Energy & Environment

State carbon tax would raise gas prices by as much as 88 cents a gallon

David Deen

David Deen, D-Putney, chair of the Fish, Wildlife and Water Resources Committee. File photo by John Herrick/VTDigger

[L]awmakers say they will push for a statewide tax on carbon dioxide pollution.

The Legislature’s Joint Energy Committee last week reviewed two draft bills that would raise the tax on gasoline by up to 88 cents per gallon.

Economists say the tax is a preferred method of reducing carbon dioxide emissions, and legislators say they’ve included measures to counteract the regressive nature of the tax.

Rep. Mary Sullivan, D-Burlington, a co-sponsor of the bill, said the tax will discourage people from using fossil fuels.

“It’s a tax concept I certainly believe in: Tax bad things and try to get people to move away from these things,” Sullivan said. “You do bring in revenue, but you also reduce the impact to society that carbon emissions have. I think there are a lot of people out there who want to see the change this bill would bring about."

Ninety percent of the revenue generated by the carbon tax would be used to cut other taxes, Sullivan said.

The largest tax cuts would go to low-income people who would be hit hardest by the regressivity of the carbon tax, according to Rep. David Deen, D-Putney, who is co-sponsoring the bill with Sullivan.

The legislation would also push the sales tax down from 6 percent to 5 percent.

The remaining 10 percent of revenue would pay for energy-saving measures such as improved home insulation and infrastructure for public transportation.

Another carbon tax bill, written by Rep. Chris Pearson, P-Burlington, would likewise remit 80 percent of the revenue to taxpayers.

A carbon dioxide tax is the means most economists prefer to reduce carbon emissions, said economist Dick Heaps, of Northern Economic Consulting in Chittenden County.

Such an approach interferes least with the free market, he said.

“You want to intervene with the lightest step possible,” Heaps said. “You don’t want to have the government tell you how to produce less carbon, and how much to consume.”

A carbon tax leaves it up to consumers to decide whether to live near their workplace, or whether to purchase an electric car. Economists prefer a carbon tax to a ban on carbon emissions, for instance, or a requirement that all commuters take public transit, Heaps said.

The tax would produce results, too, he said.

Cigarette taxes provide a good example of this effect at work, Heaps said.

“Raising the cigarette tax does reduce cigarette consumption,” he said. “With a carbon tax, you set the tax so as to reduce carbon to a [desired level], and if the tax isn’t high enough to get there, well, raise it again. If it’s set too high, then lower the tax.

“We’ve seen it time and again in markets, you raise the price, people will eventually consume less,” Heaps said.

Vermont can’t make the tax work on its own, however, Heaps said.

“I think it would be really bad policy for Vermont to do this for itself,” he said. In-state sales tax has harmed businesses along the border with New Hampshire, which does not collect sales tax, Heaps said. The same would hold true across the state if Vermont enacted a carbon dioxide tax without doing so in concert with its neighbors, he said.

“Vermont is too small to do something like this by itself,” he said. “We can at best do it as New England as a region.”

Carbon tax

File photo by John Herrick/VTDigger

An economy the size of California’s may be able to pull off a carbon dioxide tax on its own, he said, “but if you’re little old Vermont, you’re going to want to spend the effort convincing everyone else to do it first.”

Deen said he considers it a priority to get other states on board.

“The original intent was to recruit other states to do the same thing as us, starting here in New England, and I’m still working on that,” he said.

Deen said he’s open to revising the bill so that it would take effect only after other New England states pass substantially similar legislation.

And while other countries continue to emit carbon dioxide pollution, Deen said that people in the United States bear responsibility for reducing emissions.

“This notion that India and China and whatever countries are not going to do something – we’re still the biggest energy-consuming country in the world,” he said. “It’s not like we don’t have some responsibility for the amount of discharge that goes into the atmosphere.”

Both bills propose to begin applying the tax in 2018 on fuels including coal, diesel, gasoline, kerosene, propane and others.

Distributors would under both bills carry responsibility for paying the excise.

Deen and Sullivan would set the tax at a rate of $10 per metric ton of carbon dioxide pollution, and raise that amount by $10 per ton per year until reaching a maximum of $100 a ton.

Pearson’s bill takes the same tack, but would start at $50 per ton.

At $10 per ton of carbon dioxide pollution, drivers would pay a 9 cent carbon tax per gallon of gasoline; at $50 per ton, consumers would pay 44 cents a gallon. At the maximum rate of $100 a ton, drivers would pay 88 cents per gallon of gasoline in carbon dioxide taxes.

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Mike Polhamus

About Mike

Mike Polhamus wrote about energy and the environment for VTDigger. He formerly covered Teton County and the state of Wyoming for the Jackson Hole News & Guide, in Jackson, Wyoming. Polhamus studied at Southwestern Oregon Community College, University of Oxford and Sarah Lawrence College. His research has been commissioned on a variety of topics such as malnutrition and HIV, economic development, and Plato’s Phaedo. Polhamus hails originally from the state of Oregon. He now lives in Montreal.


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