So, even the advocates’ number crunchers looking at the Global Warming Solutions Act’s Clean Heat Standard have to admit that the costs Vermonters will have to cover to meet greenhouse gas reduction mandates exceed any potential benefits — by a lot — even after those advocates apply two and a half billion dollars in totally made-up benefits to the ledger via the bogus “Social Cost of Carbon.”
(Side Note: If you want an excellent if highly technical explanation of exactly how and why the Social Cost of Carbon numbers are completely fabricated, Roger Pielkey just posted this article where he describes SCC calculations as “Sneaky. Uncool. Not science.”)
Asking a clarifying question during the November 30 meeting of the Climate Council Cross Sector Mitigation Committee, TJ Poor of the Agency of Natural Resources pressed presenter David Hall about the cost/benefit dynamic, “The takeaway here is that [these measures] are not cost-effective under the societal test…. These measures are not cost-effective, is that right?”
After a little hemming and hawing, Hill stated clearly that, yes, “The net present value of the cost is greater than the net present value of the avoided fuel costs and the avoided social and economic damages.”
The delta between the costs and benefits for the most likely policy scenario, according to the report, is negative $1.33 billion. But, if you remove the fake $2.5 billion in “benefits” attributed to the Social Cost of Carbon from the equation, that number jumps to nearly negative $4 billion.
Digging into the full report, there are other red flags Vermonters should be aware of.
Readers will recall that there was much rending of garments and gnashing of teeth when ANR Secretary Julie Moore estimated the impact of the Clean Heat Standard on heating fuel prices would be around 70 cents per gallon. Well, the Thermal Analysis Final Report shows that number rising as high as $1.41 per gallon, albeit this doesn’t happen under their scenario until 2045.
In the near term, they predict a 4 cent per gallon addition in 2024, rising quickly to 25 cents per gallon by 2030, then taking off after that to 63 cents per gallon by 2035, $1.13 by 2040, and $1.41 by 2045. But I would say these estimates are low. Way low. And falsely backloaded.
First, the study admits, “Unlike the program costs, state administrative costs are not anticipated to be recovered through fuel prices or rates, but to be embedded in the state’s departmental operating budgets. A cap-and-invest program would generate revenue through the sale of allowances that can be used to fund administrative and program costs. Our analysis does not include an estimate of the size or use of such revenues [emphasis added].” So, the numbers outlined above do not include the likelihood that the substantial costs to administer the Clean Heat Standard program by the state will also be covered by the sale of Clean Heat carbon credits. They almost assuredly will be, but if not, another tax will have to be raised or created to pay for this.
Also not included in this analysis is the cost of any equity program designed to help low-income Vermonters who, for whatever reason (upfront costs, lack of desire, lack of infrastructure, lack of access to labor, etc.), don’t or can’t transition away from fossil fuels. The law promises such assistance (Act 18, § 8129 (a)), and it will be expensive. Where will the money come from to subsidize low-income fossil fuel users? Again, I’m guessing from the sale of Clean Heat, carbon credits added to the cost of heating fuel – a big number not reflected in the numbers of this report.
As for my assumption that they are falsely backloading the impact on prices, the report acknowledges that without aid subsidies to lower-income Vermonters, the Clean Heat Standard is regressive. “On the other hand,” it says, “LMI households can be prioritized for access to and benefits from clean heat measures, thereby lowering energy cost burdens for those customers who participate in the program. Such participation may result in increasing overall program costs, however [emphasis added].” Yes, indeed, this will raise the costs!
The report notes that the preferred way to help low and middle-income households is to massively subsidize their transition away from fossil fuels. “Our analyses incorporate the assumption,” says the report (p.14), “that low-income households would need financial incentives equal to 100% of the costs for the new technologies or for weatherization and moderate-income households receive an incentive equal to 75% of costs [emphasis added].”
Fully funding weatherization projects, electric panel upgrades, and installing heat pumps and heat pump hot water heaters, etc. for a large segment of the population is an incredibly expensive proposition. Those costs have to be raised “up-front” if the goal is to move the people who can’t afford this stuff (ie. have no money) to the front of the line. And again, the cost of doing this is not accounted for in the report’s numbers.
The current 2 cent per gallon state surcharge on heating fuel raises about $5 million, so, roughly speaking, an additional 4 cents increase in 2024 would raise an estimated $10 million. This doesn’t even cover the report’s estimated administrative costs of the program between 2024 and 2030, which they say are “$11 million to $28 million above the BAU [Business as Usual] for 2024, from $31 to $53 million above BAU in 2030.” And FYI, they expect the cost of this bureaucracy to grow to be between $130 to $200 million per year by 2050, which our children and grandchildren will have to pay for. Fun!
And, last point, I mentioned in a previous article on the also admitted lack of cost-effectiveness in Vermont’s renewable energy policy that the Social Cost of Carbon is a “keleven” – “a fictitious number used by an incompetent or corrupt individual to balance accounting books.” As such, the keleven changes its value to fit the accounting needs of the corrupt and incompetent actor. So it should be of no surprise that the members of the Climate Council, upon hearing this report, immediately called for adopting a higher Social Cost of Carbon number to “balance” their books as a way to claim their whackadoo policy shouldn’t be scrapped. What a crock!