What is the Clean Heat Standard?

Many people have probably heard of the Clean Heat Standard, a "carbon tax", or a fee on carbon-based heating fuels. Governor Scott vetoed the legislation to design the Clean Heat Standard, saying that it would increase cost of living for those that could least afford it. Leaders of the super-majority in the Legislature have called some of these claims "misinformation" and are adamant that carbon-pricing is necessary to combat climate change.

So what is the Clean Heat Standard, and what does it do? We break it down here for you with the help of one of the people on the advisory group designing what this system will ultimately look like.

What is the Clean Heat Standard?
The Vermont Public Utility Commission (PUC) is designing a Clean Heat Standard in response to Act 18 of 2023. Once called the "Affordable Heat Act," the law is an attempt to get Vermonters to use less fossil fuels to heat homes and businesses. A "Clean Heat Credit" is earned when something is done to reduce greenhouse gas emissions in the thermal sector (see examples below). A “Clean Heat Fee” is paid when someone purchases propane, kerosene, or heating oil.

How much will the Clean Heat Fee be?
We don’t know yet, but the best guess so far is 70 cents per gallon. That estimate comes from Julie Moore, Vermont’s Secretary of the Agency of Natural Resources. Another analysis comes from the consulting firm NV5. They claim the total cost of the program will be $17 billion. This accounts for 25 years of economic activity required to reduce greenhouse gas emissions in accordance with the Global Warming Solutions Act (GWSA). Importantly, much of that investment needs to be front-loaded which means that $7B of that cost needs to be made before the end of this decade.

What is the GWSA? 
The GWSA is a 2020 Vermont law that requires greenhouse gas emissions to be reduced by 40% by 2030 and 80% by 2050. These reductions are mandates, not goals. Failure to cut emissions will likely lead to a lawsuit against the state. 

How will the program work?
Vermonters who continue to use fuel oil, kerosene, natural gas, and propane to heat their home will pay the Clean Heat Fee. The fee will be collected and paid by whoever brought the fuel into Vermont. This is known as the “obligated party.” Similar to a sales or excise tax, the fee is paid by fuel companies that deliver fuel “in or into Vermont.”

Will all fuel dealers collect the fee?
The fee is paid by whoever brings the fuel into Vermont, regardless of the company's size or the amount of fuel sold. Nearly all of the “obligated parties” will be small retail providers of heating fuel. Since there are no refineries in Vermont and very few wholesale distributors, even the smallest fuel company will be considered “obligated” under the law.

When will Vermonters pay the fee?
The fee for heating your home with oil and gas will only apply if and when the Vermont Legislature allows the “Clean Heat Standard” to go into effect. They are expected to vote in January 2025. If that happens, the Public Utility Commission has determined that the earliest possible date that the Clean Heat Fee could go into effect is January 1, 2026. 

What is a “Clean Heat Credit,” and what is it worth?
Sales of renewable liquid and solid fuels, weatherization, wood stoves, and electric-powered heat pumps are among the products and services that will generate credits. Nearly every fuel dealer will need them, but it isn’t clear where they will get them or what they are worth or until the program is fully designed.

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