“Vermont Clean Heat Standard Lessons for New York”, by Roger Caiazza, The Pragmatic Environmentalist of New York
The Climate Leadership & Community Protection Act could learn quite a bit from the experiences of Vermont and their Clean Heat Standard as documented by Robert Roper at his Behind the Lines Substack.
Pragmatic Environmentalist of New York
Balancing the risks and benefits of environmental initiatives
Vermont Clean Heat Standard Lessons for New York
The Climate Leadership & Community Protection Act (Climate Act) could learn quite a bit from the experiences of Vermont and their Clean Heat Standard as documented by Robert Roper at his Behind the Lines Substack. Roper did an overview of the Clean Heat Standard and a summary of the Public Utility Commission’s (PUC) long awaited Draft Clean Heat Standard Rule Companion Status Report that provide evidence that New York’s similar initiatives will run into the same problems he identifies.
I have followed the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 450 articles about New York’s net-zero transition. The opinions expressed in this article do not reflect the position of any of my previous employers or any other organization I have been associated with, these comments are mine alone.
Overview
The Climate Act established a New York “Net Zero” target (85% reduction in GHG emissions and 15% offset of emissions) by 2050. It includes an interim 2030 reduction target of a 40% reduction by 2030. Two targets address the electric sector: 70% of the electricity must come from renewable energy by 2030 and all electricity must be generated by “zero-emissions” resources by 2040. The Climate Action Council (CAC) was responsible for preparing the Scoping Plan that outlined how to “achieve the State’s bold clean energy and climate agenda.” The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies. That material was used to develop the Draft Scoping Plan outline of strategies. After a year-long review, the Scoping Plan was finalized at the end of 2022. Since then, the State has been trying to implement the Scoping Plan recommendations through regulations, proceedings, and legislation.
There are two relevant initiatives. The CAC recommended an economywide cap-and-invest program. Plan that led to the New York Cap-and-Invest (NYCI) program that will “establish a declining cap on greenhouse gas emissions, limit potential costs to New Yorkers, invest proceeds in programs that drive emission reductions in an equitable manner, and maintain the competitiveness of New York businesses and industries.” In the Legislature the New York Home Energy Affordable Transition Act, or NY HEAT that passed the last session but has not been signed is supposed to secure “affordable, clean energy for New York households.”
Vermont Clean Heat Standard
Roper’s overview of the Clean Heat Standard put together a “pocket guide” that describes what this law is supposed to do, how it’s supposed to work, and what it looks like it will cost to fully implement. I recommend that you read the article for full details because Rober is a good writer that explains things well in an engaging manner. I will quote from his article and compare to New York’s situation below.
Roper explains the origin of the Clean Heat Standard:
The Clean Heat Standard is an outgrowth of the Global Warming Solutions Act (GWSA), passed over the veto of Governor Scott in 2020. The GWSA mandated that Vermonters lower our greenhouse gas emissions to 26% below 2005 levels by 2025, 40% below 1990 levels by 2030 and 80% below 1990 levels by 2050. How we were going to do this, what it would cost, or if it were even possible the lawmakers who passed the GWSA did not know, but if we failed to meet these deadlines, they inserted a provision in the GWSA that gave literally anyone standing to sue the state at taxpayer expense.
As noted in the Overview the GHG emission reduction targets for the New York Climate Act are similar. Like New York, the Vermont politicians assumed that the transition was only a matter of political will and that the details of how to get there would be a minor, easily resolved detail. The Climate Act does not include the provision for lawsuits if the deadlines were not met. Not to worry the Environmental Rights Amendment to the New York constitution will provide a similar basis for litigation.
Similar to New York’s Climate Action Council, the GWSA created a Vermont Climate Council that released their Climate Action Planin December 2021.
This plan, released in December 2021, recommended that for the thermal sector of our economy (how we heat our homes and businesses, make hot water, and cook our food), which accounts for over 40 percent of our overall greenhouse gas emissions, that the legislature pass another law establishing a Clean Heat Standard. The legislature did this in 2023 over Governor Scott’s veto with Act 18 — again not knowing what it would cost, how it would work, or if it were possible.
Roper describes the Clean Heat Standard:
In a nutshell, the Clean Heat Standard is a system requiring importers/sellers of heating oil, kerosene, propane, natural gas, and coal, to obtain (in most cases, especially for smaller dealers, this means buy) “credits” based on the amount of carbon released into the atmosphere when the fuels they sell are ultimately burned. According to the law, a carbon credit is defined as “a tradeable, nontangible commodity that represents the amount of greenhouse gas reduction attributable to a clean heat measure.” A “clean heat measure” is one of a dozen legally approved actions taken — by anyone — to reduce greenhouse gas emissions such as weatherizing a building or installing a heat pump.
Practically speaking, a carbon “credit” it is a financial instrument, much like a cryptocurrency, that a fuel importer/seller must obtain in order to legally sell their product(s) either by “mining” the credits themselves (performing clean heat measures) or buying them from a “Default Delivery Agent” (likely Efficiency Vermont) appointed by the state.
There are similarities to NYCI but significant differences too. Both programs require compliance entities to obtain authorizations to emit amounts of carbon. Affected Vermonters must earn those authorizations either themselves or buying them for someone else who performed the clean heat measures. Affected New Yorkers buy the authorizations from the auction marketplace which is supposed to use the proceeds to fund clean heat measures. New York’s proposed NY HEAT includes mandates to force electrification of home heating away from fossil fuels. Both state approaches are intended to reduce emissions on a mandated trajectory consistent with their GHG targets.
In both States the nasty little detail of how many homes must be modified to achieve those goals is only now being addressed. In Vermont “According to a taxpayer funded analysis done by The Cadmus Group for the Climate Council, in order to meet just the 2030 targets Vermonters will have to weatherize 120,000 homes, install 177,107 heat pumps, 136,558 heat pump water heaters, 14,992 advanced wood heating systems, and switch 21,086 homes to using biofuels before the end of the decade.” New York’s documentation for these numbers is buried in documents but in much less detail. In both cases the costs and where the money necessary to pay for them is unresolved.
There is a huge implementation issue for both states. In Vermont:
How is the state even supposed to ensure and verify that all of these clean heat measures take place, calculate exactly how much greenhouse gas reduction will result from each unique measure so that each measure can be monetized into a tradable carbon credit value, assign ownership of the credits, and then establish a financial exchange where the creators of credits and the parties obligated to obtain them can buy and sell them while at the same time regulators track ownership and ensure compliance? When the legislature passed Act 18, they had no idea so handed off the task of figuring all that out to the Public Utilities Commission (PUC).
In New York, the unique Climate Act emissions accounting requirements means that the State must develop reporting and tracking mechanisms for emissions, develop an allowance system for ownership, and establish a financial exchange like Vermont. In New York the assignment for this task was given to the Department of Environmental Conservation and the New York State Energy Research & Development Authority on a time frame years less than it took California to establish a similar program.
In my opinion based on years of experience with emissions accounting and reporting New York’s challenge is impossible on the mandated schedule but the Vermont approach is much worse. Roper writes and I agree:
If that task sounds impossibly complicated, it is. In fact, Efficiency Vermont released a memo to the PUC on September 19, stating, “The complexity of these arrangements also give rise to concerns over the veracity of projects claiming credits and the rigor of their completion… Efficiency Vermont is unsure of the efficiency or efficacy of monetizing credits…. [and] that while compliance may ultimately be achieved after several years, the buying and selling of credits itself becomes grossly inefficient, asymmetrical, and potentially more costly for all parties.” Not an expression of confidence that this is going to work at all, let alone be cheap.
Costs
Roper writes:
Supporters of the Clean Heat Standard say we don’t know what it will cost, shouldn’t speculate, and that all indications so far are that the cost to implement the program will be minimal for consumers. This first position is misleading, and the second is demonstrably false.
As for not knowing what the Clean Heat Standard will cost, that’s only true if you’re looking for an exact price tag, which, of course, can’t be determined until the program’s rules are fully designed and approved. However, it is not difficult to get a ballpark figure with all of the data that has been collected and testimony taken over the three-plus years that this policy has been under consideration.
The excuse for not providing costs in New York’s Scoping Plan was we cannot give an exact price because of all the uncertainties. The failure to provide a ballpark figure in New York is indicative of the likelihood that the costs are politically unacceptable. There is no reason to believe that the New York cost experience will be markedly different than Vermont.
Roper documents how much money has been spent on implementation and concludes that “Given this level of financial and human resources engaged over this extended period of time the claim that we still don’t have enough information to know basically what the Clean Heat Standard will cost – not even a ballpark understanding – defies credulity.” Inevitably the costs must come out, but in the meantime, here is a ballpark estimate:
According the newly released potential study done by NV5through the Department of Public Service, the estimated incentive spending required to fund the number of clean heat measures necessary to meet the GWSA reduction mandates will cost about $3.3 billion over the first four years leading up to the 2030 target (and about $10 billion total to meet the 2050 target). To raise that much money off the sale of 200 million gallons of fossil heating fuel sold annually comes out to a just over $4 per gallon.
Roper goes on to flesh out more details of the implications of the Vermont initiative. He describes who pays and who benefits. Most importantly, who loses: “The biggest losers in this scheme are those who can’t transition away from heating with fossil fuels even if they want to because, for example, they can’t afford the upfront costs of doing so, can’t find the labor to do the work in a timely fashion, or their homes are logistically difficult or impossible to retrofit such as those living in mobile homes, older housing stock lacking open floor plans, or multi-unit apartment buildings.” He closes this post to explain how this is supposed to be implemented.
PUC Clean Heat Status Report
Roper’s second post is a summary of the Public Utility Commission’s (PUC) long awaited Draft Clean Heat Standard Rule Companion Status Report. I particularly like his description of the conclusion that the Clean Heat Standard is a dead end and recommend reading it.
As he has been writing for years the PUC concludes:
The Clean Heat Standard as currently conceived requires substantial additional costs and regulatory complexity above the funding needed to accomplish Vermont’s greenhouse gas emission reduction goals. For example, the Clean Heat Standard would require establishing a credit marketplace managed by what is likely to be a costly credit platform, the potential for fraud and market manipulation, the appointment of new or varied default delivery agents with administrative costs of their own, and the participation and regulatory engagement of hundreds of fuel dealers and other actors — e.g., companies and individuals that install clean heat measures — not currently or historically regulated by the Commission.
Our work over the past year and a half on the Clean Heat Standard demonstrates that it does not make sense for Vermont, as a lone small state, to develop a clean heat credit market and the associated clean heat credit trading system to register, sell, transfer, and trade credits. Because the Clean Heat Standard introduces these additional regulatory hurdles and costs, the Commission is considering other options to achieve Vermont’s greenhouse gas emission reduction goals for the thermal sector.
Given that the Clean Heat Standard won’t work what alternative was proposed?
[A] new thermal energy benefit charge on the sale of fuel oil, propane, and kerosene. Similar to the long-standing electric efficiency charge, the Commission would set the thermal energy benefit charge based on statutory criteria, including the need to provide sufficient funding to meet the Global Warming Solutions Act requirements.
Roper describes this as:
A straightforward carbon tax on home heating fuels. Strip away the Rube Goldberg Carbon Credit contraption, and that’s what you’re left with: a direct charge on your oil, propane, and kerosene home heating bill. And to “sufficiently fund” the number of clean heat measures necessary to meet the Global Warming Solutions Act mandates, that carbon tax will necessarily be massive. In the billions massive. Of course, per the report, “The Commission is not providing a cost estimate at this time.” Uh huh. I guess give them another eighteen months.
The NYCI approach is similar, it is nothing other than a disguised carbon tax. In fact, given the uncertainties associated with devising a “declining cap” that appropriately accounts for all the uncertainties associated with renewable resource deployment, the necessity for new technologies to account for weather-dependent resource limitations, and the regulatory infrastructure necessary to implement the cap-and-invest auction and tracking system I believe a New York carbon tax is a better option. However, in both Vermont and New York the political optics of another tax and one that will have to be this large, makes admitting this is simply a tax untenable.
I love Roper’s closing comment on the fact that this has always just been a tax:
Now if lawmakers take the PUC’s recommendation to implement this direct tax/fee/surcharge, that plausible deniability (implausible really, but hey, they’ve been sticking to it, bless their hearts!) is gone. Do they have the guts — or a truly principled commitment to saving the planet — to face the voters with that proposition? It’s time to separate the true believers in catastrophic, anthropogenic climate change from the virtue signaling panderers!
Conclusion
It is not surprising how many similarities there are between the Vermont approach and that of New York even though the programs are packaged differently. At the end of the day both states will face enormous costs, and their funding approaches are no more than disguised carbon taxes. The only question left is which state will reach the inevitable reality wall when the citizens finally understand that politicians should not make energy policy. The current approach in both states assures that affordability and reliability will suffer. Roper’s work describes why this is happening in Vermont and New York will fare no differently unless changes are made soon.