Analysis: Only Assembly Can Impose Carbon Tax

By Steve Haner

It is illegal in Virginia for a petroleum wholesaler to arbitrarily reduce the amount of product it provides to retailers. The General Assembly has intervened in that marketplace, probably for the reasonable public purpose of preventing price gouging. Regulating the sale of fuel for some other purpose should also require action by the General Assembly.

The “other purpose” under scrutiny at this time would be reducing carbon dioxide emissions into the atmosphere. David Schnare of the Thomas Jefferson Institute for Public Policy was researching whether the governor could impose the Transportation and Climate Initiative on Virginia without General Assembly action. He found and cites the existing state law against rationing gasoline and other legislative oversight of that market in an analysis published today.

Schnare holds both environmental and law doctorates and served 34 years with the federal Environmental Protection Agency. His conclusion is the Governor lacks the authority to act arbitrarily through an executive order or agency decision.  t was the same conclusion reached recently by the Supreme Court in Washington state in reviewing and rejecting a cap-and-trade effort from that state’s governor, Jay Inslee.

Here’s the take on that from the Wall Street Journal editorial board:

Good news: The political panic over climate change doesn’t justify one-man rule. That’s the message the Washington Supreme Court delivered this week to Governor Jay Inslee, who tried to impose his command-and-control agenda by fiat.

Perhaps you heard Mr. Inslee for a millisecond in the presidential race last year declaring that climate change is “the most urgent challenge of our time.” He failed to galvanize the masses, much as he failed to persuade the Washington Legislature in 2015 when it rejected his cap-and-trade proposal.

The Transportation and Climate Initiative is a pending interstate compact to reduce atmospheric CO2 by capping and then rationing the sale of gasoline and diesel, accompanied by a carbon tax in the form of “allowances” required for each gallon sold.

There is only one bill pending so far before the 2020 General Assembly on TCI, and that one – from Republican Charles Poindexter of Franklin County – would mandate a General Assembly vote before joining. It is House Bill 1629. He had a similar bill before the 2019 General Assembly, which passed on a party line vote, was vetoed, and the veto was sustained on party line votes.

Once again, we’ll find out if the Democrats in the General Assembly are willing to surrender their authority to the governor and avoid recorded votes on such an important and controversial issue. There are dozens of bills pending with long-term visionary goals of low-carbon or zero-carbon energy 20 or 30 years down the road, with the possible costs unclear and debatable. They are lining up for those. Why pass up a vote on this?

Because TCI would impose a very concrete tax-and-cap scheme in 2022, which is not 20 or 30 year away. For almost the first time, people, voters, business owners have hard numbers on what these Green New Deal ideas actually cost to implement. The TCI experts themselves have calculated the allowances would translate into high costs at the pump, perhaps 17 or more cents per gallon. Give them credit for honesty.

Virginia started the similar Regional Greenhouse Gas Initiative (RGGI) process, which applies only to electric power plants, with proposed regulations at the Department of Environmental Quality. But several of the clean energy bills pending at this General Assembly now include direct authorization for Virginia to join.

One reason is the RGGI bills also spend the RGGI tax revenue in various ways. Schnare’s analysis examines whether the allowance charge that TCI would impose on wholesalers is a tax or a fee, coming down on the side that it is a tax. It is tax revenue the General Assembly will want to spend. That further argues for General Assembly action before TCI goes any further.

The state’s lawyers have to be part of the quiet closed-door process looking at Virginia’s role in TCI, and absent a published opinion, that advice will remain confidential. Perhaps somebody will ask for that published opinion.

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10 responses to “Analysis: Only Assembly Can Impose Carbon Tax

  1. Unless I misunderstand, we’re getting wrapped around the axle on this. In no way, shape or form should any Governor being able to dictate the price of ANYTHING.

    In fact, no legislature should be able to set prices…

    but that’s different from setting a tax then using the proceeds to pay for stuff.

    The tax versus fee question is another distraction.

    You CAN have a “provider tax” on Hospitals AND the money is dedicated/earmarks for one person and cannot be spent on other things.

    Sounds like TJI is, once again, fogging the air with FUD.

    • But UVA’s unelected board of visitors and administrators should decide that certain adults who are destined to be among the best educated Americans should get free education because their parents were poor. And the cost of that free education comes not from general fund allocations or from general tax revenues at all. Rather it is from artificially setting the price of education higher to adult students whose parents are not perceived as needy and using the surplus to fund the “free stuff”.

      That’s not price setting Larry?

      Hint: It’s actually levying an illegal tax.

      • DJ – it’s not price-setting by fiat by one guy. It’s part and parcel of a government process where the legislature has provided that power to them, no different than they provide that power to a lot of agencies and regulators to set rules than in turn affect prices.

  2. my apologies, I have a spell checker that is replacing words and I need to be more vigilant.

    re: ” You CAN have a “provider tax” on Hospitals AND the money is dedicated/earmarks for one person and cannot be spent on other things.”


    You CAN have a “provider tax” on Hospitals AND the money is dedicated/earmarked for one specific purpose and cannot be spent on other things.

  3. Steve, as we have discussed here before, the problem with all these “green” initiatives absent a comprehensive federal, nationwide scheme is twofold: To whom do you redistribute all the revenue you collect? And, what do you do about those who simply take their carbon emissions just over the State line and mock your good intentions?

    Any tax is a transfer of wealth in the short run, and it is an incentive to avoid the tax in the longer run. RGGI and TCI serve that long run purpose, but they both move a lot of money around, and that invites unintended consequences. Keep asking these questions!

  4. I think if you take the “tax” and you then make it available for people who want to buy energy-saving technology – with rules of course – it’s a good system.

    For example – most geo-thermal systems are TWICE as efficient as heat-pumps but the up-front price pretty much kills adoption. What if – that money was available up-front and it got paid back over time from energy savings?

    Other types of savings are possible for replacement of HVACs and other equipment.

    this does not have to be , should NOT be a controversial thing.

    Conserving energy is a good thing even if you do not believe in Global Warming …

    why does this have to be such a “pushed” issue?

  5. California has adopted a carbon tax scheme that adds to the cost of gasoline indirectly (officials did not want to be blamed for adding per/gallon taxes, so Ca. sends an invoice directly to the fossil fuel cos. as an extra fee they have to pay, based on a carbon market). But I think it was the whole Ca. legislature passed that bill.

  6. The sulfur dioxide (SO2) allowance-trading program established under Title IV of the 1990 Clean Air Act Amendments (CAAA) was the world’s first large-scale pollutant cap-and-trade system.

    The legislation did not prescribe how power plants would reduce their SO2 emissions. Instead, the statute capped aggregate SO2 emissions at the nation’s 3,200 coal plants and created a market for firms to buy and sell government-issued allowances to emit SO2.

    By 2007, annual emissions had declined below the program’s nine million ton goal (a 43% reduction from 1990 levels), despite electricity generation from coal-fired power plants increasing more than 26% from 1990-2007 (EPA 2012; EIA 2011).”

    Now the funny thing is that cap & trade is a Conservative idea – and it did work.

    but now, it’s opposed by Conservatives because it’s about carbon which they do not consider a pollutant so the specifics of how it would work are really not at issue – although arguments are made on that basis but the fundamentals are – that cap & trade used to reduce carbon pollution is wrong because carbon is not a pollutant.

  7. The question that has intrigued me is: Can the Governor enter Virginia into an interstate compact without GA approval? The answer seems to be that approval by the state legislature is needed for a state to enter into an interstate compact. That is the conclusion set out in a report by the Law Library of Congress. Unfortunately, the original source cited by that report is a legal textbook that I cannot access online.

    Like Steve, I assume that the state’s lawyers are pursuing that question as well. The GA should get its lawyers in Legislative Services to do some research for it.

  8. in terms of the fees vs taxes conundrum and perhaps who can do or not –

    all this faux outrage over RGGI and look at what our esteemed leaders have enabled Dominion to take from us. They get to overcharge us and keep it. They got to keep the tax rebates from the Feds. And they get to make a PROFIT on the coal ash cleanup – and more .. and yet hardly a peep from the folks who got their tongues in a twaddle over RGGI.

    Tell you what. How about we pass one more law that takes all this money that we gave to Dominion and fund RGGI. If we were “okay” with it going to Dominion and it’s already gone then why not to a better purpose?

    No more incessant whining about RGGI unless we also acknowledge all the “fees and taxes” we’ve essentially given to Dominion.

    talk about misplaced priorities!

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