Legislative Report 2/6/2019 - Decarbonization: Options for Climate Change Action

The 2019 State Budget passed last June included money for a study on the costs and benefits of various options to reduce Vermont's carbon emissions in response to climate change. Vermont has several targets for greenhouse gas (GHG) reduction that have been set during the Douglas, Shumlin and Scott administrations. In 2005 Vermont passed a law setting a target of 37% reduction from 1990 levels by 2012. In 2015 Vermont joined the conference of New England Governors and Eastern Canadian Premiers in setting a target of reducing regional GHGs by 45% from 2005 levels by 2030. In 2017 Governor Scott joined the U.S. Climate Alliance which set a taget of GHG reduction of 26% below 2005 levels by 2025. A report from the Vermont Department of Environmental Conservation released last July showed that Vermont's GHG emissions are currently 16% above 1990 levels, mainly due to transportation and heating. Our electric generation emissions, however, have decreased extensively to the point that they are now about 60% carbon-free and will improve even more in years to come. Transforming our energy use from fossil fuels to electricity will reduce total GHG emissions.

Vermont's Joint Fiscal Office commissioned the firm Resources for the Future (RFF), a non-profit research institution in Washington, DC, to conduct the study. RFF looked at four options: the Western Climate Initiative (WCI) cap-and-trade system, the ESSEX Plan introduced in Vermont last year ($.05/gallon to $.40/g after 8 years), a medium carbon pricing plan ($.30/g to $.50/g by 2030), and a high carbon pricing plan ($.60/g to $1.00/g by 2030). All of the options were assumed to be revenue neutral in their model, that is, all revenues would be returned to taxpayers either through a dividend or through tax relief. Their models took into account the cost/benefit to consumers, the cost to business, estimates of carbon reduction, and the net benefits of revenue allocation and associated health benefits. The impact on consumers was also differentiated by income and geography.

A major conclusion of the study is that transportation and heating fuel uses are relatively insensitive to moderate changes in pricing. People changed their driving habits and paid more attention to their thermostats when fuel was close to $4.00/gallon a couple of years ago. Last year's increase of $.50/gallon for gasoline back in May did little to change driving habits; most people just absorbed the increase. The conclusion was that carbon pricing alone at the levels being considered would not be enough to reduce emissions. However, if carbon pricing were combined with non-pricing policies such as financial assistance for weatherizing homes and incentives for purchasing electric vehicles (used and new), then the targets were achievable.

None of the options would negatively affect Vermont's economy more than a few tenths of a percent overall. However, fuel-intensive businesses would suffer reductions while service related businesses would grow. The economic welfare of families varied by income under all the plans with the lowest 40% benefiting (60% for the ESSEX Plan) and the upper 40% of income earners losing from $15 to $250 per year. Urban dwellers would also be better off than rural folks.

The study looked at carbon pricing in Vermont alone, not at a regional level. Governor Scott has agreed to join other New England and Mid-Atlantic states in studying a regional cap-and-trade plan called the Transportation Climate Initiative. The plan will be designed by the end of the year, after which Vermont can decide whether to join TCI. Scott also has included some money for weatherization and electric vehicle rebates in his 2020 budget. It is imperative that we take concrete steps sooner than later to drive down GHG emissions in Vermont because it will only get more expensive the longer we wait.

I welcome your emails (myantachka.dfa@gmail.com), phone calls (802-233-5238), or in person contacts.