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Defeated in legislature, carbon tax advocates eye Washington ballot initiative

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Defeated in legislature, carbon tax advocates eye Washington ballot initiative

SNL Image

Big dams like Grand Coulee make Washington uniquely situated to establish a price on carbon emissions.
Source: Associated Press

Boosting the prospects for what could be the first direct state tax on carbon emissions, a judge has specified the title and language for a ballot initiative in Washington state to establish a statewide carbon tax that supporters hope will be on the ballot in the November election.

The ruling, issued on April 6 by Judge James Dixon of the Superior Court in Thurston County, Wash., "is clearly a big win for supporters of I-1631," Democratic state Senator Guy Palumbo, a supporter of carbon pricing legislation, said in an email. "Signature-gathering using the approved language has begun in earnest and there is a lot of momentum … heading into the November 2018 election."

Initiative 1631 would "impose pollution fees on certain large emitters of greenhouse gas pollutants" starting in 2020, according to the ballot language. The use of the terms "pollution" and "pollutants" was seen as a victory for climate change advocates.

With the ballot language finalized, organizers need 260,000 signatures from registered Washington voters by June 30 to qualify for the November election. This is the second ballot initiative on carbon pricing to emerge in Washington; the first, I-732, was voted down in 2016 by a 59% to 41% margin. Earlier this year a bill to establish a carbon tax was narrowly defeated in the state legislature.

Business community's opinion mixed

Supported by Gov. Jay Inslee, that narrowly defeated bill called for a $12 per ton of carbon emissions through 2021, rising by $1.80 per ton annually until reaching a cap of $30 a ton. I-1631 would levy a $15-per-ton fee starting in 2020, climbing to a maximum of $55. Unlike a cap and trade system, which imposes penalties on companies if they exceed an emissions limit set by regulators and creates a market for companies to buy and sell allowances to emit a certain amount, a carbon tax levies direct taxes on all the carbon a company puts into the atmosphere.

The legislative version, SB 6203, represented a much more business-friendly carbon-pricing scheme than the ballot initiative, said Palumbo, one of the co-sponsors.

"Ours was a moderate version, a business-friendly carbon tax," he said. "We went out of our way to craft a smart environmental policy and not to hurt businesses in the state, and the business community basically said 'No.'"

However, Washington's business community remains split on the issue. Microsoft Corp. took an active role in supporting the carbon pricing bill in the legislature, sending a representative to testify before the Ways and Means committee. "[W]e … recommend taking a gradual approach to pricing," Microsoft government affairs director Irene Plenefisch said in her testimony. "It may be helpful to begin any program with a modest price and phase it in to allow consumers and businesses time to adapt."

Amazon.com Inc., on the other hand, remained on the sidelines; the tech giant "wanted to see how the policy developed," Palumbo said. "They also were helpful in talking to us about policy points that were important to them." Amazon did not respond to a request for comment.

The state's large timber, pulp and paper, and transportation industries, tend to oppose a carbon tax. Members of the Association of Washington Businesses, the state's chamber of commerce, "range from strongly supportive of carbon pricing to firmly opposed," said Mary Catherine McAleer, the association's government affairs director for environmental and climate issues, in an email, and AWB itself submitted more than 75 suggestions to "increase the efficiency and clarity of Senate Bill 6203."

"Pricing carbon alone will not guarantee a reduction in emissions, and the state's pursuit of additional policies to directly regulate GHG emissions would threaten some types of capital investment," says the association’s official policy statement on the issue.

Puget Sound Energy Inc., the state's major utility, supported the carbon tax bill in the legislature, but PacifiCorp, which serves 1.8 million electric customers in Washington, Oregon and Northern California through its Pacific Power utility, opposed the bill and is "absolutely very concerned" about the prospect of a ballot initiative passing in the fall, said Scott Bolton, Pacific Power's senior vice president for external affairs and customer solutions.

"Ultimately we couldn't support [SB 6203]," said Bolton, "primarily because it didn't meet the foundational principle of actual greenhouse gas reductions and accomplishing that in a way that doesn't cause regressive costs on customers."

Both AWB and Pacific Power point out a potential flaw in both the legislation and the ballot initiative: Passing a carbon price in one state may do little to reduce overall carbon emissions across the Pacific Northwest.

"A single federal policy for regulating or pricing carbon emissions is preferable to states devising their own policies," AWB's policy says.

"The wider the footprint the greater the efficacy," Bolton said. "Unless you include all the generators in the system on a multi-jurisdictional basis, you create some odd distortions in how power markets function."

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With its ample hydropower resources, Washington is uniquely situated to be a pioneer in placing a price on carbon. Only about 18% of the state's carbon emissions come from the electric power sector, pointed out Palumbo; the bulk of the rest comes from transportation.

Despite failing to pass, SB 6203 "set in motion a reality that I believe in the next two years will lead to a state-level pricing mechanism on carbon," said state Sen. Reuven Carlyle, another co-sponsor.

Such a mechanism could become a model for the rest of the nation. California, which instituted a cap-and-trade program for carbon emissions in 2012, is so far the only state in the nation with a carbon-pricing scheme that covers emissions sources outside the power sector. The Regional Greenhouse Gas Initiative, which covers nine Eastern states, uses a cap-and-trade system to limit emissions from electric generators. Widely dismissed as a failure in its first few years, the California system had produced $6.5 billion in revenue through 2017 designated for limiting climate change in the state, The Los Angeles Times reported in January.

In addition to ostensibly reducing greenhouse gases emitted by the state's businesses and the power generators that serve them, the initiative would "invest revenue in a whole host of ways that people might see benefits from, from low income credits to public investments in clean cars and clean energy," said Kyle Murphy, executive director of Carbon Washington, which helped bring the 2016 initiative to the ballot.

Unlocking a torrent

As many as half-a-dozen other states, including New York, Massachusetts and Vermont, are looking at some form of carbon tax, said Charles Komanoff, director of the nonprofit Carbon Tax Center. But so far the momentum is "sorely inadequate to the crisis we're confronting, and also inadequate to the vast potential of carbon taxing to be the principal driver of reducing carbon emissions in this country and around the world," Komanoff said.

The Washington initiative would exempt coal-fired power plants slated for closure by 2025, specifically the Colstrip plant, in Montana, which supplies one-third of its power to Puget Sound Energy, and would return all of the taxes on utilities to those companies for investments in clean energy and worker retraining. It is supported by the governor, environmental groups and virtually all of the Native American tribes in the state.

Nevertheless, many businesses will undoubtedly mount a well-funded campaign against the ballot initiative. During the legislative session, "elements of the business community decided they'd rather spend millions of dollars against ballot initiatives rather than locking in a compromise now," said Kyle Murphy, Carbon Washington, which launched the 2016 referendum.

Many political observers, however, believe that this year's initiative stands a good chance of passing. And if that happens it could be a watershed.

"A win in the state of Washington would unlock a whole torrent of things," Komanoff said. "It would encourage other states to move forward, whether through referenda or legislation. And it would rejuvenate the national conversation around carbon pricing."