§ 8127. Tradeable clean heat credits
(a) Credits established. By rule or order, the Commission shall establish or adopt a system of tradeable clean
heat credits that are earned by reducing greenhouse gas emissions through the delivery
of clean heat measures. While credit denominations may be in simple terms for public
understanding and ease of use, the underlying value shall be based on units of carbon
dioxide equivalent (CO2e). The system shall provide a process for the recognition,
approval, and monitoring of the clean heat credits. The Department of Public Service
shall perform the verification of clean heat credit claims and submit results of the
verification and evaluation to the Commission annually.
(b) Credit ownership. The Commission, in consultation with the Technical Advisory Group, shall establish
a standard methodology for determining what party or parties shall be the owner of
a clean heat credit upon its creation. The owner or owners may transfer those credits
to a third party or to an obligated party.
(c) Credit values. Clean heat credits shall be based on the accurate and verifiable lifecycle CO2e emission
reductions in Vermont’s thermal sector that result from the delivery of eligible clean
heat measures to existing or new end-use customer locations into or in Vermont.
(1) For clean heat measures that are installed, credits will be created for each year
of the expected life of the installed measure. The annual value of the clean heat
credits for installed measures in each year shall be equal to the lifecycle CO2e emissions
of the fuel use that is avoided in a given year because of the installation of the
measure, minus the lifecycle emissions of the fuel that is used instead in that year.
(2) For clean heat measures that are fuels, clean heat credits will be created only for
the year the fuel is delivered to the end-use customer. The value of the clean heat
credits for fuels shall be the lifecycle CO2e emissions of the fuel use that is avoided,
minus the lifecycle CO2e emissions of the fuel that is used instead.
(d) List of eligible measures. Eligible clean heat measures delivered to or installed in residential, commercial,
and industrial buildings in Vermont shall include:
(1) thermal energy efficiency improvements and weatherization;
(2) cold-climate air, ground source, and other heat pumps, including district, network,
grid, microgrid, and building geothermal systems;
(3) heat pump water heaters;
(4) utility-controlled electric water heaters;
(5) solar hot water systems;
(6) electric appliances providing thermal end uses;
(7) advanced wood heating;
(8) noncombustion or renewable energy-based district heating services;
(9) the supply of sustainably sourced biofuels;
(10) the supply of green hydrogen;
(11) the replacement of a manufactured home with a high efficiency manufactured home and
weatherization or other efficiency or electrification measures in manufactured homes;
and
(12) line extensions that connect facilities with thermal loads to the grid.
(e) Renewable natural gas. For pipeline renewable natural gas and other renewably generated natural gas substitutes
to be eligible, an obligated party shall purchase renewable natural gas and its associated
renewable attributes and demonstrate that it has secured a contractual pathway for
the physical delivery of the gas from the point of injection into the pipeline to
the obligated party’s delivery system.
(f) Carbon intensity of fuels.
(1) To be eligible as a clean heat measure, a liquid or gaseous clean heat measure shall
have a carbon intensity value as follows:
(A) below 80 in 2025;
(B) below 60 in 2030; and
(C) below 20 in 2050, provided the Commission may allow liquid and gaseous clean heat
measures with a carbon intensity value greater than 20 if excluding them would be
impracticable based on the characteristics of Vermont’s buildings, the workforce available
in Vermont to deliver lower carbon intensity clean heat measures, cost, or the effective
administration of the Clean Heat Standard.
(2) The Commission shall establish and publish the rate at which carbon intensity values
shall decrease annually for liquid and gaseous clean heat measures consistent with
subdivision (1) of this subsection as follows:
(A) on or before January 1, 2025 for 2025 to 2030; and
(B) on or before January 1, 2030 for 2031 to 2050.
(3) For the purpose of this section, the carbon intensity values shall be understood relative
to No. 2 fuel oil delivered into or in Vermont in 2023 having a carbon intensity value
of 100. Carbon intensity values shall be measured based on fuel pathways.
(g) Emissions schedule.
(1) To promote certainty for obligated parties and clean heat providers, the Commission
shall, by rule or order, establish a schedule of lifecycle emission rates for heating
fuels and any fuel that is used in a clean heat measure, including electricity, or
is itself a clean heat measure, including biofuels. The schedule shall be based on
transparent, verifiable, and accurate emissions accounting adapting the Argonne National
Laboratory GREET Model, Intergovernmental Panel on Climate Change (IPCC) modeling,
or an alternative of comparable analytical rigor to fit the Vermont thermal sector
context, and the requirements of 10 V.S.A. § 578(a)(2) and (3).
(2) For each fuel pathway, the schedule shall account for greenhouse gas emissions from
biogenic and geologic sources, including fugitive emissions and loss of stored carbon.
In determining the baseline emission rates for clean heat measures that are fuels,
emissions baselines shall fully account for methane emissions reductions or captures
already occurring, or expected to occur, for each fuel pathway as a result of local,
State, or federal legal requirements that have been enacted or adopted that reduce
greenhouse gas emissions.
(3) The schedule may be amended based upon changes in technology or evidence on emissions,
but clean heat credits previously awarded or already under contract to be produced
shall not be adjusted retroactively.
(h) Review of consequences. The Commission shall biennially assess harmful consequences that may arise in Vermont
or elsewhere from the implementation of specific types of clean heat measures and
shall set standards or limits to prevent those consequences. Such consequences shall
include environmental burdens as defined in 3 V.S.A. § 6002, public health, deforestation or forest degradation, conversion of grasslands, increased
emissions of criteria pollutants, damage to watersheds, or the creation of new methane
to meet fuel demand.
(i) Time stamp. Clean heat credits shall be “time stamped” for the year in which the clean heat measure
delivered emission reductions. For each subsequent year during which the measure produces
emission reductions, credits shall be generated for that year. Only clean heat credits
that have not been retired shall be eligible to satisfy the current year obligation.
(j) Delivery in Vermont. Clean heat credits shall be earned only in proportion to the deemed or measured thermal
sector greenhouse gas emission reductions achieved by a clean heat measure delivered
in Vermont. Other emissions offsets, wherever located, shall not be eligible measures.
(k) Credit eligibility.
(1) All eligible clean heat measures that are delivered in Vermont beginning on January
1, 2023 shall be eligible for clean heat credits and may be retired and count towards
an obligated party’s emission reduction obligations, regardless of who creates or
delivers them and regardless of whether their creation or delivery was required or
funded in whole or in part by other federal or State policies and programs. This includes
individual initiatives, emission reductions resulting from the State’s energy efficiency
programs, the low-income weatherization program, and the Renewable Energy Standard
Tier 3 program. Clean heat measures delivered or installed pursuant to any local,
State, or federal program or policy may count both towards goals or requirements of
such programs and policies and be eligible clean heat measures that count towards
the emission reduction obligations of this chapter.
(2) The owner or owners of a clean heat credit are not required to sell the credit.
(3) Regardless of the programs or pathways contributing to clean heat credits being earned,
an individual credit may be counted only once towards satisfying an obligated party’s
emission reduction obligation.
(l) Credit registration.
(1) The Commission shall create an administrative system to register, sell, transfer,
and trade credits to obligated parties. The Commission may hire a third-party consultant
to evaluate, develop, implement, maintain, and support a database or other means for
tracking clean heat credits and compliance with the annual requirements of obligated
parties.
(2) The system shall require entities to submit the following information to receive the
credit: the location of the clean heat measure, whether the customer or tenant has
a low or moderate income, the type of property where the clean heat measure was installed
or sold, the type of clean heat measure, and any other information as required by
the Commission. Customer income data collected shall be kept confidential by the Commission,
the Department of Public Service, the obligated parties, and any entity that delivers
clean heat measures.
(m) Greenhouse Gas Emissions Inventory and Forecast. Nothing in this chapter shall limit the authority of the Secretary of Natural Resources
to compile and publish the Vermont Greenhouse Gas Emissions Inventory and Forecast
in accordance with 10 V.S.A. § 582. (Added 2023, No. 18, § 3, eff. May 12, 2023.)