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Carbon Tax: Environmental Vanguard Or Economic Disaster?

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H.412 is "An act relating to establishing a carbon pollution tax."

Backers of a carbon tax bill say it would reduce carbon emissions in Vermont, but the proposal has critics who argue that Vermont's economy would suffer from additional taxes on gasoline and heating oil.

A bill that the Legislature might consider would add an 88 cent per gallon tax to gasoline and a dollar tax to a gallon of heating oil.  Under the proposal, 90 percent of the revenue from a carbon tax would go toward reducing the state sales tax and other taxes, and ten percent of the revenue would be directed to energy efficiency projects.

We discuss the pros and cons of a Vermont carbon tax with VPIRG Executive Director Paul Burns, who supports it, and Matt Cota, executive director of the Fuel Dealers Association, who opposes it.

On the proposal's logistics

The proposed legislation would accomplish three primary things:

1. Create an Energy Independence Fund that would help more Vermonters take advantage of cost-saving clean energy opportunities like home weatherization, air source heat pumps and solar panels.
2. Call for fossil fuel companies to pay a tax based on the impact of their climate pollution.
3. Protect Vermont consumers from companies passing along the costs along to consumers by designating 9 cents out of every dime raised to cut taxes on individuals and employers elsewhere.

In the first ten years of the program, sales taxes would be cut by $600 million in Vermont, income taxes would be cut by $1 billion, and an additional $270 million in rebates would go to low income residents. Functionally, there would be a tax cut on employers (businesses, non profits and government) of nearly $850 million dollars.

Once the program is fully implemented, Vermonters will be saving an additional 150 million dollars a year thanks to investments in energy efficiency.

On the long term impact

Vermont has the lowest carbon emission out of all 50 states, calling to question the impact such a small and unpopulated state could have on the global footprint.

However, the state is also emitting the same amount of carbon pollution as it was 25 years ago. To improve this, Vermont has set forth a goal to reduce carbon emissions by 75% and switch to 90% renewables by the year 2050.

Burns spoke of a study performed by Regional Economic Models Inc. that analyzed the impact of a $10/ton tax on carbon emissions in the state that would increase to $100/ton over 10 years.

"They said that Vermont would see 1800 new jobs by the year 2030," says Burns. "That our state economic input would increase roughly $85 million annually, and to the question of carbon emissions, we would see a nearly 2 million ton per year drop in carbon emissions in Vermont."

Cota argues that the carbon tax is not the best method for achieving the state's environmental goals, citing the passing of the Clean and Green Oil Heat Initiative as a better stride forward. High sulfur was banned, reducing emissions and increasing heat efficiency.

"We think that with more research and more development of veggie oils, soil oils and algae-based biodiesel that we can provide a B100 blend in the near term," says Cota, who believes B100 (entirely renewable biodiesel) is achievable in the foreseeable future.

On business and border communities

"It's going to be a regressive tax, which hurts the low income Vermonters the most," says Cota. "And most importantly, while this may look good from Church St. in Burlington, when you live in one of the seven counties that border New Hampshire, Massachusetts and New York where you can go to the other side of the border to get your gasoline, the reality is that those border communities are going to be devastated by these taxes."

Businesses may not only be pushed out of the state by increased taxes, but completely deterred from bringing their companies to Vermont in the first place. 45% of Vermonters live in these border counties that Cota says will feel these impacts.

Burns cites the carbon tax not as a negative, but rather as an incentive for businesses to move to Vermont. He claims that they will see huge reductions in their overall businesses taxes.

"Many businesses, regardless of how they feel about climate change, will simply end up saving money by locating in Vermont, staying in Vermont, and growing in Vermont." says Burns.

As the bill is configured now, a cent will be shaved from the sales tax for all items. A potential incentive in the future is ridding Vermont of a sales tax completely over time, motivating residents to remain in-state for their purchasing.

On the rural perspective

Vermont is a largely rural state with approximately 8,000 miles of dirt roads. Diesel is the lifeblood of the graders, backhoes, plow trucks, school buses and farm machinery that keep remote communities running.

"The idea that we are going to tax our way into using no petroleum just isn't plausible. We're in a cold, rural state. We depend on petroleum to get to work, to clear the roads to make us safe and warm in the winter," says Cota.

Farmers use about 8 million gallons of diesel fuel yearly in Vermont. At the current high end tax proposal of the bill, that would add over a million of dollars transferred from farmers to the Clean Energy Fund.

"If you are already driving 100 miles a day and you compare yourself to someone who walks to work, then you are already in a situation that you may find unfair from a financial standpoint," says Burns. "That's not going to be solved by this program. You're still going to pay more."

On H. 412's future

"I think realistically we are in a process right now that is going to continue through [the 2016] legislative session, meaning I would expect that different committees are going to look at this, take it up, bring in all sorts of stakeholders with concerns, interest and support for the legislation," says Burns.

Burns believes the discussion will continue through the session and beyond, but is confident that legislators will pass the bill rather than letting Vermont "wait on the sidelines."

Broadcast live on Fri., Nov. 6, 2015 at noon; rebroadcast at 7 p.m.