Three carbon tax bills have been introduced in the 2018 legislative session, as of January 18th. SB 6203 proposed by Governor Inslee is sponsored by Senate Energy, Environment and Technology Chair Reuven Carlyle (D-36th LD) and a large group of Democrats. Senator Ranker (D-40th LD) introduced SB 6096 and Senator Hobbs (D-44th LD) introduced SB 6335.
Our Carbon Tax Matrix (below) is designed to provide an overview of the most important differences between these bills. A short discussion of some of the key policy areas follows the table. Of course, there is no substitute for reading through the actual bills if you want to fully understand the different programs and elements of each proposal.
All of these policies focus on taxing the carbon content of fossil fuels and electricity consumed within Washington State. They all exempt fuel brought into the state in vehicle fuel tanks as well as fuels and electricity exported from the state; provide a credit against carbon tax previously paid on the same fuel or electricity in other jurisdictions; and have other technical details in common.
Two of these bills expand on a theme from last session, allowing both electric and gas utilities to retain some or all of the carbon taxes levied on energy they supply to customers and then use those funds to make certain investments related to carbon reduction, energy efficiency improvements, and low-income assistance. Utilities would have to receive regulatory approval for their investment plans before spending the retained tax money, and report back on the results. They would not be able to earn a rate of return for their stockholders on these investments, nor use the money to fund other legal obligations related to conservation and renewables.
There also continues to be an exemption for TransAlta’s Centralia coal plant in two of the bills. This exemption is intended to respect a shutdown agreement that the state, and a set of environmental groups, negotiated with TransAlta. Under that agreement, the facility is required to either cease operations or switch to a cleaner fuel source by 2025.
In recent years, the Centralia plant has been operating at only about one-third of its rated capacity, in part due to the low cost of natural gas. As we have noted before, imposing a carbon tax on power from natural gas facilities, but not the Centralia plant, could cause TransAlta to ramp up production at that plant. If that occurs, the net result be an increase in the state’s utility emissions until the plant stops burning coal.
It is important to protect Energy-Intensive and Trade-Exposed (EITE) businesses, like Aluminum and metal manufacturers, in our state that could be put at a competitive disadvantage by a carbon tax. The Governor’s proposal prescribes a technical approach to decide which businesses qualify for carbon tax exemptions, and those exemptions must be renewed periodically. The other two bills permanently exempt all businesses in specific groups of industries by using a list of North American Industry Classification System (NAIC’s) codes. Carbon Washington believes the risk of job leakage needs to be mitigated in a carbon tax bill, but we encourage the Legislature to focus on special handling only for businesses that are truly emission intensive and trade exposed.
Low Income and Disproportionately Impacted Communities
These three proposals take very different approaches for attempting to offset the impacts of the carbon tax and climate change on low-income and disproportionately impacted communities. Directly offsetting the tax regressivity impacts of the carbon price is not part of any of these proposals but would be an implementation option under both the Governor’s and Ranker’s bills. We support direct low income cash rebates and we encourage the legislature to consult directly with representatives of low-income and disproportionately impacted communities and integrate their ideas into these proposals as they continue to develop them.
Two other related bills worth noting: HB 2839 (Morris D-40th LD) and its companion SB 6424 (Carlyle) These bills are not exactly carbon taxes, but they would apply a $40/ton + 1.25%/year “shadow” carbon price to gas and electric utility decision and planning processes. This approach could produce some of the same effects as a carbon tax on regulated utilities. While not as impactful, it does start at a higher price than the carbon tax’s listed above making it an interesting complement to one of these true carbon taxes.
Submitted by Mike Massa, Board Co-Chair of Carbon Washington
January 16, 2018
Thank you, Chair Carlyle and the members of the committee, for this opportunity to provide testimony in support of SB 6203.
I am writing on behalf of Carbon Washington, a statewide, nonpartisan, grassroots organization focused on accelerating the transition to a vibrant clean-energy economy. We advocate for policies to reduce carbon pollution in ways that are effective, fair, economically sound, and politically feasible.
We believe that pricing carbon pollution is a necessary step for reaching our state’s emission reduction goals. SB 6203 is a constructive proposal that gets many of the big policy pieces right.
This bill proposes a steadily rising carbon tax covering most of the state economy, creating a strong market incentive for all of us to use energy more efficiently and transition to cleaner sources. That price signal will also motivate both entrepreneurs and established companies to develop innovative clean energy solutions that drive economic growth. Importantly, the proposed tax rate is predictable, enabling businesses and households to plan their budgets. In addition, the scope of exemptions is relatively narrow; and the requirement for EITE’s to demonstrate a substantial impact on their competitiveness before receiving one is responsible.
If there is a Legislative consensus to spend some of the revenue from pricing carbon pollution, then we would prefer to see the funds directed mainly towards two areas: 1) offsetting the economic impact of the tax on low-income households, and 2) projects that further reduce emissions and help our communities adapt to the unavoidable impacts of climate change. We also believe it is important to include strong planning and oversight processes to ensure that taxpayer money is spent effectively and efficiently.
SB 6203 appears to meet those criteria, though we would like to see an analysis of the projected financial impact of this bill on households in the bottom 40% by income. We encourage you to strengthen the relief for vulnerable citizens if modeling shows their net tax burden would increase under this proposal.
Finally, we encourage you to discuss ways to provide some tax relief for middle-income households, who are struggling to get by in both economically depressed areas of Washington and increasingly unaffordable urban centers.
In conclusion, we believe that SB 6203 is a good starting point for acting on the state’s responsibility to protect its people and natural resources from the threat of climate change. Thank you for considering our remarks. Carbon Washington looks forward to working with you on bipartisan clean-energy policies that enable our state to prosper.
Watch the video on TVW.
MEDIA STATEMENT ON GOVERNOR’S CARBON PROPOSAL
We support effective, equitable, economically sound, evidence-based, and politically feasible carbon-reduction policies. We are encouraged by what we heard outlined in the Governor’s carbon tax proposal today, and we will continue to review and provide analysis on it in the coming days.
We believe effective climate policy requires bipartisan support, and the Governor’s proposal offers a great opportunity to begin overdue conversations on both sides of the aisle — as well as from Washington’s environmental, business and progressive groups — about how to move forward.
The legislature has already waited too long to take action on climate. As we’ve said many times, the climate won’t wait. 60 days is plenty of time for the legislature to act on this issue. We urge and expect our elected officials to demonstrate leadership and take much-needed action on climate this session. (more…)
Hello, CarbonWA friends: Happy new year! A number of you were unable to read our previous newsletter due to a technical glitch, so to catch you up: We published a blog analyzing whether a city could pursue a carbon price to reach its climate goals, and we announced that we exceeded our match (!!!) from November, raising over $8,000 against our original goal of $4,000. Read on for a summary of our work in 2017 in what was a year of transition and advocacy for CarbonWA, along with an update on upcoming events for the legislative session.
As the legislative session kicks off, review our analysis of the upcoming legislative session’s prospects, check out the recent support for carbon pricing from Lands Commissioner Hilary Franz, see this piece in the Olympian from Representative Drew MacEwen opposing a carbon tax (where he holds up the Scandinavian nations as models, but fails to mention that they all rely on carbon-pricing systems…whoops!), then see the recent announcement from The Nature Conservancy, Quinault Tribe and the Alliance for Jobs and Clean Energy that they’ve agreed to work together on a potential initiative. Be sure to stay tuned for more on potential initiatives and an analysis of the governor’s forthcoming carbon pricing proposal. (more…)
San Francisco, 18 December (Argus) — Washington Governor Jay Inslee (D) will try to take advantage of a new Democratic majority in the Legislature to pass a carbon pricing bill next year.
Inslee on 14 December proposed using a price on carbon to support the state’s primary and secondary education system and end a long-running fight with lawmakers over how best to comply with a 2012 court ruling that said the state had not adequately funded its schools.
“This is the best way that I believe is both fiscally responsible, fulfills our educational mandate to our kids, and simultaneously gives our kids a Washington state that is not ravaged by climate change,” Inslee said. “We need to act.” . . .
Advocates for a carbon price in Washington say that the momentum is on their side.
“We think it is a question of when, not if, the state will adopt a carbon pricing program,” said Kyle Murphy, executive director of Carbon Washington, which sponsored an unsuccessful carbon tax ballot initiative in 2016.
Murphy framed Inslee’s proposal as an opening bid and said he expects lawmakers to submit different versions of carbon pricing bills next year.
Despite the obstacles standing in the way of climate legislation, Kyle Murphy, Executive Director of Carbon Washington, says there will be a 2018 climate initiative.
According to a legislation prospect analysis from Carbon Washington, the landscape to pass climate legislation will be tougher this year than it was in 2017. The property tax increase last year will likely hamper the willingness of legislators to come back to the table with another potential tax increase, and trying to find a compromise on revenue continues to divide those who wish to see climate legislation pass.
“We find that for carbon pricing and big climate legislation, this legislative session is not impossible, but it’s hard,” says Murphy. “However, there will be a 2018 Climate Initiative. It’s unclear yet who will lead it and what the substance of the policy will be, but we intend to make it a reality.”