Rhode Island Looks to be First State with Carbon Tax
February 4, 2017
PROVIDENCE — A bill to tax fossil fuels is back again, and this time it’s designed to be more attractive to skeptical lawmakers.
The goal of a so-called “carbon tax” is to accelerate Rhode Island’s transition from oil, gasoline and natural gas to local renewable energy. It’s a worthwhile idea, say proponents, because Rhode Island doesn’t mine or drill its own carbon-based fuel.
Instead, Rhode Island spends $3.1 billion annually on carbon-intensive gasoline, oil and natural gas extracted from outside the state. A fee on fossil fuels would keep that money local by offering incentives to produce local energy, while cutting greenhouse gases and creating jobs.
“With Exxon running the State Department and climate deniers at every level of Trump’s administration, we must accept that the ambitious climate action necessary to guarantee a habitable planet for our children is not going to come from Washington,” said Rep. Aaron Regunberg, D-Providence, sponsor of the Energize Rhode Island: Clean Energy Investment and Carbon Pricing Act of 2017.
This year, the bill is designed to only take effect when Massachusetts passes a similar carbon tax. To do so, the EnergizeRI Coalition is collaborating with other New England states to pass fee-on-carbon programs.
“This policy would make Rhode Island a city on a hill when it comes to ambitious climate action, helping to inspire other states to follow our lead,” Regunberg said during a Feb. 2 kickoff event at the Statehouse. “Anyone who was worried about this policy making Rhode Island an outlier should have no reason not to support immediate passage of this legislation because it’s not actually going to be implemented until our neighbors step up and follow suit.”
Rep. Jonathan Steinberg of Connecticut and Massachusetts Sen. Michael Barrett are legislating similar carbon-fee bills in their states.
The fee works like this: a tax of $15 is placed on each ton of carbon dioxide or other greenhouse gases emitted from the burning of a fossil fuel. Power plants, electricity and fuel distributors, and gas stations that sell the fuel are assessed the tax. The money would be collected in the Clean Energy and Jobs Fund and “recycled” back into the state. Twenty-five percent of the money would fund programs for renewable energy, energy efficiency and climate-change adaptation. Thirty percent would be returned as a dividend to companies based on their number of full-time employees. Forty percent would be paid as a dividend to each Rhode Island resident. Employees and residents earn their funds via tax credits or receive a check if they don’t file a tax return.
Taxed fuels would include propane, gasoline, kerosene, heating oil, diesel fuel and jet fuel. The fee would be collected at the first point of sale or distribution. A natural gas distribution company such as National Grid would pay the fee annually. A gas station would either have the fee paid by its distribution company or assess the fee at the point of sale.
A study conducted last year by Regional Economic Models Inc. of Amherst, Mass., estimated that the fee-dividend model would reduce energy expenses for the average Rhode Islander, while costing an estimated $25 a year for higher-wage earners.
If other states follow suit, the fee would begin Jan. 1, 2018. It’s projected to collect some $40 million in its first year, and create 1,000 to 2,000 jobs in its first two years. After 2020, the fee increase $5 annually.
British Columbia enacted a carbon tax in 2008, which is considered a trial model. Reports indicate that the fee reduced emissions and had a mild benefit on the economy. Much of the rest of Canada is expected to adopt a carbon tax this year. Ireland enacted a fee on carbon in 2010. Australia enacted a carbon tax in 2012, and repealed it in 2014. Chile approved a carbon tax in 2014, but it doesn’t take effect until 2018. Washington state defeated a carbon-tax referendum last November.
“The need for this legislation has never been more critical,” Regunberg said.
He noted that Rhode Island is already suffering from climate change. Ambitious steps are needed to save the planet from the impacts of climate change, but help isn’t going to come from the federal government, he said. “It’s going to have to come from the states.”
The bill was introduced in the House on Feb. 3 and will be reviewed by the House Finance Committee. A hearing date hasn’t been set.
The Senate bill will be sponsored by Sen. Jeanine Calkin, D-Warwick.
“This is our generation’s moonshot and we need to take steps to do it right now,” Calkin said.
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