Roper: Clean heat standard is a stealth carbon tax on heating fuel

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Roper: Clean heat standard is a stealth carbon tax on heating fuel

Thu, 01/06/2022 - 3:24am -- tim

by Rob Roper

A key component of the Climate Action Plan just put forward by the Vermont Climate Council is a thing they’re calling “The Clean Heat Standard.” This is a convoluted scheme that is in practice a stealth tax on home heating oil, propane, natural gas, and kerosene that will drive up the costs of those products for consumers.

In a nutshell, the Clean Heat Standard (CHS) would create a government-run market of green “credits” that some businesses can generate (kind of like the way people “mine” Bitcoin) by doing things like installing heat-pumps, switching customers from oil to biomass, or other actions that reduce greenhouse gas emissions.

Fuel wholesalers who sell heating oil, propane, kerosene, and natural gas would be forced by law to buy these credits or pay a fine in excess of what it would cost to purchase them for the privilege of being able to sell these products to you and me. The price of the credits would be passed along to us, the customers, driving up the cost heat our homes.

So, who would be in a good position to “mine” these credits and therefore be in a position to sell them? Politically favored entities like Efficiency Vermont and businesses that install heat pumps and other “green” technologies. These folks can expect a windfall of cash as a result of selling “credits” they do nothing to create to “customers” forced to buy them at metaphorical gunpoint. (It’s like when the mafia creates lucrative do-nothing jobs for its members by getting their victims to buy “protection credits” -- or else.)

Ergo, the “credit” system is essentially a hidden tax on heating fuel wholesalers – passed along to you and me -- the revenue from which will be another de facto taxpayer funded subsidy to Efficiency Vermont and others engaged in politically favored activities.

(One major question that the Council leaves unanswered is how Vermont could force wholesalers based in other states or countries, such as Canada, from which Vermont gets much of its heating fuel, to participate in this credit market. Legally and practically speaking, we can’t. That’s a problem, but the Council had proven exceptionally adept at ignoring critical realities.)

There’s more. Unnecessarily high prices to heat our homes in a very cold state is this is just where the Clean Heat Standard nightmare begins.

First of all, just imagine the size and scope of the bureaucracy necessary to monitor, verify, and keep track of all these “credits” being generated by people installing heat pumps, etc., and then maintain an accurate ledger of who creates, buys, sells, and owns these things. Here’s an example put forward by the Climate Council of what they are proposing:

“If in the Fall of 2025 the PUC [Public Utilities Commission] approves an updated assumption that a 3-ton centrally-ducted heat pump provides 5 clean heat credits for each of the fifteen years of its assumed life, any heat pump installed in 2026 would earn five credits in 2026 and each year thereafter through 2040 (its fifteenth year).  Those credits would remain as assigned in 2026, even if a future evaluation suggests that such heat pumps produce more or less GHG emissions reduction than 5 credits per year would imply.  In other words, the number of credits a common measure provides is determined by the PUC approved assumptions for the year the measure is installed.”

Clear as crystal, no? And, this is for just one initial transaction, the “mining” of 5 credits, each with a fifteen-year shelf life. These can be applied to the company that mined them, or that company can sell some or all of them at any point before they expire. Now consider that the Council’s target just for installing heat pumps around 200,000, and each of these transactions will presumably generate some amount of credits.

How many auditors, inspectors, and accountants will it take to verify, assign a credit value and a shelf life to each transaction, identify the “owner” of each credit, and then keep track of any future buying and selling of credits between parties over time. How much will it cost to administer such a program, again, at taxpayers’ expense?

The “Clean Heat Standard” is an expensive, inefficient, recipe for cronyism, corruption, and oppressive regulatory overreach that will achieve little more than increasing the cost for the majority of Vermonters to heat our homes. No thanks. 

Rob Roper is president of the Ethan Allen Institute.