Connecticut: Carbon tax proposal conditioned upon Massachusetts and Rhode Island following suit

The state of Washington had an issue on its November 2016 ballot that would have imposed a carbon tax on its citizens. Had voters not rejected Initiative 732 by 59 percent to 41 percent, they would have seen the nation’s first ever carbon emission tax on the sale or use of certain fossil fuels and fossil-fuel-generated electricity, in the amount of $15 per metric ton of emissions, increased to $25 per metric ton in July 2018. There would also have been additional increases of 3.5 percent plus inflation each year until the tax reached $100 per metric ton.

As we described after the election, some are not willing to let the idea of a carbon tax die. The Alliance for Jobs and Clean Energy is one; with the group’s full support, a new effort in Washington is afoot, HB 1646.

According to the Alliance, HB 1646 will accomplish the following:

• Drive significant investment in clean energy, healthy forests, and water infrastructure, to reduce pollution, address the impacts of climate change in Washington, and grow our clean energy economy;
• Fund these investments with a performance based tax on climate pollution that is linked to how well the state meets emissions limits; and
• Bolster economic stability and equity in the transition to clean energy.

West Coast environmentalists are not the only ones trying to establish carbon taxes on fossil fuel emissions. Connecticut is among several East Coast jurisdictions actively pursuing such laws. In an article titled New England Lawmakers Join Forces On Carbon Tax, CTNewsJunkie reported that lawmakers from Massachusetts, Rhode Island, Vermont, and New Hampshire are also considering similar proposals. A Connecticut lawmaker declared that this could “possibly could wind up being a regional initiative.”

There is some precedent for this kind of cooperation on regulatory matters, in the form of the Regional Greenhouse Gas Initiative, Inc., a 501(c)(3) non-profit corporation. The initiative encompasses the intentions of nine states, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont, to reduce greenhouse gas emissions.

Connecticut’s proposal, Raised Bill no. 7247 with an initial term from Jan. 1, 2019, to Dec. 31, 2019, would impose a fee on all fossil fuels of fifteen dollars per ton of carbon dioxide equivalent that is released by burning such fuel. All fossil fuels sold in the state for the purpose of distribution or use therein would be subject to the fee. Bill No. 7247 defines fossil fuels as coal, oil, natural gas, propane or any other petroleum product.

In subsequent years, starting on Jan. 1, 2020, that rate would increase by not less than $5 per ton from the prior year's rate, unless the newly formed Carbon Pollution Council were to determine that the increase should be another amount. fee would be reduced for sales of fossil fuels where the greenhouse gas emissions are permanently sequestered and not released into the atmosphere. Public transportation providers would be exempt.

Though it may raise legal issues, the Connecticut carbon tax proposal is contingent upon similar action in Massachusetts and Rhode Island. The bill’s language requires both states to enact fees on fossil fuels at a rate of not less than ten dollars per ton in order for its own measure to take effect.

The tax revenue would be passed back to residents and businesses, and otherwise utilized, as follows:

• 40 percent to provide direct dividends to residents in the state.
• 30 percent to provide direct dividends to employers in the state.
• 25 percent to climate resilience, energy efficiency, energy conservation and renewable energy programs that benefit low-income residential properties and small business properties, where there is a low level of participation in energy efficiency and renewable energy programs.
• No more than 5 percentto pay for administrative costs.

CTNewsJunkie cited approval from various places. For example, in Rhode Island, one house member remarked that the tax proposal is “truly is a win-win.” A Massachusetts senator pointed out that “[y]ou can fight climate change in a market oriented way so as to not hurt consumers.” And a Washington state lawmaker opined that the regional cooperation could “support a national conversation,” all the more necessary in light of the Environmental Protection Agency’s stance rejecting climate change science.

One energy corporation, NRG, supports Connecticut’s measure. The company describes itself as “the leading integrated power company in the U.S., built on the strength of the nation's largest and most diverse competitive electric generation portfolio and leading retail electricity platform.”

CTNewsJunkie quoted an NRG director who believes that this is right way forward “if the state wants to move forward with reducing carbon.” He thinks because the Bill No. 7247 is “not centered on any single resource or technology [means that] it’s more likely to withstand a legal challenge because ‘it doesn’t distort the wholesale markets.’”

On the other hand, it is not surprising that many other stakeholders do not embrace the carbon tax. HartfordBusiness acknowledged that utilities, oil dealers, power plant owners and business groups all are concerned about the proposal’s “potential to increase energy prices in the state, which are already among the highest in the nation,” despite the re-distribution of tax revenues to businesses and residents.

A lobbyist for the Connecticut Business and Industry Association worried that the carbon tax would make the state even more uncompetitive, “at a time when we're already the least competitive state with regard to energy costs in the country.” He also doubted that the steps of a few states would be “enough to address the planet's warming climate.” Even so, many feel there is enough political momentum to continue with the discussion.