With new draft rules, Vermont’s clean heat standard faces murky future

Vermont passed its Affordable Heat Act in 2023, marking the official start of the state’s transition from heating homes with fossil fuels to using cleaner alternatives instead — a shift that will be crucial to meeting state climate goals.

Last week, Vermont reached a milestone in implementing the law: Its Public Utility Commission (PUC) released draft rules for how the clean heat standard, one of only a handful in the nation, will work. But the policy’s future remains murky.

Vermont’s clean heat law seeks to simultaneously penalize the state’s fossil fuel suppliers for their emissions and help its residents pay for the installation of cleaner heating sources. Fossil-fueled heating is a major source of greenhouse gas emissions nationwide; that’s especially true in Vermont, where home heating accounts for more emissions than any other sector, given the state’s heavy reliance on fuel oil.

Under the proposed rules, Vermont’s oil and propane suppliers, along with its gas utilities, will have to obtain a certain amount of ​“clean heat credits,” depending on how much fuel they delivered the year before and its carbon intensity.

The PUC’s new draft rules would allow these companies to purchase clean heat credits via a marketplace; the proceeds of credit sales would then fund efficiency and electrification projects, particularly for low- and moderate-income households. Firms can also generate credits by installing heat pumps, weatherizing homes, and delivering biofuels and other alternative fuels to customers.

This last point — the decision to allow biofuels, biomass, ​“renewable natural gas,” and hydrogen to qualify as clean heat measures — has drawn criticism from climate advocates. In many cases, alternative fuels can actually raise, rather than reduce, greenhouse gas emissions.

“The main concern is that [alternative fuels] will be prioritized over real solutions that can help us reduce our emissions and improve our health, like heat pumps, like weatherization, like thermal networks,” said Eva Morgan, an organizer with 350Vermont. ​“It’s really important that we move these things forward, but it’s even more important that we do it right. We don’t want to get stuck into a system that produces even more emissions.”

Climate advocates want the clean heat standard to focus instead on incentivizing energy efficiency and electrification projects. Electric heat pumps can slash emissions from home heating even when the grid powering them is dirty. They’re even more effective when the grid is clean though, and Vermont aims to have a 100 percent renewable grid by 2035 thanks to a law passed in June.

Despite the pushback, the new draft rules made no changes to prioritize electrification over alternative fuels.

Climate advocates aren’t the only ones who have criticized the standard. Fuel suppliers have opposed it, saying the policy would put small companies out of business. An effort funded by Americans for Prosperity, which was founded by conservative billionaires Charles and David Koch, has said it will ​“drastically increase” home heating bills.

Vermont voters, climate advocates, fuel suppliers, lawmakers, and members of the public have an opportunity to voice any outstanding concerns during the PUC’s public hearing on October 30.

The PUC must present final rules on January 15, 2025. After that, state lawmakers will decide whether to vote on implementing the rules or to do more analysis — or to take a different path to complying with the Affordable Heat Act.

Experts say that it’s unclear as of now how things will shake out.

To begin with, the PUC, made up of three members appointed by Republican Governor Phil Scott, has cast doubts on the feasibility of creating a credit-based market.

“Our work over the past year and a half on the Clean Heat Standard demonstrates that it does not make sense for Vermont, as a lone small state, to develop a clean heat credit market and the associated clean heat credit trading system to register, sell, transfer, and trade credit,” a report released alongside the draft rules notes.

The PUC has floated an alternative to the marketplace approach: implementing a charge on the sale of fuel oil, propane, and kerosene and using the revenues to fund weatherization and electrification projects. The commission intends to develop ​“this alternative concept,” which has its roots in Act 62 (a 2019 state bill that never passed), and will ​“solicit feedback later this year.”

Then there’s the November election. The Affordable Heat Act passed last year only after the state’s legislature overrode Governor Scott’s veto. Changes to the legislature or the governorship could influence the clean heat standard’s fate.

As it stands, Matt Cota, an appointed member of the Vermont Climate Council and a lobbyist for fuel dealer associations in the state, predicts the clean heat standard will not pass if put up to a vote. In his view, the fee-based approach floated by the PUC could be more effective for incentivizing electrification.

“We’ll either have to come up with a compromise or there will be another lawsuit filed for failure to do anything to reduce greenhouse gases,” Cota said. In July, Conservation Law Foundation sued the state’s secretary of the Agency of Natural Resources for failing to ensure Vermont is on track to reduce emissions.

Though the exact form the clean heat standard will take remains a question, the state will need to settle on some pathway in order to meet its emissions-reduction goals. Under a 2020 law, Vermont must reduce greenhouse gas pollution 40 percent below 1990 levels by 2030 and 80 percent by 2050.

“At the end of the day, the Global Warming Solutions Act targets are there,” said Alek Antczak, director of efficiency and energy services at the Vermont Department of Public Service. ​“The state is legally obligated to meet those targets. So how they decide to ultimately do that, I can’t say, but [the clean heat standard] is the first attempt at trying to address that.”