Vermont Pushes for a Carbon Pollution Tax

March 17, 2015

The International Panel on Climate Change (IPCC) has made it pretty clear: to avoid catastrophic climate change we need to transition from fossil fuel energy sources to renewable energy, starting now.

Establishing incentives that support this transition is something that political, economic and environmental leaders have been working on for a long time. Remember how the Senate’s ill-fated climate bill turned into a partisan battlefield? With the federal government mired in gridlock, it looks like it’s once again down to the states to push forward a solution.

 

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And no big surprise, Vermont is helping lead the way. This legislative session, a coalition of environmental, business and low-income advocates— led by the Vermont Public Interest Research Group (VPIRG)— has proposed a Vermont state Carbon Pollution Tax. The tax on pollution would take the form of a fee per metric ton of carbon dioxide emitted and would be imposed upstream, on gasoline, oil, propane, natural gas and other fossil fuel distributors. State electric utilities, which already take part in a regional carbon pollution cap and trade system, would not be included in this plan.

“Our kids and grandkids are counting on us,” says Julia Michel, Energy and Democracy Advocate at VPIRG. “Carbon pollution from fossil fuels has already stacked the deck for more destructive storms like Irene, and we can’t count on Congress to stand up to polluters before it’s too late.” Hurricane Irene cost over $733 million in state and federal money to clean up, and the impacts are still felt nearly four years later. With 2014 topping the list of hottest years ever, climate change is already ushering in more extreme weather, making the need to enact policies like this even more urgent.

Beyond reducing the economic and social burden of climate change, a study by Regional Economic Models Inc. (REMI) showed that a carbon pollution tax would help most VT residents by returning 90% of the money generated as tax cuts to individuals, businesses and other institutions. The remaining 10% would go toward an “Energy Independence Fund” that would help Vermonters slash heating bills with clean energy, and make public buildings more energy efficient. In the REMI study, a tax of $5 per metric ton of carbon emissions, increased over 10 years to $50 per ton, would lead to 1,000 new jobs, an economic boost of around $40 million annually, and a cut in carbon emissions by more than 1 million tons per year.

“While this is obviously a big policy that legislators will take their time on to get right,” says Michel, “we all know how urgent action on climate has become.”

Vermont is not launching this initiative in a vacuum. British Columbia instituted a carbon tax in 2008, moving from $10 per metric ton of carbon emissions to $30. Their scheme was “revenue-neutral,” meaning that for every dollar generated by the carbon tax, the government cut an equivalent amount of taxes elsewhere.

Their results are pretty encouraging. In terms of the fuels covered by the tax, carbon pollution in BC is down 16% (while the rest of Canada is up 3%). BC now enjoys the lowest personal tax rate in Canada, and one of the lowest corporate rates in North America. Canada’s Kyoto Protocol goal was to reduce carbon pollution 6% in 20 years— BC has been able to add another 10% to that reduction goal in just seven years. Now that sounds like progress.

With so many positives, it’s hard to see a downside. We’ll be watching closely as Vermont lawmakers take up this policy — we hope they’ll show the rest of the country, and the world, the way forward.