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.
As we explored the possibility of a city “going first” on carbon pricing, the first and most significant obstacles that appeared were legal. In Washington State, cities are constrained in their taxing authority by the Washington State Constitution. Taxing authority lives with the legislature, which must expressly give some authority to a city. Existing law appears to grant taxing authority for things like local sales and property taxes, but not carbon. But, further digging found a sliver of hope — the legislature appeared to grant cities broad (possibly including carbon) taxing authority via RCW 35a.11.020.
“legislative bodies of code cities shall have within their territorial limits all powers of taxation for local purposes.”
The tension between the Constitutional limitations and the broad RCW touches on what legal experts refer to as Dillon’s Rule vs. Home rule, referring to the ongoing tug of war between city and state authority. Further complicating things, the RCW that empowers cities also restricts taxes on motor vehicle fuel:
“no city, town, county, township or other subdivision or municipal corporation of the state may levy or collect any excise tax upon or measured by the sale, receipt, distribution, or use of fuel.”
This complicates things. We think a carbon tax is distinguishable from a general gas or fuel tax, but we aren’t Constitutional lawyers. One option would be to pass it and then let the armies of lawyers decide whether Home rule or Dillon’s Rule applies, and whether a carbon tax is a fuel tax. This would be a high risk-high reward endeavor, which could lead to significant legal costs for all involved.
But, another potentially safer path would be to use a carbon fee. Cities have more clarity around their authority to use fees to clean up public nuisances and local problems. Fees have different rules than taxes — you couldn’t create a revenue-neutral fee, for example. You can only use fees to raise revenue to fix problems outlined in the fee’s purpose. In this case, a city or county might be able to use a fee to pay for climate mitigation efforts, like building a seawall, electrifying a bus fleet, or something else with a clear nexus to climate change.
While the fee approach is restrictive, it would be much better to use a carbon fee than a sales tax (or similar mechanism) to raise money for something we already need (like the seawall Seattle is building). A fee would probably be small (because you can’t rebate the money and you can only spend it climate mitigation), so it wouldn’t robustly change the energy marketplace. However, even a small fee could move the needle in useful ways.
A new carbon tax calculator from the research firm E3 lets you model carbon tax rates in a national setting; in one test scenario a flat $5 per ton carbon tax still generates about a 6% CO2 reduction. This demonstrates that a small price signal can still be helpful. A $5-per-ton fee could raise revenue for core city priorities related to climate mitigation, while lightly nudging energy markets in the right direction and demonstrating that carbon pricing is popular. A small fee would also mitigate the obvious policy challenge of leakage at the city or county level.
Our takeaway is that absent statewide carbon pricing action, cities should seriously explore using a fee to pay for a climate-related need to see what happens — legally, politically, and ecologically.
The cities that have signed the Paris Agreement but failed to back it up owe their constituents a new approach.