Another Take On What A Carbon Tax Could Mean For Vermont

Nov 5, 2015

Earlier this week, we talked to Dr. Jon Erickson, a professor at the University of Vermont's Gund Institute for Ecological Economics about what he thinks a carbon tax would do for the state of Vermont. 

Erickson said a tax on carbon would complement Vermont’s Comprehensive Energy Plan and existing greenhouse gas targets.

Dr. Art Woolf, professor of economics at the University of Vermont has another perspective.

For Vermont

Woolf says that for businesses that plan around the cost of energy, a carbon tax could make Vermont an unappealing location to do business.

“Any decisions that have been made based on a certain price of energy are going to turn out to have been bad decisions,” says Woolf. “Businesses that use a lot of energy - they might find it all a sudden, Vermont’s not a very good place to locate their business.”

And for individuals looking for a place to settle, Woolf says, a carbon tax would make it hard for Vermont to compete.

“Individuals that have made decisions on where to live, [the] type of house to build, or to buy," says Woolf. "Those decisions will have been pretty badly made, in hindsight."

Especially, Woolf says, if neighboring states like New Hampshire and Massachusetts aren’t on board with the tax.

Can Vermont make a difference alone?

“Would people use less carbon-based fuels, if you made it more expensive?” Woolf says, “The answer is, absolutely.”

“The real question is, ‘what kind of other effects would it have on the state?’ And frankly, I think Vermont is just too small of an entity, both geographically and in terms of our population, for it to work,” Woolf explains, “In the sense of getting people to use less carbon based energy, but not having all sorts of other negative effects on the economy and individuals.”

But what also makes a difference, according to Woolf, is the size of the tax, should Vermont implement one. A smaller tax of “just a few pennies” says Woolf, “wouldn't make that much difference.”

“But if you're talking about a significant tax,” he explains, “Like 50 cents [or] $1 per gallon, then Vermont is too small. And in fact, even if it was done regionally with the New England it would probably still not be a great idea.”

Woolf says the bigger the region the tax applies to, the better, but also the more difficult it would be to implement.

“Let's suppose that Vermont emitted zero carbon into the atmosphere. What would that do to worldwide carbon? The amount of carbon in the atmosphere?” Woolf says, “The answer is [it] would do nothing.”

Woolf says that the argument for Vermont leading the charge on a carbon tax would not pay off for Vermonters or the global community.

"Let's suppose that Vermont emitted zero carbon into the atmosphere. What would that do to worldwide carbon? The amount of carbon in the atmosphere? The answer is [it] would do nothing." - Dr. Art Woolf, professor of economics at the University of Vermont

“So we spend a whole lot of money, we have all sorts of dislocation effects,” explains Woolf, “And yet they would be no - not even significant - there would be no measurable decrease in carbon.”

“One of the problems Vermonters have is we think too much of ourselves. I don't think the rest of the world would look at Vermont and say, ‘oh wow! They did it! Well, we might as well do it!” says Woolf.

How carbon taxation works around the world

In 2008, British Columbia implemented a carbon tax that used the revenue to lower other taxes. Could a similar plan work in Vermont?

“A carbon tax should be predicated on an equal reduction in other taxes. Say we raise $100 million in carbon taxes, we should we should reduce $100 million in other taxes. Sales tax or income tax would be the two primary ones,” says Woolf.

While British Columbia has implemented such a tax, Woolf says that Vermont’s size compared to the Canadian province would make it hard for Vermont to make a comparable impact.

“Vermont only has 600,000 people,” Woolf notes, “British Columbia [is] several million people - there's a big difference there.” And that difference, says Woolf, is a major factor when looking at what kind of impact a carbon tax in Vermont could have on the environment.