Commentary: The Disappearing Reappearing Carbon Tax

by John McClaughry

On February 10, VTDigger political columnist Jon Margolis declared that “the carbon tax is dead”. The Democratic leaders of the House and Senate have pretty clearly said “not this year”, and Gov. Scott has repeatedly promised a veto. Margolis wondered why the carbon tax opponents were so unwilling to declare victory, and move on.

Of course the carbon tax (aka fee, charge or pricing) is not dead. Two House bills have since been introduced to impose 40 and 50 cents per gallon tax increases on motor fuel to fight climate change. True, they probably won’t be considered, but as will be seen, the issue has far from gone away.

The “Energy Independent Vermont” coalition’s sweeping carbon tax bill of 2016 disappeared, along with three of its sponsors in that year’s election. The ESSEX Plan of 2017 likewise disappeared. The best the carbon tax advocates could do in 2018 was get a $120,000 taxpayer-financed study of “decarbonization”.

That study arrived in February. From the standpoint of carbon tax enthusiasts, it must have been a serious downer. It found that even with a carbon tax almost twice that called for in the ESSEX Plan, bringing in up to $433 million a year, Vermont would have almost no hope of meeting its 2005 carbon dioxide emissions goals; economic welfare would be reduced, a situation the study tried to salvage by positing dubious climate benefits occurring in Africa and Asia; and the most likely “significant impact” would be “if Vermont’s policy leadership were to inspire increased leadership and policy innovation in other states or nations.”

The only ray of hope the study identified was blending a “moderate” carbon tax and “nonpricing policy approaches.”

The Regulatory Assistance Project, a consulting organization headed by former PUC Chairman Richard Cowart, rushed to grasp at this straw. It obtained a small grant from the Joint Fiscal Office to “review” the decarbonization study. That evolved into a slide show presented to the House Appropriations Committee on February 28. That presentation had very little to do with the $120,000 study. Instead it argued for an alternative: “energy savings through low-cost carbon management”.

Until now, the carbon taxers’ strategy was to impose an increasingly burdensome tax on gasoline, diesel, heating oil, natural gas and propane to depress Vermonters’ use of those fuels and switch to something else. Cowart’s alternative begins with spending, not taxing.

The approved spending includes weatherizing drafty oil and gas-heated homes, replacing furnaces with cold climate heat pumps, switching schools to wood pellet heat, improving building energy efficiency, expanding public transit, and more subsidies and charging stations to induce motorists to swap their gas and diesel-powered rides for electric vehicles.

Most Vermonters probably see some merit in weatherizing, efficiency, and even, for paved-road urbanites, electric vehicles. People wisely invest their own money into weatherization and energy efficiency that promises a reasonable payback. Others choose to switch to already-subsidized electric vehicles. But that’s far from enough to make a dent in “climate pollution”.

The Cowart review recommends $600 million in “public investment in building and heating strategies” over the next ten years. It also asks for $70 million over 12 years for light duty EV subsidies. That’s pocket change compared to the expected taxpayer price tag for the Energy Action Network’s goal of subsidizing EVs to get from the 2,985 on the road today to 90,000 (!) six years from now.

But now, with the carbon tax supposedly off the table, where is the state supposed to find the hundreds of millions of dollars needed to pay for all these subsidies, incentives, “investments” and “carbon management” plans?

Now comes the moment of truth. The two state retirement funds are now facing $4.5 billion in unfunded liabilities. Medicaid is demanding ever more millions of budget dollars. Highway and bridge maintenance is falling further behind. There is no school property tax relief on the horizon. How are we supposed to find $60 million or more a year for ten years to pay for all this new stuff?

Rich Cowart boldly faced up to this important (implied) question. “Carbon revenue is required,” he told the Committee.  “In my opinion, we should be using carbon revenues to pay for a carbon reduction program”.

Carbon revenues? Bingo! The carbon tax! The tax we just agreed to forget because of the widespread opposition, its adverse economic effects, and its futility in combating climate change!

This is what passes for policy genius among the climate change establishment. More practical Vermonters aren’t going to buy it.

John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org)

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