New Carbon Tax Bill Would Increase Gas Prices, But Lower Electricity Rates

Dec 8, 2017

Backers of the latest proposal for a carbon tax in Vermont say lawmakers can increase the price of gasoline and home heating oil without inflicting financial stress on residents and businesses.

A coalition of lawmakers, environmental advocates and business leaders has introduced what they’re calling the “Economy Strengthening Strategic Energy Exchange.”

The idea is to hasten the transition away from fossil fuels, by making them more expensive. But Chittenden Sen. Chris Pearson says the proposal will alter consumer behavior without increasing household expenses, since money collected from the new tax will be used to buy down monthly electricity bills.

“And this would help Vermonters transition away from fossil fuels by giving them an incentive to turn to electric energy,” Pearson says.

The 10-year plan phases in over time. In year one, Vermonters would see about a 4-cent per gallon increase at the pump. By year 10, it would jump to 45 cents a gallon.

The proposal would collect more than $300 million in revenue annually once fully implemented. Pearson says this part of the proposal  would act as an economic stimulus plan because it would increase demand for locally produced energy generated from renewable sources.

"I'm afraid that this in and of itself would have a huge detrimental effect on our economy. Prices on goods and services would have to go up, as a result of that." — Gov. Phil Scott

“It lands us having the cheapest electric rates in all of the northeast, by about 25 percent,” Pearson says.

Republican Gov. Phil Scott says the redistribution of dollars won’t result in the benefits Pearson envisions.

“I’m afraid that this in and of itself would have a huge detrimental effect on our economy. Prices on goods and services would have to go up, as a result of that,” Scott says.

Caledonia County Sen. Joe Benning, also a Republican, says the plan would be especially bad for people in rural districts like his.

“I represent a constituency that must travel to get to work. There’s just no way around it,” Benning says.

Pearson says he’ll introduce the carbon-pricing bill in the Senate. Lawmakers will introduce a companion bill in the Vermont House.

Resistance to the plan won’t come from Republicans alone.

The proposal includes special rebates for rural residents and low-income households, to mitigate the effects of higher gas prices. But House Speaker Mitzi Johnson, a Democrat, says she thinks the new carbon tax plan would nonetheless have adverse impacts on the people who can least afford them.

"We have an opportunity to localize our energy spending in the same way we've localized how we pay for food here in Vermont." — Dan Barlow, Vermont Businesses for Social Responsibility

“I don’t think that it creates enough alternatives for rural Vermont and for lower-income folks,” Johnson says.

Johnson says she plans to offer alternative plans to reduce carbon emissions during the 2018 legislative session.

Some influential businesses will be trying to convince Johnson, Scott and other critics of the plan to reconsider their opposition. The authors of the proposal include some prominent business owners, and Vermont Businesses for Social Responsibility is actively lobbying in support of it.

Dan Barlow, policy director at Vermont Businesses for Social Responsibility, says his members believe climate change might well be the biggest threat facing businesses in the state.

“One of the things that business is really good at is identifying a societal problem and finding a way to turn that into an economic development opportunity,” Barlow says.

Barlow says his organization believes the latest carbon-pricing proposal offers the clearest way to seize that opportunity. And he says it’ll allow the state to take some of the $2 billion Vermonters spend annually on fossil fuels, and redirect it toward the local renewable energy economy.

“We have an opportunity to localize our energy spending in the same way we’ve localized how we pay for food here in Vermont,” Barlow says.

This post was edited on 12/11/17 to correct the name of the district represented by state senator Joe Benning