The Case for a VT Carbon Tax
Rationale
• Simplification
– Replace existing energy taxes with a single
tax on carbon content of fuels.
• Behavioral Change
– Encourage reduced consumption of fossil
fuels and reduced CO2 emissions.
• Revenue Leveraging
– Make use of revenues to purchase energy
saving efficiencies and stimulate growth.
Current Energy Taxes
Rate
‘04 Revenue
Gasoline Tax
$.19 / gal
71.9
Diesel Tax
$.16 / gal
18
Sales Tax on
Comm. Energy
Utilities Gross
Receipts
Fuel Gross
Receipts
TOTAL
5%* (with
15
exceptions)
.3-.5% of gross 5.7
oper. revenue
.5% on retail
5.5
sales
116.1
Carbon Tax: Pro/Con
• PRO
• Broad influenceconsumers, transport.
• Low transaction costs
• Ease of
administration
• Produces recyclable
revenue
• CON
• Emissions reductions
not predictable
• Vulnerable pricing
due to inflation/ price
shocks
• Not targeted to
reduce all GHG’s.
• Regressive
Carbon Tax Proposal
• $100 per ton tax on carbon content of
fuels.
• Applied at point where fuels enter Vermont
economy.
• Revenues recycled back to taxpayers
(individual and commercial).
• Comparable tax on nuclear and large
hydro (market competitiveness).
Revenue Estimates
Total
Residential
$100/ton + tax Minus existing
on hydro/nukes energy taxes
364,500,000
248,400,000
112,400,000
76,600,000
Commercial
71,500,000
48,800,000
Industrial
53,000,000
36,100,000
127,500,000
86,900,000
Transportation
Price Effects on Fuels
2004 Estimate
Gasoline ($ per gallon)
Electricity (cents / kWh)
.29 - .19 = .10 net
increase
.01 (less existing)
Natural gas (cents/
therm)
Fuel Oil ($ per gallon)
17.2 (less existing)
Coal ($ per ton)
76 (less existing)
.34 (less existing)
Energy Savings and CO2
Reductions
Energy Use (TBTU)
125.56
Energy Saved (TBTU)
4.98
GHG Emissions (CO2
equiv. tons)
9,702,000
GHG Emissions
Reduced (CO2 equiv.
tons)
386,000
2004 Energy Tax Revenues
(Existing)
Vermont 2004 Energy Taxes
Electric
Fuel Gross
Energy Tax
Utilities Gross Estimated Revenue
Receipts Tax
1%
Receipts Tax 2%from Sales Tax on
2%
Commercial Energy
use
6%
Motor vehicle
Diesel Tax
registration fees
7%
21%
Total Motor Vehicle
Purchase and use
tax
33%
Total gasoline taxes
28%
• 2004 Total energy revenue: $259,269,147
Energy Tax Revenues (Including
Carbon Tax)
2004 revised energy taxes
Diesel Tax
0.3%
Motor vehicle
registration fees
10.6%
Total Motor
Vehicle
Purchase and
use tax
16.8%
Total gasoline
taxes
1.4%
carbon tax
42.0%
Nuclear and
large hydro tax
28.8%
• 2004 Revised Energy Revenue: $521,540,000
Energy Tax Revenues (Including
Carbon Tax)
Vermont 2004 Energy Taxes
$500,000,000
Nuclear and large hydro tax
$400,000,000
carbon tax
Motor vehicle registration fees
Total Motor Vehicle Purchase and use tax
$300,000,000
Total gasoline taxes
Diesel Tax
$200,000,000
Estimated Revenue from Sales Tax on Commercial
Energy use
Utilities Gross
Receipts Tax
Electric
Energy Tax
Fuel Gross
Receipts Tax
$100,000,000
$0
2004
2004 final
revision
Trading Carbon Offsets
• Emerging markets for emissions/ sequestration
trading:
–
–
–
–
Kyoto Signatory nations
EU cap and trade system (2005)
Chicago Climate Exchange
Northeastern States cap and trade system (2005)
• Allows for trading CO2 emissions with carbon
sequestering “sinks.”
• “the biggest commodities market in the world.”
-R. Sandor (Northwestern Univ. / CCX)
Carbon Trading Potential for VT
Agricultural/Forest Land
• States (NE,AK) have begun quantifying
sequestration potential of land.
• VT forests hold a carbon stock of 492.6 MMTC
(1997).
• Carbon tax revenues can be used to quantify
capacity/pool land holdings/define compliance
mechanisms for trading.
• US farmers can sequester 200 MMTC annually /
add $4-6 billion gross income (10% increase in
average net farm income).