Vermont Faces Potential Retrenchment in Climate Ambition

A heat pump works thanks to a simple fact: even very cold air contains thermal energy, and as the air moves across the refrigerants in a heat pump, that energy gets captured and transformed into hot air or water. 

Supporters of a fledgling policy that would, among other things, lead to more heat pump installations in Vermont are hoping a similar alchemy can breathe life into the program after it was used as an attack line against key Democratic legislators in last fall’s election. 

Popularly referred to as the “Clean Heat Standard,” the policy would expedite the pace of decarbonizing heating in this cold northern state by requiring companies importing fossil-based heating fuels—coal, natural gas, kerosene, propane and #2 fuel oil—to help pay each year for projects that transition Vermont buildings off those fuels. 

The companies would get to choose which projects—from installing electric heat pumps to improving building insulation—they fund, but a certain number would need to go to low-income households.  

Supporters say such a program would simultaneously cut heating costs and emissions over the lifetime of the program by harnessing market forces, allowing for pragmatic heating solutions such as biofuels, and taking advantage of rapidly improving technologies. 

But detractors, including Republican Gov. Phil Scott, point to the large up-front investments required to realize such savings (a new heat pump can cost upwards of $13,000), the technology’s difficulty coping with the very coldest temperatures and the likely impacts of the program on heating fuel prices as the affected companies pass along their costs to argue that it is unworkable for Vermont. 

They deployed these arguments successfully in last fall’s election, unseating one of the standard’s lead supporters in the Legislature, along with 24 other Democrats, depriving the party of a supermajority.

The last bit of information the few remaining agnostics in the debate awaited came on January 15, when the state’s Public Utilities Commission (PUC) released proposed regulations and a revised, though still incomplete, cost estimate for the program. The commission concluded that the program could work but would be complex to administer, and that it would create large new costs—close to $1 billion over its first 10 years—but even larger society-wide benefits. In other words, its report provided fuel for supporters and opponents alike.

But the battle lines were drawn months, and in some cases, years prior. If the Clean Heat Standard dies, the question becomes whether the five years of work to develop it were in vain, and if not, what will take its place. 

The Policy

Democrats passed the framework for a Clean Heat Standard on their second attempt, overriding Scott’s veto in 2023. But they installed a critical “check-back” provision in the law, which required the rules finalizing the program to be adopted by the legislature (and therefore signed by the governor) after being drafted by the PUC. Without those rules, the Clean Heat Standard will not go into effect.

Had Democrats succeeded in passing the law in 2022, that check-back likely would have fallen in early 2024. As it is, however, a fraught election in which they lost their supermajority intervened and the final proposed rules were released last week. Gov. Scott has remained steadfastly opposed to finalizing the law and Democrats no longer have the votes to override his veto. Republican legislators, meanwhile, filed a largely symbolic bill to repeal the framework law on the first day of the 2025 legislative session.

The policy’s complexity and relative newness—Colorado is the only other state to date with a similar program in the heating sector, although Massachusetts and Maryland are both developing their own—have made it difficult to explain and easy to vilify. 

At its core, the program is a way of getting more money flowing to an effort to make buildings more energy efficient and less dependent on fossil fuel heating. The nuts and bolts of such a transformation, including building weatherization and the installation of electric water heaters, heat pumps and wood pellet boilers, are already taking place in Vermont, with fluctuating levels of state and federal incentives. The Clean Heat Standard would greatly increase the funding available by requiring fuel dealers to generate or buy credits that represent investments in such activities.

Compared to a tax and invest program, which has been floated as a possible alternative, the designers and supporters of the measure say it is more likely to guarantee both emissions reductions and equity: By requiring fuel dealers to obtain a certain number of credits each year, the law directly leads to equivalent emissions reductions, and by requiring a percentage of those credits to come from low-income households, it ensures such households benefit equally

The policy also creates a greater incentive for fuel dealers to become providers of biofuels (which, somewhat controversially, are allowed to generate credits under the program) or heat pump installation and weatherization services, offering these companies a future after fossil heat. Many already are providing such services.

But even supporters of the law admit that the fuel companies would likely pass on a substantial portion of their new costs to their remaining customers. Politically, that has been the most sensitive issue, especially at a time when Vermont faces overlapping affordability crises.

A 2023 report commissioned by the Agency of Natural Resources projected very small fuel price increases each year as a result of the Clean Heat Standard, resulting in effectively a 35-cent per gallon surcharge for fuel oil and propane in 2035. 

In contrast, a 2024 report commissioned by the Department of Public Service contained figures translating to an average annual price impact over the estimated 25-year lifetime of the program of anywhere from roughly $1.80 to $4.00 per gallon for fuel oil and 94 cents to $2.12 per gallon for propane. 

Scott seized on the numbers from this report and publicized them in the months leading up to the election. The PUC’s recently released estimates, which only run to 2035, are in the middle but closer to the 2023 numbers.

Jared Duval, executive director of the Energy Action Network, speaking only in his role as a member of the Vermont Climate Council, disputed the modeling behind the Department of Public Service figures. He noted the model assumed that fuel suppliers would pay the entire cost of clean heat projects rather than just offering a partial incentive—unreasonable, he says, since no household expects to receive a new boiler or hot water heater for free. 

And he criticized the use of a single average cost-increase figure. “When you convey a price per gallon effect that takes 25 years of analysis into one number, people think that they’re going to pay it next year.”

He also said it is wrongheaded to focus only on the added heating costs without acknowledging the existing high and volatile prices Vermonters pay for fossil heating fuels or the fact that those additional costs carry benefits, namely transitioning households and businesses onto largely cheaper, cleaner forms of energy. 

The Election

Christopher Bray, a six-term state senator from Bristol, became the public face of a Clean Heat Standard in 2023 when he shepherded the bill from committee through veto override. In 2024’s election, Bray was challenged by a political newcomer and business owner, Steven Heffernan, who made opposition to the Clean Heat Standard part of his affordability platform. Heffernan won a shocking victory, echoed by substantial gains by Republicans in the state house.

Observers put those losses primarily down to other pocketbook issues—2024 was a year when many Vermonters saw double-digit percentage increases in both property taxes and health insurance premiums, along with persistently high inflation. “Most people were most upset about their property taxes going up—this was just an add-on,” Christopher Klyza, a Middlebury College political science professor, said, noting, however, that it fit into Scott’s “larger narrative on affordability in Vermont.”

The race attracted outside interest and spending. Americans for Prosperity, a national super PAC affiliated with the Koch brothers, sent mailers with what analysts described as misleading claims about the Clean Heat Standard, and national green groups also poured money in.

“Vermonters got gaslit,” Bray said. “All these claims that I and others were going to hit people with a big bill were false. There was no program that was about to drop and be enacted—a whole new bill would need to be drafted and go before the governor again.” While the policy design already allowed the PUC to rein in costs, he says he would have gladly adopted any further affordability provisions deemed necessary.

Scott, meanwhile, said such willingness was too little too late. “It’s unfortunate the governor’s concerns were dismissed, and instead, a significant amount of taxpayer money and time was spent to fully develop a complicated program that isn’t workable for Vermont,” the governor’s press office said in an emailed statement. 

The Tip of the Spear 

Looming behind the debate over the Clean Heat Standard is the Global Warming Solutions Act (GWSA), the 2020 law that established legally binding emissions reductions targets for Vermont. The citizen-led commission charged by the law with proposing decarbonization strategies recommended a Clean Heat Standard. 

As enacted by the legislature, the standard was tied to the targets of the GWSA. And supporters and detractors alike have pointed to the possibility that if a citizen sues the legislature under the law, a judge may order the state to adopt emissions reduction policies. A Clean Heat Standard would be an attractive, ready-made policy in that scenario. (The Conservation Law Foundation has already sued for what it claims is the state’s failure to meet its 2025 targets.)

Scott has indicated he wants to amend the GWSA to push back the timelines and remove a citizen’s ability to sue. But he needs Democratic votes to do so. “The governor is hopeful the legislature will work with him and his team to make changes to the GWSA to develop a realistic and achievable climate action plan Vermonters can afford,” his office said. 

This stance is a surprise to some—though Scott vetoed the GWSA (and was overridden), he had previously led Vermont to join the U.S. Climate Alliance, through which states committed to reducing emissions in line with the goals of the Paris Agreement following President Trump’s first withdrawal from it. 

Critics contend Scott has since only played the role of spoiler: trying and in some cases succeeding in blocking concrete emissions reducing policies, while failing to offer solutions that could meet the emissions trajectory mandated by the law. 

“The governor—unlike in some places— says climate change is important, he believes in it, but [he] has not offered any way forward as far as I know on really any climate issues,” Klyza said.

Bray echoed this sentiment: “You have to make a good faith effort to follow those laws,” he said. “You should be proposing a program to meet the requirements of the GWSA … and I think that he has failed to act.”

 The Future

The PUC, in its final report, concluded that a Clean Heat Standard, though “theoretically workable” is “not … well suited to Vermont,” pointing to the complexity and high costs of administering the standard. 

That administrative burden includes identifying all fuel importers, separating out their sales for home heating (propane, for example, has other uses), quantifying the life-cycle emissions associated with a wide array of heat sources, maintaining a registry for clean heat credits and verifying those credits. Some, but not all, of those components would be present in any major push to decarbonize the thermal sector.

The PUC recommended, as an alternative, increasing or augmenting the two cent-per-gallon fuel tax already paid on the sales of heating oil, propane and kerosene. Its proposal would use the money to expand existing weatherization and energy-efficiency programs. 

Matt Cota, a lobbyist for the Vermont Fuel Dealers Association and participant in multiple working groups on the Clean Heat Standard, agrees with this approach. “A better way exists because it’s been in place for 35 years,” he said. “That’s the existing system called the fuel tax.”

Bray thinks there’s a dark irony in these calls, since he proposed such a policy only to be shut down. “I heard—under both Governor Shumlin [Scott’s Democratic predecessor] and Governor Scott, and more than one [Senate] pro-tem, ‘do not bring this forward. There is no appetite in the building to pass a tax that will fund climate activities.’” 

Whether such a measure could now achieve bipartisan agreement remains to be seen. Scott’s office did not respond to a question about his support for an increased or augmented fuel tax.

Democrats, for their part, indicate willingness to compromise. The PUC’s “critiques and suggestions are well-taken. In terms of moving forward we’ll be looking at all of our options and seeing what if anything our committee can agree on since we will need bipartisan agreement if anything is going to pass,” Sen. Anne Watson, who took over chairmanship of the Natural Resources & Energy Committee from Bray, said. 

In the House, Rep. Laura Sibilia, a prominent Independent who has defended the Clean Heat Standard, raised decoupling the standard from the GWSA targets as one potential compromise at a committee hearing on the PUC report.

Meanwhile, the state’s Climate Action Office is studying a different alternative, namely joining a regional cap-and-invest program. Vermont is already part of the Regional Greenhouse Gas Initiative for the electricity sector—now the state is considering whether to expand such a partnership to other sectors, potentially including transportation and heating. Getting there would take years, however, according to an interim report from that office—and as ex-senator Bray found out, years in politics are no sure thing.