Gov. Inslee of Wash. unveils carbon cap, predicts Republican support 

Source: Nathanael Massey, E&E reporter • Posted: Friday, December 19, 2014

Despite a divided state Legislature coming out of the 2014 midterm elections, Washington Gov. Jay Inslee (D) says 2015 is the year for his state to get serious about climate change.

“Everyone agrees on the basic proposition” that the climate is changing and that the state needs to act on it, he said yesterday, speaking at REI’s main outlet in Seattle. “We don’t all agree on what the first steps should be. But I’m open to all ideas.”

Inslee laid out his plan for cutting greenhouse gas emissions yesterday. Its centerpiece is a carbon cap for major emitters and a system of allowances they would purchase to stay within the cap, he said. Revenue from the system would go toward education, transportation and support for vulnerable communities.

Along with the carbon fee, the budget also proposes new incentives for zero- and low-carbon vehicles, a clean energy fund, and incentives for solar power.

The proposed budget heads to the Legislature next month, where it is expected to meet fierce debate — as Inslee put it, “several months of storm and fury.” Republicans who control the state Senate have previously said that they are not on board with the governor’s green agenda, which they said falls at odds with the basic economic concerns of most Washingtonians (ClimateWire, Nov. 6).

But Inslee insisted that he could reach lawmakers from both sides of the political aisle.

“Here’s one thing that I know — if we do not act in 2015, we will not comply with the existing law,” he said, referring to greenhouse gas limits adopted by the Legislature in 2008. “We won’t meet our 2020 limit, we won’t meet our 2035 limit, and we’ll fall a whale short of our 2050 limit.”

Largest emitters hit first

Under the “Carbon Pollution Accountability Act” — the title of Inslee’s proposed measure to charge companies for carbon — a hard cap would be placed on the emissions from roughly 130 of the state’s largest emitters starting in 2016, and subsequently ratcheted down over subsequent years.

Early modeling indicates that that would cover about 85 percent of the state’s total emissions, according to members of the governor’s staff who took questions after yesterday’s announcement.

The program may someday be linked with other carbon price systems in California, Oregon and British Columbia, Inslee said, but for now it is being put forward as a plan specifically tailored for Washington. Conversations about a West Coast regional carbon market “are for another day,” he said.

While the list of covered facilities is still conceptual at this point — and based on a greenhouse gas inventory Washington conducted a few years ago — it’s likely that the bulk of emissions sources would be from the oil, gas and electrical sectors, according to David Postman, an Inslee spokesman.

Companies that sell fuel in Washington would also have to buy allowances based on the emissions from the fuel at the point of combustion, staff said.

Early models suggest that charging a carbon fee could result in a price hike at the pump of between 3 and 12 cents.

While acknowledging that some of the plan’s costs might be passed on to consumers, Inslee said that one aim of the program was to shift the state and its residents to a less carbon-intensive economy.

“It’s impossible for [companies] to pass along the cost of carbon when consumers aren’t using any,” he said.

Paying overdue bills

Inslee is pitching his carbon price plan as a way to plug significant holes in the state budget. Washington faces a $2.35 billion budget shortfall over the next two years, and the Legislature has been found in contempt by the state Supreme Court for failing to adequately fund education.

“There are some economic realities that the Legislature has not come to grips with yet,” he said. “I’ve had to come to grips with the stark realities we’re facing. They’re hard choices. But both parities are going to conclude that we need some revenue to meet our educational commitments to our children.

“When they open their minds to new ideas, I think they’ll see that it’s better to tax pollution than voters. It’s better to tax polluters than drivers.”

There’s no guarantee that Republicans, who battled the governor over energy policy during the midterm elections, will accept Inslee’s logic.

“The [political] landscape is tough. It’s as challenging as it can be,” said Jay Manning, a partner with the Cascadia Law Group who served as chief of staff for former Washington Gov. Christine Gregoire (D) from 2009 to July 2011. Manning headed efforts to get a carbon price in place in 2009, but the measure narrowly failed, despite Democratic majorities in both the House and Senate, he said.

That effort was cut short in part by the economic recession in 2009, and prospects for new action might fare better in the recovering economy of 2015, he said. But the plan’s real chance of success lies in the need for new revenue streams.

“That’s why we’re alive right now more than anything else, because the legislation is going to have to do something to solve this education problem,” he said.

The carbon price plan would raise roughly $1 billion annually, with the revenue to be divided among education and transportation funding — both 40 percent — with programs for disadvantaged communities and clean energy incentives making up the remainder.

The funds diverted to transportation would be allocated toward decarbonizing that sector through improved public transportation, new pedestrian and bike paths, and incentives for low- or zero-carbon vehicles (ClimateWire, Dec. 17).

The governor has also asked the state Department of Ecology to prepare a draft rule for a Washington clean fuel standard.