Legislative Report 1/24/2018 - A Practical Approach to Pricing Carbon Pollution

Most people recognize that climate change is happening, that it is caused by burning fossil fuels, and that it has serious environmental and health consequences. The challenge to our generation is how to counter the trend of increasing concentrations of CO2 and other greenhouse gases (GHGs) in the atmosphere. The most obvious action is to reduce our consumption of fossil fuels.

Our economy and lifestyle depends heavily on fossil fuels for electricity, heating and transportation. We successfully continue to transform our electric generation to renewable, clean sources, making Vermont's electric supply among the cleanest in the country while keeping our electric rates the second lowest in New England. However, despite our goal of reducing Vermont's GHG emissions by 25% compared to 1990 levels, our GHG levels have instead increased by 4%. We cannot be successful unless we address fossil fuel consumption in heating and transportation.

A proposal currently being considered called the ESSEX Plan, an Economy Strengthening Strategic Energy EXchange, was developed by a group of environmental advocates, business people and legislators over the last summer and has been introduced as Senate bill S.284. The goal of the plan is to move dependence on dirty fossil fuels to Vermont's clean electric energy by discouraging use of fossil fuels and encouraging a transition to electricity for heating and transportation. Here is how the plan works.

The EPA during the Obama administration calculated the “social cost of carbon pollution” to health and the economy to be $40/ton. Based on this number the plan starts at $5/ton of CO2 (5 cents/gallon) and rises steadily to $40/ton (40 cents/gallon) over an 8 year period. The revenue generated goes back to Vermonters in the form of a rebate on electric bills. About $30M would be raised the first year and grows to $240M when the price tops out in eight years. This money would go into a special fund which would be drawn on for the rebates. Each month the amount collected would be allocated to each utility based on its electricity consumed for that month. That share would then be allocated based on whether the revenues came from the commercial, industrial or residential side of fossil fuel consumption. The rebates would be based on the amount of a customer's electricity usage. The revenues from the commercial and industrial customers would be rebated to them. The revenues from the residential customers would be divided based on income and geography.

Of the residential revenue 50% would be rebated to all residential customers, 25% would be rebated to customers in rural areas, and another 25% would be rebated to low income customers. Low income Vermonters in rural areas would get both bonus rebates. This formula is in recognition that Vermont is a rural state that requires longer commutes for rural residents and that low income residents pay a proportionally higher share of their income on energy costs. This strategy should encourage Vermonters to use less fossil fuel by transitioning to technologies like cold climate heat pumps, electric vehicles, mass transit, carpools and other strategies to reduce their carbon footprint.

So, how does this strengthen the state's economy? First of all, it makes Vermont more affordable. While electric rates themselves won't be affected, the carbon rebates, itemized on consumers' electric bills, will significantly decrease the net cost of electricity. Vermont's already low rates relative to our neighboring states will be even more attractive to businesses. Secondly, Vermont is not a source of fossil fuels, so 80 cents of every dollar spent on fossil fuels leaves Vermont. On the other hand, Vermont's electricity is increasingly sourced within the state or region, keeping millions of dollars of energy spending in Vermont. Third, transitioning from fossil fuels to electricity will add more well-paying green jobs to the 17,500 already created in Vermont. Finally, we are not alone. Vermont's New England neighbors and New York are poised to introduce their own carbon pricing legislation in the coming weeks making this a regional effort.

This method of carbon pricing is innovative and environmentally and economically beneficial. I look forward to a productive dialog about this plan and will host an informational forum on the topic at the Charlotte Senior Center on February 12 at 7:00 PM. I hope to see you there.

As always, I can be reached by phone (802-233-5238) or by email (myantachka.dfa@gmail.com).