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Vermont Lawmaker Plans Carbon Tax Proposal

  • State Rep. Sarah Copeland Hanzas, D-Bradford, talks about a program to enact a carbon tax and move Vermont away from fossil fuels in West Lebanon, N.H., on Dec. 7, 2017. (Valley News - Jennifer Hauck) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com.



Valley News Staff Writer
Saturday, December 09, 2017

White River Junction — Progressives and some Democratic lawmakers are beginning to beat the drum for a carbon tax proposal designed to reduce Vermonters’ electric bills by adding to what they pay for fossil fuels at the gas pump.

A carbon tax is the best idea on the table to keep Vermont moving toward a goal of getting 90 percent of its energy from renewable sources by 2050, according to state Rep. Sarah Copeland Hanzas, D-Bradford, who intends to introduce the plan during the upcoming legislative session. “We are kidding ourselves if we think that anything that we’re doing right now is moving us in that direction,” said Copeland Hanzas, who visited the Valley News on Thursday with an official from the Vermont Natural Resources Council to talk about the plan.

But the “Economy Strengthening Strategic Energy Exchange” — or Essex — plan is already drawing divisions between politicians and within the business community.

Republican Gov. Phil Scott’s office panned the idea as the wrong approach on Friday, with his communications director, Rebecca Kelley, saying it would “add cost burdens for many Vermont families who spend more on transportation and heating than they do on electricity.”

The proposal envisions adding 4 cents to the cost of a gallon of gas every year for eight years, eventually totaling 32 cents a gallon. The fee would be 3 cents on a gallon of propane, and 5 cents for diesel or home heating fuel to start, escalating to 24 cents, and 40 cents, respectively over the eight-year ramp-up. The fee would be assessed to wholesalers, who could choose to pass that cost directly on to the consumer.

Early estimates show that at the end of the eight-year ramp-up, $240 million would be raised from the tax on fossil fuels and act as a stick that would nudge Vermont residents and businesses to use greener alternatives to gas-guzzling vehicles and inefficient heating fuel systems. As it’s collected, that $240 million stick is transformed into a carrot — it would be used to subsidize an estimated 30 percent reduction in electricity rates, which advocates hope will incentivize people and businesses to incorporate more electricity use into their heating and transportation decisions. Though the average electric bill reduction would be 30 percent, more credits would be directed to the bills of low-income, and rural households, because poor and rural residents would be most affected by an increase in fossil fuel costs.

Those amounts were calculated based on each fuel’s environmental impact — in year one, the fees total $5 per ton of carbon dioxide emissions, and in year eight, they amount to the maximum rate of $40 per ton. The plan targets a $40 per ton cap, because that is the societal cost estimated by the Environmental Protection Agency, and is also the amount being contemplated in parallel legislative efforts in Rhode Island, Massachusetts and Connecticut.

Businesses Disagree

One of the co-authors of the plan is Mark Curran, who also co-founded Springfield-based Black River Produce. With enormous refrigeration units and a fleet of 50 trucks that drive more than 1.5 million miles each year, Black River is an energy hog, Curran said. While he’s not sure what the total net impact on his food distribution operation would be, he said he would welcome any shift in the market that would help him to be more socially responsible, without placing him at a competitive disadvantage.

“We would love to be the first in New England to take advantage of electric trucks,” he said. “I’m sure there will be challenges to that, but somebody has to do it.”

Curran said market forces have punished him for making other investments in greener energy technology. When fossil fuel costs were high, he invested in a modern wood pellet heating system and installed an electric vehicle charging station.

But oil prices tumbled from $4 a gallon to $2 a gallon, which meant that burning oil was still cheaper than wood, and left the charging station virtually untouched by a workforce that has bought a new generation of fuel-burning pickup trucks.

Curran’s is an example of a business that’s working on a “triple bottom line,” of profits, employee well-being and environmental stewardship, said Dan Barlow, public policy manager for Vermont Businesses for Social Responsibility, an association representing about 700 businesses across the state.

Copeland Hanzas and Sen. Chris Pearson, P-Chittenden, unveiled the plan during a legislative breakfast Wednesday morning in Burlington hosted by VBSR.

Barlow said Vermont’s solar boom is an example of how thoughtful policy can goose the economy. “There are about 19,000 Vermonters working in the clean energy economy,” he said. “It’s seen explosive growth over the past few years. That’s not just a fluke. That’s by design, by smart businesspeople and smart legislators that put together policy to allow that industry to grow and be a model for other states.”

At least one industry — the one that sells fossil fuels — is lined up against the idea.

Matt Cota is the executive director of the Vermont Fuel Dealers Association, a nonprofit trade association representing 240 companies in the heating business.

Cota said there’s no way to mask the fact that the bill will have winners and losers, and he said the losers would include many Upper Valley residents and businesses.

“It creates a pricing dynamic in which any businessperson would have to think about where they fill their gas tanks,” he said. “And businesses that are energy-intensive, that have diesel-powered vehicles for heavy work, they don’t have an alternative. There’s talks of how we can electrify, but that doesn’t exist in any tangible form right now.”

He predicted some of those added transportation costs would translate into higher prices for goods, such as milk and groceries. “The only way this tax works is if we feel the pain,” he said. “If we don’t feel the pain we won’t be incentivized to change.”

He also said that, if the plan is successful in driving down fossil fuel usage, it will create a new revenue hole for the state, which relies on taxing gasoline and diesel to maintain roads and bridges.

But as Copeland Hanzas promoted the plan, she repeatedly returned to the idea that business as usual is unacceptable.

“The fact of the matter is we need to make this transformation. If we are going to liberate ourselves form the yoke of fossil fuel and from being at the beck and call of OPEC, we have to make this transformation,” said Copeland Hanzas, a former House majority leader.

Protecting the Vulnerable

The state’s existing Comprehensive Energy Plan includes a carbon tax as one of several possible market based strategies, such as cap-and-trade or renewable energy portfolio standards, that can help achieve the 90 percent renewables target.

It cautions that, because poor households use just as much energy to drive and heat the home as rich households, assigning costs to energy should be done with caution.

“Any market-based program should use revenue created by market-based policies to offset more regressive taxes,” it reads.

The extent to which the Essex Plan successfully navigates that issue will weigh heavily on its chances in the Statehouse.

Copeland Hanzas said she expects to get 30 co-sponsors on the carbon tax legislation, including state Sen. Alison Clarkson, D-Woodstock.

The plan will undoubtedly face tough challenges, both from some Democratic colleagues and from a governor who has indicated that he will veto carbon tax legislation. Two veteran Democrats from Orange County last year lost their House seats in part because their opponents tied them to support for a possible carbon tax.

Rep. Charlie Kimbell, D-Woodstock, who also has been active in the Woodstock Economic Development Commission, said Friday that reading the Essex Plan had left him with unanswered questions. “I need to read it at least two more times to understand how it affects working Vermonters on a day-to-day basis before commenting on it,” Kimbell said. “My focus has been, and continues to be, on the economic health and vitality of Vermont. It is through that lens that I will evaluate the merits of the proposal.”

House Speaker Mitzi Johnson, D-South Hero, also spoke against the idea of a state carbon tax when asked about the Essex Plan during a Friday interview on Vermont Public Radio’s Vermont Edition show.

“I haven’t seen one that really thoroughly balances the needs of low-income and rural Vermonters,” she said. “I think that in order to make a carbon tax something that’s viable, I think we need to recognize that ... Vermont’s a relatively small state, that we need to be thinking about a regional solution.”

Copeland Hanzas acknowledged on Thursday that passing the Essex Plan could be difficult in 2018, and said she views it as more of a conversation starter that would allow the state to tap into resources to analyze the effects and lay the tracks for a future session.

Scott and state Democratic leaders enjoyed a moment of amity when, in the wake of President Donald Trump’s withdrawal from the Paris climate agreement, Scott affirmed his commitment to those goals, created the Vermont Climate Action Commission and signed onto the United States Climate Alliance.

“Vermonters applauded when we stood together and said we are going to meet our statutory goals,” Copeland Hanzas said. “We are going to stand by the Paris climate agreement. We are going to continue as a state to do things even if the Trump administration pulls out the rug from beneath it.”

But Kelley, Scott’s communications director, underscored the governor’s opposition to the proposal on Friday.

“All carbon tax proposals create a burden on Vermonters without providing them the tools to change their behavior to reduce their emissions and save money on energy,” Kelley said Friday. “Further, there is no guarantee this plan actually leads to emissions reductions. Gov. Scott is focusing on tangible actions that will reduce emissions, drive economic activity, and make Vermont more affordable, which is why he tasked the Vermont Climate Action Commission to make recommendations.”

Johanna Miller, a member of the Vermont Climate Action Commission and the energy program director at Vermont Natural Resources Council, said the Essex Plan was drafted to address the governor’s stated concerns, and that it’s at least worthy of a closer look.

“My hope is that we would actually do a deep, full study that would get all of those questions answered,” said Miller, who accompanied Copeland Hanzas as she met with several media outlets on Thursday. “As a member of that commission, I’ve been encouraging us to ask the Joint Fiscal Office to do an independent study, crunch the numbers, get the very numbers that you, I, and others need and want, to understand that both the benefits and the potential costs for everyone in this scenario.”

Matt Hongoltz-Hetling can be reached at mhonghet@vnews.com or 603-727-3211.