Color toned picture of Salt Lake City downtown, Utah, USA.

Policy Introduction

Our proposal puts $100m a year into local air quality programs and $50m a year into rural economies, eliminates the state sales tax on grocery store food and expands the state’s Earned Income Tax Credit match for low-income working families, and pays for it all with a modest carbon tax on the fossil fuels that are the main source of both local air pollution and global climate change.

Scroll down for additional details in one paragraph, one page, or all the legal details. Or download the two-page PDF.

One-Paragraph Summary

The carbon tax starts in 2026 and funds:

  • $100 million a year for cleaning up local air pollution from wood-burning stoves, gas-powered lawnmowers, freight-switcher locomotives, dirty school buses, and more. This money also reduces emissions by reducing fares for and expanding access to public transit for groups including students, elders, and low-income individuals.
  • $50 million a year for rural economies in parts of the state that are struggling economically and/or don’t have air quality problems.
  • Elimination of the state sales tax on grocery store food.
  • Expansion of the current 15% non-refundable match of the federal Earned Income Tax Credit for low-income working families to a 20% refundable match.
  • Additional tax cuts, especially for low- and middle-income households and for energy-intensive trade-exposed businesses, if there is any remaining revenue.

The carbon tax starts at $12 per metric ton CO2 (a bit less than 10 cents per gallon of gasoline, about 0.8 cents per kWh of electricity) and goes up slowly over time. There are exemptions or reduced rates for agriculture and industry to help these energy-intensive trade-exposed businesses stay competitive.

Pie chart coming soon! 

One-Page Summary

The carbon tax starts at $12 per metric ton CO2 in 2026 and goes up at 3.5% plus inflation, reaching (in real terms) $15 per ton in 2033, $20 per ton in 2041, etc., up to a maximum of $120 per ton. The carbon tax applies to electricity consumption, calculated based on the fuel mix of each utility. (For most utilities, $12 per ton works out to less than 0.8 cents per kWh, which is at or below 10% of current residential retail prices.) The carbon tax also applies to motor fuels ($12 per ton is a bit less than 10 cents per gallon for gasoline and about 12 cents per gallon for diesel and jet fuel) and to natural gas not used for electricity generation ($12 per ton is about 6.6 cents per therm, or 66 cents per mcf, but with a reduced rate for industrial use as described below); for both motor fuels and natural gas, $12 per ton is below 10% of current retail prices. Finally, the carbon tax is levied, at a reduced rate as described below, to a few dozen large facilities such as refineries and steel mills that report to the EPA more than 25,000 metric tons of CO2 emissions from fossil fuels other than natural gas. (Because the carbon tax is levied elsewhere on natural gas and on electricity consumption, the carbon tax on large facilities does not cover consumption of natural gas and it does not cover power plants that generate electricity.)

To help them stay competitive in national and international markets,  industrial users get a reduced rate that phases in over a few decades: 10% of the standard rate in 2026, 12% in 2027, etc. Red-dyed agricultural diesel is exempt, as is most off-road diesel except railroad diesel.

Most of the revenue from the carbon tax goes into a Carbon Emissions Fund, except that carbon taxes on jet fuel to go into an Airport Fund as required by federal rules. Also, as required by Utah’s constitution, the carbon tax on motor fuels goes into the Highway Fund, but a roughly equivalent amount of the sales tax money currently going to highways is put into the Carbon Emissions Fund instead.

This Carbon Emissions Fund revenue is directed as follow:

  • $100m for improving air quality ($5m to UTA to expand access for and reduce fares for groups including students, elders, and low-income individuals; $20m to the CARROT program, which reduces emissions from school buses, industrial vehicles, and lawn equipment; and $75m to DEQ for a Clean Air Grants Program).
  • $50m for rural economies through the Governor’s Office of Economic Development.
  • Transfers to the General Fund to make up the lost revenue from eliminating the state sales tax on grocery store food.
  • Transfers to the Income Tax Fund (formerly the Education Fund) to make up the lost revenue from expanding the current 15% non-refundable match of the federal Earned Income Tax Credit to a 20% refundable EITC match.

If there is insufficient revenue, all of these transfers are reduced in proportion to the overall shortfall. If there is excess revenue, the remaining revenue goes into a Carbon Emissions Tax Refund Restricted Account that the legislature can only use to “lower state taxes, especially for low- and middle-income households and for energy-intensive trade-exposed businesses.”

All the Legal Details

Here is our Jan 10 ballot measure filing. 

The Fiscal Impact Estimate should be available by Feb 8 and we will post it here. it should also be available on the Lt Governor's website. Read on for a technical overview, and a section-by-section description that covers all the sections, which in order are:

Technical overview

The carbon tax is levied in Chapter 59-30, which applies the carbon tax to:

  • motor gasoline, on-road diesel fuel and railroad diesel fuel, and aviation fuel (sections 59-30-201, 59-30-202, and 59-30-203, respectively);
  • natural gas (section 59-30-204, but electricity generators are exempt because electricity is taxed in section 59-30-206);
  • fossil fuel CO2 emissions by "large emitters", e.g., cement plants, steel mills, and refineries---but not power plants---with over 25,000 metric tons of CO2 emissions from consuming fossil fuels other than natural gas according to their EPA reports; and
  • electricity providers, which are taxed based on The Climate Registry's Electric Power Sector Protocol single-system average deliveries metric, meaning that in-state power plants are not directly subject to the carbon tax but power consumed in Utah is taxed based on the fuel mix of the electric utility (section 59-30-206).

Industrial users (agriculture, mining, manufacturing, etc., see the definition in 59-30-101) get a phased-in carbon tax rate for the natural gas and "large emitters" portions of the tax, starting at 10% of the standard rate in 2026, then 12% in 2027, 14% in 2028, etc. (Note that off-road diesel is only subject to the carbon tax when used in railroad locomotives or in facilities covered by the large emitters portion of the tax that report such emissions to the EPA.) Emissions from large emitters and electricity providers are certified by DEQ in sections 19-1-208 and 19-1-209; amended returns for these entities are in section 59-30-103. Exemptions from the carbon tax are in section 59-30-207.

Almost all of this carbon tax revenue goes into the Carbon Emissions Fund created in section 59-30-301. (Note that carbon taxes on motor fuels enter the Carbon Emissions Fund indirectly through section 59-12-103, with a small amount remaining in the Highway Fund to help account for demand response, and that taxes on aviation fuels are required to go into an Airport Fund per sections 59-30-203 and 72-2-126.)

The Carbon Emissions Fund then directs money to air quality and rural economic development programs, and to the General Fund and the Education Fund to hold them harmless from various tax cuts, as follows:

  • $100m to improve local air quality, including $5m to UTA, $20m to the CARROT program and $75m for a Clean Air Grants program administered by DEQ per section 19-2-401; and
  • $50m to the Governor's Office of Economic Development -- Rural Employment Expansion Program to "use for diversifying the economy in rural counties and communities in ways that reduce dependence on fossil fuels."
  • eliminating the state sales tax on grocery store food (section 59-12-103) and creating a 20% refundable match of the federal Earned Income Tax Credit for low-income working families (sections 59-10-1002.2 , 59-10-1102.1, and 59-10-1114); this replaces the existing 15% non-refundable EITC match (Section 21).

If there is insufficient revenue to fund all of these programs, their funding is reduced in proportion to the overall shortfall. If there is excess revenue, any remaining revenue goes into a Tax Cut Fund (section 59-30-302) that the legislature can only use "to lower state taxes, especially for low- and middle-income households and for energy-intensive trade-exposed businesses." Section 21 repeals the existing 15% non-refundable EITC match. Section 19 establishes an effective date of Jan 1, 2026, except that the various provisions affecting the EITC take effect for a taxable year beginning on or after January 1,  2026.

Details on the various sections of the bill

Introductory material (lines 1-60)

19-1-208 (lines 61-103): Certification of large emitter for tax purposes.

This section has DEQ certify emissions from large emitters based on their reports to EPA. (See EPA FLIGHT database.) The tax on large emitters is in section 59-30-205. See that link for important notes about which facilities count as large emitters. (Note that power plants and facilities whose main fossil fuel emissions come from natural gas that they purchase do not count.)

19-1-209 (lines 104-64): Certification of electricity provider.

This section has DEQ certify emissions from electricity providers based on the single system-average anthropogenic delivery metric in the Electric Power Sector Protocol from The Climate Registry. The tax on electricity providers is in section 59-30-206.

19-2-401 (lines 165-218): Clean air grant program.

Establishes a Clean Air Grant program within DEQ to improve air quality, with 20% of the grant money prioritized for air quality improvements for low-income individuals and low-income communities.

59-10-1002.2 and 59-10-1102.1 (lines 219-248): Apportionment of tax credit.

These sections concern apportionment of the state match of the federal EITC (see the next section, 59-10-1114) for individuals who are nonresidents or part-year residents.

59-10-1114 (lines 249-68): Refundable state earned income tax credit

This section provides a 20% refundable match of the federal Earned Income Tax Credit for low-income working households. It also uses carbon tax revenue to backfill into the Income Tax Fund 85% of the cost of this match. (This 85% figure is roughly the difference between the $100m cost of this 20% refundable EITC match and the $16m cost of the existing 15% non-refundable EITC match).

59-12-103 (lines 269-787): Sales and use tax base -- Rates -- Effective dates -- Use of sales and use tax revenue.

This is a very long section because the existing sales and use tax language is complicated, but there are only a few changes:

  1. Eliminates the state portion of the states tax on grocery store food. The current state sales tax rate is 1.75%.
  2. Some housekeeping changes, plus language to ensure that the carbon tax backfills the General Fund and various earmarked funds for the lost sales tax revenue on food (see the references to 59-30-301(5)(b)(i)) on lines 491, 500-501, 632, 692, and 776).
  3. Like about half of the states in the USA, Utah has a requirement in the state constitution (article XIII, section 5(6)) that revenue from taxes on motor fuels—notably motor gasoline and on-road diesel—have go into a highway fund that can be used only for road construction and maintenance. Our measure meets this requirement by putting the revenue from the carbon tax on motor fuels into the state highway fund. At the same time, lines 777-87 take out of the highway fund a roughly equivalent amount of sales tax revenue that is currently being used to subsidize the highway fund. More specifically, “roughly equivalent” means 97%: for every $100 in carbon tax revenue going into the highway fund, $97 in sales tax revenue comes out of the highway fund to be used for air quality improvements, rural economies, and offsetting tax reductions. So the net impact on the highway fund will be modest.

59-30-101 (lines 788-832): Definitions.

Definitions for the carbon tax. Note in particular that a "purchaser" of natural gas does not include power plants (because electricity is taxed elsewhere) and that "large emitter" only includes facilities that (1) are not power plants because electricity is taxed elsewhere, (2) report to EPA under 40 CFR 98, and (3) have over 25,000 metric tons of CO2 from fossil fuels not taxed under other sections of the carbon tax. In particular, this means that the many large facilities that primarily use natural gas are not taxed as "large emitters" as long as the natural gas is taxed under 59-30-204.

59-30-102 (lines 833-46): Records.

Record-keeping for the carbon tax.

59-30-103 (lines 847-66): Amended return for large emitter or electricity provider.

Standard language dealing with returns in case they need to be amended.

59-30-201 (lines 867-916): Imposition of a carbon emissions tax on motor fuel.

This section imposes the carbon tax on motor gasoline, starting at $12 per metric ton CO2 (9.72 cents per gallon, see EIA). This portion of the carbon tax piggybacks on the existing per-gallon motor gasoline tax: see the Motor and Special Fuel Tax Act, especially 59-13-201(3)(a).

59-30-202 (lines 917-96): Imposition of carbon emissions tax on special fuel.

This section imposes the carbon tax on diesel fuel (called "special fuel") intended for highway use or for railroad use, starting at $12 per metric ton CO2 (12.23 cents per gallon, see EIA). This portion of the carbon tax piggybacks on the existing per-gallon special fuel tax; see the Motor and Special Fuel Tax Act, especially 59-13-301. Note that subsection (7) references the International Fuel Tax Agreement (IFTA) provision for interstate trucking.

59-30-203 (lines 997-1063): Imposition of carbon emissions tax on aviation fuel.

This section imposes the carbon tax on aviation fuel, starting at $12 per metric ton CO2 (11.7 cents per gallon for jet fuel, see EIA; note that aviation gasoline would more accurately be a tiny bit different, but since jet fuel is over 99% of aviation fuel used in Utah it made sense to just use the jet fuel number for all aviation fuels). This portion of the carbon tax piggybacks on the existing per-gallon tax on aviation fuel. In accordance with federal DOT requirements, the revenues are placed in the Aeronautics Restricted Account, which is the fund for airports; see 59-13-402.

59-30-204 (lines 1064-115): Imposition of carbon emissions tax on natural gas.

This section imposes the carbon tax on natural gas, starting at $12 per metric ton CO2 (65.84 cents per thousand cubic feet, see EIA). The tax is levied on the "purchaser" ("a person in this state that buys natural gas for consumption") but collected and remitted by the "natural gas supplier" ("a person supplying natural gas to a purchaser"). As noted in the Definitions (section 59-30-101, lines 820-26), the tax does not apply to power plants burning natural gas; this is because electricity is taxed based on consumption, not production. Note also that industrial use (agriculture, mining, manufacturing, etc., see the definition in 59-30-102) gets a phased-in carbon tax rate, starting at 10% of the standard rate in year 1, then 12% in year 2, 14% in year 3, etc.

59-30-205 (lines 1116-70): Imposition of carbon emissions tax on large emitters.

This section imposes the carbon tax on large emitters for CO2 emissions not taxed under other sections of the bill. Some important points:

  • The definition of "large emitter" (section 59-30-101, lines 807-13) only includes facilities that (1) are not power plants, (2) report to EPA under 40 CFR 98, and (3) have over 25,000 metric tons of CO2 emissions from fossil fuels not taxed under other sections of the carbon tax. (In particular, this means that the many large facilities that primarily use natural gas are not taxed as "large emitters" as long as the natural gas is taxed under 59-30-204; see EPA FLIGHT data on large facilities.)
  • Most "large emitters" are engaged in industrial use (agriculture, mining, manufacturing, etc., see the definition in 59-30-102) and so they get a phased-in carbon tax rate. The standard carbon tax rate starts at $12 per metric ton CO2; the rate for industrial use starts at 10% of the standard rate in year 1, then 12% in year 2, 14% in year 3, etc.
  • The tax applies only to CO2 emissions (not "process emissions") and only to CO2 emissions not taxed under other sections of the bill.

59-30-206 (lines 1171-224): Imposition of carbon emissions tax on electricity provider.

This section imposes the carbon tax on electricity providers, starting at $12 per metric ton CO2. The tax is based on on the carbon content of delivered electricity, and more specifically on the "single system-average anthropogenic delivery metric" in the Electric Power Sector Protocol from The Climate Registry. Note that industrial use (agriculture, mining, manufacturing, etc., see the definition in 59-30-102) gets a phased-in carbon tax rate for this portion of the tax, starting at 10% of the standard rate in year 1, then 12% in year 2, 14% in year 3, etc.

59-30-207 (lines 1225-34): Exemptions.

This section provides a carbon tax exemption for fossil fuels that (a) are brought into the state in the fuel supply tank of a car, etc; (b) the state is prohibited from taxing by state or federal law; or (c) are being exported out of the state.

59-30-301 (lines 1235-96): Carbon Emissions Revenue Restricted Account.

This section creates a Carbon Emissions Fund (formally the Carbon Emissions Revenue Restricted Account). As described in Subsections 3 and 6, funds are allocated to (a) transfers to the Income Tax Fund to hold it harmless from the revenue reductions resulting from the EITC expansion; (b) transfers to the General Fund to hold it harmless from the revenue reductions resulting from the elimination of the state sales taxes on grocery store food; (c) $75m for the Clean Air Grant program create in Section 19-2-401; (d) $5m to UTA "to reduce vehicle emissions by reducing fares for or expanding access to public transit for low-income individuals, individuals of high school age and younger or 65 years of age and older, and individuals with disabilities"; (e) $20m to the CARROT air quality program; and (f) $50m to the Governor's Office of Economic Opportunity "for diversifying the economy in rural counties and communities in ways that reduce dependence on fossil fuels". If there is insufficient revenue for all this then each amount is reduced in proportion to the overall shortfall; if there is excess revenue then the remainder is transferred into the Tax Cut Fund described in the next section.

59-30-302 (lines 1297-307): Carbon Emissions Tax Refund Restricted Account.

This section creates a Tax Cut Fund (formally the Carbon Emissions Tax Refund Restricted Account) in case the carbon tax brings in more revenue than the tax cuts described above. The excess revenues are put in this account, which the legislature can only use to lower state taxes, "especially for low- and middle-income households and for energy-intensive trade-exposed businesses."

72-2-126 (lines 1308-52): Aeronautics Restricted Account.

This section deposits carbon tax revenue from aviation fuels into an Airport Fund, as required by federal regulations.

Section 21 (lines 1353-55): Repealer.

The section repeals the existing 15% non-refundable EITC match because it's being replaced with a 20% refundable EITC match.

Section 22 (lines 1356-58): Effective date.

The section establishes an effective date of Jan 1, 2026, except that the existing 15% non-refundable EITC match in Section 18 is repealed on Dec 31, 2026.

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