Affordable Heat Act FAQ

The Public Utility Commission expects to issue a draft rule by October 1, 2024, which will be followed by a 30-day public comment period. 

Final draft rules are due to the Legislature from the PUC by January 15, 2025. At that point, the legislature will have the ability to adopt or amend the draft rules. It is expected that the Clean Heat Standard rules will be modified through the legislative process. 

As stated in the Affordable Heat Act, the PUC cannot adopt Clean Heat Standard rules — meaning no program can become law — “without specific authorization enacted by the General Assembly.” 

The Affordable Heat Act requires that 16% of clean heat credits come from serving customers with low incomes and another 16% from customers with low or moderate incomes. However, only residential customers can meet the LMI guidelines, not commercial or industrial customers. Residential customers make up about 54% of fossil heating fuel use. 

If the residential, commercial, and industrial sectors adopt clean heat services proportional to their current share of energy use, then a majority (59%) of clean heat credits from the residential sector would come from serving Vermonters with low or moderate incomes.

The Affordable Heat Act also requires that at least half of clean heating services that Vermonters with low and moderate incomes receive be “installed measures” that reduce heating costs over time, such as weatherization, heat pumps, and advanced wood heat. The Act was carefully designed to center and advance energy equity, prioritizing cost-saving benefits for Vermonters with lower and middle incomes in a progressive way.

See: S.5 §8124 (d) (2)

Nothing. The requirements of the Affordable Heat Act/Clean Heat Standard apply to the importers of fossil heating fuels into Vermont. Individual Vermonters and Vermont households can make the heating choices they think are best for them and their families, depending on their unique circumstances. However, this policy ensures that more affordable and cleaner heating options will be made available at lower cost for more Vermonters to choose, if they wish.

Financially speaking, the Vermonters who will benefit the most will be those who take advantage of more affordable, cleaner heating options that the Affordable Heat Act will make more available, especially lower- and moderate-income Vermonters who are required to be served in the greatest numbers. And all Vermonters and future generations will benefit from reduced pollution and early adoption of more price stable energy systems. Additionally, the state economy as a whole will benefit as we move from 100% imported fossil fuels toward energy options that keep more dollars in-state and do more to contribute to local jobs and the Vermont economy. 

The Affordable Heat Act will result in more clean heat options becoming available to Vermonters at lower cost — everything from weatherization to heat pumps and heat pump water heaters to advanced wood heating options to biofuels (though only those biofuels that are lower emitting on a lifecycle basis than fossil fuels and that are eligible under the program’s carbon intensity threshold). 

In order to comply with the Affordable Heat Act, fossil fuel importers will have to purchase and retire clean heat credits, the value of which is directly proportional to the amount of emissions reduction achieved. In order to acquire clean heat credits, fossil fuel importers will have to pay for them. This means that Vermonters — especially lower and middle income Vermonters — will get increased incentives to do things that reduce pollution (i.e., lower cost weatherization, more heavily incentivized heat pumps and heat pump water heaters, etc.), paid for by fossil fuel importers (those fossil fuel importers, in turn, will likely pass some of that cost on to their fossil fuel customers). At the same time, fossil fuel importers will also have a powerful incentive to uncover and deliver the lowest cost means of reducing climate pollution. And the prices of lower emitting fuels, such as qualifying forms of B100 biodiesel, are expected to decline in price.

Scenario A: The Anderson family is a lower-income family that lives in an apartment. They pay the utilities for the apartment but the property owner is responsible for the appliances. The propane water heater that heats their water dies. Instead of replacing it with another propane water heater, the property owner takes advantage of a clean heat credit supported incentive that lowers the upfront cost to install a new heat pump water heater to below the cost of installing a new propane water heater. This allows the Anderson family to save nearly $500 a year.

Scenario B: The Bertrand family is a middle-income family. They live in an average size home and heat with a fuel oil furnace. They make too much to qualify for free weatherization through the Weatherization Assistance Program that supports the lowest income Vermonters, but they don’t make enough to go ahead with weatherization without additional incentives. Due to the incentives made available by the Affordable Heat Act, the Bertrand family can finally afford to comprehensively weatherize their home. Any remaining upfront investment of the weatherization that is not covered by expanded incentives is financed by the Weatherization Repayment Assistance Program (WRAP), paid back over time on their electric bill. The project results in a 25% reduction in fossil fuel use, which lowers their average annual fuel oil bill from $2,000 a winter to $1,500 a winter, saving them up to $500 a year in fuel costs, or up $5,000 over the next decade (depending on the rate they pay on their utility bill to pay back the WRAP investment).

Scenario C: The Cassidy family is a lower-income family who owns a small home that is well-insulated because they previously had it weatherized by the Weatherization Assistance Program. However, they still have trouble with the high cost of their propane bills. Because their home is small and well-weatherized, their heating contractor let them know that they could heat their whole home with heat pumps (while leaving their existing heating system in place as a backup). Thanks to the incentives created by the Affordable Heat Act, as well as an additional 30% incentive available via the Inflation Reduction Act, the Cassidy family harnesses significant incentives to cut their upfront costs, installs the heat pumps and proceeds to save about $1,000 a year in heating costs.

Scenario D: The Diaz family is a middle-income family who had a new fuel oil boiler installed 5 years ago. Because they are invested in keeping their relatively new boiler, they decide to simply switch their heating fuel from fuel oil to B99 biodiesel, made from recycled restaurant oil. Because of the Affordable Heat Act and the value of a B99 biodiesel that is 5x lower emitting than fuel oil, the cost of the biodiesel becomes lower than fuel oil. The Diaz family keeps their boiler but pays less per year in fuel than before.

Scenario E: The Edmonds family lives in an old home that is twice the size of the average home in Vermont. They decide to replace their old propane boiler, which was costing them an average of $5,000 a year, or over $50,000 in total fuel costs over the past decade. Instead, thanks to the Affordable Heat Act, the upfront cost to install a new advanced wood heating pellet boiler is brought down to less than the cost of installing another propane boiler. After installing the pellet boiler, the Edmonds family saves an average of $2,000 a year in fuel costs as a result of using wood pellets rather than propane.

Generally speaking, the most expensive heat is fossil fuel heat (especially kerosene, fuel oil, and propane) and the most affordable, price-stable heat is clean heat (especially the heat you don’t use as a result of weatherization, plus heat pumps and advanced wood heat). That is why, by 2030, the clean heat services that could result from the Act have been estimated to reduce the overall heating costs of Vermonters by $2 billion, or an average of $7,500 per household. The cost of heating oil — which more Vermonters rely on to heat their homes than any other fuel — was at a near record high of $5.48 in November of 2022. The impact of that price spike, compared to prices from a year earlier ($3.13/gallon in Nov. 2021), for a household that used 1,000 gallons a year, amounted to an annual heating bill increase of over $2,000. While fuel oil prices have come down more recently, dramatic price fluctuations are a longstanding feature of the fossil fuel market. This is not sustainable.

The high costs and price volatility of fossil fuels are features of 100% imported commodity fossil fuels. The burden of these costs are especially large for lower-income and moderate-income Vermonters. To work toward a more affordable Vermont, we can’t continue to leave Vermonters — especially lower and middle income Vermonters — dependent on high cost, price-volatile fossil fuels. The only way to effectively cut energy cost burdens is to help Vermonters shift to more affordable, price-stable, and efficient clean heating options. To take just one example, combining the up-front cost of equipment with the annual fuel or electricity it consumes, over a twelve year period it costs the average household about $200 – $500 a year (range depending on equipment cost and incentives) to use a heat pump water heater. The cost to use a propane water heater is, on average, about 2 to 3 times higher, at about $800 a year.

Whether an individual household saves money or not will depend on the choices they make. Those who take advantage of the expanded and more heavily subsidized cleaner heat options that are expected to result from this policy will very likely see their bills go down. Those who decide to continue depending on fossil fuels will continue to be exposed to the higher costs and price volatility that have been features of the 100% imported commodity fossil fuel market for decades.

Any estimates on price effects are premature until the rule is actually written by the PUC (initial draft expected in October 2024, final draft due in January 2025). Even then, the legislature retains the ability to only authorize the adoption of the CHS rule with modifications. Therefore, key inputs and assumptions are not yet available for modeling, so we simply don’t yet have enough information to make accurate estimates about how much the costs of fossil fuels may rise or how much the costs of cleaner heating options may fall. 

It is also important to note that any potential price increase on fossil fuels will go towards reducing the costs of cleaner, more efficient and, ultimately, more affordable heating for Vermonters. In this way, a Clean Heat Standard would be revenue-neutral – no revenue is collected by the government and any money from higher fossil fuel prices will go toward lowering the cost of cleaner alternatives, especially for low and moderate-income Vermonters. 

The Affordable Heat Act required the Public Service Department (PSD) to conduct a potential study to assess and quantify “technically available, maximum achievable, and program achievable thermal resources” to help meet Vermont’s emissions reduction targets (see §8125 e) 1) A)). The PSD hired NV5 to conduct the potential study. 

The first draft of the potential study was shared with the Clean Heat Standard Technical Advisory Group on July 25th, 2024. That draft was followed by a significantly revised version of the Potential Study that was released on September 3rd, which can be found at: https://publicservice.vermont.gov/clean-heat-standard/public-service-department-thermal-sector-carbon-reduction-potential-study

In its letter to the Public Utility Commission, the Public Service Department stated: 

“It is important to recognize that the Potential Study is not an implementation plan for the Clean Heat Standard. Thus, while [independent consultant] NV5 has distilled cost information that can be used as an input for estimating the costs of implementing the Clean Heat Standard, the Potential Study does not include such a cost estimate.” 

And, from the Executive Summary for the Potential Study, the consultants underscored how their analysis and cost numbers should – and shouldn’t – be used:

“Note that this analysis focuses on societal costs and is not meant as an implementation plan analyzing actual program costs needed to implement Act 18. In an actual program, significant participation can be achieved without incentives that cover the full cost of the measures. In addition, there are large existing funding streams available from federal and other state and local programs, such as from the IRA, tax credits, and Energy Efficiency Utilities, that can contribute to GWSA target achievement.”

Indeed, it is not possible to confidently assess costs or price effects of a Clean Heat Standard, until the rules – which will determine key assumptions and variables – have been actually drafted. Even then, the draft rule may be revised by January 15th, 2025 and even then the legislature retains the ability to revise the draft rules themselves. Key assumptions such as how clean heat credits will be counted, the annual compliance schedule, and per credit prices, need to be settled before estimates of price effects (upward for fossil fuels, downward for cleaner fuels) can be developed with any degree of confidence.

To be clear, the cost number outlined in the Potential Study is not an estimate of the cost of the Clean Heat Standard. It is primarily the estimated cost of installing cleaner heating equipment across Vermont over the next 25 years in line with thermal sector emissions reduction targets, if Vermonters paid nothing for that equipment (i.e., 100% incentives for all equipment). That’s an outlandish assumption with no basis in reality. 

What the Potential Study does estimate is the costs and benefits, over 25 years, of moving to cleaner heating systems across Vermont, in line with thermal sector emissions reduction targets. The study estimated nearly $12 billion in benefits (including both cost savings to Vermonters and avoided costs to society from climate pollution) and nearly $9 billion in costs of doing so over that 25 year period, with a net benefit of $3 billion.  

That back of the envelope analysis got many key assumptions wrong, leading to heavily inflated numbers. 

The biggest mistake was ignoring technical evidence and assuming that many clean heat measures would only deliver savings for one or a few years rather than for many years. For instance, as affirmed in official technical manuals used by the State of Vermont, weatherization, heat pumps, advanced wood heat and other clean heat measures reduce emissions for anywhere from 15-25 years or more after installation — which means that they are clean heat measures that will earn the value of clean heat credits for decades. Pushing all of the costs up-front and ignoring the value of clean heat credits into the future, as the Secretary’s back of the envelope math did, results in big up-front price effects. But that key assumption ignores technical reality and is not how the program would actually work. 

For more information, see: 

https://legislature.vermont.gov/Documents/2024/WorkGroups/Senate%20Natural%20Resources/Bills/S.5/Witness%20Documents/S.5~Jared%20Duval~Testimony~1-31-2023.pdf 

The only thorough, professional analysis on the question of price effects done to date was completed by EFG, SEI, and Cadmus (contracted by the Agency of Natural Resources) in a report titled, The Analysis of Buildings/Thermal Energy Sector Emissions Reduction Policies for Vermont. 

This independent report estimated a far lower number — only a 1 cent increase in the price of fuel oil in the first year of the Clean Heat Standard program and only 1-2 cents per year between now and 2030 (see page 56). 

For the 2030 Clean Heat Standard policy scenario, the projected cumulative price effect on a gallon of fuel oil was 9-12 cents a gallon (representing 7 years of annual investments in cleaner heating being provided to thousands more Vermonters, especially to Vermonters with lower and middle incomes). 

It is important to note that most of the anticipated price effect on fossil heating fuels (60% of the estimated per gallon price increase in the study) is projected to come as a result of providing generous incentives to help low- and moderate-income Vermonters switch away from fossil heating. Specifically, the modeling done for the report assumes that financial incentives equal to 100% of the up-front cost of installing new heating equipment for low-income Vermont households and equal to 75% of the up-front cost for moderate-income households will be provided (see page 14). So most of the projected fossil fuel price increase comes from the anticipated costs of delivering cost-saving measures to lower-income Vermonters, at no cost (i.e., with 100% incentives). 

Important note: Given the language of both the Global Warming Solutions Act (GWSA) and the Affordable Heat Act, Scenario 3b is clearly the Clean Heat Standard scenario to assess, not 2b. This is important when selecting which CHS policy scenario to look at in the tables provided in the report. Specifically, Act 18 (§8122 (a)) states that the Clean Heat Standard shall “meet the thermal sector portion of greenhouse gas emission reduction obligations of the Global Warming Solutions Act”. The Affordable Heat Act does not require the thermal sector to do more than its proportional share (nor does the GWSA). 

The truth is, any number – whether from the back of Secretary Moore’s envelope (that she herself acknowledged was likely wrong) or the initial estimate in the more carefully done EFG/SEI/Cadmus study – is premature and subject to change. Price effects in both directions (upward for fossil fuels, downward for cleaner alternatives) will only be able to be estimated accurately once a Clean Heat Standard rule or an adapted bill is drafted, answering key questions of what assumptions and inputs to use. For instance, how will clean heat credits be counted? At what pace will they have to be retired? What initial price will they be set at? None of these questions have yet been answered – and the answers to each of them are necessary for any accurate price-effect analysis to be conducted. 

It should also be noted that, even if there are increased prices per gallon of fossil heating fuel, it is possible that total fossil heating fuel costs (which are a function not just of the price per gallon but also the number of gallons used) could still stay the same or go down, relative to what they have been historically. This is because Vermont’s winters have, on average, been warming over time, with fewer average Heating Degree Days per year. This means that heating load/ heating demand is trending down over time, requiring fewer gallons of heating fuel to heat the same home or building relative to prior years. Therefore it’s likely that, even if prices per gallon go up, fewer gallons will be needed over time. Whether warmer winters partially, fully, or more than offset any increase in fossil fuel prices will depend on the degree of warming and the amount of any price increase. 

The Inflation Reduction Act created new and expanded incentives for efficiency and clean heat. With leverage provided by the Affordable Heat Act, Vermonters will now be able to receive hundreds of millions of additional federal dollars to invest in their homes and heating systems.

The IRA expanded many tax credits for clean energy, efficiency, and electrification technologies like weatherization, cold climate heat pumps, heat pump water heaters, and even the electrical panel upgrades sometimes needed to accommodate that work. It also created two new programs to provide even more significant rebates and grants for low- and moderate- income households. Those incentives create an incredible opportunity for Vermonters, and people across the US, to make this transition to cleaner, more affordable heating options. However, the IRA alone will not ensure that Vermont will achieve its greenhouse gas requirements in the thermal sector.

The Affordable Heat Act creates the framework to ensure exactly that. The requirement that the Affordable Heat Act puts on fossil fuel companies to help Vermonters make this transition will ensure that even more Vermont families and businesses are able to take advantage of the incentives in the Inflation Reduction Act, ultimately resulting in hundreds of millions of dollars of additional federal funding flowing into Vermont to help pay for this work.

For more information on the incentives in the Inflation Reduction Act, check out Rewiring America’s great calculator here: https://www.rewiringamerica.org/app/ira-calculator

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Importers of fossil heating fuel into Vermont.

See: S.5 §8123 (12) (A) (B)

There is no evidence that performance standard policies create large price increases in fossil fuels. Perhaps the most relevant example is Oregon’s Clean Fuels Standard. Oregon’s experience has shown that, for every 5% reduction in emissions achieved, the effect on fossil fuel prices has only been about a 1% increase. In the worst-case scenario, for those fossil fuel suppliers in Oregon who didn’t take their own action to reduce emissions and had to buy credits from others, the cost translated to about 5-8 cents a gallon. And that money has gone directly into making clean fuel options more accessible and affordable. While there may be a price effect of some cents per gallon on fossil heating fuels, that is very minimal in comparison to the natural price swings of fossil fuels.

At the same time – and this is very important – Oregon’s policy also resulted in decreases in the prices of the cleaner alternatives. 

So, while their Clean Fuel Standard had a price effect of an additional $0.05 to $0.06 per gallon of fossil fuel in 2021, in that same year it also brought down the price of biodiesel from used cooking oil by about $1.16 per gallon, and the price of biodiesel made from soybean oil by about $0.61 per gallon, making biodiesel less expensive than diesel. (Watch Senate Natural Resources and Energy hearing – 1:44:00 to 1:48:00 or read Oregon has a plan to cap emissions from fuels)

And that’s part of the goal of the Affordable Heat Act. It’s to help people pay less, saving on energy costs that have been far too high for far too long because of dependence on high cost and price volatile fossil fuels. We can’t effectively address the fact that energy costs are too high until and unless we help Vermonters reduce fossil fuel dependence by making a variety of cleaner and more affordable options more accessible.

For instance, fuel oil customers who currently use fuel oil and who want to save money will be able to use biodiesel instead, thereby lowering their heating costs (if the price of B100 biodiesel from used cooking oil or from a standard soybean biodiesel is reduced as much in Vermont as we saw in Oregon). 

We should also reasonably expect a CHS to help keep downward pressure on the price of  electricity in Vermont. As a result of the electrification that the Affordable Heat Act will help advance, fixed utility costs will be spread over a broader base of use meaning each unit of electricity sold will cost a bit less. This would help offset any price increase on fossil fuels. And since all Vermonters use electricity, we would all realize that benefit (whereas not all Vermonters use fossil heating). 

And of course, the Affordable Heat Act is especially important in its ability to make weatherization, heat pumps, and heat pump water heaters more affordable and more accessible, giving many more options to help people escape from fuel prices that are, by their nature, high cost and price volatile. 

Overall, the Affordable Heat Act is designed to achieve significant net savings in energy costs alongside legally required pollution reduction. 

Finally, the largest fossil fuel companies are some of the most profitable companies that exist right now. In 2022, while many Vermonters struggled to pay higher heating bills, Shell reaped a record profit of $40 billion in 2022 and BP raked in over $27 billion in record annual earnings. At the federal level, legislators are looking into windfall profits taxes on fossil fuel corporations and also investigating them for price gouging.

First, they won’t have to come up with all of it. This program aligns well with the ability for Vermonters to access and benefit from unprecedented financial support from federal and state programs – such as the Inflation Reduction Act (IRA), state weatherization incentives, and incentives from Vermont electric utilities under Tier 3 of the Renewable Energy Standard – which will offset the cost for many clean heat measures, especially those that benefit low- and moderate-income customers. Additional upfront funds could come from a fossil fuel importer’s corporate reserves, profits, or from borrowing. Fossil fuel corporations, in turn, will likely seek to pass the cost of financing to their fossil fuel customers. 

The obligated parties under the Clean Heat Standard are the corporations that import fossil fuel into Vermont, many of which are quite large and profitable, with significant access to capital (either held or borrowed). One of the largest fuel importers into Vermont is Irving Oil. The owner of Irving Oil has a net worth, as reported by Forbes Magazine, of $4 billion. There is no reason that phenomenally profitable fossil fuel corporations like Irving Oil should push their cost of complying with pollution reduction standards onto consumers – and we should explore ways to ensure that they don’t. In economics there is a principle known as “polluter pays.” It is not appropriate to keep putting the burden of investing in efficiency and clean energy solely on Vermont’s electric utilities, which are responsible for far less climate pollution than the corporations that import fossil fuel into Vermont. 

At the same time, the Affordable Heat Act will help limit the cost of compliance that fossil fuel corporations pass onto their consumers. One of the primary factors regarding the “incidence” of the cost of compliance (i.e. how much is paid by the fossil fuel corporation vs. how much is paid by the fossil fuel customer) are the relative elasticities of demand and supply. All else being equal, the more inelastic customer demand is (i.e., customers desire to buy the same volume of fuels, no matter the price), the more that fossil fuel companies can pass the cost of compliance on to their fossil fuel consumers. 

However, what the Affordable Heat Act will do is help lower the cost and increase the accessibility of alternatives to fossil fuels (both those biofuels that are lower emitting and installed measures like weatherization, heat pumps, heat pump water heaters, and advanced wood heat). This means that demand for fossil fuels will become more elastic, limiting the amount of the cost of compliance that a fossil fuel corporation can pass on without consumers looking for options to reduce fossil fuel use (whether through weatherization, heat pumps, advanced wood heat, or simply substituting biofuel for fossil fuel).

First, only corporations that import fossil fuel into Vermont are obligated to comply with the Clean Heat Standard. Fuel dealers that do not import fossil fuels into Vermont (but instead buy their fuel from Vermont-based wholesalers) do not have to acquire clean heat credits.

Additionally, many fuel dealers will be able to expand thanks to a Clean Heat Standard. The Clean Heat Standard will incentivize many fuel dealers to diversify their business and provide clean heat services to their customers. Many fuel dealers are already transitioning away from exclusively selling fossil fuels, expanding as “energy service providers,” with a full complement of weatherization services, deploying heat pumps, selling wood pellets, and selling biofuels. Examples include VGS, Bourne’s Energy, and the Energy Co-op of Vermont. The Stone age didn’t end because we ran out of stones: this is an opportunity to better serve customers with lower-cost and more price-stable heating options and to innovate and grow local businesses as we meet our social and environmental responsibility to move beyond fossil fuel dependence. 

See: S.5 §8123 (12) (A)(B)

There are two main reasons.

1. to ensure a more equitable energy transition
2. to ensure the scale and pace of transition matches our legal obligations in the Global Warming Solutions Act.

Regarding a more equitable energy transition, it is important to note that most of the clean heat installations that are already occurring tend to be installed by Vermonters with the financial means to invest in adding to or changing their heating systems. 

If we want to make sure that the transition to cleaner and more affordable heat is an equitable one where Vermonters with lower and moderate incomes can also benefit from the transition away from high-cost and price-volatile fossil fuels like fuel oil and propane, then we need to require that those Vermonters with lower and moderate incomes be served affordably, because they often need more of the up-front cost covered. 

The second reason is that just generating some amount of clean heat activity is not the goal. What we are obligated to do is to shift the market to ensure that the required scale and pace of emissions reduction occurs, in line with our legal obligations under the Global Warming Solutions Act, which in turn are based on Vermont doing our part toward science-based targets and national commitments. Without this policy, a business-as-usual approach is likely to lead to far less clean heat activity overall and far fewer clean heat services provided to Vermonters with lower and moderate incomes, in particular. 

The Affordable Heat Act is an accountability mechanism to ensure that this transition actually happens at the scale and pace necessary to deliver maximum to achieve Global Warming Solutions Act obligations in the thermal sector and that, while we do so, Vermonters with lower and moderate incomes receive a progressive share of the benefits of that transition. If fossil fuel companies are correct that all of this activity would happen anyway, then it will be very easy for them to acquire clean heat credits without having to pay anything extra to incentivize that additional activity. If that is the case, the cost to fossil fuel importers to acquire clean heat credits will be at or near $0 and the cost of compliance with this program will be minimal. 

A main goal of the Clean Heat Standard (CHS) is to reduce climate pollution in Vermont in line with our legal obligations by 2030 and 2050.

But a CHS will not be starting from scratch to do this. Vermont already has several programs that reduce both monthly energy bills and fossil heating emissions. Those programs include the Weatherization Assistance Program (WAP), incentives from Vermont’s electric utilities to help Vermonters reduce fossil fuel use under the Renewable Energy Standard (sometimes referred to as “Tier 3” of that law), rebates from energy efficiency utilities, the Clean Energy Development Fund, and others. In addition, private actors, including some fuel dealers and many homeowners, schools, and businesses are taking actions on their own, perhaps with tax credits or other incentives, to insulate buildings, use biofuels, or install heat pumps or advanced wood heat systems.

 All of these actions contribute towards meeting the overall emissions reduction targets of the CHS, and therefore qualify to earn clean heat credits. This is an important feature of a CHS structure that promotes cost-effective use of existing programs in the energy sector. Creating a CHS as an “umbrella” policy that counts all eligible savings the same — regardless of who delivers them — will give Vermont the greatest flexibility in reaching the GHG reduction obligations, encourage action by many actors, and will lower the cost of meeting GHG obligations. 

Vermont’s existing energy-saving programs have their own internal requirements (though none have lifecycle tons of GHG reduced as a primary performance metric, as the Affordable Heat Act does), but the tons of GHG reduction they deliver are still real, and those tons can only be counted once for clean heat credits. The same idea applies to a private business or family who might use the tax credits now available under the Inflation Reduction Act to weatherize a building or install heat pump technology. The CHS does not exclude the action just because the building owner got a tax credit for doing it. If the savings are real, they can earn clean heat credits based on the quantity of emissions reduced.

Some have asked: “But if a utility already has an obligation to deliver Tier 3 savings, or a Community Action Agency already has a budget to deliver low-income weatherization, isn’t it “double counting” to give the same actions credit under the CHS?”

Not at all. If an analogy helps, consider a school with a math requirement for graduation. If you take a math class it may meet the math requirement and will also count towards the credits needed to graduate. The class is satisfying two requirements, but the math credits only count once on your transcript. That’s not “double counting.”

Or consider a football game. We often say something like: “the quarterback passed for 300 yards and 2 touchdowns.” The touchdown passes are included in the 300 yards, but neither the touchdowns nor the yards are counted twice. It’s not double counting – it’s counting two different things.

Establishing a Clean Heat Standard, as envisioned by the Affordable Heat Act, would deliver on the #1 recommendation of the Vermont Climate Council for how to reduce Vermont’s Climate Pollution. This policy is designed to achieve over a quarter of Vermont’s legally required emissions reductions under the Global Warming Solutions Act (GWSA) by 2030. This policy is by far the biggest pollution reduction strategy in the Climate Action Plan passed by the Vermont Climate Council and, if adopted, will likely be the most important climate policy in Vermont history. By 2030, it will reduce climate pollution by more than twice as much as the recently adopted Advanced Clean Cars and Advanced Clean Trucks rules. Vermont’s Climate Action Plan does not add up to the GHG reductions that Vermont is legally obligated to achieve under the GWSA without the Clean Heat Standard envisioned by the Affordable Heat Act.

See: S.5 §8124 (a) (1)

There are at least three big reasons. 

1. A moral responsibility to do our part to reduce the climate pollution that we create
2. An opportunity to save Vermonters money and strengthen the Vermont economy by moving away from fossil fuels
3. An opportunity to create a more equitable energy system and economy that better serves Vermonters with lower and moderate incomes. 

The legal commitments that Vermont made as part of the Global Warming Solutions Act simply represent Vermont taking responsibility for doing our part to reduce the climate pollution that we create, in line with science-based targets, to help avoid the worst impacts of climate destabilization, in alignment with the US commitment as part of the Paris Agreement. For more analysis of Vermont’s climate responsibility, see EAN’s research paper, “Assessing Vermont’s Climate Responsibility.” 

Often there is much attention on the cost of action but little attention paid to the costs of inaction (or the benefits of action). The status quo of Vermont’s disproportionate dependence on high-cost, heavily polluting fossil heating fuels is unaffordable for Vermonters. Policy can help shift markets toward more affordable and cleaner forms of heat, helping lower energy bills. 

It is especially important to help the lowest income Vermonters reduce their energy cost burden, which is why the Affordable Heat Act requires that a progressive share of clean heat services to benefit lower- and middle-income Vermonters (see Q.7) 

No state, no country alone can solve the climate crisis. We all have to do our part.  Reducing our own greenhouse gas pollution — which we create and have the ability to reduce — is our part. Vermont’s per capita greenhouse gas emissions are the third highest in the Northeast and are much higher, both currently and historically, than those of other people around the world.

Vermonters are not the type to shirk responsibility — or miss an opportunity to make life better for their neighbors. Every state, country, nation doing “their part” and taking responsibility for the pollution they create is how we will impact global climate change. And here, in Vermont we can do that while also reducing the cost of heating.

A Clean Heat Standard is a performance standard for the thermal fuels sector. It holds the corporations that import fossil heating fuels into Vermont responsible for reducing climate pollution over time, in line with Global Warming Solutions Act obligations. 

A Clean Heat Standard differs from a tax in fundamental ways. A tax is when the government collects revenue and then decides how to spend it. No revenue is collected by a Clean Heat Standard. Labeling it a “tax” is simply untrue. 

Instead, Act 18 requires fossil fuel importers to reduce their pollution over time in a gradual, predictable way. Whether or not fossil fuel prices increase will depend on how these fuel companies choose to adapt to the performance standard, and what types of services and energy they offer their customers.  

Any cost of compliance associated with the Clean Heat Standard will go toward making clean heat options more accessible and affordable for Vermonters. The goal is to help more and more Vermonters – especially lower and middle income Vermonters – save money over time by reducing dependence on high cost, price volatile fossil fuels as we move to lower cost and more price-stable clean heating options. 

 Yes. Performance standards are some of the most tried and true policies to effectively and equitably reduce climate pollution across the United States. A similar program was established over a decade ago in California to reduce pollution from transportation fuels. Similar “Clean Fuels Standards” are also now underway in Oregon and Washington, and a Clean Heat Standard is in place in Colorado. Maryland and Massachusetts are also pursuing their own Clean Heat Standards via administrative rulemaking. 

Additionally, in Vermont, performance standard policies like this have existed for years in the efficiency and electricity sectors, including through Efficiency Vermont and the Renewable Energy Standard (RES). What is different about the Affordable Heat Act and Clean Heat Standard is that the corporations that import fossil heating fuels into Vermont will finally be required to take similar responsibility and help their customers cut their heating costs and carbon pollution, not just electric utilities. 

The Global Warming Solutions Act established legal obligations for Vermont to reduce greenhouse gas pollution. This means that one of the key criteria for a policy solution had to be: can it confidently deliver emissions reductions, on schedule and as legally required? At the same time, the Climate Council wanted to ensure that policy solutions, in addition to being able to confidently achieve emissions reduction requirements, are able to do so both equitably and cost-effectively. 

The two policies with the best track records of meeting these key criteria are performance standards (like the Clean Fuels Standards in Washington, Oregon, and California) and emissions caps (like the Regional Greenhouse Gas Initiative operating in the Northeast for the electric sector and the economy-wide cap and invest program known as the Western Climate Initiative program, which both California and Quebec participate in). Fuel taxes by themselves don’t have the same track record of confidently or effectively reducing emissions, and therefore were not seriously considered. 

There are two main reasons: 

1) The goal is not to raise revenue – it is to reduce climate pollution, in the most equitable and cost-effective way possible. The only policies from around the US and the world that have been proven to be able to reduce emissions with confidence are either performance standards (which is what the Clean Heat Standard is) or emissions caps. Putting a price on carbon helps you know how much money you might raise but it does not, generally speaking, confidently guarantee emissions reduction. 

Importantly, the Global Warming Solutions Act requires that Vermont do its part to reduce greenhouse gas emissions, in line with scientific consensus, and alongside many other states, including Massachusetts, Maine, and Connecticut. Stated another way, the performance metric we are legally held to is GHG emissions reduction – not revenue raised or dollars spent. If we implemented a fuel surcharge, it would not guarantee that emissions would actually decline (and the effect on emissions would largely depend on the wisdom and effectiveness of the resulting public investments). 

Another critical source of revenue that’s rolling out are the tax credits, grants, and rebates available under the federal Inflation Reduction Act, which have the potential to bring thousands of dollars of incentives to individual Vermont households and hundreds of millions of dollars in revenue into the state to help pay for measures like weatherization, heat pumps, etc. The Affordable Heat Act creates a framework to ensure that Vermonters have the best possible chance of benefiting from those incentives.

2) Different fuels have different carbon intensities (or lifecycle GHG emissions). A flat fuel surcharge across the board on all fossil fuels would create market distortion if the charge is not actually scaled to carbon intensity and the lifecycle greenhouse gas emissions of the fuel(s). To the extent that we are legally obligated to count and reduce GHG emissions, some complexity is necessary in any kind of policy – because GHG emissions are, themselves, complex. 

No, this is not true. First, the Affordable Heat Act does not require any Vermonter to change their heating system – the law only requires fossil importers to help provide Vermonters with more and better choices. And cold climate heat pumps are only one of at least a dozen options that will qualify for clean heat credits and become more available and affordable to Vermonters as a result of the Affordable Heat Act. Other options include: weatherization; advanced wood heat; sustainable biofuels, and more.

See: S.5 §8127 (d) (1-12)

No, this statement is not true. All importers of thermal sector fossil fuels — including importers of fuel oil and natural gas (and propane, etc.) — will be responsible for reducing their climate pollution over time under a Clean Heat Standard. There is no exception for natural gas.

See Act 18 §8123 (11-13) 

No, none of those assertions are true. That mailing is misinformation from the fossil fuel industry. Let’s take each of those false claims one at a time: 

What AFP said about Act 18:

• “Mandates heat pump installations in Vermont homes”

The Truth: 

• There are no mandates for installing heat pumps in any home or business. Vermont fossil fuel heating providers carry the only obligation in the law – and that obligation is to help their customers, gradually and cost-effectively, cut their carbon pollution over time. At the same time, heat pumps are only one of at least a dozen clean heat measures (see Act 18 § 8127 (d) for the long list of measures eligible for clean heat credits) that obligated fossil heating providers can offer their customers. In short: There is no “mandate” for heat pumps. Instead, there will be many cleaner, healthier, more cost-effective heating choices for Vermonters.

What AFP said about Act 18:

• “Imposes a tax on home heating oil”

The Truth:

• The Affordable Heat Act/a Clean Heat Standard is not a tax. A tax is when the government collects revenue and then decides how to spend it. No revenue will be collected by any clean heat standard program. Labeling it a “tax” is simply untrue. The Affordable Heat Act offers choices and its primary goal is to help Vermonters access more clean, cost effective, price stable heating options. 

 What AFP said about Act 18:

• “Forces severe restrictions on natural gas”

The Truth:

• Vermont’s lone natural gas utility – VGS – did not oppose the law in recognition that it provides multiple compliance pathways, and that they’re already offering clean heat products and services (gas alternatives, heat pumps, heat pump water heaters, weatherization) that support customers. 

The obligated parties under a Clean Heat Standard are the corporations that import fossil heating fuels into Vermont. Sellers of wood are not obligated parties. Advanced Wood Heating is also explicitly named as an eligible clean heat measure. Like other clean heat measures, the extent to which wood, pellets, etc. are eligible will be determined by the Public Utility Commission (PUC) and the Technical Advisory Group (TAG) who will have to assess how many credits wood heating measures will receive, depending on a lifecycle GHG emissions analysis. 

No. The Affordable Heat Act states that “Clean heat measures shall not include switching from one fossil fuel use to another fossil fuel use” (§8123 (3)). Additionally, no fossil fuels are included in the list of eligible measures (§8127 (d)). Finally, the declining carbon intensity threshold (§8127 (f)) effectively prohibits fossil fuels from generating clean heat credits because all fossil fuels have a carbon intensity above 80. For instance, in Oregon’s Clean Fuels Program, the list of Carbon Intensity Values in the Reference Materials section shows that no fossil fuel has a carbon intensity below 80.

(See Fuel Pathways – Carbon Intensity Values : Oregon Clean Fuels Program)

There are many different kinds of biofuels. Some biofuels are more polluting than fossil fuels while other biofuels are far less polluting than fossil fuels. Key factors that affect the lifecycle emissions calculations for different biofuels include the sourcing, production, and transportation of the fuel and whether/ to what extent its production resulted in direct or indirect land use change. See the chart below from Oregon’s Clean Fuels Program, which compares the lifecycle emissions of different fuels via a “carbon intensity value.” Note how different lifecycle emissions/ carbon intensities of different biofuels are. 

The only biofuels that will qualify for the Clean Heat Standard are those that are significantly lower emitting, as measured on a full lifecycle emissions basis, than fossil fuels. Biofuels that are more polluting than fossil fuels are ineligible for clean heat credits. For more information about biofuels, including how they are treated in related policies that informed the development of the proposed Clean Heat Standard, see this fact sheet on “Clean Fuel Standards” from the Union of Concerned Scientists.

Lifecycle greenhouse gas emissions can be understood most simply via a carbon intensity scale, with #2 fuel oil having a carbon intensity value of 100. To qualify for clean heat credits, all liquid and gaseous fuels will have to have a carbon intensity below 80 as of 2025 (or be 20% lower emitting than fuel oil), below 60 as of 2030, and below 20 as of 2050 (See: Act 18 §8127 (f)). This declining carbon intensity threshold will ensure that, over time, only the lowest emitting heating solutions are eligible. Also, eligible biofuels will only receive clean heat credits in proportion to the degree that they reduce lifecycle greenhouse gas emissions. (See: Act 18 §8123 (10) ;§8127 (c); §8127 (g)(2))

The Affordable Heat Act is directly tied to the Global Warming Solutions Act (GWSA). 

The GWSA states that “Vermont shall reduce emissions of greenhouse gasses from within the geographical boundaries of the State and those emissions outside the boundaries of the State that are caused by the use of energy in Vermont” (see Act 153 §578 (a); italics added). Additionally, the use of “offsets” or “alternative reduction mechanisms” (i.e. reductions in emissions outside the boundaries of Vermont, or reductions in emissions not related to the use of energy in Vermont) are explicitly disallowed until at least 2050 (see Act 153 §593 (i)). 

It’s also worth noting that most of the actions in the thermal sector that need to happen — weatherization, heat pumps, geothermal systems, etc. — need to be physically installed in Vermont buildings to benefit Vermonters, whereas cleaning up our interconnected regional electric grid can be beneficial to Vermont whether the new clean electricity is constructed within our borders or elsewhere.

Analysis done by the Vermont Climate Council and the Energy Action Network shows that we almost certainly cannot meet Vermont’s emissions reduction requirements — especially by 2030 — with weatherization and heat pumps alone. Challenges include a) the number of fossil fuel heating systems that currently exist in Vermont homes and buildings; b) the age of Vermont’s housing and building stock; and c) limited workforce. Let’s take each of these in turn: 

a) The number of fossil fuel heating systems that currently exist in Vermont homes and buildings
Currently, the leading source of space heating in VT homes is fuel oil boilers and furnaces. Specifically, 43% of Vermont households report that fuel oil is their primary heating source (compared to only 5% nationally). After fuel oil, other primary heating sources for Vermont homes include fossil gas (17.5%), wood (16.5%), and propane (16%).

A challenge is that the fuel oil, propane, or fossil gas boilers and furnaces that use these fuels often operate for 20 years or more — so there are fewer opportunities to replace them than there are with shorter-lived equipment. And as long as these pieces of equipment exist in Vermont homes and continue to be in use, they will either use fossil fuel or a biofuel. A Clean Heat Standard would incentivize Vermonters to use those biofuels that are cleaner than fossil fuels for as long as those pieces of equipment continue to be in operation. Even when a residence or business adds air-source heat pumps, in a cold climate like Vermont’s where winter temperatures are often below zero, keeping a backup source of heat is often important for safety, reliability, and resilience — and the Clean Heat Standard would help incentivize the fuels that those backup or supplemental options use to be as clean as possible. (Vermont Housing Needs Assessment: 2020-2024 p. 31)

b) The age of Vermont’s housing and building stock

Vermont’s housing is older than the national average. The median home in Vermont was built nearly half a century ago (1974) and over a quarter of our homes were built before 1939. Less than a quarter of Vermont homes have been built since 1990. This means that many Vermont homes are not very energy efficient, leading to higher than necessary energy costs. 

Vermont has the challenge — and the opportunity — to weatherize a lot of our homes and buildings as soon as possible, especially if we want to be able to make greater use of heat pump technology. However, there is a limited workforce currently available to do this work at scale. Currently Vermont is weatherizing only about 2,000 homes/year. To help meet climate and affordability goals, Climate Council analysis suggests we should be comprehensively weatherizing closer to 10,000 homes/year — but we don’t yet have the workers to do so. (Vermont Housing Needs Assessment: 2020-2024 p. 32)

c) Limited workforce

While weatherization and the installation of cleaner heat systems like heat pumps and advanced wood heat can cut costs and pollution, they are also labor-intensive activities that require available workforce to do the projects. To the extent that we face workforce limitations, having less labor-intensive options — such as simply switching to using less polluting fuels — is an important option to have on the table if we are to ensure that we can meet our emissions reduction obligations, especially for 2030, cost-effectively in the face of workforce shortages. 

Modern cold-climate air-source heat pumps have been proven to work very well in Vermont. They can operate efficiently and effectively when the outside temperature is below zero, and provide substantial heat to Vermont homes all winter. Older models could not, and unfortunately some units that can only operate to around 0 degrees are still being installed. Efficient electric air-source heat pumps should be a big part of cutting costs and cutting greenhouse gas pollution in Vermont, but they’re not a silver bullet. Many households installing air-source heat pumps also weatherize, and most continue to use other fuels as well. That’s what the Affordable Heat Act and a Clean Heat Standard will continue to allow — a variety of options, based on Vermonters preferences and unique circumstances.

It’s also true that no matter what your primary heating system is, it is best to have backup heating options. Many Vermonters who heat with heat pumps have backup of supplemental heat provided by wood heating options, or by their existing furnaces or boilers, whether those are fueled by fossil fuels or biofuels. 

It should also be noted that, beyond air-source heat pumps, ground-source heat pumps and thermal energy networks are also among the more than a dozen eligible clean heat measures listed in the Affordable Heat Act. And unlike air-source heat pumps, ground-source heat pumps are able to maintain high efficiencies even in the coldest of temperatures, by drawing latent heat from the ground rather than the air. For more on the different types of heat pump technology, see: https://www.efficiencyvermont.com/products-technologies/heating-cooling-ventilation/heat-pumps.

It’s also important to note that the Affordable Heat Act and the Clean Heat Standard that it could establish does not require heat pumps (or any technology). It simply makes heat pumps a more attractive option — alongside many other solutions that are cleaner than fossil fuels, from efficient wood heating to those biofuels that are significantly lower-emitting than fossil fuels, in addition to weatherization — which reduces energy use no matter how a home or building is heated. 

The Vermont Electric Power Company (VELCO) reports that our transmission system is already capable of serving, conservatively, a peak load of about 1,140 megawatts (MW) in the summer, and is predicted to be capable of serving, again conservatively, about 1,400 MW in the winter. The approximately 25% higher winter peak load capacity arises because transmission is much more efficient at lower temperatures, and is good news for electrification in the heating sector.

Investments made since 1990 by Vermont’s electric efficiency utilities, Efficiency Vermont and Burlington Electric Department, resulted in annual electricity savings of over 1,000 Gigawatt hours (GWh) in 2022. These historical gains in electric efficiency, along with distributed renewable generation, have helped reduce Vermont’s electricity load (both on an annual basis and during peak periods) over the last two decades, creating significant headroom for additional load. In the past five years, Vermont’s annual peak load has stayed below 985 MW, well under the historic peak of 1,118 MW in 2006.

However, due to anticipated levels of beneficial electrification, the Vermont Electric Power Company (VELCO) projects significant growth in the use of electricity over the next 10 years, particularly in their high growth scenario consistent with Vermont climate policy. The forecast estimates that Vermont’s summer peak load could increase more than 30% by 2033, while the winter peak could increase more than 40% ( This forecast also projects Vermont’s total annual electricity use could increase by more than 1,000 GWh (21%) in the next 10 years, from just under 5,500 GWh in 2023 to over 6,500 GWh in 2033). Coordinated planning and investment in load management strategies is necessary to allow this level of growth without straining the capacity of the existing transmission system.

Fortunately, Vermont electric utilities have  introduced a number of flexible load management (FLM) strategies in recent years. FLM strategies can help shift electricity loads away from periods of peak demand — when the power supply tends to be more expensive and less clean — thereby improving grid resilience, saving money, and reducing GHG emissions. For example, some utilities have managed EV charging programs or offer lower rates for charging an EV outside of peak periods. Others, including Green Mountain Power (GMP) and Vermont Electric Co-op (VEC) have introduced home battery storage programs, facilitating thousands of residential battery installations across the state, which allow customers and utilities to draw on stored power during periods of peak demand as well as during power outages.

Battery storage will grow in importance, especially as we continue to electrify and build more intermittent renewable energy resources, such as wind and solar. In the last few years, Vermont has significantly scaled up battery storage at the residential, community, and utility level, more than doubling capacity since 2019. As of the end of 2023, Vermont had 54 MW of battery storage deployed, nearly half of which were small-scale residential installations. 

In the short term, Vermont has sufficient capacity to accommodate increased adoption of electrified heating systems and EVs. However, continuing to deploy load control and storage measures will be necessary to maintain the reliability and resilience of the grid, and to reduce the need for additional transmission assets.

Vermonters will continue to be exposed to high cost and price volatile fossil fuels without a plan to reduce fossil fuel dependence and costs from heating. It will also be next to impossible to meet our legally (and morally) binding requirements to reduce Vermont’s climate pollution. 

Without the Affordable Heat Act and the Clean Heat Standard — the #1 pollution reduction strategy recommended by the Vermont Climate Council — the Climate Action Plan simply does not add up. In that scenario, Vermont will likely be put under court order to meet our emissions reduction requirements, but with less time, less flexibility, and at greater cost. 

A terrible scenario for Vermonters is for our state government to continue to not have a comprehensive heating sector policy that holds fossil fuel companies accountable. We’ve seen the price of oil spike over and over again due to forces outside of our control — often due to decisions made by dictators and autocrats like Vladimir Putin. The fossil fuels we primarily heat with in Vermont — every drop of which we import — are tied to global markets. That reality leaves Vermonters incredibly exposed and vulnerable. The only way we can truly insulate Vermonters from the fossil fuel price volatility that will inevitably keep happening in the future is to move away from fossil fuels to more affordable, price-stable, and predictable cleaner options.