February 16, 2017

Vermont Cap-and-Trade Bill Looks a Lot Like a Carbon Tax, Observers Say

An energy cap-and-trade bill introduced in the Vermont Senate could potentially add costs to all forms of non-renewable, carbon-based energy in the state. Industry watchers say the bill looks a lot like a carbon tax.

“The cap-and-trade bill … is essentially the carbon tax by another name,” said Matt Cota, director of the Vermont Fuel Dealers Association. “That’s going to draw the most fire coming up in the next few weeks or so.”

Prospects for an explicit carbon tax bill were highly uncertain during the first weeks of the session, but S.66, the cap-and-trade bill introduced last week, may introduce similar requirements.

Cota said the bill requires that every truck entering Vermont would be forced to contribute to a fund for Efficiency Vermont, the state’s efficiency utility.

The bill’s author, state Sen. Virginia Lyons, D-Chittenden, told Watchdog that S.66 would not add any new price increases to non-renewable fuels. Although she didn’t rule it out.

“The punitive way is to put a tax on fuel — that’s not what’s in the bill, although that may be a suggestion that comes back,” Lyons said.

“What is in the bill is a direction to begin negotiations on behalf of Vermont with other partners to look at ways we can reduce greenhouse gas emissions in the transportation sector, the heating sector [heating fuels], and sectors that are not regulated.”

Lyons seemed to suggest that the initiative doesn’t go full bore in the direction of a tax on carbon.

“Vermont could go it alone, but I don’t know that our economy is robust enough to do that,” she said. 

“The way to go it alone, obviously, is to put a tax or a fee on carbon at different levels, and that might be a recommendation that comes back, if we should have a fee on products produced by fossil fuels or have traveled a great distance.”

One example she gave of reducing emissions without imposing fees was using more biodiesel fuels and additives to increase efficiency.

“That’s a benefit, and we may be ahead of other states in that,” she said.

Art Woolf, associate professor of economics at the University of Vermont, agrees with Cota that cap-and-trade sounds like a carbon tax.

“Cap-and-trade and carbon taxes are very similar,” Woolf told Watchdog. “They are different ways of achieving the same goal. The two of them are virtually identical.”

S.66 is one of two bills introduced this session to shift energy usage towards renewables. The other bill, S.51, would codify Vermont’s non-statutory goal of achieving 90 percent renewable status for all energy by 2050, in addition to reducing overall energy usage by 33 percent.

Cota said the two bills combined could shake up economic development: “There’s the renewable requirements combined with cap-and-trade. … It’s sort of the grab-bag of bad energy laws that will be discussed for the next three months.”

Regarding the renewable portfolio standards of S.51, Woolf said the “cap” in cap-and-trade is essentially already there. This means that, instead of having utilities only use X percentage of non-renewables, it is saying that utilities must use X percentage of renewables.

“So the cap is there,” Woolf said. “And if you do a trading part [allowing renewable credits to be purchased in place of compliance], then you are at least allowing some businesses to exceed that level and others not, depending on the cost.”

Woolf said that whether it is mandating more renewables or putting a tax on carbon-based energy, the end result is a higher cost of living for Vermonters.

“It would make heating our homes more expensive, it would make driving our cars more expensive, it would make turning on lights more expensive, so it would make the energy to accomplish the goals that we need more expensive,” he said.

Woolf added both Senate bill proposals are expected to face an uphill battle.

“I think it’s on the people who are supporting these to lay out what this is going to cost the average Vermonter and not just say, ‘Well, this sounds really nice,’” he said.

Lyons said Vermonters should not accept the status quo when it comes to energy choices.
“Time is running on limiting and reducing greenhouse gases,” she said.

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