Vermont study: cap-and-invest for transportation would cut emissions but likely miss 2030 target; start realistically 2028

Vermont state officials presented findings Feb. 20 from a technical study on whether the state should join an existing cap-and-invest program for transportation fuels, concluding the policy would reduce emissions and raise significant revenue yet is unlikely to meet the state’s 2030 statutory target by itself.

The study, led by consultants with Cambridge Systematics and subcontractor Resources for the Future and presented to the Joint Senate and House Transportation Committee by a state presenter identified as Chris, analyzed options for Vermont to align with the Western Climate Initiative (WCI) or a New York cap-and-invest program, reviewed sectoral coverage, and modeled a range of allowance prices and reinvestment scenarios.

The study’s main conclusion: cap-and-invest would move Vermont toward the emissions reductions required by the Global Warming Solutions Act but — even under higher-price, broad-coverage scenarios and aggressive reinvestment — “we do not hit the 2030 required level,” the presenter said. The analysis shows larger emission reductions by the early-to-mid 2030s under many scenarios, and greater progress by 2050 if the program has a high allowance price and covers multiple sectors.

Officials emphasized revenue and household-impact tradeoffs. The study modeled allowance prices near current WCI trading levels (about $30 per metric ton) and a WCI price cap near $60 per ton, while noting New York has proposed a lower cap in the $10–$15 range. Under modeled scenarios, annual revenue ranged from roughly $30 million to $60 million in a low-price case to about $100 million–$175 million in a median case, the presentation said. Those proceeds could be reinvested in energy efficiency, electrification incentives or returned to households.

The study also modeled household effects under a medium-price scenario with 50% reinvestment: some households would pay more for fuels while receiving dividends or rebates; lower-income households (the lowest three income quintiles) were modeled to receive dividends so net effects for those groups are “almost no change in cost,” the presenter said. For households that cannot make upfront investments (for example, buy a heat pump), authors noted the need for rebates or low-interest financing to cover up-front costs. The presentation showed example household outcomes where fuel-switching to a heat pump produced lower lifetime energy costs despite higher up-front purchase costs.

State officials repeatedly cautioned that Vermont would be a “price taker.” Jane Lazorschak, director of the Climate Action Office at the Agency of Natural Resources, said Vermont could not set allowance prices and would accept prices set by the market if the state joins a larger program. “Vermont is what would be called a price taker,” Lazorschak said, “so meaning we would not be able to influence the price of joining any of these programs.”

Timing and next steps: presenters and committee members said Vermont could consider a reporting-only year as early as 2027 to familiarize obligated entities with recordkeeping, and that the earliest practical start date for allowance obligations would be around 2028. The Western Climate Initiative is already operational; New York’s cap-and-invest program was described in the presentation as still under development and unlikely to require allowance purchases before 2027. The Vermont Climate Council’s update to the Climate Action Plan, which will consider the study’s findings, is due July 1.

Public input gathered for the study showed different stakeholder priorities: obligated businesses raised concerns about administrative burdens and cost impacts and preferred a single simple program across sectors; environmental and community groups supported a program that reinvests proceeds and prioritizes equity so rural and low-income Vermonters are not left behind.

Deputy Treasurer Gavin Boyle, speaking for the Treasurer’s Office, highlighted the study’s tone. “This is extremely disheartening and, depressing way to start the morning,” Boyle said, referring to the finding that even an aggressive alignment with New York still leaves Vermont short of its 2030 statutory limit in many scenarios. Officials also noted federal funding assumptions used in the base (reference) case models and said those assumptions are being updated; presenters acknowledged uncertainty about future federal support.

The committee requested further analysis on how reinvestment choices (for example, funding transit, smart growth, and vehicle-miles-traveled reduction strategies) interact with the modeled outcomes. Officials said the study assumed various reinvestment mixes and advised the legislature that detailed program design decisions — which sectors to include, allowance-price caps, and how to spend proceeds — would substantially affect distributional outcomes and effectiveness.

The technical study was funded with federal climate-related grant money; presenters said the contract for the analysis was “just under $500,000.” Committee members asked witnesses to return with additional detail if the legislature seeks to draft statutory language or pursue negotiations with existing programs.

The presentation and committee discussion did not include any formal votes or binding decisions; legislative and Climate Council deliberations will determine whether Vermont pursues further rulemaking, a reporting-only year, or legislative authorization to join an outside cap-and-invest program.

Ending: The Climate Action Plan update due July 1 will incorporate the study’s findings; committee members signaled interest in more granular modeling of reinvestment choices and in continued coordination with the Treasurer’s Office and the Vermont Climate Council before any statutory action is taken.