The Carbon Washington team was excited to see Governor Inslee kick off the legislative session this week by introducing a carbon pricing plan. The Governor has gone “all-in” on this proposal, using the bulk of his State of the State address on Tuesday, January 9, to speak to it and issue a passionate challenge to legislators to take serious action on climate this session:
“...we must recognize an existential threat to the health of our state, a threat to the health of our children, and a threat to the health of our businesses that demands action. That threat is climate change.”
On balance, we find that Governor Inslee’s proposed bill gets many of the big pieces right. We are still reviewing the details but we hope and expect to see it gain momentum this session. The policy has four major components:
The Governor’s proposal would tax carbon pollution from from all coal, oil, and gas sources in the state, as well as electricity from those sources including imported electricity. (Montana’s coal plants that power Puget Sound Energy would be taxed, for example.) Public transit and marine fuels are covered by the carbon tax, with agricultural diesel exempt. The price would start at $20 per ton beginning in June of 2019. Starting in 2020, it would increase by 3.5% plus inflation each year, without a price cap. The tax has broad coverage and is imposed upstream. That may sound familiar, as it closely replicates Initiative 732.
The tax is estimated to generate “$1.5 billion in new revenue over the first two years and an estimated $3.3 billion over the next four years,” which will be allocated into three main areas — clean energy investments, water and natural resources resilience, and transition assistance. Of the revenue, 50% would go to investments in clean energy transition — a priority would be given to projects that benefit low-income communities, communities of color and indigenous communities — but there is not a specific overlay or percentage that is required to be spent on low-income communities. An additional 35% of the revenue is designated for water and natural resource resilience, including projects to reduce stormwater pollution, build fish culverts, improve forest health and fire management, and prevent flooding. The final 15% of the revenue would go to worker transition and low-income support through existing programs, including income assistance, affordable housing and transportation development, rural economic development, and training and education subsidies. The plan also features strong accountability measures in the form of clear agency authority, metrics and cost abatement data around the spending programs, and citizen oversight. The table below breaks it down:
|50%||Clean Energy Transformation||Funds investments in clean energy, particularly in low-income communities, indigenous communities, and communities of color. Nonprofits, businesses, and local governments will be eligible to apply for funding for verified carbon-reduction projects.|
|35%||Water and Resource Resilience||Funds for stormwater and flood risk management, fish culverts, forest fire prevention and management. Also a focus on water resource reliability and conservation.|
|15%||Transition Assistance||Funds rural economic development, low-income assistance, affordable housing and transportation development, worker re-training (via subsidies through existing organizations), and identification of disproportionately impacted communities. Training programs will focus on renewables, SmartGrids, next generation hydropower, renewable forest products, and health and fire risk management.|
What’s in this for the business community?
The Governor’s carbon tax would exempt exported fuels and electricity, as well as Washington’s only coal plant, TransAlta, which is due to shut down completely by 2025. The bill also exempts Emission Intensive Trade Exposed (EITE) industries such as aluminum production and pulp-and-paper mills, but uses a particularly narrow definition of an EITE, compared to some past carbon tax bills that granted broader exemptions. Industries would have to provide proof of harm to be exempt from the carbon price — for example, facing something like a significant competitive disadvantage. Any exemptions granted would have to be re-evaluated every three years by the Department of Commerce.
This bill seeks to find a reasonable middle ground that protects manufacturers without exempting businesses that don’t meet the definition of Emission Intensive and Trade Exposed. The EITEs are also eligible to receive funds from the clean-energy programs (both the state-run program and the utility retained revenue program) to reduce their carbon emissions.
The proposal also has some special rules for utilities called Utility Retained Revenue. This is a top priority for utilities who lobbied for this concept last year. Under this program all utilities (including public utility districts) can retain the carbon tax they owe in a seperate account for clean energy and energy efficiency programs. For example, Avista could use up to 100% of the taxed amount by designing a plan to use that money for clean energy, weatherization, and low-income programs. Each utility would have to design, and get UTC or Department of Commerce approval of, a Clean Energy Investment Plan that would reduce greenhouse gas emissions in a manner beyond existing legal obligations (each additional dollar would have to yield an additional carbon reduction).
Furthermore, 20% of the Clean Energy Investment Plan money would have to be dedicated to low-income energy assistance such as discounted rates and weatherization, EV charger distribution, rebates, and other support. Each utility’s plan would not be allowed to earn a rate of return and would have to be updated every three years. This area in particular is one part of the bill we want to examine more closely to ensure that funds are used in a responsible way.
Finally the Governor’s bill also requires the Department of Commerce to develop a “Deep Decarbonization” plan within the first two years. This section would require establishing an advisory committee that would come up with a statewide plan to reduce our emissions by 80% (or more) of 1990 levels by the year 2050. The Office of Financial Management, Department of Ecology, UTC, and WSU extension program would assist an advisory committee made up of “local and state governments, businesses, public interest organizations, energy industry, and citizens” in developing this plan.
As the 2018 Washington State legislative session begins, Commissioner of Public Lands Hilary Franz has sent an open letter to House and Senate leaders in Agriculture, Natural Resources, and Energy, Environment and Technology, highlighting the threat climate change poses to our state lands and waters and calling for our state to adopt a carbon policy that puts a price on carbon and adheres to Four Resilience Principles.
Commissioner Franz stated in an interview on KING 5 News that we are already seeing significant impacts of climate change on our land and water. Franz said that while looking at a price on carbon, a mechanism for implementing this policy must ensure that we don’t have an undue impact on those people who produce our food, keep our forests safe and healthy, and protect our waters.
Franz emphasized that we need to implement a carbon policy in Washington State that strengthens the health and resilience of our lands, waters, and communities and invests in carbon sequestration. This policy must look at our natural resource areas, particularly our farms and forests, as critical areas that will actually help reduce carbon emissions. We must invest in making our lands and waters more resilient in the face of climate change, which is already impacting us and will only get worse.
In particular, Franz emphasized that we must address the concerns and impacts on rural communities in Washington, whose economies are heavily dependent on natural resources threatened by climate change. They are also a crucial part of the overall state economy — from the lumber we use to the food we all eat. By recognizing the needs of rural Washingtonians, Franz made a strong case for the bipartisan nature of climate action, as climate chaos will impact all of us.
Explaining why we need to put a price on carbon, Franz pointed out that we are already incurring enormous costs because we are not preparing for the future impacts of climate change. In her letter, she said, “While it is true that Washington is small in global emissions, it is also true that we provide significant national and global leadership when it comes to innovation, technology, and sustainable resource management—all of which are needed to combat climate change. We are home to rich forests, soils, and aquatic lands that offer climate change solutions that could stretch well beyond our state borders.”
Franz went on to say, “the threats to our healthy and productive lands are real. We are already late in responding, and we cannot afford to wait for others to bring leadership to this challenge.” Franz believes that Washington State’s leadership is needed and timely, and she urges rapid action.
As we move into 2018, and the legislature and our communities around the state contemplate this critical and enormous challenge, Franz and the Washington Department of Natural Resources (DNR) offered the following four principles intended to “guide and inform the statewide debate on carbon policy” — which they believe are critical to successfully addressing climate change and carbon policy.
We appreciate the leadership and thoughtful analysis that Franz and her staff at the Department of Natural Resources are bringing to the discussion. Washington State’s leadership is needed and timely. In ongoing negotiations on climate policy, lawmakers should consider including Franz’s recommendations to strengthen the health of our land, forests, water systems and rural communities.
On January 9, Carbon Washington board member (and former UTC Commissioner) Philip Jones testified on CarbonWA’s behalf in support of HB 2338, the Low Carbon Fuel Standard (LCFS) bill introduced by Representative Joe Fitzgibbon. He joined representatives from Audubon Washington, Climate Solutions and the Washington Environmental Council, who also testified in support.
Carbon Washington is strongly supports carbon pricing, the most economically efficient policy mechanism for reducing carbon pollution, but putting a price on carbon isn’t the only strategy for reducing it. We also support legislative action, and initiatives to create other carbon reduction policies that align with our mission. The three most common policy options for reducing carbon pollution are pricing mechanisms, subsidies, and regulations. A low carbon fuel standard is a regulation designed to reduce carbon emissions from the transportation sector which accounts for the majority of Washington’s emissions.
HB 2338 would require the Department of Ecology to develop a regulatory program to reduce the carbon intensity of transportation fuels to 10% below 2017 levels by 2028. The carbon intensity of each transportation fuel type would be calculated by completing a full life-cycle analysis of the emissions associated with the production and distribution of the fuel, in addition to its use in a motor vehicle. Importantly, that analysis would take into account the carbon emissions associated with any changes in land-use, an important factor for biofuels.
Functionally, this bill grants Ecology the authority to reduce greenhouse gas emissions in the transportation sector by requiring fuel switching. The climate benefits come from increasing the use of electricity and natural gas for transportation, and from blending low carbon alternative fuels, like biodiesel, into conventional transportation fuels.
Often, when people think of LCFS, they think of ethanol, a dubious federal experiment in biofuels. But, this LCFS is more focused on electrification of transportation, requiring 25% of credit revenues to be invested in EV infrastructure, and on other verified carbon reduction fuel options. By requiring a life cycle analysis, this bill will also sort out the biofuel options that are beneficial for the climate from those that aren’t. It also creates a tradeable credit system that will allow regulated entities to monetize going “above and beyond” if they are able to reduce carbon beyond the established targets.
California, Oregon, and British Columbia, in addition to many countries, already have Low Carbon Fuel Standards in place. California has the oldest LCFS, which has successfully reduced the carbon intensity of their transportation fuels with nominal impacts on retail prices. The price impacts are expected to increase some as reduction targets increase; however, compliance flexibility, including a system for trading reductions, makes the economic efficiency of a well-designed LCFS quite high.
Hopefully, HB 2338 can pass in the Legislature this year, but if not, it may be feasible as an initiative since a majority of voters from both parties support a transition to cleaner fuels in polling.
A LCFS is also potentially a very good complement to a carbon tax in Washington. In a perfect world we would have a strong economy-wide carbon tax with a relatively high price. That price would encourage lots of households and businesses to buy dramatically more efficient vehicles, particularly electric ones, while motivating deep carbon reductions in many other sectors. But realistically, when Washington does enact its first carbon tax, it is likely to start at a relatively low price. A low carbon price still motivates a lot of carbon reductions by targeting low hanging fruit in the electric sector, industrial sector, and built environment while encouraging better vehicle purchasing decisions. However, fuel switching is typically considered a higher hanging fruit and may not be significantly motivated by a relatively low price on carbon.
Combining these two policies would allow the carbon tax to efficiently reduce carbon emissions across the economy without having to design multiple sector-specific programs. Later, as the carbon price grows, the costs of the two policies do not become additive, because normal market forces gradually achieve the regulatory requirements of the Low Carbon Fuel Standard, and it eventually just becomes redundant, adding no additional cost. To summarize, a LCFS can begin reducing carbon in the transportation sector until a robust carbon price kicks in.
We hope the Washington Legislature will adopt HB 2338 during this session. But if lawmakers don’t act, an LCFS could be a good subject for a ballot initiative. Polling consistently shows that a majority of voters from both parties support a transition to cleaner fuels. One way or the other, we will succeed in reducing the carbon emissions that drive climate change, by accelerating Washington’s transition to a prosperous clean energy future.
The election results from initiative 732 demonstrate that in Bellingham, Tacoma, Seattle and other Washington cities, support for climate action via carbon price is strong and politically viable. It prompts the question, why not start here? Launching carbon pricing as a patchwork within Washington State would both show the viability of the policy and create an incentive to level the playing field with a statewide policy. Washington cities, with Seattle in the lead, have also pledged themselves to serious carbon emission reductions by joining the Paris Agreement and other agreements, despite having made little progress towards the goals thus far. (more…)
Hello, CarbonWA friends: Soon, we’ll be sharing our policy goals for next year and updating you on developments with other environmental groups like the Alliance for Jobs and Clean Energy, The Nature Conservancy, Washington Tribes, and the business community as we all work toward pricing carbon. In the meantime, read on for policy updates and climate news!
Puget Sound Energy Paying off Colstrip by 2027!
Puget Sound Energy, in a settlement agreement has agreed to pay off its debts on Colstrip by 2027, significantly earlier than the original 2045 payoff date. This is a useful step towards shutting down Colstrip units 3 and 4 (Units 1 and 2 are already scheduled to shut down in 2022). This agreement doesn’t ensure that Colstrip will shut down in 2027, and UTC commissioners will still need to approve the deal, but it makes it much easier to achieve an earlier shutdown of Colstrip units 3 and 4 because PSE will not be under as much pressure to continue to run the plants to pay off existing debt after 2027. (more…)
Week 1 (May 1-7): Learn about the various proposals and think about what is important to you. .
The carbon tax bills: The Seattle Weekly was among the first to cover Senator Palumbo’s carbon tax bill, introduced on April 20th. Carbon Washington provided an analysis of this bill (SB 5930). Earlier, in January, Investigate West pointed to a possible sticking point in the governor’s carbon tax proposal. Any proposal will likely undergo significant changes during the budget negotiation, so don’t count out any bill just yet. This was signaled in the joint article by Crosscut/Investigate West published earlier in session.
The bill sponsored by Representative Joe Fitzgibbon and backed by the Alliance for Jobs and Clean Energy (HB 1646) would spend the money on a clean-energy transition, and would not direct any funds towards education. It received a partial support from 350 Seattle,which wanted amendments to the bill “to include stronger emission-reduction goals that are included in HB 1372.” CarbonWA has taken a neutral position; our testimony on the bill is here.
Senator Hobbs’ bill (SB 5385) was introduced early, and is currently in the Senate Energy & Environment committee. It would direct half of the money to K-12 transportation. The remaining share is spread out for stormwater funds, habitat restoration, energy investment, and highway maintenance. Senator Palumbo’s bill, SB 5930, in many ways is an updated version of Hobbs’ bill. You can read our analysis of Palumbo’s bill here.
Governor Inslee’s proposal (SB 5127) is currently in the Senate Rules Committee. The majority of revenue is directed towards K-12 education, and the remaining is spread out for “energy efficiency, electrification of transportation, and other activities that will further cut greenhouse gas emissions in the state.” Audubon WA supported both the Governor’s and Alliance bills. 350 Seattle did not endorse this bill, “based on its limited funding for green energy, its failure to address climate justice, and because of its exemption for the state’s only coal-burning power plant.” CarbonWA is generally supportive of this bill but is concerned about the coal exemption.
Don’t get too fixated on a single proposal, because it is likely that these bills will be heavily modified if any one of them is to pass. Instead, think about the most important factors for you and be prepared to communicate them to your legislators. For CarbonWA, the important thing is that any bill be effective, equitable, and politically feasible.
On the national level, carbon taxes are gaining momentum. Although Republican lawmakers are hesitant to introduce legislation, many have vocally supported the idea of a carbon tax, such as the one modeled by the Climate Leadership Council. This approach received commentary in the Washington Post and by Charles Komanoff from the Carbon Tax Center. This presents an opportunity to think about what’s important in a policy. With an initiative process, like I-732, we avoided many of the political tradeoffs. All of these articles highlight the difficulties that a carbon tax will face through the legislative process.
Simple Explanation: SB 5930, introduced by Senator Guy Palumbo, would implement a carbon tax of $15 per ton, rising $2.50 per year to an eventual rate of $30 per ton. Imported electricity, agricultural fuel, and EITE’s (energy-intensive, trade-exposed manufacturers) are exempt. There is a phase-in for residential natural gas and the electric sector. Electric utilities can redirect up to 75% of the carbon tax they owe to fund carbon reduction projects. The measure will devote $400 million to fund existing programs that are currently paid for out of the general fund, which would free up budget room for K-12 education. The remaining revenue is divided up between forest, water, low income, and carbon reduction programs. The measure also rescinds regulations on greenhouse gas emissions, such as the Clean Air Rule, in exchange for enacting the carbon tax. (more…)
HB 1646 Testimony to the House Environment Committee
Submitted by Mike Massa, Co-Chair of Carbon Washington
March 14, 2017
Thank you to Chair Fitzgibbon, and the members of the committee, for this opportunity to provide testimony regarding HB 1646.
I am speaking 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. Carbon Washington was the chief sponsor of Initiative 732, a revenue-neutral carbon tax measure that went before state voters in November 2016.
First, we want to recognize and thank the organizations and individuals who have put in tremendous work over many years to develop HB 1646.
We applaud the sponsors for designing a carbon tax mechanism combining broad coverage with a steadily rising price that is tied to the state’s emission goals. Economists across the political spectrum agree that such a policy is the most effective and least cost way to reduce carbon pollution. We believe this should be Washington’s primary clean energy transition strategy.
We also strongly support the inclusion of a cash rebate for low-income households to offset the impact of the carbon tax. We would even support expanding the size of that program to avoid raising costs for state residents who are already burdened by a regressive tax structure.
The inclusion of investments in forest management and water resources, if appropriately administered, will help mitigate the impacts of climate change in Washington, such as wildfires, drought, and floods.
Despite those positive features, Carbon Washington cannot fully support HB 1646 without some improvements.
While we support the goals of the clean energy programs, a spending package of this size deserves additional scrutiny at a time when the state is facing major funding needs in education and mental health, and when many communities are still struggling to recover from the Great Recession. This portion of HB 1646 lacks sufficient accountability and oversight to ensure that taxpayers’ funds are spent both effectively and efficiently with broad benefits. We would like to see stronger accountability measures in these programs as well as a re-evaluation of the spending priorities to include other pressing state needs, like education, or broad tax relief for lower and middle income households. We would also welcome the incorporation of policy priorities from conservative and business leaders to make sure our climate policies work for everyone in the state.
Thank you again to the Chair and committee members for your consideration, and to the backers of HB 1646 for putting forward a concrete plan with many good elements. Carbon Washington looks forward to working with you on bipartisan clean-energy policies that enable all people of our state to prosper.