Jones: A carbon tax could supplement education funding


There is an ocean separating Paris and Wall Street. And not just the Atlantic, but an ocean of differences in economic understanding as well. Global leaders are celebrating the Paris agreements to reduce the use of fossil fuels in their landmark climate change treaty while at the same time, Wall Street economic markets are panicking because fossil fuel use is not increasing at historically rapid rates and as a result, prices are crashing.

While the sea level is rising, it hasn't yet caused an actual ocean between Wall Street and Vermont, but an equally large gulf in thinking seems to be in place. The drop in oil prices has led to more than $500 million in extra money in the pockets of Vermonters this year as the result of paying one half of their previous expense in gasoline, heating oil and propane. And yet Wall Street is worried that those low prices are symptomatic of a troubled economy.

Despite the apparent differences, there is some overlap between the economic worries of Wall Street and Vermont's economy. Vermont has grown its clean energy businesses dramatically in the past few years, in part because the pressure of high oil prices opened business opportunities for helping home and business owners switch to wood, low temperature heat pumps and weatherization of their buildings. Just as the profitability of the fossil fuel industry is threatened by low oil prices, those newly formed Vermont clean energy businesses are feeling the effects of the drop in fuel oil and propane prices. Inventories of wood pellets at local dealers are busting at the seams due to the combination of warmer temperatures and last year's users deciding to go back to their "cheap" oil. And the demand for weatherization services is dropping, as well.

High oil prices are a two edged sword. Higher prices can mean that Vermont pumps more millions of dollars out of the state for fossil fuels but it is also the driver for consumers to shift to more local sources. There is a strategy that keeps the energy spending in Vermont and supports local Vermont clean energy businesses: that nasty sounding policy of a carbon tax. A carbon tax focused on heating fuels will restore the market viability of clean energy alternatives that have recently gotten new energy service businesses up and running. And the revenues from a heating fuels carbon tax will not go to out of state interests, but rather be retained by taxpayers.

The use of the revenue from a heating fuels carbon tax is an important choice. The fear that increased revenue will simply feed the appetite of state government is legitimate, but clean energy advocates realize that there are economic dislocations resulting from increased Vermont taxes as the rest of the region lags in carbon pricing. That is why almost all proposals call for tax reductions using at least 90 percent of the carbon tax revenue with targets to reduce impacts on at-risk households and businesses.

One possibility to consider is the use of the revenues to support the Education Fund and reduce the state property tax. Act 46 is striving to reduce education costs by encouraging the consolidation of administrative functions. The incentive for these consolidations is to provide property tax relief for those towns agreeing to merge with neighboring districts. In the case of the Essex-Westford merger, town residents will see property tax relief of more than $1 million in the first year but that million dollars must be made up by other Vermont property tax payers. Additional mergers this year and into the future will drain the Education Fund putting even greater stress on those towns that are not able or willing to merge. While not touted as "tax reform" in the same way that some may see the carbon tax, the result is the same — a shift of tax burdens with resulting winners and losers.

The revenues from the carbon tax on heating fuels could relieve some of the pressure of Act 46 on the Education Fund giving towns time to implement other education cost reductions such as multi age classrooms in very small schools and blended learning using technology to complement teacher led classes in the upper grades. Scheduling the increase in a tax on heating fuels to address the needs of the Education Fund over the next two years will be important for not causing a dramatic increase in the property tax and provide the necessary price signals so that Vermont home and business owners will continue to support our home grown clean energy businesses.

The time to consider and act on this form of a carbon tax is today. Oil prices are still dropping, which is good in that even a 20 to 50 cent per gallon additional charge on fuel oil will not approach the price of just two years ago, and at the same time, keep the reminder that alternative approaches for heating homes and businesses are available and will protect us from the certain increases in oil prices that will take place in future years. In the absence of such a price signal, many of our clean energy businesses will scale back or even close making it harder to shift away from oil when prices recover in the future and the impacts of climate change demand fossil fuel reduction.

A bridge to Paris in the form of a heating fuels carbon tax will put Vermont on the map as making the necessary linkages between our energy choices and the responsibility to future generations about climate change and the local economy. If Vermont is going to be true to its responsibility, we need to muster the political leadership to build this bridge, today.

Ken Jones is a co-founder of the Montpelier Energy Advisory Committee, and former Tax Policy Analyst in the Vermont Department of Taxes. He is currently on the School Board for the Montpelier schools.


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