Vermont Clean Heat Standard Legislation

In March, 2023, the Vermont Senate approved  landmark legislation to create a Clean Heat Standard. The bill, S05 (2023), set up a system designed to fund the transition to “clean heat measures,” such as weatherization, electric cold-climate heat pumps, advanced wood heating systems, the use of some biofuels and other measures. Individuals and businesses that install clean heat measures would earn credits, while those that import heating fuel into the state — including oil, propane, natural gas, coal and kerosene – would need to obtain clean heat credits to offset the lifecycle carbon emissions.

Vermont’s 2021 Climate Action Plan called for the creation of a Clean Heat Standard. The Senate voted to override the Governor’s veto in May 2023, bringing the law to passage.

Amendments to the bill reduce the plan to a mandate for the state’s Public Utility Commission, requiring them to design a full program over the next two years. The plan would then come back before the full Legislature for another vote, or for potential modification.

In October, 2024, the Public Utility Commission issued its first draft proposed rules for the Clean Heat Standard, linked below. The rules are notable as an early mover in this space, and also because they reflect a conflict at the PUC that may yet be decided in the legislature. The PUC notes in a companion report that, “it does not make sense for Vermont, as a lone small state, to develop a clean heat credit market and the associated clean heat credit trading system to register, sell, transfer, and trade credit.” As the PUC’s plan will have to be submitted to the Vermont Legislature again for a vote, this discouraging note sounds an alarm for the future of one the nation’s only two existing Clean Heat Standards, alongside Colorado.