Carbon tax assessment by top economist comes back ugly

Michael Bielawski/TNR

FORECAST: Ethan Allen Institute President Rob Roper details a review of the ESSEX carbon tax by economist and former policy director for the Vermont Department of Public Service, Dr. Jonathan Lesser.

MONTPELIER, Vt. — The Ethan Allen Institute has heard enough about the bold claims of proponents of the ESSEX carbon tax plan, which raises the cost of gasoline, heating fuel, propane and natural gas and subsidizes green-energy alternatives.

The free-market think tank recently hired economist and former policy director for the Vermont Department of Public Service, Dr. Jonathan Lesser, to crunch numbers and see what economic impact the tax would have on the state.

On Wednesday morning, speaking in the Cedar Creek room at the Statehouse, EAI President Rob Roper presented the report’s findings and criticized lawmakers who put forth carbon tax bills year after year.

“Since 2014, advocates of a carbon tax have been obsessed with artificially driving up the cost of fossil fuel and have put forward seven different legislative concepts,” Roper said. “None were popular with Vermonters, and for good reasons. At this point, they are throwing everything at the wall in hopes that something, anything will stick.”

Over an eight-year period, the tax would add an additional 40 cents to each gallon of home heating fuel and diesel, 32 cents to a gallon of gasoline, and 24 cents per gallon for natural gas and propane.

“Half of the revenue gathered from this tax on people driving to work, heating their homes, etc., will be used to generally subsidize electric rates, and the other half would be split between rebate payments to low income and rural Vermonters,” Roper said.

Proponents of the tax plan praise it as the way to tackle man-made climate change and spur the economy via new green jobs and infrastructure.

Lesser’s economic analysis of the ESSEX carbon tax refutes such rosy projections.

“As a one-time Vermonter deeply involved in the state’s energy planning, I believe that the Essex Plan has so many unsupportable and just plain wrong economic assumptions that enacting it would serve Vermonters very poorly,” Lesser said.

“It would achieve virtually nothing beyond a sizeable wealth transfer, it would cast a dark shadow over Vermont’s economy, and of course it would produce no detectable effect on climate change.”

Lesser’s analysis does not anticipate a reduction in carbon-based fuel use, and in some cases it concludes that a carbon tax may create incentives for further use of such fuels. Also, it finds that a reduction in electric utility rates is an unlikely scenario — a more likely case is rates will rise.

“The ESSEX carbon tax would be an overall drag on the state’s economy,” Roper said. “[It] will not be revenue neutral if only because the cost to implement it will be such a complicated scheme … and the money to administer the tax will have to come from somewhere, The ESSEX carbon tax will be disproportionately punishing to low-income Vermonters and will have no measurable impact on climate change.”

During a question and answer session, Roper said there would be an incentive for Vermonters and even shipping companies to avoid the tax if the state goes it alone. “People will cross over into New Hampshire to have their fuel oil delivered by a New Hampshire company that’s not subject to the tax.”

“There will be plenty of opportunities for what they call ‘leakage,’ which is the technical term Dr. Lesser uses for people who avoid the tax,” he said.

Roper also argued that while a portion of the tax proceeds would subsidize low-income ratepayers, the portion that would go toward subsidizing electric vehicles and electric heat pumps will mean the wealthy will be the ones who enjoy the subsidy.

“If you can’t afford to buy those things, you are stuck subsidizing the wealthy people who can afford them,” Roper said.

The most affordable electric cars, before subsidies kick in, are around $25,000-to-$30,000, while high-end EVs get near six figures.

Vermont is not the first place to consider the carbon tax. Australia imposed and later repealed its tax on carbon emissions in 2014. At the time, Australian Prime Minister Tony Abbott conceded the scheme brought harm to the country.

“Today, the tax that you voted to get rid of is finally gone: a useless, destructive tax which damaged jobs, which hurt families’ cost of living and which didn’t actually help the environment,” Abbott told reporters.

Click here to read “The ESSEX Carbon Tax Plan for Vermont: An Economic Analysis.”

Michael Bielawski is a reporter for True North Reports. Send him news tips at bielawski82@yahoo.com and follow him on Twitter @TrueNorthMikeB.

Image courtesy of Michael Bielawski/TNR

12 thoughts on “Carbon tax assessment by top economist comes back ugly

  1. http://www.townandcountryrealty.com/displayprop.php?Id=4499922&SPRINGFIELD%20VT-Multi%20Family-for-sale-114995

    Year Built: 1920
    Heat Expense : $3000
    2 Unit Multi Family Home, in Springfield VT

    http://www.townandcountryrealty.com/displayprop.php?Id=4431230&CLAREMONT%20NH-Multi%20Family-for-sale-97000

    Year Built: 1900
    Heat Expense : $4188
    3 Unit Multi Family Home, in Claremont NH

    http://www.townandcountryrealty.com/displayprop.php?Id=4665636&CLAREMONT%20NH-Multi%20Family-for-sale-109900

    Year Built: 1880
    Heat Expense : $3436
    3 Unit Multi Family Home, in Claremont NH

    Oil heat, first one is $1500 a year per unit and the second one is almost $1400 a year per unit.
    Last one is Gas – LP | Oil an over $1100 a year per unit.

    Actual efficient & affordable housing would eliminate the need for a higher minimum wage but the powers that be would sooner destroy people to save old buildings while stuffing section 8 money in landlords pockets.

    https://heatsquad.org/testimonials/

    Not one building was fixed, they where improved and they are still energy hogs.

  2. The carbon tax would drive many retired people out of their homes. Many low income workers would lose money just by having to pay more for gas.

  3. John Kenneth Galbraith once said “If we took all the economists in the world and laid them end-to-end,
    it would be a good thing”!

  4. Here’s a para phrase form above from Dr. Jonathan Lesser :

    “It would achieve virtually nothing beyond a sizeable wealth transfer, it would cast a dark shadow
    over Vermont’s economy, and of course it would produce no detectable effect on climate change.

    So the bottom line is that this liberal boon doogle of a proposal from Sen. Chris Pearson, P/D-Chittenden and his agenda would have ” No Detectable Effect ” on Climate Change .

    Where do these legislators come from , we know they are not VT born !!

    • People need to remember this when they are handed the ballot at election time.

      “Where do these legislators come from , we know they are not VT born” !!

  5. If this bill passes into law, we will simply move out of state and not look back. We are a husband and wife with two business incomes and hire +-8 . Wife grew up on seven generation dairy farm in Pawlet and my family farm has been in our family since 1933.
    On our recent trip to Bend , Ore. to visit our once native VT children, we learned that our property taxes would be about 1/3 of our current taxes and much lower electricity costs if we locate there.
    Our adult prodigy, who are also entrepreneurs, stated that they would love to return to VT except for the “high taxes, poor quality of education,cost of energy, lack of civic planning, and general lack of opportunities both business and socially.
    Just sayin’ this camel has too many straws on his back, enough is enough.

  6. Vermont Lagging Behind Other NE States: Vermont has been sliding backwards regarding economic growth, compared to other NE states during 2012-2016, because of various expensive follies, such as:

    – The huge adverse impact of all the state mandated, expensive, subsidized renewables
    – The state usurping dominance in centralizing control of education, instead of local control of education
    – Socialist-style experimenting with healthcare systems
    – Vermont having a bloated, inefficient government that suffocates the private sector.

    These follies have become an increasing headwind that further reduces the near-zero, real-growth of the anemic Vermont economy.
    http://truenorthreports.com/the-essex-plans-exaggerated-growth-claim

  7. UNILATERAL, REGRESSIVE CARBON TAXES A HEADWIND FOR THE VERMONT ECONOMY
    http://www.windtaskforce.org/profiles/blogs/unilateral-regressive-carbon-taxes-a-headwid-for-the-vermont

    A wise person would advocate putting the horse before the car, i.e., first use less energy, then build-out the much lesser capacity systems needed for the energy still being used. This is so simple. Most people get it, but most pro-carbon tax folks do not.

    Pro-carbon tax folks want to have the unilateral carbon tax now, so the state government would set up various programs, and folks would have to go through various hurdles to qualify to get some of their money back; most folks would never qualify. Here is one way the money would be used.

    Various subsidies would be used to finance high-efficiency duplex mobile home communities in Vermont’s Northeast Kingdom, with solar panels on the roofs and batteries on the wall, and efficient appliances and lighting, and heat pumps. It would be part of GMP’s expensive “islanding/microgrid” fantasy. Here are examples of such a state-subsidized boondoggles.

    The low-income residents likely would:

    – Have minimal or no heating and electric bills
    – Pay minimal or no rent
    – Get food stamps and qualify for Medicaid, and other welfare goodies
    – Pay minimal or no income and school taxes
    – Sing the praises of the good that befell to them in pro RE press releases
    – Vote for Democrat legislators forever

    Who pays for all the subsidies?
    Who pays the resulting higher prices for goods and services?
    Answer: Those who will pay the carbon taxes, and other taxes, surcharges and fees.

    Anytime a politician says he going to extort a tax from you and “give it all back”, he means give some of it to back you, but most of it to his favorite constituents who voted for him.

    Efficiency Vermont is a notoriously wasteful, quasi-government program, audited on a cozy basis, by the PUC.
    EV, financed with an onerous, ever-increasing, $65 million surcharge on electric bills, is a perfect example of taxing the many and giving to the few who are “deserving”, i.e., willing to do things the expensive EV way to get some money back.
    http://www.windtaskforce.org/profiles/blogs/efficiency-vermont

    In the meantime, Vermont ranks 48th on business climate, per Forbes. A unilateral carbon tax, and more government-directed, socialist-style redistribution programs will make it even worse. State-directed, socialist-style economics was practiced in the USSR and Cuba. We all know how that worked out.

  8. Here is some plus-in data on Vermont
    http://www.windtaskforce.org/profiles/blogs/evs-and-plug-in-hybrids-in-new-england-and-norway

    Plug-ins increased from 88 in July 2012 to 1522 in January 2016.
    Pure EVs totaled 330, about 330/1522 = 22% of all plug-ins.
    The plug-in increase was about 1522 – 1113 = 409 from Jan. 2015 to Jan. 2016.
    Total plug-ins could be as much as 2000 at end 2017
    New vehicle registrations were 41000 in 2016.
    Plug-in registration was about 409/41000 = 1.0% of all new vehicle registrations.
    The Comprehensive Energy Plan goal is 4700 new plug-in registrations in 2025. See page 164 of CEP.

    People favor hybrids over EVs, because EVs just do not have the range and are terrible performers under Vermont winter conditions. See below.

    In Vermont, the two vehicles shown in the table totaled about 48% of all plug-in hybrids. The Chevy-Bolt, a pure EV (not a hybrid), was added to the table, because it was the second-best selling EV in the US in 2017.

    Most popular in Vermont Battery Plug-in hybrid mileage
    Toyota Prius Prime 8.8 kWh 25 miles electric; 55 city/53 hwy/54 combined hybrid
    Ford C-Max Energi 7.6 kWh 19 miles electric; 42 city/38 hwy/40 combined hybrid
    Chevy-Bolt EV 60.0 kWh 238 miles electric, city 255 miles, hwy 217 miles

    Vermont’s 22 fast-charging and 88 slow-charging stations are predominantly clustered in and near three towns: Burlington, Montpelier, and Rutland. The RE activists in these towns would like to have:

    – More charging stations, located mostly in and near their towns, and have 1) other Vermonters, 2) carbon taxes, and 3) Volkswagen “diesel-gate” settlement money to pay for them.
    – The charging electricity to be tax-free, low-cost, or for free

    Cost shifting and subsidies are the name of the game to “improve” the payback of plug-ins.

    Plug-in Driving in NE: With snow and ice, and hills, and dirt roads, and mud season, 4-wheel/all-wheel drive vehicles, such as SUVs, ¼-ton pick-ups, minivans, are a necessity in rural areas.

    Here is a list of plug-ins. Very few have 4-wheel/all-wheel drive and some of them cost 1.5 to 3 times as much as a Subaru Outback, which has all-wheel drive.
    http://www.plugincars.com/cars

    Plug-in EV: Driving an EV in winter, with snow and ice, and hills, and dirt roads, and mud season, and at low temperature, say – 10 C, with the heat pumps heating the battery and the passenger cabin, would be very sluggish going, unless the EV had a large capacity, kWh, battery. The additional stress would cause increased battery aging and capacity loss.

    There are EVs, such as the Tesla Model S, $80,000-$100,000, with 85 – 100 kWh batteries, which offer road-clearance adjustment and all-wheel drive as options, but they are out of reach of almost all Vermonters.

    Plug-in Hybrid: Driving a plug-in hybrid in winter, such as a Toyota Prius Prime, 54 mpg, would be much better, but it does not have 4-wheel/all-wheel drive, a major drawback; the major reason I drive a Subaru Outback.

    Battery Costs: Batteries likely will decrease in cost, because of mass production, and in weight, due to clever packaging (which would decrease rolling resistance). However, the lithium-ion chemistry is pretty well maxed out, according to Musk, CEO of Tesla.

  9. Here is how Norway subsidizes plug-ins.
    I hope Bray reads this
    I took out the URLs, as otherwise it would not post.

    EVs and Plug-in Hybrids in Norway
    http://www.windtaskforce.org/profiles/blogs/evs-and-plug-in-hybrids-in-new-england-and-norway

    As of December 2017, the Norwegian light-duty, plug-in fleet consisted 141,951 plug-in EVs, and 67,171 plug-in hybrids. The fleet included more than 24,000 used plug-in vehicles that were imported.

    Year Plug-in registrations (new and used imports) % of total registrations
    2017 71,737 39.2
    2016 50,875 29.1
    2014 39,632 22.4

    Very High Gasoline Prices: Regarding plug-ins, Norway is a special case. Gasoline prices are about 9 – 10/gallon; 70+% is tax. It has plug-in subsidies up to the armpits. With enough subsidies in rich Norway (household income over $105,000/y), the government can make it look like Norwegians are “voluntarily” buying plug-ins.

    “What we have proven in Norway is, if you give enough subsidies and impose enough restrictions on fossil fuel vehicles, people will buy electric,” says Andreas Halse, the environmental spokesman in Oslo for the opposition Labor party. But he adds: “If we want to continue to be an example for the rest of the world, we need to show how this can be commercial. We need to get there, because we can’t rely on public finances forever.”

    Hans Olav Halvorsen is a government employee who drives the 200 km between Oslo and Lillehammer 2 – 3 times a week. His Tesla Model S is not subject to tolls on the motorway, saving him up to NKr 810 ($105) every week. Charging at one of the 20 Tesla superchargers — there are eight more for other electric cars — is free. More importantly, his Tesla is free from VAT and the high purchase taxes of IC vehicles, such as a BMW — cutting the price roughly in half. “To be honest, the reason for buying the Tesla was a little bit about the environment, but mostly the savings,” he says. “I think most of the owners are thinking about their economy.” According to NEVA, about 72% of buyers are choosing a plug-in for economic reasons, i.e., the generous monetary subsidies, and just 26 per cent for environmental ones.

    Taxes on New Cars, Except Plug-ins: Norway taxes cars more heavily than most European countries. For instance, a BMW 5-series, with a four-liter gas engine, attracts a purchase tax of NKr 230,000, bringing its total cost, including VAT, to about NKr 770,000 ($100,100).

    The basic versions of Tesla’s Model S and Model X, the SUV model, if fully taxed would cost about $150,000 – $160,000. But the price is about the same as a BMW 5-series, if no purchase tax, and no 25% VAT. No wonder Norskis love them EVs!!

    A proposal to raise the road tax for plug-ins while cutting it for IC cars caused a crisis in the minority center-right government last year.

    EV drivers may use bus/taxi lanes; a great advantage during peak hour travel on Oslo*.
    EV drivers pay no parking fees, anywhere in the country, except at private garages.
    EV drivers pay no tolls on roads, bridges and ferries; a major saving for many drivers.

    *An Oslo newspaper survey found a total of 829 vehicles used a bus/taxi lane between 7:30 and 8:30 a.m., of which, 618 vehicles were plug-ins (74.5%). Buses were only 7.5% of the traffic, and taxis, two-wheelers and mini-buses made up the rest.

    Driving Range: Norwegians are not fools; they like plug-ins, but they also like driving range. With a plug-in hybrid, you go electric for about 15 – 25 miles and then you go into hybrid mode, like a Prius, to get a range of 550 miles or more. The electric miles/y of EVs is much less than of ICs and plug-in vehicles.

    EVs have outsold plug-in hybrids up till 2016. But during 2017, sales of hybrids almost equaled EVs, and are expected to surpass EV sales in 2018.

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