How to Pay for Administering the Carbon Tax on Home Heating Fuels? With an Excise Tax on Home Heating Fuels!

These people have no shame.

The Public Utilities Commission (PUC), which is charged under the Clean Heat Standard (Act 18/S.5) with operating the “carbon credit” system created by the law, is now soliciting ideas for how to fund said operation. Keep in mind that the carbon credits on their own are estimated to add at least 70¢ to every gallon of fossil-based home heating fuel (oil, propane, kerosene, natural gas) purchased by Vermonters. This amounts on average to over $500 per household per winter. Just the cost of the credits.

The bureaucratic cost of operating the credit system is, well, extra. And the leading suggestion for how to cover that extra cost is – guess what – ANOTHER TAX ON HOME HEATING FUELS! On top of the coming carbon credit “tax” and the existing excise tax on same.  

The PUC’s Order Seeking Recommendations for Funding Report of November 3 ends with, “The Energy Action Network’s [a truly awful conglomeration of special interests] Clean Heat Standard whitepaper identifies a small surcharge on fossil-fuel sales to provide the funding necessary to support the Department’s role in verification of compliance and evaluation.” “Small,” of course, is different in the eyes of the person forced to pay the tax than those of the ideological zealot proposing it.

Not surprisingly, the PUC leaves out one key detail regarding what might allow for an informed suggestion for where the money should come from to run their carbon tax program: how much revenue they need to do so. For some reason they don’t say. For some reason our legislators didn’t want to be associated with such a number either and made no effort to find out before they passed the law. Maybe – just maybe – that’s because they know it’s going to be a very unpopular number.  

The current excise tax on fuel oil, kerosene, propane, and other dyed diesel fuel is $0.02 per gallon and raises between $4 to $4.5 million per year.

Advocates for these carbon taxes often point to the Regional Greenhouse Gas Initiative (RGGI), a regional credit system for large-scale electrical generation as an example. In 2023, RGGI reported an operating budget of $3,118,019 (RGGI website). Let’s take that as a base cost. But RGGI is a far simpler a program, and therefore far cheaper to run, than the Vermont Clean Heat Standard.  

The number of credits in RGGI are determined and issued by the single entity, RGGI, and then auctioned off on a quarterly basis to the small handful of major utilities required to buy them. “Verification of compliance and evaluation” in this case is not particularly complicated. Vermont Clean Energy Carbon Credits, on the other hand, will be generated, not issued, literally by thousands of individuals performing hundreds of thousands of “clean heat measures” -- a wide variety of activities from installing heat pumps to replacing appliances to insulating buildings – at just as many locations all around the state, each of which needs to be independently verified and assigned a credit value by someone, either directly or indirectly, on the state’s payroll. This is complicated. Way complicated. Probably impossibly complicated. It will take an army of bureaucrats to do this work if you don’t want to open the program up to massive fraud and abuse. (Important possibility: maybe they do!)

Equally if not more complicated than generating Vermont’s carbon credits is keeping track of them. RGGI, as mentioned above, just auctions them off on a quarterly basis and that’s it. Vermont’s system requires setting up what is essentially a commodities exchange – that will, by the way, be subject to federal financial regulation – where these financial instruments (credits) are expected to bought, sold, and kept track of until ultimately retired.

Establishing and running this exchange will require highly skilled (read expensive) oversight and a very sophisticated (read expensive) IT system. How much this will cost? I don’t pretend to know, but the IT upgrade that the Vermont DMV just got cost something like $45 million. No IT intensive program is cheap to set up or properly maintain.

In conclusion, operating the Clean Heat Carbon Tax will be a massively complicated and grotesquely expensive bureaucracy to run. It will be much more labor intensive than RGGI, the cost of which is, unlike the Vermont program, shared by multiple states. More people equals more salaries plus more sophisticated technology equals much higher overall costs. I can easily see these costs far exceeding $10 million per year, not including start up costs. That’s admittedly just a gut guess, but whatever the number is, look for it to come out of your even higher heating bill.  

So, I do have a suggestion for the PUC… and the Energy Action Network, and the lawmakers who passed this monstrosity of a law and their never ending appetite for other people’s money. Not a suggestion of how to pay for it, but where they can stick it.

• Rob Roper is a freelance writer with 20 years of experience in Vermont politics including three years service as chair of the Vermont Republican Party and nine years as President of the Ethan Allen Institute, Vermont’s free market think tank.

---

Click that ♡ button, please. And don’t forget to subscribe and share. I’m grateful for your help with growing the BTL audience! Thanks.

---

Event Notice: Rob Roper will be a panelist for a “TownHall on Energy: Discussion of GWSA, Home Heat, Carbon Tax, Fossil Fuels, and the Electric Grid” on Tuesday, November 14, 2023, at the Rutland Free Library, 5:45-8 pm. Other panelists are ANR Secretary Julie Moore, Judy Taranovich of the Vermont Fuel Dealers Association, JT Dodge of No Carbon Tax Vermont, and Senator Terry Williams. Attend if you can!