Mermel: Fatal flaws appear in Clean Heat Standard

by Myers Mermel

The Clean Heat Standard is dead. That’s not to say that S.5 won’t become law, because it will. But the fatal flaws in the policy which will prevent its implementation became very clear this past week. The primary flaws are excessive upfront cost and resulting non-compliance. It is good that the policy will eventually collapse. But until that time, it will prevent us from reaching critical climate targets and it will punish low and middle income Vermonters for the rest of this decade.

While cloaked in the rectitude of punishing polluters, the Clean Heat Standard is an immoral policy that shifts the full cost of the entire state’s climate compliance onto the less fortunate. It is classist. It creates further income inequality through a regressive surcharge and will cause human needs to go unmet. We agree with the VT Renews BIPOC Council that it harms BIPOC people and upholds white supremacy. The moral underpinning of the Clean Heat Standard is not virtue. To further attempt the enactment and imposition of this policy from this point forward is no more than vanity.

Myers Mermel

After graduating from UVM, I left Vermont for 35 years to have a career in real estate finance and banking in Manhattan. Over my professional career I supervised the renovation of over 60 million sq. ft. of real estate, which is about four times the total inventory of our state. While there are many real estate experts in Vermont, my breadth of experience should put the validity of my assessments amongst theirs. Last week, Secretary of Natural Resources Julie Moore made her own “really rough” assessments of the renovation costs of the policy, and she admitted she “was confident that it’s wrong,” that she could “easily be off by a factor of two.”

Our calculations are that she is indeed off by a factor of two, if not more, on her gross costs. We believe that gross renovation costs will be impacted by inflation, and the scope of heat pump placement in each typical home will be larger including electric upgrades, and overall weatherization more expensive.

Further, we also believe that her deductions ranging from “free” state administration, a “free” default delivery agent, continued large Federal subsidies, and fuel dealer cooperation to eliminate their own profits are not guaranteed or achievable. The Ethan Allen Institute plans to conduct further detailed analysis of the costs. But the net result of our own “really rough” math using Moore’s model with our inputs is that fuel costs will not increase by 70 cents per gallon under the Clean Heat Standard, they will increase by over $3.50 to $4.00 per gallon. Some renovation cost data indicate the actual amount required to be passed through on a surcharge could increase fuel costs by more than $5.00 per gallon.

This excessive upfront cost will unravel the policy. The tipping point of the policy, in our estimate, is likely around $1.00 per gallon. At that price, it will be more cost effective to purchase black market fuel imported from other states. Vermonters will react just like they did to other bad policies, namely the Embargo Act of 1807 (War of 1812), Vermont Alcohol Ban of 1853, and later the 18th Amendment (Prohibition), all of which strained the economy and created widespread non-compliance. Just as in the past, Vermonters will rampantly smuggle contraband into the state from any number of sellers out of state at much lower prices. Why pay $4.00 per gallon more when for just $1.00 per gallon you can get it delivered for a lot less? And since the state currently cannot stop fentanyl, it is unlikely it can stop fuel. The lesson for lawmakers to learn today is the same learned by the British and Yorkers in Vermont’s Revolutionary days: never underestimate a farmer. 

Once it is passed, there will be legal challenges. In our view, the policy violates the 14th Amendment due process and equal protection clauses because it makes a portion pay for the mistakes of the whole. It also violates the 5th Amendment, because through its structure, it effectively takes the fuel dealer’s private property without compensation. But legal challenges may fail. Yet the basic structure mandating fuel dealers to front billions to improve homes won’t work.

Under the plan, the fuel dealers pass the improvement cost back to the consumer. But if the fuel dealers don’t have the sales at first to advance the money through credits, improvements won’t be made quickly, yet fuel prices will be high under the grand design.

As prices stay high, consumers will move to cheaper wood heat or start smuggling. As total gallons sold by Vermont dealers decrease, the $4 per gallon surcharge will escalate as the retrofit cost will be spread over a smaller group of fuel buyers. The downward spiral of the policy will pick up speed.

Predictable outcomes will result. Seniors will have to choose between heat and health, stress on families will build, domestic violence will increase, declines in education will happen, despair will bring more drug use, and there will be more strain on municipal services like police and fire. The policy will hurt the least among us and the vulnerable like BIPOC. Because the policy will rest on the backs of the poor, it is structurally racist.

While we believe the Clean Heat Standard is unworkable, the moral imperative of combatting climate change will likely continue to be put ahead of the moral imperative of being compassionate to the less fortunate. Despite its classist and racist failings, the Clean Heat Standard will become law, and the state will achieve neither climate compliance nor moral justice. And a decade in which we could do both will be lost.  

Myers Mermel is the President of the Ethan Allen Institute with a career in finance and advanced degrees in history and theology. He resides in Manchester.

Categories: Commentary, Legislation

10 replies »

  1. Senator Bray says the “north star” is reducing greenhouse gases. Senator McDonald says S.5 is not about poor people, it’s about saving the planet. Progressive legislators see Vermont as the tip of the spear for spreading socialist ideology throughout the country. Their policy goals are largely funded by out of state money. They aren’t concerned about Vermonters as people – only as votes to be harvested. How much will fossil fuels cost? They want to make fossil fuels so expensive that you will stop using them. That’s how much they will cost.

  2. The State of Vermont essentially CHOOSES to not heavily enforce the trafficking of opioids, and treats those who create the strong market for them as “VICTIMS of opioid use disorder”. I doubt that any such victimhood class would be created for those who brazenly continue to use petroleum for heating. The state does nothing to raise the price of these products like we do with alcohol, tobacco and sugary beverages.Users of the scorned product, petroleum would be treated with the same second-class citizen status we render upon those whose chosen addiction is to nicotine. Marxism is all about double standards and authoritarianism. We voted for this.

    • I share the opinion that the clean heat standard is a problem. I’m also of the opinion that the author of this article, Myers Mermel, helped tank any chance for a moderate republican senate candidate. Stop trying to help.

  3. Re: “While we believe the Clean Heat Standard is unworkable, the moral imperative of combatting climate change will likely continue to be put ahead of the moral imperative of being compassionate to the less fortunate.”

    Not so. The moral imperative of being compassionate to the less fortunate is manifest in the State’s imperative to put the less fortunate out of their misery… literally killing two birds with one stone.

    Jefferson put it this way. “When tyranny becomes law, rebellion becomes duty.”

  4. While the passage of S.5 may seem inevitable, so too is phil scott’s veto. In the battle to override the veto, it is essential that affected Vermonters (that’d be all of us) at a minimum send letters, e-mails and phone calls to our alleged representatives and senators. Public pressure may sway enough D’s to reject the override for this biennium.
    Allowing this to be litigated in the courts will be a mighty slow process, with the outcome looking somewhat similar to Act 48- with subsequent changes- all health care got was more expensive and harder to obtain.
    That said, the use of the “equity” provisions of the GWSA as well as the racial, sexual orientation and other social issue provisions make any clean heat standard vulnerable to litigation by affected parties. Again a slow process- as the dollars from the tax come into state coffers, the less likely to have this standard repealed.
    Unfortunately, we are seeing a perfect storm of climate evangelism, public indoctrination to socialism and apathy among voters- which translates to about $1.00 a gallon tax, first year and by 2025 (2024 is an election year) $ 2.50-$3.00 per gallon tax. Plus the current fuel tax, of course. As we “subjects become accustomed to the tax, the tax will increase.
    The time to be vocal has past, with the last opportunity being Nov. 8 2022.
    Now, we must try a desperation plea to deaf ears in Montpelier, or literally vote with our feet as so many have already done.

  5. Not that I disagree with the premise of the article that energy costs in this state will skyrocket and Vermonters will have to get crafty to find ways to survive (seems as though we always have), but a couple of the things said in this article bother me:

    -“reaching critical climate targets”
    What critical climate targets? Climate change is a certainty. It’s certain that naturally the climate changes with humans (weather modification or otherwise) or without humans and it’s certain that the only thing affected by combating climate change is the certainty of economic failure.

    -“Because the policy will rest on the backs of the poor, it is structurally racist.”
    So most poor people are black? WTH?

  6. Senator McDonald admits S.5 is to save the planet. The planet did not elect him or his comrades. The people of Vermont elected them and their first duty is to the people of Vermont.

  7. Thank you Myers for your critique of this ridiculous and illegal S.5.
    The analysis by Sec. Moore is a pure 3B (BS baffles brains) with projections that should embarrass anyone who can use a pencil and envelope.
    What Vermont needs is low cost, dependable energy from all sources.
    Call or write your Legislators and Senators to kill this monster grab for illegal control
    over our state.
    Milton Eaton

  8. It is deeply regrettable that the VTGOP lacks both the solutions and the electable candidates needed to address the challenges posed by the Clean Heat Standard. The party’s failure to effectively address the dual imperatives of combating climate change and promoting social justice is a significant shortcoming, and one that is sure to have far-reaching consequences. The implementation of the Clean Heat Standard will likely result in a situation where the state fails to achieve either its environmental goals or its moral obligations, and a decade of opportunity will be lost. This is a devastating outcome, and one that should be a source of great concern to all citizens of Vermont.

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