Opinion – The 70 cents a gallon heating fuel tax estimate is likely low

Opinion – The 70 cents a gallon heating fuel tax estimate is likely low

Rob Roper, Contributor

Secretary of Natural Resources, Julie Moore, pulled back the veil a little on what the cost of the proposed Clean Heat Standard, S.5, could be for Vermonters and it’s a really big number.

Moore calculates that the first four years of the program (from 2026, when the law would take effect, to 2030, a milestone year for the Global Warming Solutions Act) will require $2 billion-plus in spending on weatherization and new heating system installation. After subtracting federal money that can be used to pay for some of this activity and what Vermonters can be expected to privately pay out of pocket, the net need for revenue would be, according to Moore, $1.2 billion.

That translates into an additional 70 cents per gallon for home heating fuels (oil, propane, kerosene, natural gas). Given that the average Vermont household uses 700 gallons of fuel oil per year, the Clean Heat Standard represents for the average family a $500 per year carbon tax to stay warm in winter.

The Clean Heat requirements necessary to meet the greenhouse gas reduction goals Moore cites are, by 2030: 85,000 homes weatherized at $10,500 each ($890 million), 145,000 heat pumps installed at $5000 each ($725 million), and 125,000 heat pump hot water heaters at $3,000 each ($375 million).

But here is why Moore’s estimate is a low ball.

As she admitted in her testimony before the Natural Resources & Energy Committee, her numbers do not include the administrative costs of running the Clean Heat Standard program. The operational costs of the Regional Greenhouse Gas Initiative (RGGI), which is often referred to when describing the proposed Clean Heat credit system, were over $3 million in 2022, and the Clean Heat Standard is far more complicated than RGGI with literally thousands of uncoordinated actors claiming “credits” — all of which have to be verified, valued, tracked, and retired by a bureaucracy —  as opposed to one entity, RGGI, simply issuing them and auctioning them off to a handful of power supply companies.

Moore’s numbers don’t consider the other categories of actions called for under the Clean Heat standard. Although weatherization, and air and water heat pumps are the big three, S.5 calls for measures to take place across eleven specific categories of action, including replacing appliances (gas stoves, etc.), installing solar water heating systems, advanced wood heating, and even using green hydrogen.

Moore assumes in her calculations that fuel dealers will absorb 25 percent of the cost of the credits they will have to buy, passing on just 75 percent to customers. That seems like a lot to eat, especially for the small mom and pop fuel dealers in Vermont. In fact, when fuel dealers later testified many indicated they would have to pass along all of the cost to customers in order to remain in business.

Additionally, and this is a considerable absence from the ledger, Moore’s numbers don’t account for the cost of any social safety net programs that will be necessary to mitigate the impact of higher prices on low-income Vermonters — either for those still using fossil fuels by choice or necessity or for those who will experience much larger electric bills as a result of switching from fossil fuels to electricity.

S.5 is explicit in demanding that “it shall minimize adverse impacts to customers with low income and moderate income.” The bill doesn’t say how to do this, but it says it must be done. For fossil fuel customers the federal Low Income Heating Assistance Program (LIHEAP) already exists, though it would surely need companion state program to cover these increased costs caused by Clean Heat Standard. However, there is no LIHEAP equivalent for electric bills. That program would have to be created from whole cloth, and how much it would cost and where the money would come from is anybody’s guess. For the winter of 2021-22, LIHEAP subsidies in Vermont came to $47 million.

Proponents of the Clean Heat Standard have been weirdly adamant about not saying what this program will cost. The Senators currently in charge of vetting the bill are insistent that we need to “pass it in order to figure out what’s in it” and, in this case, what it will cost and how it will work. They were apoplectic that Moore dared to try to bring some price transparency to the process and did their best to discredit what she admittedly called a “back of the napkin” calculation that is likely wrong.

She’s right about that. It is likely wrong. It’s likely too low. But Vermonters should be grateful to Moore for doing what the Vermont Climate Council has refused to do for over two years and our elected officials are refusing to do right now — tell us what your climate agenda is going to cost us. Let’s hope Moore’s efforts put enough pressure on the right places to get a real cost benefit analysis Clean Heat Standard done before the bill becomes law. Vermonters deserve at least that.

(Rob Roper is a freelance writer with over 20 years’ experience in Vermont politics and a former president of the Ethan Allen Institute. He is author of “Behind the Lines” on Substack.com and lives in Stowe.)

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