by John McClaughry
The (misnamed) Affordable Heat Act (S.5) is on its way to the Senate floor. As the likely consequences of this bill become more widely known, a multitude of questions have been raised.
In this column I will try to offer some clear and candid answers without injecting my own opinion. These answers may seem overly brief, but explaining the complicated workings of what one Democratic Senator described as a “Rube Goldberg” creation would take much more space than is available.
What is the reason for this bill? The sponsors believe that human-caused carbon dioxide emissions are propelling our planet into a deepening climate emergency. This bill is an effort to reduce those emissions from Vermont’s thermal (heating) sector, to enable the U.S. to meet the Paris Agreement obligations agreed to in 2016.
What amount of CO2 emissions reduction has the legislature decided to make Vermont responsible for? In 2020 the legislature adopted the “Global Warming Solutions Act”. It requires state government to make emissions drop from about 8.5 million metric tonnes CO2/year to 5.18 by 2030 and to 1.78 by 2050 (a decrease of almost 80%). According to the Vermont Climate Council, over one third of Vermont’s emissions come from heating with fuel oil, natural gas, and propane.
How will these requirements be reached? For the thermal sector, by making fossil fuels significantly more expensive, and thus less used, and channeling the resulting new revenue to subsidize building weatherization, install electric heat pumps and advanced wood heat, and replace gas stoves and water heaters with electric.
Is this a carbon tax on heating fuels? The bill’s “Clean Heat Standard” is purposely designed to technically not be a carbon tax, paid by a taxpayer to the state treasury. Instead, the Vermont Climate Council came up with a complex plan that will raise the needed new money by requiring fuel dealers to earn or buy “credits”. In practice, the fuel dealers will be required to make their customers pay for the required credits, exactly the same as if the State imposed a carbon tax on those fuels.
So who actually produces the money to enable the fuel dealers to buy these credits? Everyone who buys heating oil, natural gas and propane: home owners, renters, businesses, farms, schools, hospitals, churches, state and municipal governments, etc.
How much more will this increase the price of a gallon of heating fuel? As much as the PUC decides will be needed to drive down the thermal CO2 emissions, together with similar measures coming for the transportation sector, to the levels imposed by the Global Warming Solutions Act. An early estimate by the Agency of Natural Resources, omitting quite a few large costs such as the administrative bureaucracy and inflation, was seventy cents per gallon of fuel. A more thorough calculation by financial expert Myers Mermel of the Ethan Allen Institute came out to about a $4.00 a gallon increase.
How will low and moderate income Vermonters who heat their homes with these fuels find the means to pay their sharply increased fuel costs? That crucial question seems to have received little attention from the Senate Committee. In fact, Sen. Mark MacDonald explained to the Committee that “”We don’t do things based on helping poor people. We do things to save the world.”
How will low and moderate income people who install heat pumps pay their share of the equipment and installation, and also the sharply increased electric bills that heat pumps will require? There is no provision for that.
How much spending is anticipated for the thermal sector by 2030? Mermel’s projection is $5 billion over 5 years, minus uncertain Federal spending likely to be less than ten percent of that amount.
Will this $5 billion program be voted on by our legislators? No. Once set in motion, meeting the CO2 reductions will proceed however the PUC chooses to manage the system – such as increasing the cost of the credits and thus passing even higher prices through to fuel customers. A “checkback” provision to require a legislative vote was included in the Clean Heat Standard bill that Gov. Scott vetoed in 2022, but it was dropped in the current bill because many legislators become uncomfortable when held accountable for consequences.
What if the PUC-managed credit system fails to raise heating fuel prices enough to achieve the mandated CO2 emissions reductions by 2030? The Global Warming Solutions Act included a provision authorizing the Conservation Law Foundation – or for that matter “any person” – to sue the State to force it to move faster to achieve the lower emissions levels. If such a suit “substantially prevails,” taxpayers will pay the legal costs.
Is this complicated $5 billion program built on higher prices for heating fuels a wise choice for our legislators? That’s up to you.
The author, a Kirby resident, is founder and vice-president of the Ethan Allen Institute. To read all EAI news and commentary, go to www.ethanallen.org.