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.
Our Takeaway: We find, on balance, that this bill as written is almost certainly a net positive for the climate. It attempts to balance the concerns of business and utilities, with tangible carbon reduction efforts and low income support, while replacing the clean air rule with a price on carbon. It would be the first carbon tax in the nation and would also make useful investments in forest health, water/drought mitigation, and complementary carbon reduction projects. Overall, this bill is a good framework for a bipartisan compromise that would move us closer to preserving a livable climate while providing certainty and stability to Washington’s economy. However, we harbor some concerns about the bill and believe it must be improved with a handful of changes.
SB 5930 Price Per Ton
SB 5930 Revenue: Approx $1.2 Billion
||Carbon Solutions Account
||Funds existing climate programs, freeing up general fund room for K-12 Education.
|15% of remaining
||Funds a combination of TANF, LIHEAP, and a cash rebate program.
|20% of remaining
||Creates a fund to fight wildfire through thinning/forest health and active suppression.
|20% of remaining
||Creates a fund for water projects to curtail drought, flooding, and improve water quality.
|45% of remaining
||Carbon Reduction Investment Fund (CRIF)
||Creates a grant fund to support public and private carbon reduction projects.
Our favorite parts of SB 5930:
- The transparent, rising carbon tax.
- The low income cash rebate.
- The CRIF program prioritizing efficiency.
- Investments that help Washington adapt to climate change, like fire prevention and drought relief.
Our Recommendations to Improve Bill 5930:
- Higher price: SB 5930 would eventually align Washington with our northern neighbors British Columbia (C$30) and Alberta (C$20). However, compared to I-732 ($25 rising to $100), this is not the strong, robust price we want to see. The price should start out immediately at $25 per ton to align Washington with British Columbia, and it should climb regularly until Washington’s emission reductions goals are met or the tax meets a much higher cap of $100+ per ton.
- Close the imported power loophole: Aside from increasing the price, our highest priority is to close the imported power loophole. In general, the carbon tax should apply to all energy consumed in Washington, no matter where it is produced. Washington electric utilities import a substantial amount of coal and gas generated power from out of state. Exempting that power creates a perverse incentive to shift emissions out of state, and invites legal challenges and citizen action. In defense of SB 5930, The Clean Air Rule also does not tax imported power, and the commerce clause in the Constitution makes it difficult to do so. Still, in principle we believe if you pollute, you ought to pay.
- Curtail natural gas subsidies: There are a number of provisions that pertain to the usage of natural gas. One is a credit for replacing coal electricity with natural gas, and another is a credit for using liquefied natural gas in transportation. In the short run, natural gas may provide a CO2 reduction compared to coal or diesel sources. However, we think it’s likely that over the 40+ year lifetime of new natural gas infrastructure, it will not be the best choice, with cleaner forms of energy and transportation becoming more available. Some of these natural gas subsidies may make sense, but we support further review and a mechanism to sunset natural gas subsidies in the future.
- Redefine “Greenhouse Gases” to “Carbon Dioxide Emissions”: A clause in the bill repeals existing regulations on ‘greenhouse gas’ emissions and prohibits similar rules from taking effect before 2023.. We support narrowing this definition to ‘carbon dioxide’ emissions. Greenhouse gas is a broad category that includes other highly toxic pollutants that we need to limit to protect our communities and public health. Since the carbon tax only applies to fossil fuels, this clause should only block rules on those sources.
- Give extra revenue back to the people: As the carbon tax increases and the carbon tax revenue grows, the funding available to the CRIF, water, and forest programs will also grow. We would like to see a provision that directs revenue not spent ‘efficiently and effectively’ directly back to taxpayers through an expansion of the low income grant program, and possibly a broader tax rebate program.