On July 26, Gov. Tim Walz explained his support for the Minnesota Clean Cars rule using a hockey analogy, saying, “You need to skate where the puck is going to be. The puck is going to be in EV vehicles, and that is irrefutable.” OK, sure. But what’s also irrefutable is that trying to meet the state’s climate goals using the Clean Cars rule is like playing hockey shorthanded — and without sticks.
On the positive side, the state is moving with the rest of the country in acknowledging the need to reduce its greenhouse gas (GHG) emissions. The Minnesota Pollution Control Agency justified importing California’s vehicle standards by correctly noting that, while Minnesota is making substantive progress in reducing greenhouse gas emissions in the electricity sector, it is not doing as well in transportation. The rule is a good start, and if the policy works as intended, we will see more EVs at more attractive prices in the state. However, changing the mix of new vehicles Minnesotans buy addresses only a part of the problem.
What would be even more effective? As economists, we are contractually obligated to point out that increasing the state gas tax is our best bet to reduce transportation sector GHG emissions by inducing drivers to choose how to reduce the pollution they generate. The state could also reform its registration fee system. Right now, state registration fees are highest for the newest and most expensive cars, which are often the least polluting vehicles on the road. But let’s be honest, raising the state’s gas tax to a level that would induce changes in driving behavior is politically untenable, and changes to vehicle registration fees seem unlikely.
But even if the state were to supplement the Clean Cars rule with these policies, it wouldn’t solve the larger problem. The truth is that we imported the wrong policy from California. If the state is serious about reducing greenhouse gas emissions from all sectors, we should join California’s cap and trade system.
Cap and trade sets strict limits on total emissions for all covered sectors, making polluters buy a “permit” for each ton they emit. The system takes advantage of the fact that greenhouse gases contribute the same amount to global warming no matter where they are emitted. By entering a cap and trade agreement with California (and ideally other states), Minnesota would work with others to reach its climate goals rather than going it alone.
Further, rather than relying on the government to mandate the “right” reductions from transportation and other sectors, the policy allows Minnesota companies and consumers to trade permits and uses a market-based approach to determine who can reduce emissions the most cheaply at any given time. Even better, study after study, including those from the highly respected nonpartisan research institution Resources for the Future, has shown that cap and trade programs reduce carbon emissions at much lower cost than other policies. Unlike the Clean Cars rule, the policy would also generate revenue, allowing the state to invest in low carbon technologies, fund EV charging infrastructure, and ensure that all Minnesotans benefit from the state’s move into a low-carbon future.
Walz’s original analogy is off the mark. In the policy world, adopting a Clean Cars rule is playing where the puck is. If Minnesota wants to lead, it should look ahead to where the puck is going to be and pursue broader carbon policies like cap and trade.
Gabriel Lade is an assistant professor of economics at Macalester College. Sarah E. West is the G. Theodore Mitau professor and department chair of the Economics Department at Macalester College. Both are environmental economists who have advised state and federal regulators on transportation and climate change policies.