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The Case for a VT Carbon Tax

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

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The Case for a VT Carbon Tax

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  1. The Case for a VT Carbon Tax

  2. 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.

  3. Current Energy Taxes

  4. 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: Pro/Con

  5. 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).

  6. Revenue Estimates

  7. Price Effects on Fuels

  8. Energy Savings and CO2Reductions

  9. 2004 Energy Tax Revenues (Existing) • 2004 Total energy revenue:  $259,269,147

  10. Energy Tax Revenues (Including Carbon Tax) • 2004 Revised Energy Revenue: $521,540,000

  11. Energy Tax Revenues (Including Carbon Tax)

  12. 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)

  13. 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).

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