UVM Carbon Tax Powerpoint

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

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

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

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

$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

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)

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)

• 2004 Total energy revenue: $259,269,147

Energy Tax Revenues (Including Carbon Tax)

• 2004 Revised Energy Revenue: $521,540,000

2004 revised energy taxes

carbon tax42.0%

Nuclear and large hydro tax

28.8%

Total Motor Vehicle

Purchase and use tax16.8%

Motor vehicle registration fees

10.6%

Diesel Tax0.3%

Total gasoline taxes1.4%

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 finalrevision

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 CommercialEnergy useUtilities GrossReceipts TaxElectric Energy TaxFuel GrossReceipts Tax

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).