Initiative 1631 is the latest iteration of carbon pricing to come to Washington state. It was filed by a coalition including the Alliance for Jobs and Clean Energy, The Nature Conservancy, and a number of Washington’s Tribal nations. The following analysis looks at features of the ballot initiative in comparison to the recent legislative carbon tax proposal (SB 6203) that passed out of two senate committees and Carbon Washington’s 2016 carbon tax initiative (I-732). This analysis compares their ability to reduce emissions and offset any disproportionate impacts of pricing carbon, leaving discussion of political strategy and the use of other investments (like forests/water/rural economic development) to future blog posts.
This analysis is not meant to be an endorsement of the initiative or to suggest opposition to it. (more…)
The mission of Climate XChange is to provide policymakers and advocates with cutting edge information on market-based solutions to climate change.
By Jonah Kurman-Faber, Communications and Policy Fellow, Climate XChange
Carbon pricing efforts are not just picking up steam in New England, a similar fight is underway in the northwest. On Thursday afternoon Washington’s state Senate Committee on Ways & Means approved a substitute bill of Governor Jay Inslee’s carbon tax legislation. Inslee has been a climate champion in the Northwest, pushing multiple carbon pricing initiatives since 2015 despite substantial resistance from the legislature and courts.
His 2018 plan has been in constant flux since it was introduced last month but has achieved significant victories this month, namely passing both the Senate committee on Energy, Environment, and Technology and the Senate committee on Ways and Means. But discussions around this bill are still running hot – various groups and officials have come out with hard stances for/against the various design factors of the bill, particularly the list of industrial exemptions. As such, here is a quick dive into the bill’s current status, what industries are exempt, and whether these exemptions make sense.
The Current Bill
Passing this bill through the Senate Committee is a huge victory – to our knowledge it is the first time that a carbon fee was voted on and passed by subnational politicians – but there is still a long way to go. The most recent version calls for a price tag of $12 per ton of carbon starting in 2019, increasing annually by $1.80 per ton starting in 2021 until it reaches a cap of $30 per ton in 2030. This is a more modest proposal than the Inslee’s original plan, which started at $20 per ton, had a 3% percent increase in price each year with no cap.
With regards to exemptions, the bill recognizes that “some industries are energy-dependent and trade-exposed and thus have independent incentive to be energy efficient. These industries are exempt from carbon taxation in order to allow them to remain globally competitive and ensure these industries and jobs remain in Washington.” The idea makes sense on paper, as long as it’s done fairly – the bill proposes that the department of commerce establish an objective numerical process for evaluating industries that qualify for exemption.
However, the bill subsequently lists a whopping 67 industries, listed by their North American Industrial Classification System (NAICS) codes, that are guaranteed exempt status “notwithstanding the criteria established”. In addition to these industries, the bill also exempts “transition coal power”, which is catered towards TransAlta’s few coal-fired power plants in the state that are still transitioning to natural gas. This raises concerns for local advocates – why establish an objective numerical process for determining exemptions, only to prematurely exempt large swaths of polluting industries? (more…)
A substitute version of SB 6203, the carbon tax proposal championed by Governor Inslee, passed out of the Senate Energy Environment and Technology Committee on February 1st. The substitute version is a significantly modified version of the original bill. It includes a reduced carbon tax rate, additional exemptions for various industries, new funding priorities for multi-modal transportation and rural economic development, as well as requirements for utilities, claiming credits, to eliminate carbon in the electric sector by 2050. Next, the bill moves to the Ways and Means committee, where it can be further modified. If it passes the Ways and Means committee, it will move to the floor of the Senate.
We are hopeful that this bill, even with the modifications, will move forward. In particular, we welcome the new focus on rural economic development and the provision requiring utilities to decarbonize by 2050, which ensures they are using the retained revenue to reduce their reliance on coal and natural gas. However, we are concerned that the lower price and additional exemptions will reduce the carbon reduction impact of the policy.
Carbon Washington therefore advocates returning to the original $20 per ton carbon price, removing the exemption for Transalta’s coal plant and reducing exemptions for non-EITE industries, as well as additional focus on low-income and middle-class financial support. Read on for a section-by-section breakdown of the bill. The table below also outlines the major changes between the original bill and the substitute. (more…)
Washington State lawmakers are considering numerous approaches that tackle climate change in the current legislative session. (See our previous blog posts on carbon pricing and low-carbon fuels.) Among the proposals on the table are policies to accelerate the adoption of electric vehicles (EVs) by households, businesses and government agencies.
Current Washington EV Policies
The Washington Department of Transportation has developed a 2015-2020 EV Action Plan, which identifies 13 action items to increase EV adoption, including completion of a fast-charging network along highways and electrifying public and private fleets. This 2015 action plan aims Washington State toward the goal of placing 50,000 EVs on the road by 2020 (we are almost halfway there). Washington State also offers a sales tax exemption for the purchase of new EV vehicles, which is soon to expire (more on this later).
States with existing plans to expand electric vehicles on-the-road:
|State||Current EV Totals||EV Cumulative Goal||Goal Deadline|
What’s proposed for Washington?
Washington can learn from Kansas City by enlisting utilities as partners. In 2015, Kansas City Power and Light chose to install over 1,000 EV charging stations, becoming the first investor-owned electric utility in the nation to install and operate its own charging network. As a result, EV adoption has already nearly doubled since the network was launched. In 2015, the Washington State legislature moved in this direction by enabling investor-owned utilities to spend a limited amount of taxpayer money on charging infrastructure. This move was guided by a Policy Report from the Utilities and Transportation Commission (UTC), which regulates investor-owned utilities. The policy report was completed in 2017, and lays out some of the ground rules. It is one of the most forward-thinking and comprehensive policy statements regarding EV infrastructure in the nation, and also sets the stage for more in-depth discussions about EV adoption. A simple step this session would be to pass HB 2897, which would allow our smaller consumer-owned utilities to join the investor owned utilities in developing transportation plans and investing in infrastructure to electrify transportation. Here are a few other EV concepts on the table:
Below, we’ve compiled a brief table comparison of the four bills we consider most relevant. You can download a PDF here.
If you have further questions, or would like some follow up information, please contact Megan Conaway at firstname.lastname@example.org. And if you have a blog idea or would like to be a featured guest author, please email us to get started.
Carbon Washington’s core mission includes developing policies and raising awareness about climate solutions that can appeal to both sides of the political aisle.
During the Initiative 732 campaign for a revenue-neutral carbon tax we demonstrated this by securing endorsements from Republican party leaders including:
These efforts proved that Republicans can actively support a carbon tax if provided with the information and time to understand a market-driven, non-regulatory approach to pricing carbon that doesn’t increase taxes.
The carbon tax conversation looks to be moving in a different direction this legislative session and in the upcoming initiative season, and that is OK. The climate movement, despite decades of hard work by many of us, is in its infancy and still finding its way forward. While Carbon Washington remains steadfast in its desire to put a meaningful price on carbon, we have also started examining other approaches to achieve carbon reduction that can attract bipartisan support.
One such idea that caught our attention last year was biochar. If you’re a climate wonk — but don’t know much about biochar — don’t worry, you aren’t alone. Very few people know about biochar, despite its being an at least 2,000-year-old practice for increasing the health of agricultural soils, with the added benefit of creating long-term carbon sequestration.
You can learn more about the environmental benefits of biochar by reading further in this blog. But first we want to describe our recent efforts to educate our state lawmakers about the benefits of producing and using it.
This project has been spearheaded by CarbonWA board member and volunteer lobbyist Greg Rock. Over the past year he organized a Sequestration Workgroup of over 40 scientific and academic experts, which researched and evaluated biochar and other potential carbon sequestration pathways. This legislative session Greg has met with over 50 legislators to explain what biochar is and how it presents a potential economic and environmental opportunity for our state, as well as advocating for a carbon tax.
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 (above | download PDF) 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. (more…)
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.
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.