Connecticut signed onto a major new climate change agreement Monday, but opponents are calling it a veiled 'gas tax increase.'

The Transportation and Climate Initiative Program (TCI-P) will guarantee Connecticut at least a 26% reduction in carbon emissions by 2032. It's also expected to generate $89 million its first year — money earmarked for electric buses, more electric vehicle changing stations and mass transit improvements.

The plan caps how much pollution can come from wholesale fuel providers, starting in 2023. Each year after that, the cap drops. Fuel providers would have to bid on 'pollution allowances,' a cost they could then pass onto gas customers at the pump. It doesn't include a gas tax hike, but a TCI analysis estimated retail gas prices could rise 5 to 17 cents per gallon.

Gov. Ned Lamont, who simply signed a memorandum of understanding, says the agreement will help make Connecticut urban centers healthier.

"Engaging in this way with my fellow governors and Mayor Bowser accomplishes goals we have set for Connecticut for years," Gov. Lamont said. "Participating in the TCI-P will help grow our economy through a fresh injection of capital to provide for jobs and new infrastructure. This collaboration will cut our greenhouse gas emissions, and it will make our urban centers healthier, after decades of being adversely impacted by the emissions being released by traffic every day. Connecticut has always taken pride in our leadership role when it comes to climate, and when we can combine that with a stronger economy, fast transit systems, and regional cooperation, that's a win for all of us."

MORE: Transportation and Climate Initiative Program

Supporters say this will make the air much cleaner and address climate change.

TCI promises to cut greenhouse gases by 26% over the next decade.

"The design of this program is intended to provide for a lot of flexibility for fuel suppliers for compliance and help them to compete and drive innovation," says Katie Dykes, Connecticut DEEP commissioner.

The National Federation of Independent Business (NFIB) issued a statement saying, “Small businesses in the state are already struggling due to COVID-19 related forced shutdowns, endless restrictions, and capacity limits. With Connecticut joining TCI, small businesses are going to face an additional financial burden at a time they can least afford it. Restaurants require fuel to deliver food orders, plumbers and electricians drive to job sites, construction companies utilize fuel to operate their equipment – all of these small business jobs will now be more expensive because Connecticut joined TCI. The higher fuel costs due to TCI will undoubtedly affect small businesses firsthand, but it will also hurt the wallet of workers who must commute to their jobs in vehicles every day. This is bad policy at a bad time.” 

For now, only two other states and Washington, D.C. are joining the TCI agreement - but more could come later. Connecticut state lawmakers will ultimately decide whether the state joins TCI.