TCI ‘tax’ on VT gasoline, diesel sales would nick drivers for up to $72 million/year, maybe without vote from Legislature

October 23, 2019 – Guy Page – Monday night, after Rep. Sarah Copeland-Hanzas (D-Bradford) called for a law requiring Vermont to reach net-zero carbon emissions by 2050, someone at the VT Climate Solutions Caucus meeting in Craftsbury cut to the chase:
“Hardwick Electric board member Gina Campoli, who was a member of the audience, asked about the cost of pursuing the agenda proposed by the lawmakers. “The question is how do you raise money to fund this stuff?” she said.” Copeland-Hanzas admitted that money is a challenge.” (Michael Bielawski, True North Reports)

Less than 24 hours later, state officials went public with a partial solution to Rep. Copeland-Hanzas ‘challenge.’ Under the multi-state, northeast regional Transportation and Climate Initiative (TCI) discussed at a public hearing in Montpelier, drivers will help pay for “this stuff” – electric cars, charging units, buses, trains, bike paths, etc. – every time they buy fuel at Vermont gas pumps. Estimated annual revenue: $20 million to $72 million for starters, with room for growth if regulators decide to make it so.  

The 13-state TCI might not require approval from the Vermont Legislature. Although the Legislature usually jealously protects its ‘power of the purse,” in this case it might be willing to make an exception. Some lawmakers who support carbon taxation would welcome not having to explain to angry constituents why they voted for one. But the TCI would need approval from Gov. Phil Scott – a longtime carbon tax foe.

TCI ‘Point person’ Peter Walke, Deputy Secretary of the Vermont Agency of Natural Resources, told the 25 people at a public hearing at the Pavilion Building in Montpelier how the TCI would make transportation carbon dioxide polluters pay state governments the money they need to meet carbon emissions goals. A complicated ‘cap and trade’ auction system would extract pollution payment from fuel dealers. Dealers would pass the cost along to consumers.

The only question is: how much would consumers pay per gallon? Pricing similar to an electricity cap and trade system now in use (the Regional Greenhouse Gas Initiative) would be about 5 cents/gallon. The WTI transportation cap & trade scheme operated by California and Quebec nets 18 cents/gallon.

About 400 million gallons of gasoline and on-road diesel fuel are sold in Vermont annually. Five cent/gallon would yield $20 million; 18 cents/gallon, $72 million. Per-gallon assessments may increase as regulators try to induce drivers to buy less and, of course, seek to generate more climate-change fighting revenue.  In California, the assessment is expected to double in 10 years.

The next draft of the TCI will be released in December. The final version will go to the member states sometime in late spring, 2020. Walke was asked by the Vermont Daily Chronicle if the Legislature would be required to vote on the TCI. He answered: “The agreement between the states has all been done at the executive level of state government. The Legislature endorsed the state pursuing this in the past.”

“That is a question for the legislature. They could take it up before we sign on. That is up for them to decide,” Walke said. However, “on day one of the legislative session it’s quite possible that legislation is introduced in the Senate or the House to authorize participation.”

The Vermont State Constitution limits explicit powers of taxation to the Legislature. Even state government fees are approved in the Legislature’s annual “fee bill.” The Constitution allows the governor to draw on the state treasury, but gives him/her no power to tax.  

Deputy Secretary Walke’s ultimate boss, Gov. Scott, has told him to get the best deal he can for Vermont and then give it to him to look at. After Scott kicks the tires and looks under the hood, he will decide – for the executive branch, anyway – if it’s a good buy for Vermont, or else goodbye from Vermont. Scott criticized 2016 campaign opponent Sue Minter for supporting a regional carbon tax plan. Carbon tax foes hope he hasn’t changed his mind.

Some observers at the Tuesday night meeting suggested he may be watching for what New Hampshire decides. The Granite State also is a member of the 13-state group. But if they opt out, Gov. Scott might not want to risk driving consumers across the Connecticut River. Such a move would not only harm businesses all along Vermont’s eastern border. The Vermont Transportation Fund relies on fuel tax receipts, and receipts are already down during the first quarter of 2019. Increased electrification and sales lost to New Hampshire would be a double whammy to the state fund responsible for paving and maintaining state roads.

Walke also stressed the need for “equity” for rural communities in this multi-state agreement: “Obviously we’re not interested in a program that just takes money from rural areas and delivers it to New York City.” But the reality of rural transportation could make that a challenge. Vermont’s rural drivers consume lots of fuel per capita, thanks to rural driving distances, lack of public transportation, and weather and terrain that make all-wheel drive vehicles advisable despite their relatively low miles-per-gallon.

Breaking news: Reuters reports today that the Trump administration is suing California for entering into the WTI pact with Quebec, saying “the state of California has veered outside of its proper constitutional lane to enter into an international emissions agreement. The power to enter into such agreements is reserved to the federal government.” All 13 members of the TCI are U.S. jurisdictions.

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