the 2016 model year. The U.S. Environmental Protection Agency (EPA) in May 2009 proposed new regulations for the National Renewable Fuel Standard Program in response to the Energy Independence and Security Act of 2007, which establishes new volume standards for renewable fuels that must be used in transportation fuels each year. In addition to efforts that focus on vehicles and fuels, there has also been growing interest in policies to achieve GHG emission reductions through transportation decision making. For instance, the new House and Senate legislation both include provisions that would establish national GHG reduction goals and would establish criteria for DOTs and large MPOs to set GHG targets for metropolitan and statewide transportation planning. Policy changes such as these legislative proposals could become law as part of a national multi-sector policy to regulate GHGs, reauthorization of the federal surface transportation legislation, amendments to the Clean Air Act, or EPA rulemaking under the existing Clean Air Act. Numerous proposals have been put forth by environmental groups to address GHGs at the metropolitan and state level. Reauthorization discussions have included development of performance-based funding programs, including use of GHG reduction performance metrics. 5 Center for Climate Strategies, http://www.climatestrategies.us/ and U.S. Conference of Mayors, http://www.usmayors.org/climateprotection/revised/. As of October 15, 2009.

NCHRP Project 20-24(64) Final Report 2 Exhibit 1-1: U.S. Greenhouse Gas Emissions by Sector, 2007 Industry 29% Agriculture 8% Residential 17% Commercial 18% Transportation 28% Source: U.S. EPA, Inventory Of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007, April 2009. Already, several states have begun to develop policies to address the quantification and reduction of GHG emissions through transportation planning decisions (see Exhibit 1-2).6 These include:  Quantification of Plan Impacts. In New York State, the State Energy Plan, adopted in 2002, calls for the metropolitan planning organizations (MPOs), in conjunction with the state, to assess the energy use and GHG emissions expected to result from implementation of transportation plans and programs . Most MPOs in New York have now estimated energy use and CO2 emissions from their long-range transportation plans and also from their transportation improvement programs (TIPs).7 In California, several large MPOs have quantified the GHG impacts of their regional transportation plans as part of the environmental review required by the California Environmental Quality Act (CEQA).  Regional Transportation GHG Reduction Goals. With the signing of SB 375 in September 2008, California became the first state to enact mandatory GHG reduction targets in regional transportation planning. The law directs the California Air Resources Board (CARB) to provide each of the state’s 18 MPOs with GHG emissions reduction targets from the auto and light truck sector for 2020 and 2035 by June 30, 2010. MPOs will then be required to include measures in their long range plans to reach the GHG targets, either as part of a “sustainable communities strategy” within the plan or as part of an “alternative planning strategy” separate from the plan. Each MPO must have the approval of CARB for either of these strategies.  State VMT Reduction Goals. In March 2008, the state of Washington enacted climate change framework legislation HB 2815, which includes a requirement to reduce light-duty vehicle miles traveled (VMT) per capita 18 percent by 2020, 30 percent by 2035, and 50 percent by 2050. This provision was a recommendation arising from the state’s 2007 Climate Advisory Team. 6 See ICF International, Integrating Climate Change into the Transportation Planning Process: Final Report, Prepared for FHWA, July 2008. 7 See ICF International, Estimating Transportation-Related Greenhouse Gas Emissions and Energy Use in New York State, prepared for the U.S. DOT Center for Climate Change and Environmental Forecasting, March 2005.

NCHRP Project 20-24(64) Final Report 3 Exhibit 1-2: Examples of Proposed and Existing Requirements for Integrating GHG Objectives into Transportation Planning and Programming American Clean Energy and Security Act of 2009 (HR 2454, House-passed) Amends existing transportation planning processes to require states and MPOs in transportation management areas (TMAs) to develop targets and strategies for GHG emissions reductions. State and MPO plans must “contribute” to the achievement of the national emissions reductions targets. Clean Energy Jobs & American Power Act (Boxer/Kerry proposal) Amends existing transportation planning processes to require states and MPOs in TMAs to develop targets and strategies for GHG emissions reductions. MPOs must demonstrate progress in stabilizing and reducing GHG emissions to achieve state targets. Surface Transportation Authorization Act Of 2009 (Oberstar proposal) Requires states and MPOs in TMAs to set targets for GHG emissions reductions from surface transportation and incorporate strategies to meet targets into their plans. U.S. DOT, through performance measures, will verify that states and MPOs achieve progress towards national GHG goals. California’s SB 375 (Signed 2008) Requires the state to set GHG reduction targets for California’s 18 MPOs. MPOs must prepare long range plans that demonstrate how they will achieve the targets. Washington’s HB 2815 (Signed 2008) Requires the state to reduce light-duty VMT per-capita 18% by 2020, 30% by 2035, and 50% by 2050. New York’s State Energy Plan (Adopted 2002) Calls for analyzing the energy and emissions impacts of long range transportation plans and transportation improvement programs (TIPs). Transportation agency officials are understandably concerned about the effects new transportation GHG requirements on their agencies, in terms of analysis and decision making within statewide and metropolitan transportation planning and programming as well as project development. New requirements for managing GHG emissions from transportation sources may influence how DOTs and MPOs develop their long-range transportation plans and TIPs. New requirements may also change how DOTs, MPOs, and transit agencies must conduct project-level analyses, and affect their relationships with federal and state environmental agencies. Some of the approaches being advocated are similar to a transportation conformity-style mechanism involving mandatory emissions budgets for on-road emissions sources, such as has been used for managing pollutants defined under federal law—what are termed criteria pollutants. The more than 15 years of experience with the transportation conformity process established under the Clean Air Act (CAA) Amendments provide a number of lessons learned about what has worked well and what has been less successful. Most observers agree that greater interagency consultation and emphasis on funding transportation strategies that improve air quality have been positive outcomes of the requirements. At the same time, many agencies believe that the conformity-based procedures are costly, time-consuming, and have only produced marginal improvements in air quality, due to limited ability of transportation agencies to influence the most significant factors that relate to motor vehicle emissions. In the 1990s, dozens of MPOs went into a conformity “lapse” at one time or another, causing federal transportation funding to be restricted to a limited number of already approved or exempt projects (e.g., maintenance, safety, or air quality reduction projects). A number of technical issues with modeling and assumptions have also arisen due to the dynamic nature of transportation planning and mismatches between the tools and assumptions used to develop the State Implementation Plan (SIP) and transportation plans. For example, transportation plans and programs must demonstrate conformity at least every four years but there is no requirement to update the SIP on a regular basis. Thus, the tools and data used to develop the emissions budget can be different than those used to demonstrate conformity.

NCHRP Project 20-24(64) Final Report 4 Although state air agencies have in many cases responded to these concerns (e.g., updating conformity budgets, trading mechanisms, or identifying additional strategies to assist in meeting conformity requirements), these issues have been challenging for many areas. Difficulties in analysis have also occurred in areas where nonattainment area boundaries did not match MPO travel demand model boundaries, and in rural areas with less resources and modeling experience. The conformity experience and some of the recent state GHG initiatives raise questions about the incorporation of GHG objectives into the transportation decision making process. Perhaps the most significant of these is the concern that transportation agencies may be required to produce large reductions in transportation GHGs that will be unattainable, since these agencies have virtually no control over vehicle technology and fuels.8 While there are a number of effective strategies to mitigate transportation emissions through demand management and system management, there is no clear evidence about how successful these strategies will be or what level of emissions reduction is appropriate to assign to transportation planning solutions in the context of state or national GHG reduction goals. While many transportation agencies have had experience with integrating air quality considerations into transportation planning through the transportation conformity process, GHGs are distinct from the criteria air pollutants currently regulated under the Clean Air Act in several important ways:  The environmental impact of most GHG emissions is the same regardless of where or when they are released. Issues such as localized “hot spots” and how atmospheric conditions, such as temperature, affect pollution are not relevant for most GHGs.9  GHGs encompass at least six different gases – carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorcarbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6) – all of which have the same general effect on the climate, though some are more potent than others. CO2 accounts for the majority of GHG emissions from human activity and for about 95 percent of all GHGs emitted from transportation. Consequently, many analyses of transportation GHGs include only CO2.  There is no means of using air quality monitoring data to designate nonattainment areas that exceed safe levels.  GHGs persist in the atmosphere for decades – thus cumulative emissions are important. Criteria air pollutants, such as ozone and particulate matter, can be directly measured by means of air quality monitoring data, and geographic areas that exceed safe levels are designated by EPA as nonattainment areas. The geographic scale of requirements for reducing emissions is, therefore, based on atmospheric and meteorological data on air sheds using monitored air quality data as well as the location of emission sources. The target reductions are based on atmospheric modeling showing the pollutants of concern that contribute to poor ambient air quality and the level of reductions necessary to meet health- based air quality standards. 8 For example, modeling by the Metropolitan Transportation Commission, the MPO for the San Francisco Bay Area, for its 2035 plan found that a policy package of road pricing, smart growth, and telecommuting would reduce GHG emissions 17% from the baseline. Only with the addition of vehicle fuel efficiency improvements could the region reach its goal of a 40% reduction in on-road GHGs by 2035. 9 Localized pollutants such as tropospheric ozone, carbon monoxide (CO), and aerosols also contribute to trapping heat in the atmosphere but their radiative forcing effects are difficult to quantify due to their short atmospheric lifetimes and concentrations that vary spatially and temporally.

NCHRP Project 20-24(64) Final Report 5 In contrast, due to the global nature of GHGs, there is not a clear basis for setting limits to GHG emissions for specific regions or states within specific time frames. While climate scientists can identify a total level of GHG reduction necessary for climate stabilization, it is not clear how much of that reduction should come from the transportation sector, and how GHG reductions should be apportioned across states, metro areas, and rural areas, given vast differences in growth rates, economic base, and analytic capability. Consequently, any regulatory scheme for addressing GHG emissions in transportation planning will need to consider the unique aspects of GHG emissions if setting targets and establishing measurement techniques. Moreover, establishing GHG-related requirements in transportation planning will involve decisions on several policy issues that are not easily answered. 1.2 Purpose and Scope of the Study The study reported here was intended to provide a factual basis for judging the merits of alternative policy mechanisms for managing GHG emissions from transportation. The research specifically explored how various approaches in place or proposed integrate with or impact transportation decision making at the state, regional and local levels. The primary audience for this research is intended to be federal, state, regional, and local policy-makers who are facing decisions about how best to integrate GHG reduction strategies with transportation and air quality planning. The analysis may also be useful to technical staff who support these policy makers and staff at state DOTs, MPOs, transit agencies, and environmental agencies that may play a role in advising upon and implementing new requirements. The study is designed to provide information on (a) how alternative approaches to managing GHGs from transportation may affect states and metropolitan areas; (b) the strengths, limitations, and technical issues associated with implementation of alternative approaches; and (c) the capabilities of existing analysis tools to support implementation of alternative approaches. This report is not intended to recommend any one regulatory approach over another, but is designed to help prepare policy and technical staff to contribute to and respond to regulatory proposals with a full understanding of their implications for transportation agencies. The research focused on policy mechanisms or approaches that may affect transportation planning and investment decision making, such as those that may be included as part of new legislation, or regulations or rulemakings, and in particular on three policy approaches that might place requirements on state DOTs or MPOs involving setting specific targets for GHGs or VMT. These policy mechanisms are not mutually exclusive in that federal or state regulations or requirements could combine aspects from several of them. The three policy mechanisms and a brief description of each are shown in Exhibit 1-3. In addition, this research analyzed four additional mechanisms that may place direct requirements on transportation agencies and may serve as components of the three approaches above or as stand-alone activities. The additional mechanisms are shown in Exhibit 1-4. This report does not explore the effectiveness of specific transportation strategies (such as land use strategies, transit investment, transportation demand management programs, or operations strategies), or packages of strategies to reduce GHGs. A variety of other studies have examined and are examining such strategies.10 In addition, this paper does not focus on regulatory approaches aimed directly at improving 10 For instance, on-going projects or recently completed projects include: Moving Cooler, an effort co-sponsored by transportation and environmental groups and federal agencies, which examined strategies that could be implemented to reduce GHG emissions from personal travel; NCHRP 20-24(59): Strategies for Reducing the Impacts of Surface Transportation on Global Climate Change, which is preparing a synthesis of current research; NCHRP 25-25 (45):

NCHRP Project 20-24(64) Final Report 6 vehicle efficiency (such as federal corporate average fuel economy (CAFE) or GHG emissions standards for vehicles) or increasing the use of low carbon fuels (such as a renewable fuel standard), or at economy- wide policies, such as cap-and-trade programs. While these approaches, and advances in technologies, are likely to be central components of the overall effort to reduce the transportation sector’s contributions to climate change, they do not directly affect transportation agencies and therefore are considered outside the scope of this project. Exhibit 1-3: Policy Mechanisms Analyzed Involving Target Setting Policy Mechanism Summary Description Transportation GHG performance standard11 Involves establishment of GHG reduction targets with incentives for compliance or to assist in compliance. Transportation GHG budget12 Establishes maximum levels of allowable GHG emissions with penalties for non-compliance. This approach is something similar to the process currently used in transportation conformity for areas not meeting the national ambient air quality standards. Vehicle miles traveled (VMT) performance standard Involves establishment of a VMT or VMT per capita target, with incentives provided for compliance or to assist in compliance. Transportation Program Responses to GHG Reduction Initiatives and Energy Reduction Programs, which is documenting state DOT roles and practices to develop an estimate of GHG emissions reductions from on-going and potential actions; TRB study: Potential Energy Savings and Greenhouse Gas Reductions from Transportation, which is estimating the potential energy savings and GHG reductions that might be realized from transportation; and U.S. DOT’s Report to Congress on Transportation and Climate Change, which is examining the GHG reduction effects of alternative transportation strategies, and the potential fuel savings and reductions in air pollution associated with these strategies. 11 For purposes of this project, performance standards are defined as aspirational in nature. No penalties for non- compliance are assumed. 12 For purposes of this project, budget assumes a fixed, numerical budget that cannot be exceeded for specific analysis years (e.g. 2020, 2050) and that penalties would apply for inability of a state DOT or MPO to reduce emissions to the allowable budget level.

NCHRP Project 20-24(64) Final Report 7 Exhibit 1-4: Other Mechanisms Considered as Stand-Alone or Companion Policies Other Mechanisms Analyzed Summary Description Climate Change Action Plan Requirement This approach would require states to develop a GHG reduction plan for all sources, including both on-road and off-road transportation sources. This plan could involve setting targets for the transportation sector as a whole or specific components (e.g., on-road sources) and could identify specific GHG reduction strategies. Interagency consultation requirements Agencies involved in transportation planning / programming and air quality regulatory agencies would be required to consult on an on- going basis. This process could be somewhat similar to the current consultation requirements in transportation conformity, and depending on other requirements could address issues such as progress in meeting targets, revisions to targets, selection of strategies, or progress in implementing strategies, etc. A requirement for implementation or prioritization of transportation emissions reduction strategies This approach could require implementation of specific types of transportation emissions reduction strategies or best management practices (BMPs) within transportation plans and/or project development. It could involve credits or points that regulated areas would receive for implementing specific measures and allow State DOTs or MPOs to select from a predetermined list of BMPs in order to achieve a required number of points. It could also involve a requirement to prioritize funding for emissions reduction strategies before certain types of transportation investments (e.g., highway capacity improvements) could move forward. Project level GHG analysis Project-level emissions analysis is currently required only for hot- spot concentrations of certain pollutants. This would add GHG to the list of pollutants subject to a project-level analysis requirement which is usually carried out through the NEPA process. 1.3 Study Process The identification and assessment of alternative policy mechanisms included in this study relied heavily on extensive input from practitioners from state DOTs, MPOs, transit agencies, and state environmental and air quality agencies, as well as federal agencies and national associations that represent transportation planning organizations. The research effort involved the following activities:  Development of a background paper, based on research describing alternative possible policy mechanisms and their attributes;  A workshop, held April 2-3, 2009 in Washington, DC, to engage participants in identifying alternative approaches and their perceived attributes, strengths and weaknesses, and implications;  Two “virtual meetings” held via webinar on April 14 and 15, 2009 to bring in additional perspectives for other members of the transportation and environmental communities;  A technical memo evaluating alternatives policy mechanisms for addressing transportation GHGs, comparing the alternative approaches, and assessing analysis tools and methods, based on additional research as well as interviews with selected transportation and environmental agencies with experience with GHG requirements;

NCHRP Project 20-24(64) Final Report 8  A second workshop held August 25-26, 2009 in Washington, DC, which invited back the initial group of workshop participants (plus a few additions) to validate the assessment of the alternative approaches and clearly define the pros and cons of each alternative. In total, the workshops, virtual sessions, and interviews involved over 40 transportation and environmental professionals. These practitioners included staff with specific experience addressing state/local GHG requirements and experience with the transportation air quality conformity process, as well as some representing states with limited experience with current air quality requirements. The study also involved gathering input from national organizations, including the American Association of State Highway and Transportation Officials (AASHTO), the Association of Metropolitan Planning Organizations (AMPO), the American Public Transportation Association (APTA), and the National Association of Regional Councils (NARC). (See Appendix A for a list of all workshop participants.) 1.4 Report Organization The remainder of this report is divided into four main sections:  Overarching Options for Establishing Transportation Requirements that Involve Targets. Section 2 of this report discusses several overarching considerations associated with any requirement that involves setting targets to address GHG emissions in transportation planning/programming. It addresses the following key questions, and notes strengths and limitations of the primary options: 1) at what geographic level (e.g., state, metro area, other) should requirements be placed? 2) what should be measured (e.g., GHGs or VMT)? 3) what sources should be covered (e.g., light-duty vehicles, all on-road vehicles, all transportation)? 4) how should targets be defined? And 5) how should compliance be incentivized (e.g., penalties for non-compliance or incentives for compliance)?  Assessments of Alternative Policy Mechanisms for Reducing Transportation GHGs. Section 3 identifies and describes several policy mechanisms that involve setting targets, along with requirements that might be implemented in addition to or instead of target-based requirements. It identifies key issues for policy makers to consider regarding each of these options, and includes a comparative assessment of the potential approaches focusing on the following assessment criteria: technical and staffing requirements, GHG reduction certainty and control, co- benefits/synergies, potential unintended consequences, flexibility/adaptability, equity, and public understanding.  Implications of Alternative Targets on Sample States and MPOs. Setting targets is a particularly challenging and complex issue for any national-level policy mechanism addressing GHGs in transportation. Given differences in population growth, travel patterns, and economic activity, among other factors, the reductions required to meet a specific target will vary significantly across different states and metro areas. Section 4 of this report contains an analysis of a sample of states and metropolitan areas examining the estimated GHG emissions reductions that would be required to meet alternative targets. .  Analysis Tools and Techniques to Support Implementation of Policy Mechanisms. Under policy mechanisms that include transportation planning/programming requirements, state DOTs or MPOs or both would need to conduct quantitative analyses to forecast GHG emissions or VMT associated with their transportation plans and programs. Section 5 of this report reviews the availability, strengths, and limitations of existing tools that may be needed to meet requirements, identifies gaps, and discusses the potential implications of these gaps.