2. 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.
3. Current Energy Taxes
Rate ‘04 Revenue
Gasoline Tax $.19 / gal 71.9
Diesel Tax $.16 / gal 18
Sales Tax on
Comm. Energy
5%* (with
exceptions)
15
Utilities Gross
Receipts
.3-.5% of gross
oper. revenue
5.7
Fuel Gross
Receipts
.5% on retail
sales
5.5
TOTAL 116.1
4. Carbon Tax: Pro/Con
• PRO
• Broad influence-
consumers, 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
5. 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).
6. Revenue Estimates
$100/ton + tax
on hydro/nukes
Minus existing
energy taxes
Total 364,500,000 248,400,000
Residential 112,400,000 76,600,000
Commercial 71,500,000 48,800,000
Industrial 53,000,000 36,100,000
Transportation 127,500,000 86,900,000
7. Price Effects on Fuels
2004 Estimate
Gasoline ($ per gallon) .29 - .19 = .10 net
increase
Electricity (cents / kWh) .01 (less existing)
Natural gas (cents/
therm)
17.2 (less existing)
Fuel Oil ($ per gallon) .34 (less existing)
Coal ($ per ton) 76 (less existing)
8. 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
9. 2004 Energy Tax Revenues
(Existing)
• 2004 Total energy revenue: $259,269,147
10. Energy Tax Revenues (Including
Carbon Tax)
• 2004 Revised Energy Revenue: $521,540,000
2004 revised energy taxes
carbon tax
42.0%
Nuclear and
large hydro tax
28.8%
Total Motor
Vehicle
Purchase and
use tax
16.8%
Motor vehicle
registration fees
10.6%
Diesel Tax
0.3%
Total gasoline
taxes
1.4%
11. Energy Tax Revenues (Including
Carbon Tax)
Vermont 2004 Energy Taxes
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
2004 2004 final
revision
Nuclear and large hydro tax
carbon tax
Motor vehicle registration fees
Total Motor Vehicle Purchase and use tax
Total gasoline taxes
Diesel Tax
Estimated Revenue from Sales Tax on Commercial
Energy use
Utilities Gross
Receipts Tax
Electric
Energy Tax
Fuel Gross
Receipts Tax
12. 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)
13. 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).
