By Rob Roper
Dear Senate Committee on Natural Resources & Energy,
You asked today what is a “Clean Heat Credit.” Good question. You didn’t really receive a clear answer from your witnesses, so I hope you find the following helpful.
A Regulated Financial Asset. The Credits obligated parties will be required to obtain through the Clean Heat Standard (CHS) are a buyable, tradeable financial commodity that will have to be regulated as such. How this will be done and at what cost is a question your committee should delve into.
“Mined” not “Minted.” A key characteristic of the Credits under the CHS is that they are “mined” (created organically through authorized but unorganized activities of individuals acting on their own initiative) as opposed to being “minted” (issued by a central authority and made available for purchase.)
RGGI credits, for example, are “minted” – issued by RGGI Inc, auctioned off quarterly to obligated parties, who can then trade them on secondary markets. CHS credits, on the other hand, are created whenever someone, for example, installs a heat pump, or weatherizes a building, or switches from oil to bio-fuel. I hope it is obvious that the latter way of creating credits is INSANELY more complicated than the former. This is a problem for the viability of the program.
Please consider that according to analysis presented to the Climate Council, there will be about 250,000 such actions necessary by 2025 and nearly 500,000 by 2030 in the thermal sector alone to meet the GWSA goals. Each of these actions would generate one or more Clean Heat Credits, with credits having different shelf lives. These credits, thus generated, can then be bought and sold on a secondary financial market. Which gets us to the next question…
How is the PUC going to be able to verify that these half a million actions take place all over the state, assign a unique credit value and shelf life to each, and, once this is done, broker sales, track the ownership of, and then retire those credits when they expire? If you want to see how complicated this process is, check out the latest RGGI financial compliance report.
This CHS process will be significantly more complicated – and more expensive — than RGGI to administer, and RGGI costs multiple millions of dollars a year to administer with those costs shared by the multiple states in the RGGI coalition. Not just little ole’ Vermont.
Not Enough Miners. A further complication to the CHS (and the Climate Action Plan as a whole) is the fact that there is not a labor force in Vermont large and skilled enough to do the work necessary to generate all these credits.
As Jared Duval could have told you (guess he forgot), The Energy Action Network reported, “Vermont currently has about 700 weatherization workers. We have good reason to anticipate that … we will likely need somewhere in the range of 5,000 weatherization workers by sometime around the middle of this decade if we are to achieve the weatherization recommendations of the Climate Action Plan.” (1/6/22)
That’s 4,300 workers short, or 14% of where we need to be — on just weatherization. These people are not going to just materialize. Is there an actual viable plan to attract them? No. So, what happens if the credits obligated parties need to buy are never created in the first place? Are they stuck paying a penalty through no fault of their own? What happens to consumers who may wish to swap out their furnace for a heat pump to escape the rising costs of fossil fuels exacerbated by the CHS, but can’t because no one is available to do the work?
I hope in the weeks to come your committee will explore these issues in depth and bring some measure of reality to this debate.
The author, a Stowe resident, is a member of the Ethan Allen Institute Board of Directors.