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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 - PowerPoint PPT Presentation
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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).
