Following unsuccessful attempts to pass the TCI Gas Tax in 2021 and a subsequent effort for an even more sinister version known as “TCI on Steroids” an environmental justice organization has shifted its attention to a new tax scheme. The latest initiative on the horizon is the Clean Heat Standard (CHS), a policy proposing a tax on home heating fuel.
Acadia Center, an environmental advocacy group based in the Northeast, has initiated efforts to garner support for implementing CHS across the Northeastern states. Described as a credit-based performance standard, the CHS is intended to be applied to heating energy suppliers, specifically targeting gas utilities, heating oil and propane providers — and potentially electricity suppliers in certain cases.
Simply put, the CHS will require heat providers to either produce or purchase clean heat credits to sell their products legally. These credits essentially function as an additional tax on fossil-based home heating fuels. Consequently, this cost will be passed on to consumers, resulting in increased costs to those who heat their homes with these fuels.
Heating fuel suppliers must keep track of each unit of fossil fuels they distribute. In order to offset the environmental impact of keeping households warm, these suppliers would be required to produce clean heat credits. This can be achieved by installing environmentally friendly heating systems — heat pumps for example.
If suppliers find themselves with insufficient credits they will be compelled to purchase the necessary credits from those that do. Over time, the number of credits mandated for each heat provider increases to match the pace of state-level greenhouse gas reduction targets.
Noncompliance can result in penalties and fines.
Currently, there is no concrete plan outlining how the implementation of the CHS would unfold in the Constitution State. However, the Department of Energy and Environmental Protection (DEEP) has already expressed its interest in adopting such a standard. Earlier this year, DEEP published the Connecticut Greenhouse Gas Emission Inventory which covers the years 1990-2021 and recommends that Connecticut should consider adopting the CHS.
The report states that “Clean heat standards, as proposed or implemented in other states like Vermont and Oregon, create a standard and market for ‘clean heat credits’ similar to existing renewable energy credits used in electricity markets.”
Vermont enacted CHS this past spring and according to the state’s Secretary of Natural Resources Julie Moore, the anticipated cost is estimated to be 70 cents per gallon for home heating fuel. Given the average annual usage of 700 gallons of fuel oil per household in Vermont, this translates to a $500 carbon tax each year to stay warm during the winter.
It is worth noting that Moore’s estimation doesn’t account for administrative costs associated with operating CHS. Additionally, her assumption includes the expectation that fuel dealers will absorb 25 percent of the credits’ cost, passing only 75 percent of it on to consumers. However, according to Harvard’s Kennedy School, “state gasoline and diesel taxes are on average fully passed on to consumers.”
Luckily, this year, the “TCI on Steroids” bill was not voted out of the Appropriations Committee. The proposed legislation would have granted the commissioner of DEEP broad powers to adopt regulations and implement policies and strategies without legislative oversight. These broad powers would allow the commissioner to adopt CHS without approval from the General Assembly.
Expect DEEP to lobby for this bill in the 2024 session. During a July 26 press conference to announce the proposed regulation to ban the sale of gas cars by 2035, Katie Dykes, Commissioner of DEEP led the discussion and declared that she needs more “regulatory authority” to “reduce emissions and provide cleaner options for consumers.”
Although touted as a credit-based performance standard, the Clean Heat Standard bears a striking resemblance to a tax rather than a credit system. The mandatory nature of obtaining credits echoes the very definition of taxation.
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