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Cigarettes, Coca Cola and the Carbon Tax

At the Energy Co-op of Vermont, one of our key goals is to help our members stay informed about important energy issues that will have a direct effect on their lives and their bottom line. No energy or tax-related issue in recent memory seems more confusing than the Vermont legislature’s attempt to introduce a carbon tax. In fact, 47% of our members who responded to a June 2015 survey said they didn’t know enough about the carbon tax to take a position for or against it.

What does this have to do with cigarettes and Coca-Cola? A simple way to understand the carbon tax is to point out that it works in some ways like the familiar “sin” taxes. For example: taxes on cigarettes are used to fund quit-smoking campaigns. The recently passed tax on sugar-sweetened beverages supports programs to fight childhood obesity. Similarly, the carbon tax is designed to discourage the use of fossil fuel while benefiting a range of popular tax reduction options and energy efficiency programs.

Vermont’s Carbon Tax Bill (designated as H.412) will, in some form, probably come up for a vote in the Vermont legislature next year. The current draft proposes to establish an excise tax on fossil fuels that emit greenhouse gases. The intention is that reflecting the external costs of greenhouse gas emissions in the price of fossil fuels will result in reduced use. It also proposes to offset 90 percent of the carbon tax revenues through:

• Reduction of the sales and use tax
• A refundable tax credit to personal income taxpayers
• A low-income taxpayer rebate
• A per employee rebate to employers

The remaining 10 percent of the carbon tax revenues would fund low-income weatherization and a Vermont Energy Independence Fund (VEIF) to promote energy efficiency and reductions in fossil fuel use.

The question becomes – Is a carbon tax the best way to reduce fossil fuel use or is it just another confusing government bait-and-switch tax rebate program?

A good place to look for a case study is to our Canadian neighbors in British Columbia. In 2012, B.C. implemented a carbon tax that has so far been successful on many fronts. David Roberts, a former energy policy staff writer for, cites some important reasons why. His concluding point is that the B.C. carbon tax program, as implemented, is currently revenue-neutral, thanks to cuts in other taxes, mainly corporate and personal income.

According to a June 2015 New York Times op-ed titled “The Case For a Carbon Tax“, top executives of six large European oil and gas companies such as the BP, Royal Dutch Shell and others, have already called for a tax on carbon emissions. A world environmental summit in Paris later this year will certainly continue this dialog.

Opposition to a carbon tax in the environmental community often focuses on the exclusion of biomass as a taxable carbon source. In Vermont, it could be argued that a carbon tax on fossil fuels will increase the use of wood and wood pellet stoves, which would cause carbon emissions to increase, at least in the short term. Pending legislation in Vermont does not address this concern, so we will be watching to see if Vermont legislators find a compromise on this issue.

The bottom line is this: Climate change is real. It’s impacting our daily lives, endangering our planet and threatening the future well-being of our children and grandchildren. Burning fossil fuels is the major cause of climate change. Using less fossil fuel is a large part of the solution. By learning about and taking a position on the carbon tax issue you are taking a small step towards being part of the solution.

Member: Vermont Fuel Dealers Association, Vermont Businesses for Social Responsibility, Renewable Energy Vermont, Local First Vermont

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