Legislation aims to restart carbon-pricing discussion

Ginny Lyons
Sen. Virginia Lyons, D-Chittenden
Vermont legislators are again seeking to reduce the state’s greenhouse gas emissions by pricing carbon dioxide pollution, after having failed last year to gain much traction with a carbon tax.

Sen. Virginia Lyons, D-Chittenden, has proposed a bill that would authorize the governor to enter into a regional or nationwide cap-and-trade program to place additional costs on industries that emit greenhouse gases.

The bill, S.66, doesn’t mandate any particular cap-and-trade mechanism. It would require a report by 2019 on the administration’s efforts to enter into a program.

Under cap and trade, regulators set limits on carbon dioxide emissions within a region and sell to businesses the right to emit fractions of that total. Lyons’ bill encourages participation in a program addressing greenhouse gas emissions caused by transportation, heating, cooling and ventilation.

State law already sets a goal of reducing greenhouse gas emissions, both within Vermont and elsewhere if they result from Vermonters’ energy use.

This bill “may not go 2 inches,” but it may lead to some serious discussions among legislators and members of the administration, Lyons said.

“This is the beginning of a conversation, that’s all,” Lyons said. “There are people outside Vermont and inside Vermont who agree that we need to reduce carbon emissions from our transportation sector and our heating sector, so let’s have that conversation … and see what creative ideas emerge. There’s no jeopardy in doing that.”

Gov. Phil Scott is willing to discuss a cap-and-trade program that includes jurisdictions other than Vermont as long as it improves the economy and makes the state more affordable for families and businesses, said his spokesperson, Rebecca Kelley.

Cap-and-trade programs are one of two common ways that states and countries try to deter carbon dioxide pollution by making it more expensive.

Economists typically prefer the other common pricing scheme, which is a carbon tax. Generally these take the form of taxes on fossil fuels. These taxes are often made to be revenue-neutral, meaning a government reduces other taxes in proportion to the size of the carbon tax.

Scott promised during his campaign to veto any carbon tax.

But Scott has also described cap-and-trade programs as a tax.

As long as the bill leads to a serious effort by legislators and the administration to reduce Vermont’s greenhouse gas pollution, Scott can call it whatever he wants, Lyons said.

“It’s in his hands,” she said. “If they don’t want a tax, it’s not a tax.”

Vermont already participates in a New England cap-and-trade program that applies only to electricity generation, called the Regional Greenhouse Gas Initiative, or RGGI.

Environmental advocates often point to the Regional Greenhouse Gas Initiative as an example of what a successful cap-and-trade program looks like.

The program through 2014 brought Vermont nearly $15 million, in exchange for the state’s promise some years ago not to replace the now-shuttered Vermont Yankee nuclear plant with a fossil fuel-powered generator.

Nearly all of that money goes to Burlington Electric Department and Efficiency Vermont, through which the state operates its two electricity efficiency utilities.

The efficiency investments by BED and Efficiency Vermont that RGGI funded through 2014 are expected to eventually save Vermonters $115 million on their energy bills, according to RGGI’s 2014 proceeds report, issued in September.

By the end of 2014, 4,523 Vermont households and 297 Vermont businesses had received efficiency assistance funded by RGGI. That investment is expected to prevent the emission of 138,859 tons of carbon dioxide, the report says.

One environmental advocate said she welcomes the bill but sees a few areas of concern.

One of those is the administrative complexity that cap-and-trade programs typically involve.

There are simpler ways of putting a price on carbon pollution, such as a carbon tax, said Sandra Levine, senior attorney at the Conservation Law Foundation.

Further, it’s important that a new cap-and-trade program not weaken or replace effective existing programs, she said.

Lyons’ bill would allow up to $300,000 a year for program administrative and enforcement costs. Remaining proceeds would be split between home weatherization and energy-efficiency efforts.

The bill would also tighten a requirement in state law that Vermont must cut its greenhouse gas emissions 25 percent from 1990 levels by the year 2028 and 75 percent by 2050 “if practicable using reasonable efforts.”

The bill would eliminate the “if practicable using reasonable efforts” provision.

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  • Gus Steves

    Ah, Cap and Trade.

    Otherwise known as: We recognize that carbon pollution is bad, BUT we need to protect corporate profits.

    And people say VT is bad for business?

    • Adam Maxwell

      Gus, on point, as always!

  • John Snell

    We actually already pay a carbon tax and have for years. Unfortunately, it is very complicated AND, importantly, doesn’t make a bit of difference in reducing use of fossil fuels. What carbon tax do we already pay? The main costs are those associated with environmental damage, degraded human health, and global warming caused by our use of fossil fuels. The “tax” is what we all already pay to either fix these problems or pay for the consequences of not fixing them. If we take all of what we are paying in these ways and package it up into a real carbon tax that can be used to actually reduce fossil fuel use, we’ll be way ahead economically. The current carbon tax is outrageously high and goes unpaid by those who are profiting on “mining” the carbon long stored in the ground.

    • Matthew Davis

      Exactly. The externalities of fossil fuel production and use are being passed onto the taxpayers in the form of excessively high taxes on goods and services as well as excessive income taxes. The cost of subsidizing fossil fuels alone is astronomical. By some estimates the true cost of a gallon of gas likely exceeds $10.

  • Adam Maxwell

    While this is a nice effort to shed light on the need to include the full costs of carbon pollution cited below by John Snell, it is not the best policy in general, or Vermont specifically. As cited in the article, cap and trade has a lot more overhead and opens itself up for the kind of abuses we see in most commodities trading markets. Additionally the actual “caps,” while laudable are notoriously difficult to enforce.

    If we want to do the smart thing we make it as simple as possible: implement a gradually increasing tax on fossil fuels when they’re imported into our state by fossil fuel dealers, then return that to the bottom 5 or so deciles of the income bracket as a tax time rebate. For low income folks, an additional monthly rebate should be offered as they are more sensitive to fluctuations in energy costs. Whatever money is left over should be invested in weatherizing our aging infrastructure using the highly respectable efficiency utilities we already have. Boom, problem solved. #PolicyDork #DoPeopleHashtagInCommentSections #OnlyDorks

  • Jim Sawhill
  • John McClaughry

    Here we go again. From my VBM article of May 2008: “A centerpiece of the bill reported to the Senate [by Sen. Lyons] would have created a new “cap and trade” program… Under pressure from nervous senators, Sen. Lyons secured adoption of a last-minute amendment to delete her own cap-and-trade section. In its place she offered new language directing the natural resources and transportation agencies and the public service department to adopt rules to do most anything needed to reduce greenhouse gas emissions. This was obviously an attempt to smuggle the Shumlin-Lyons cap-and-tradeprogram back into the bill by hiding it in bureaucratic language.”

  • Robert Lehmert

    The best news I had all week was that a group of senior Republicans
    released a “conservative” branded and approved plan to reduce carbon dioxide emissions with a carbon-tax-and-dividend system. The tax would set an initial price of $40 per ton initially, with a phase-up over time. Rex Tillerson, late Chairman of Exxon Mobil, has stated that EOM already assumes a $60 per ton carbon cost in their internal cost accounting. Under the pan, carbon emissions will be taxed at source, and revenues returned to all citizens in the form of a cash dividend, estimated to be (initially) $2,000 a year for a family of four. The plan is designed to be revenue neutral. Individuals will offset their increase in costs with the dividend, or they can invest in less polluting products and keep the savings. While our Canadian neighbors have already adopted such a plan, our neighboring states have not, and it’s difficult for a small state to do so in isoloation. But if adopted on a national basis, this plan would encourage transition to modern and sustainable practices, and the torrent of money flowing out of Vermont for imported energy and fuels will slow to a trickle. The interesting thing is that prominent Republicans understand this solution as supporting individual choice. If you want a pickup that gets 5 MPG, that’s your choice — use your dividend to pay the externalized costs. https://www.scientificamerican.com/article/republicans-offer-to-tax-carbon-emissions/

  • Robert Lehmert

    Two additional points about a carbon-tax-and-dividend system:

    1) At $40 per ton of carbon, it would tack about 40 cents per gallon onto the price of gasoline. Each gallon of gasoline produces 20 pounds of CO2. (This assumes that the gasoline is taxed and not the crude oil that made it. We don’t know details about how it would work yet.)

    2) because it is intended to be revenue neutral, the 40 cents would flow into the dividend. However, these leaves no incremental revenue to fix roads and other infrastructure currently funded by an inadequate gas tax. There would need to be another solution that replaced the revenue from gas tax, because gas consumption based revenues could be expected to fall sharply.

  • Dave Hughes

    So if the major contributor to GGE’s lies within our transportation segment (commuters, delivery & service vehicles, school and CCTA vehicles etc.), where is the strategy to acheive reductions of carbon while improving energy efficiency that merits a positive ROI of our efforts to make our vehicles , homes and businesses more energy efficient? I keep hearing our legislators lament the potential payback but no means of implementing anything except another regressive tax on fuel.