Maryland County Carbon Tax Law Could Set Example for Rest of Country

Montgomery measure will raise millions for clean energy, strengthen Northeast carbon trading scheme, supporters say

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WASHINGTON—While Congress continues to dilly-dally over passing climate and energy legislation, Marylanders almost in the shadow of the U.S. Capitol have opted to cut to the carbon chase on their own.

Montgomery County passed the nation’s first countywide carbon tax on May 19. The measure is directed at a single coal-burning electricity plant.

In voting 8-1 to approve the tax, the environmentally minded Montgomery County Council is aiming to set an example for the rest of the country and direct the dollars collected to help reduce its greenhouse gas footprint by 80 percent by 2050.

“I hope this contributes to the conversation at the federal level and creates greater incentive for federal action,” Roger Berliner, the council member who introduced the tax, told SolveClimate in an interview. “There’s no question we need federal action, but federal action won’t sufficiently recognize the role of local governments. This legislation highlights the role we can play.”

The council vote came as Sen. Lisa Murkowski (R-Alaska) is poised to lead an effort to prevent the Environmental Protection Agency (EPA) from regulating heat-trapping gases via the Clean Air Act. Ironically, a disproportionately large number of EPA employees are among the close to 1 million residents of Montgomery County, long considered a Democratic-led bastion of progressivism.

Montgomery, one of Maryland’s most populous and wealthy counties, expects to collect $10 million to $15 million annually from the tax, figures from the council indicate.  The new legislation calls for payments of $5 per ton from any stationary source emitting more than a million tons a carbon dioxide during a calendar year.

The only source currently fitting that description is an 850-megawatt coal-fired power plant in Dickerson, a community near the Potomac River in far western Montgomery County on the Maryland-Virginia border. Records show that the Dickerson plant releases 3 million tons of carbon dioxide per year, making it the county’s largest single stationary emitter.

Mirant Corp., an independent power company based in Atlanta, owns and operates the plant. Pepco, a transmission and distribution utility in the Washington, D.C. region, has assured Montgomery County officials that the carbon tax will have “no discernible” impact on the electric company’s ratepayers, according to county documents. Pepco buys its long-term power for residential customers at auction for the least expensive price.

Not surprisingly, local environmentalists and scientists are heartened by the efforts of Berliner and his fellow council members. The Chesapeake Climate Action Network (CCAN), the Montgomery County Sierra Club, the National Wildlife Federation and University of Maryland researchers were especially supportive.

“The tax will live up to our expectations to really be environmental leaders by doing what is needed to cut greenhouse gas emissions,” said Matthias Ruth, director of the Center for Integrative Environmental Research at the University of Maryland. “In doing so, the county will provide the right incentives to cut emissions, generate revenue to foster efficiency improvements and break out of the ideological logjam that has prevented taxes from being used as means to guide action.”


What the Tax Can Achieve for Montgomery County

As Berliner fully expects Mirant to file a lawsuit against his legislation, the county will put first-year earnings into a special reserve fund.

Afterward, dollars will go toward lowering the county’s carbon footprint, Berliner said. For example, at least half of the $10 million to $15 million will seed a low interest loan program designed to improve residential energy efficiency with upgrades to windows, heating and ventilating systems, and even the addition of solar photovoltaic panels.

That money also can go toward transit and other carbon-reducing programs such as buying renewable energy, Berliner said, explaining that the county can’t otherwise afford those programs now because of recession-related fiscal belt-tightening.

Mirant’s Dickerson plant contributes about 25 percent of the county’s total greenhouse gas emissions, and almost 40 percent of total emissions from all stationary sources, according to EPA figures.

A major motivating factor for introducing the bill, Berliner explained, is to show electricity providers and federal lawmakers why local control should be valued with any climate legislation.

“What we’re doing is giving Mirant an offset for a tax liability for the carbon we take out of the air by virtue of our programs funded by our dollars,” he said. “This is important because with a cap-and-trade system, I want Montgomery County to be able to make case as to why local governments are perfect examples for offsets. We will have verifiable and measurable results with our home energy loan program.”

Offsets include projects that fall outside a mandatory cap that participants can count if they fail to meet greenhouse gas reductions at their own facilities.

Berliner is disappointed that the two front-running pieces of federal climate legislation — the American Clean Energy and Security Act passed by the House last June and the American Power Act unveiled by Sens. John Kerry (D-Mass.) and Joseph Lieberman (I-Conn.) earlier this month — fall far short of recognizing the full potential of coordinating offsets with local entities.

“This is a chance for us to lay claim to a revenue stream and clean up after a polluter at a time when we are under financial constraints,” Berliner noted. “Both fiscal and environmental imperatives brought this together at a time the federal government should be encouraging local governments to solve this problem.”


Mirant Hearing Strategy Appears to Backfire

Cities such as Boulder, Colo., and some jurisdictions in Northern California have put a carbon tax in place, but research indicates Montgomery is the first U.S. county to take such action. But obtaining a near-unanimous vote wasn’t as simple as it might sound.

Going into the May 18 public hearing on the bill, Berliner said, he was sure he had at least six votes — and the majority he needed among the council.

Mirant, which did not grant SolveClimate’s requests for an interview, had lobbied intensely against the bill. In addition to organizing a direct mail effort, it also orchestrated telephone polling and e-mail campaigns. Mirant labeled the bill anti-environmental, telling voters that the tax would shut down the Dickerson plant, thus forcing the local utility to buy its power from dirtier sources and coal harvested from mountaintop mining sites in West Virginia.

Last Tuesday’s hearing became a somewhat raucous hollering match, said Berliner and CCAN director Mike Tidwell, adding that it appeared those shouting down the carbon tax bill were recruited from groups of Tea Party members and global warming doubters. Their rude and disruptive behavior, the pair agreed, prompted at least two council members to switch sides and vote in favor of the tax. A joint committee passed the measure before it advanced to the full council.

“I thought I had the six votes, but those who turned out made my case easier not harder,” Berliner said about the booing and hissing during the hearing. “They did not help their cause.”

“Here you have the county’s worst polluter in a coalition with the Tea Party and climate deniers, and you have them testifying before you,” he continued. “My colleagues are looking at each other and saying they would rather support the environmental community in this case, thank you very much.”

What unfolded at the hearing, Tidwell said, illustrated that big coal doesn’t have a constituency. He called the final vote by the council “heroic.”

“Their strategy totally backfired,” Tidwell explained. “Mirant can’t bring honest-to-God, reasonable people who support what they wanted to do — vote down the carbon tax.”

Mirant does not have the cleanest record in Maryland, according to CCAN records. For instance, the company tenaciously fought the state’s landmark Healthy Air Act that the General Assembly passed in 2007.

In 2006 environmental organizations raised concerns about the Dickerson plant’s continual violation of the state’s nitrous oxide standard during summer. Mirant’s Chalk Point plant in Prince George’s County violated the Clean Air Act 1,400 times for burning “bunker oil” without a permit, according to Tidwell.


Giving RGGI More Muscle Power

Supporters of the county’s carbon tax expect the legislation to strengthen RGGI, the Regional Greenhouse Gas Initiative that caps the carbon dioxide emissions of the power sector. It covers 10 states in the Northeast and mid-Atlantic.

“Most people feel RGGI has underperformed,” Tidwell said. “The carbon tax complements RGGI.”

Maryland has signed on to this cap-and-trade system that allows states to set the upper limits on greenhouse gas emissions and auction off permits to utilities. Via auction, a price is set for heat-trapping gases, utilities receive incentives to reduce the costs of purchasing permits and revenues are generated for each state.

Cumbersome constraints put on RGGI don’t allow the market to reign freely, said Ruth, the University of Maryland professor. Montgomery County’s tax helps to set the price of carbon at a more meaningful level, thus letting the market sort out optimal emission quantities.

“Introducing this tax is a clever way of leveraging the innovative capacity of power generators,” Ruth wrote in support of the legislation, “and stimulating markets for clean technology and efficiency improvements.”


National Academy of Sciences Weighs In

On the same day that Montgomery County passed its carbon tax, the National Academy of Sciences (NAS) told Congress to set a price on carbon now. NAS scientists released a series of three reports at the behest of Congress.

Available evidence, the reports emphasize, make a compelling case that climate change is happening now, is driven by human activities and threatens people today and in generations to come.

The 800-plus pages lay out the underlying science of climate change and the measures to limit and adapt to it. They offer a blunt assessment of how Congress should address climate change by setting a price on carbon via either a carbon tax or a cap and trade plan.

The juxtaposition of Berliner’s legislation and the NAS recommendations resonated with Tidwell.

He’s hopeful that direct action by a political entity adjacent to Washington, D.C., will inspire counties nationwide to follow suit. That momentum, he added, eventually will force Congress to do more than argue and stall.

“The reason CCAN worked hard on this carbon tax is not just because it’s good policy for the county,” he continued. “Counties and cities across the country should begin taking similar action, especially in light of the federal stalemate on climate legislation.”

(Images: Mirant, Montgomery County Council, CCAN)

See also:

Economists: Graham-Kerry’s Sector-Specific Approach to Carbon Limits is Less Efficient

The People vs. Cap‐and‐Tax 

Picking Winners: Obama Budget Shifts Tax Incentives Toward Renewables

China Floats Carbon Tax Plan as a Means to Curb Emissions