Net-Zero Carbon Heating
Friend or Foe?
A Retailer’s and Wholesaler’s Guide
to Northeast Clean Heat Standards
While there is much that we don’t know about the future
of energy, one thing is certain; carbon reduction will remain
a top goal of northeast states, especially when led
by Democratic administrations. A Clean Heat Standard
(CHS) is the one regulatory approach that is gaining
momentum. CHSs are complex and will impact the heating
oil industry from the wholesaler down through the
supply chain.
What is a Clean Heat Standard and
Will There be One in My State?
In its simplest definition, a Clean Heat Standard is a
compliance program with the specific goal of reducing
the consumption of fossil fuels in the thermal sector. It is
a market-based regulatory standard that would require
fossil fuel wholesalers to sell less carbon-intensive fuel
each and every year. It would be built to meet the state’s
building emissions sublimits through the electrification of
buildings. There are two states that are likely to implement
a Clean Heat Standard in the not-too-distant future.
In Vermont, the Climate Action Plan led to the consideration
of a Clean Heat Standard in order to meet the
state’s goal of achieving a 40% reduction in greenhouse
gas emissions from 1990 by 2030 and 80% by 2050. The
CHS bill was passed by Vermont’s legislature in the
Spring of 2022, but was voted by Vermont’s governor the
following month. Governor Scott cited grave concerns
about the costs to renters, homeowners, building owners,
and Vermont businesses. An attempt to override the
governor’s veto failed by a single vote, and it is expected
to be reintroduced next year.
The Massachusetts Clean Energy & Climate Plan for
2050 has proposed a “Cap on emissions from heating by
having MassDEP implement regulations by the end of
2024 that consider emissions caps, standards and potentially
a Clean Heat Standard” and to “Implement a Clean
Heat Standard (CHS) as a regulatory approach to meet
buildings emissions sublimits through electrification
and energy efficiency.” The Commission on Clean Heat,
which was established by Executive Order by Massachusetts
Governor Charlie Baker, and is set to recommend
emissions-reduction policy at the end of this year, will
almost certainly be recommending a Clean Heat Standard
for the Bay State.
Joe Uglietto
President
Diversified Energy Specialists
If Vermont and Massachusetts both adopt a CHS,
we can very reasonably expect to see similar programs
enacted in Connecticut, New York and elsewhere across
the Northeast.
How a CHS Will Work
The design of the CHS is expected to be similar in both
Vermont and Massachusetts, and the greater the similarity
of these two programs, the greater the likelihood that
a CHS in your state will follow this blueprint as well.
Here’s how we expect it to work.
The regulated entities will be the wholesalers of natural
gas, propane, and fuel oil. It’s possible that the electric utilities
will be regulated as well. If heating fuel is purchased
out of state, the obligated party will be the entity that is
the first point of sale within the state. These regulated
entities will have a compliance obligation that aligns
with the goals set by the state. In Massachusetts, that
will mean the regulated entities will have an obligation
of achieving 29% emissions reduction below 1990 levels
10 ICM/November/December 2022