AGENDA ITEM 3.1
April 27, 2010
Introduction
MEMORANDUM
TO:
FROM:
SUBJECT:
County Council
~ichael
Faden, Senior Legislative Attorney
Introduction:
Expedited Bill 29-10, Taxes- Excise Tax - Carbon Dioxide
Emissions
Expedited Bill 29-10, Taxes- Excise Tax - Carbon Dioxide Emissions, sponsored by
Councilmembers Berliner, Leventhal and EIrich, is scheduled to be introduced on April 27,
2010. A public hearing is tentatively scheduled for May 18 at 1:30 p.m.
Bill 29-10 would:
• establish a reliable funding source for greenhouse gas reduction programs in the
form of an excise tax on major emitters of carbon dioxide;
• set the rate of the tax and authorize the County Council to increase or decrease the
rate each year by resolution;
• define certain terms, and authorize the County Executive to issue certain
regulations;
• provide for collection of the tax and payment of interest and penalties, set the
effective date of the tax, and apply certain provisions of law to this tax; and
• require part of the revenue from this tax to be used for certain greenhouse gas
reduction programs.
Materials from Councilmember Berliner are attached at ©6-13.
This packet contains:
Expedited Bill 29-10
Legislative Request Report
Memo from lead sponsor
Carbon Tax fact sheet
Statement of Sierra Club
Statement of Chesapeake Climate Action Network
Statement of Dr. Ruth Matthias
Letter to Pepco
Mirant Emissions
Circle
#
1
5
6
7
8
9
10
11
13
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Expedited Bill No.
29-10
Concerning:
Taxes- Excise Tax ­
Carbon Dioxide Emissions
Revised: 4-8-10
Draft No.--±­
Introduced:
April 27, 2010
Expires:
October 27,2011
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ _ __
Effective: _---:-_ _ _ _ _ _ __
Sunset Date: _N:.,::.o:,:n.:.;:e'-----:::--_ _ __
Ch. _ _, Laws of Mont. Co. _ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmembers Berliner, Leventhal and EIrich
AN EXPEDITED ACT
to:
(1)
establish a reliable funding source for greenhouse gas reduction programs in the
form of an excise tax on major emitters of carbon dioxide;
(2)
set the rate of the tax and authorize the County Council to increase or decrease the
rate each year by resolution;
(3)
define certain terms, and authorize the County Executive to issue certain regulations;
(4)
provide for collection of the tax and payment of interest and penalties, set the
effective date of the tax, and apply certain provisions of law to this tax;
(5)
require part of the revenue from this tax to
be
used for certain greenhouse gas
reduction programs; and
(6)
generally amend the County laws governing excise taxation.
By adding
Montgomery County Code
Chapter 52, Taxation
Article XIII, Excise Tax on Major Emitters of Carbon Dioxide
Sections 52-95 through 52-99
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
*
*
*
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill,
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unafftcted by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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ExPEDITED BILL
No. 29-10
1
Sec. 1. Chapter 52 is amended by adding Article XIll, Excise Tax on
Major Emitters of Carbon Dioxide:
Article Xill. Excise Tax on Major Emitters of Carbon Dioxide.
52-95.
Findings.
The County Council finds that:
2
3
4
5
6
7
!ill
In December, 2009 the US Environmental Protection Agency found that
greenhouse gases in the atmosphere endanger both the public health and
the environment for current and future generations.
8
9
10
®
Montgomery County has embraced an 80 % reduction in greenhouse
gas emissions
by
2050 and has begun to engage in programmatic efforts
to reduce these emissions.
These efforts constitute
~
11
12
significant
investment
by
the County and its constituents and cover both stationID
sources (County owned and otherwise) and mobile sources.
13
14
W
52-96.
It is appropriate that the largest emitters of carbon dioxide in the County
contribute to paying for these greenhouse gas reduction programs.
15
16
17
18
19
20
21
Tax levied; rates.
Any major emitter of carbon dioxide, as defined in subsection
ili1
must
file
~
!ill
tax return and
~
an excise tax each year on the privilege of
emitting carbon dioxide into the County airshed.
®
A major emitter of carbon dioxide is any person who owns or operates
any stationID source of carbon dioxide located in the County that emits
more than
1
million tons of carbon dioxide in any calendar year.
22
23
24
25
W
@
The rate of the tax established under subsection
carbon dioxide emitted.
The County Council
by
resolution, after
~
!ill
is $5 per ton of
public hearing advertised
26
27
under Section 52-17Cc), may increase or decrease the rate set in
subsection
i£1
-(i)
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EXPEDITED BILL
No.
29-10
28
@
As
used in this Article:
29
30
31
32
33
34
35
36
ill
Ton,
when applies to carbon dioxide in gaseous form, means the
amount of gas in cubic feet which is the equivalent of 2000
pounds on
~
molecular weight basis.
m
ill
Director
means the Director ofFinance.
Person
includes
any
individual,
business,
corporation,
~
association, firm, partnership, group of individuals acting as
unit, trustee, receiver, assignee, or personal representative.
ill
By regulations issued under method
m
that are
consistent with this
37
38
39
40
41
Article, the County Executive may further specify the administration of
this tax.
52-97.
ill}
Due date.
The tax levied under Section 52-96 is due and payable for each month
on the last day of the next month.
42
43
44
45
46
47
48
49
50
51
52
53
54
(hl
The Director may establish an alternative payment system.
If an
~
alternative payment system is established, the Director must require
pro-rated payment for any taxable period that ends before the system
takes effect.
52-98.
Collection; interest and penalties; violation; lien.
ill)
If any person does not
~
the Director the tax due under Section 52-96,
that person is liable for:
ill
interest on/the unpaid tax at the rate of one percent per month for
each month or part of
~
month after the tax is due; and
m
~
penalty of
~
percent of the amount of the tax per month or part
of
~
month after the tax is due, not to exceed 25 percent of the
tax.
The Director must collect any interest and penalty as part ofthe tax.
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ExPEDITED BILL
No. 29-10
55
56
57
58
59
ihl
If any person does not
lli!Y
the tax when due, the Director must obtain
infonnation on which to calculate the tax due. As soon as the Director
obtains sufficient infonnation on which to calculate any tax due, the
Director must assess the tax and penalties against the person.
The
Director must notify the person of the total amount of the tax, interest,
and penalties
60
61
121
mail sent to the person's last known address. This
notice is prima facie evidence of the tax due; entitles the County to
judgment for the amount of the tax, penalty, and interest listed in the
notice; and gives the taxpayer the burden of proving that the tax has
been paid or any other sufficient defense to the action. The total amount
due must be paid within
1Q
days after the date ofthe notice.
62
63
64
65
66
67
68
69
ill
Every person liable for any tax under Section 52-96 must preserve for
;1
years suitable records necessary to detennine the amount of the tax.
The Director may inspect and audit the records at any reasonable time.
@
Any failure to
lli!Y
the tax when due under Section 52-97, and any
violation of Section 52-97 or this Section, is
!!
Class A violation. Each
violation is
!!
separate offense. A conviction under this subsection does
not relieve any person from paying the tax.
70
71
72
73
74
75
76
77
ill
52-99 :.
Section 52-18D applies to this tax.
Allocation
of Revenue.
Of the revenue from the tax levied under Section 52-96,50% must be reserved
for and allocated in the annual operating budget to funding for County greenhouse
gas reduction programs, including mass transit.
78
79
80
Sec. 2.
Expedited Effective Date.
The Council declares that this Act is necessary for the immediate protection of
the public interest. This Act takes effect on the date when it becomes law.
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LEGISLATIVE REQUEST REPORT
Expedited Bill 29-10
Taxes- Excise Tax
-
Carbon Dioxide Emissions
DESCRIPTION:
PROBLEM:
Implement an excise tax on major emitters of carbon dioxide
The Environmental Protection Agency has found that greenhouse
gases in the atmosphere endanger both the public health and the
environment for current and future generations. County programs to
reduce greenhouse gases have suffered from lack of funds.
To find a steady source of funds for programs to reduce greenhouse
gas emissions by taxing the major producers of those emissions.
Finance Department, Department of Environmental Protection
To be requested.
To be requested.
To be requested.
To be researched.
Michael Faden, Senior Legislative Attorney, 240-777-7905
Taxes apply County-wide.
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIEN CE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENAL TIES:
See proposed §52-98.
f:\law\bills\ 1029 carbon tax\legislative request report. doc
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MONTGOMERY COUNTY COUNCil
~Q(;"\fI'-t..Ii., ~l""v
LA,.r;:.
ROt:iiE.R
BE.RLll'.IER
C:OI)NCjL~E."'D!':R
DISTRICT I
Good day to you all and Happy Earth Day.
I can not think of a better way to honor Earth Day than by taxing the single biggest threat
to our earth the burning of coal in power plants.
In
Montgomery County, the Mirant coal fired power plant is by far and away the single
largest emitter of greenhouse gases. It's C02 emissions alone represent approximately
25% of the total amount of greenhouse gas emissions in the County.
At the same time, our County is struggling to make ends meet, and we need new sources
of revenues.
My proposed carbon tax is a responsible approach to addressing both our environmental
and fiscal imperatives.
It
will generate between $10 and $15 million a year in new
revenues and it will incentivize Mirant to reduce its emissions. These dollars will
provide just a portion of the resources necessary to pay for the carbon reducing programs
our County and our citizens support.
It
is only right that Mirant should pay its fair share
of those costs.
And unlike every other tax we are considering, this tax will not be felt by Montgomery
County residents. Why? Because our power is bought on a competitive basis, and if
Mirant's power is not priced competitively, it will not be bought. Plain and simple.
I am sure that Mirant will fight this tax. They have fought their own shareholders who
have argued that Mirant should be doing more to reduce their emissions. But I did not
proceed with this proposal without first having our lawyers review it. They concluded, as
have
t
that we have the legal authority to impose this tax.
While all of us here would prefer for there to be strong regional or federal standards, the
truth is we don't today. And it is also true that local governments often take the lead on
this issues, and as result of those initiatives, there is a greater push for federal legislation.
That would be a good outcome. But until then, we have the authority and we must use
that authority on behalf of our taxpayers and the health and wellbeing of our residents.
I am pleased that within a span of hours, two of my colleagues immediately asked to join
as co-sponsors. Councilmember Leventhal, who himself has been a strong champion for
the environment for many years, and Councilmember EIrich.
Let me ask them if they would like to say a few words now before turning to two of the
leading environmental advocates in our community.
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MONTGOMERY COUNTY COLI Nell
FlOCi!<;\itJ....E,
~l
..
,Il:I{I.Al'<itr
ROGER
BERLINER
COUN(;1L"'ItMF.lEF!
DISTRICT
t
A CARBON TAX
FOR
MONTGOMERY COUNTY
SPONSORED BY COUNCILMEMBER ROGER BERLINER
CO-SPONSORED BY COUNCILMEMBERS ELRICH AND LEVENTHAL
This legislation will establish an excise tax on major emitters of carbon dioxide that do business
in Montgomery County, The County has been working diligently to reduce its green house gas
inventories and shrink its carbon footprint.
It
is time for those who contribute to this pollution to
pay their fair share.
• EPA and the State of Maryland have determined that carbon dioxide emissions pose an
unacceptable risk to public health and our environment.
• Montgomery County is committed to reducing green house gas emissions by 80% by
2050.
• Carbon Dioxide is a greenhouse gas,
• It
is appropriate, fair, and good public policy for those contributing to the County's
greenhouse gas emissions inventory to also contribute to help fmance its reduction
programs, including the Home Energy Loan Program, Clean Energy Rewards, and
transit.
• This proposal calls for a tax on any carbon emitter who pollutes over one million tons of
carbon dioxide in a calendar year.
• The Mirant power plant emits over 3 million tons of carbon dioxide a year at its
Dickerson, Maryland location, by far the largest single source of greenhouse gas
emissions in the County,
• At $5 per ton this tax will generate more than $15 million a year for the County and
create an additional economic incentive for Mirant and any others to reduce emissions.
• A $5 per ton tax on Mirant will have NO DISCERNABLE impact on PEPCO ratepayers
according to Pepco officials who have analyzed the proposed tax, PEPCO buys its power
in an auction; if Mirant's power is not competitive, it will not be purchased; and Mirant
does not have enough "market power" to raise the price of power unilaterally.
• At the end of 2009, Mirant had approximately $2 billion in cash and power plants
throughout the mid-Atlantic
&
Northeast, and in California, In its 10-K filing with the
SEC, Mirant observed that "[fluture
local,
state and federal regulation of greenhouse
gases is likely to create substantial environmental costs for us in the form of
taxes
or
purchases of emissions allowances and/or new equipment."
• A $5 per ton tax complements the existing Regional Greenhouse Gas Initiative (RGGI), a
regional cap-and-trade program.
• According to the state's leading experts, a $5 tax is equivalent to the estimated value of
allowances under RGGI ifMirant's allocation were reduced by 10% from the current,
steady-state levels permitted through 2014.
• The County has the legal authority to impose an excise tax on carbon.
• In the absence of a strong national program, local govemments must continue to lead.
• If adopted, Montgomery County will be the first county in the country to impose a carbon
tax on major emitters,
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SIERRA
CLUB
FOUNDED 1392
Montgomery County Group
April 21, 2010
Contact:
David Hauck
Chair
Sierra Club, Montgomery County Group
(301)-270-5826
Hauck_d@msn.com
The Montgomery County Sierra Club strongly supports Councilmember Berliner's bill that
would impose a fee on major emitters of carbon dioxide within the county. Carbon dioxide
emissions are the primary cause of global climate change and steps must be taken now to reduce
this carbon pollution. For too long there have been no costs associated with releasing
greenhouse gases into the atmosphere. For too long major producers and users of fossil fuels
have said we can't afford to put a price on carbon emissions. The truth is that the costs of global
climate change far outweigh the costs of reducing greenhouse gas emissions.
This bill recognizes that truth and includes two key provisions:
• it places a specific price on carbon dioxide--$5.00 a ton-that lets large emitters know
exactly how much their contribution to global climate change will cost them in the future,
as well as how much reducing their carbon emissions can save them.
• it dedicates half of the money raised by the fee to the county's greenhouse gas reduction
programs which help homeowners, renters and businesses save energy, reduce their
carbon emissions and lower their utility bills.
The Montgomery County Sierra Club recognizes the hard work and creative thought
Councilmember Berliner has demonstrated in finding ways for Montgomery County to have an
impact on reducing greenhouse gas emissions. This bill is the next step in that effort and we
look forward to its being enacted.
103 North Adams Street
Rockville, MD 20850
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Statement from the Chesapeake Climate Action Network:
Montgomery County "Carbon Tax" on Big Polluters is a
Key Step Toward Protecting Kids and Our Climate
Earth Day, April 22, 2010
From CCAN Director Mike Tidwell:
"On Earth Day 2010; I salute Councilmember Roger Berliner for proposing one of
America's fIrst county-based carbon taxes on major polluters. The County Council
should pass this bill as soon as possible. This much-needed legislation will apply to only
one company: The Mirant Corporation, owner of the massive, coal-fIred power plant in
Dickerson, Maryland. The Dickerson plant is by far the largest carbon polluter in the
county, and Mirant is one of the largest carbon polluters in America. Unfortunately the
company has a long history of contaminating our air and our watersheds
in
Maryland
without voluntarily acting to protect the public from its pollution. In 2006 alone, Mirant's
Chalk Point plant in Prince George's County, Maryland, recorded 1400 violations of the
Federal Clean Air Act for burning dirty "bunker oil" without a permit. Mirant fought
tenaciously against Maryland's landmark Healthy Air Act passed by the General
Assembly in 2007. And just last month, the Maryland Department of the Environment
fIled a lawsuit alleging Mirant violated federal Clean Water Act regulations at its coal
waste landfill in Prince George's County. And in 2006, CCAN raised serious concerns
about the Dickerson plant's continual violation of the state's nitrous oxide standard
during summer months.
"The Montgomery County carbon tax is a wise and much-needed response to Mirant's
long-established pattern of serious pollution. The bill would not discernibly affect
ratepayers.
It
would, however, generate much-needed funding for county-sponsored
greenhouse gas reduction efforts. Until Congress fmally acts to generate a nation cap on
carbon pollution, every county in Maryland and every county in the country should
follow Roger Berliner's lead today."
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Statement of DR. MATTHIAS RUTH
Roy F. Weston Chair in Natural Economics
Director, Center for Integrative Environmental Research,
Division of Research
Director and Professor, Environmental Policy Program,
School of Public Policy
Co-Director, Engineering and Public Policy Program,
A. James Clark School of Engineering and School of Public Policy
University of Maryland
The State of Maryland and Montgomery County have begun to establish themselves as
leaders in the Nation in dealing with the global challenge of climate change. Maryland
has signed on to the Regional Greenhouse Gas Initiative (RGGI) - a cap and trade system
in which the state sets upper limits on greenhouse gas emissions and auctions off permits
to utilities. Through the auction process, a price for carbon and other greenhouse gases
gets established, incentives are provided to utilities to reduce the costs of purchasing
permits, and revenues are generated to the state. In essence, the state sets emissions
targets, and the market determines the price of emissions. Recent experiences with cap
and trade in the state suggest that the emissions targets are not particularly ambitious.
As a result low prices for carbon and comparatively low state revenues result.
With the introduction of the carbon dioxide tax proposed in Councilmember Berliner's
bill, the county recognizes that there is considerable room to improve on RGGI. The tax
wi11live up to our expectations to really be environmental leaders by doing what is
needed to cut greenhouse gas emissions_ 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, to date, prevented taxes from being used as
means to guide action: RGGI has been an important step
in
promoting smaller carbon
footprints, but the cumbersome constraints put on it actually do not lead the market to
reign freely_ The tax proposed here, instead, helps set the price of carbon dioxide directly
at a more meaningful level, and then lets the market sort out optimal emission quantities.
Introducing this tax is a clever way of leveraging the innovative capacity of power
generators, and stimulating markets for clean technology and efficiency improvements.
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MONTGOMERY COUNTY COUNCIL
ROCKVILLE, MARYLAND
OFFICE OF COUNCILMEMBER
ROGER BERLINER.
April 14, 2010
Mr. Thomas Graham
President
Pepco Region
701 Ninth Street, NW
Washington, DC
Dear Tom:
I want to express my appreciation to you and your senior staff for taking the time to
review my proposed legislation that would impose a $5 per ton carbon tax on the County's major
emitters of greenhouse gas emissions.
In particular, your staff's expertise with respect to the operation of the Mirant power
plant at Dickerson, a plant that had been owned and operated by PEPCO, and the potential
impact of this legislation on Montgomery County ratepayers was extremely valuable. As you
appreciate, that power plant all by itself contributes approximately 25% ofthe County's total
greenhouse gas emissions, and almost 40% of the emissions from all stationary sources within
the County.
One of the first questions I am asked about this legislation is the potential impact on
ratepayers.· Your staff's bottom line conclusion that the bill will have
"no discernable"
impact
on ratepayers is a major consideration.
As we discussed, this conclusion was based on the fact that PEPCO buys its long-term
power for its residential customers at auction, and at auction, PEPCO buys the least expensive
power. Accordingly, your staffhas concluded that if Mirant's power is priced competitively
with other base load power from plants that do not pay a carbon tax, you will buy it. If Mirant' s
power is not competitively priced, you will not.
To the extent that PEPCO buys power on the spot market, and to the extent to which the
Mirant power plant sells power on the spot market, Mirant's power would never affect the price
of spot market supplies in the PJM power pool except on those occasions when the plant is
literally the "marginal cost" supplier. As your staff explained, this would be a most
100
MARYLAND
A
VENUE' ROCKVILLE, MARYLAND
20850
2401777-7828 • TTY 2401777-7914 • FAX
2401777-7989
Councilmember.berliner@montgomerycountymd.gov
www.montgomerycountymd.gov
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..uncommon.. situation, perhaps happening for a few hours, given that natural gas and other more
expensive supplies typically establish the marginal, peak price.
While there are many public policy reasons why a carbon tax on the County's major
emitters is sound public policy, PEPCQ's conclusion that the legislation will not have any
discemable impact on ratepayers is itself a significant plus. Your analysis in this regard is quite
similar to the analysis of Dr. Mathias Ruth at the University of Maryland, a recognized state
expert and authority, who also has stated that any impact would be "quite minimal."
I understand that you will be testifying on this legislation after it is introduced, and I look
forward to you assuring my colleagues and our community that should we decide to adopt this
revenue raising legislation, we can do so confident that our County ratepayers will not
experience any "discemable" effects - other than the positive effect of having $15 million more
dollars to deal with our budget crisis.
Sincerely,
Roger Berliner
Councilmember
District 1
100
MARYLAND
A
VENUE' ROCKVILLE, MARYLAND
20850
2401777·7828 • TTY 2401777·7914 • FAX2401777-7989
Councilmember.berliner@montgomerycountymd.gov
www.montgomerycountymd.gov
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Mirant Dickerson Plant Carbon Dioxide Emissions (C02)
Source: United States Environmental Protection Agency,
Egrid
2007 (2004
plant data)
Mirant vs Montgomery County Community Emissions
2004/2005
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00+----­
Mirant Dickerson
Plant C02
Emissions
Montgomery County
Community
Emissions (C02
Equivalent)
Mirant
=
Approximately 25%
of Community Emissions in
2004/2005
@