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Follow VPR's statehouse coverage, featuring Pete Hirschfeld and Bob Kinzel in our Statehouse Bureau in Montpelier.

McClaughry: Carbon Tax

Last month an environmental coalition called “Energy Independent Vermont” announced it would do battle in Montpelier for a new tax – the carbon tax.

The coalition says Vermont needs a new tax on natural gas, heating oil, propane, gasoline and diesel fuel in order to combat what it calls “climate pollution – the biggest environmental challenge of our generation!”

They argue that when tax increases on carbon dioxide producing fuels cause the prices of these carbon-based fuels to rise enough, people will spend more on energy efficiency and conservation. They will replace home heating gas and oil with electric heat pumps. They will turn to electric vehicles to replace gasoline and diesel-fueled vehicles.

The state would tax all of these fuels at some convenient point in their supply chains. The proposal exempts electricity because the carbon tax advocates consider it covered by the Regional Greenhouse Gas Initiative. With the carbon tax, Vermonters could look forward to paying a third more for natural gas, propane, heating fuel, gasoline and diesel.

The study commissioned by the coalition estimates that a $50 dollar per ton rate would produce $35 million in 2016 and $250 million in 2030. The $150 rate would raise $700 million a year by 2030. The model promises increases in jobs, disposable incomes, and Gross State Product.

The advocates propose that the state redistribute 90 percent of the carbon tax revenues through tax cuts and rebates to people, governments, organizations and corporations to compensate them for the higher energy costs caused by the carbon tax. Ten percent of the revenues would be directed into “investments in energy efficiency, renewable energy, and other clean alternatives to fossil fuels.” These interests could receive as much as $70 million a year in 2030.

The carbon tax opponents might have an unlikely ally in Gov. Shumlin, who recently observed “that “if you have a high carbon tax in a gas station on this side of the [Connecticut River] bridge and you have no carbon tax on the other side of the bridge, it’s pretty clear where you’re going to fill up your tank.”

Of course you wouldn’t have that option with natural gas home service or a heating oil delivery.

Last month the governor abandoned his cherished single payer health care plan because it could not be financed by “tax rates that I can responsibly support or urge the Legislature to pass." He should add the carbon tax to that list.