(Bloomberg) -- U.S. drivers may soon see a new expense at somegas pumps: the cost of taking the global-warming fight on theroad.

New York and four other states are exploring ways to put a priceon the air pollution spewing from cars, trucks, trains and othervehicles — the source of more than a third of greenhouse-gasemissions in the northeastern U.S.

The result may eventually be new taxes, tolls or apollution-trading system that could raise $3 billion a year or morefor mass transit, electric-vehicle rebates and other projects,supporters say. With the Paris climate deal in therear-view mirror and governments moving to put a price onindustrial emissions, especially from power plants, regulators seetailpipe pollution as the next logical step.

“Transportation is one of the largest sources of carbon dioxideemissions in the nation and innovative strategies are needed toreduce these emissions,” Lori Severino, a spokeswoman for New Yorkstate’s Department ofEnvironmental Conservation, said in an e-mail. She stressedthat discussions “are just beginning” and there’s no preference forspecific policies.

The states may follow the lead of California, which lastyear extended its pollution-trading system to cover fueldistributors and refineries. The impact would ripple far beyond thedirect targets, however, affecting drivers at the pump, oilcompanies worried about gasoline sales and automakers that may seedemand shift toward more efficient vehicles.

In their Nov. 24 letter, released on the eve of internationalclimate talks in Paris, the five states vowed to “achievesubstantial reductions in transportation sector emissions andprovide net economic benefits." Besides New York, the effortincludes Connecticut, Delaware, Rhode Island and Vermont, alongwith Washington, D.C.

Market-based policies

The group pledged to study “market-based policies” to cuttransportation emissions; they’re expected to resume talks earlythis year, according to Vicki Arroyo of the GeorgetownClimate Center in Washington, which is organizing thereview.

Options under discussion include gas taxes, tolls or fees basedon miles driven or vehicle efficiency. Also likely to be discussed:a cap and trade system, in which regulators set a limit on totalpollution and let individual companies buy and sell permitscovering their output. That theoretically encourages participantsto find cost-effective ways to clean up the air.

New York and eight other states already run a trading system forpower-plant emissions in the northeast, the RegionalGreenhouse Gas Initiative. California has a similar market andexpanded it last January to include transport fuels.

Oil companies

The oil industry resisted the move in California and wouldlikely do the same in the Northeast, said Andre Templeman, managingdirector at Houston-based carbon consultant Alpha Inception.

“Transportation could be a huge expansion” for U.S. pollutionmarkets, Templeman said. “The oil companies would probably nottake this lying down. That’s a fight they’d pour a lot of energyinto.

With crude already trading near a 12-year low, “If they cutmeaningfully into the demand of oil not just in California but alsoin the Northeast, in this market that could be disastrous for theoil industry," he said.

California’s emissions market added about 10 cents to the costof a gallon of gasoline, according to the California Air ResourcesBoard, which oversees the cap-and-trade system. The impact ondrivers was largely offset by the plunge in oil prices last year,Templeman said.

Greenhouse-gas cuts

In the northeast, some combination of taxes, tolls or tradingmay raise $3 billion annually over 15 years to supportelectric-vehicle sales, expand freight rail and mass transit andtake other pollution-cutting steps, according to a GeorgetownClimate Center report released with the November letter. Suchefforts are a necessity if states are to make the deepgreenhouse-gas cuts they’ve promised by mid-century. Transportationaccounts for 35% of carbon emissions in the Northeast andMid-Atlantic, the single largest source, according to thereport.

Other states are watching the talks, said Arroyo, the center’sexecutive director. The attraction is both financial andenvironmental: States have seen gas-tax revenue shrivel as peopledrive less and use more efficient cars; they’ve also seen thepower-plant cap-and-trade market generate more than $1 billion byauctioning permits to polluters.

“They come to the table interested in models that do somethingabout transportation emissions while still bringing in revenue,”Arroyo said.

Additional costs for gasoline in the northeast would be morethan covered by savings from cutting fuel consumption and trafficcongestion, as well as consumer rebates funded by emissionspayments, according to the Georgetown report. Benefits tobusinesses and consumers would reach $72.5 billion over 15 years,the Climate Center projected.

Adding transportation to the trading mix would seem a logicalextension of the power-plant market, said Deron Lovaas, a seniorpolicy adviser at the Natural Resources Defense Council in NewYork.

“There’s already a robust system set up for stationary sourcesand that could be expanded to include other sources,” Lovaas saidin a telephone interview. “What the Northeastern states haveannounced could be building toward that.”

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