Inslee unveils carbon tax, hoping it passes in 59 days

Source: Benjamin Storrow, E&E News reporter • Posted: Thursday, January 11, 2018

Washington Gov. Jay Inslee (D) unveiled a carbon tax this week in his annual address to the state Legislature, telling lawmakers that “while this session is short, our legacy on climate change must be long and lasting.”

Washington would be America’s first state to adopt a carbon tax if Inslee’s proposal is approved. The governor, an outspoken climate hawk, enters his sixth year in office with new momentum to curb emissions. Democrats took control of the state Senate last year and now control both chambers in Olympia. Several of the state’s leading businesses have said they are supportive of efforts to price carbon.

But hurdles remain in Inslee’s path. Legislative leaders have signaled they have other priorities for this year’s shortened 60-day legislative session, and significant opposition remains in Washington’s business community.

Inslee sought to assuage those concerns and inspire action in his annual State of the State speech, dedicating much of his remarks to the subject.

“We have just 59 days to do our part to save our children from an endless cycle of crop-killing droughts one year and rivers spilling their banks the next; to save salmon from dying in ever-warming rivers and our forests from being reduced to plumes of ash,” the governor said.

He added: “We must be victorious over climate change, because, as Winston Churchill said, ‘Without victory, there is no survival.'”

Inslee’s proposal would impose a $20 price on carbon starting in July 2019. It would rise 3.5 percent annually, plus inflation. The governor’s office estimated that it would generate $3.3 billion over its first four years.

Half of the revenue would be spent on programs designed to reduce emissions, including grants to purchase electric buses and expand charging stations. An additional 35 percent would be invested in resilience measures to manage floods and improve irrigation, while the remaining 15 percent would be earmarked for transition assistance to support low-income communities.

Aircraft fuels and fossil fuels used for agriculture would be exempt from the tax.

In an apparent bid to win over the state’s utilities, the plan includes a provision that would allow power companies to receive a tax credit on investments for projects designed to reduce emissions.

Puget Sound Energy, the state’s largest utility, offered its support for the measure. In a statement, the company said: “PSE is committed to doing our part, which is why we set a target last fall to reduce our carbon footprint 50 percent by 2040. Reaching our full potential will require policy changes this year at the state level to update our regulatory environment and put a price on carbon, and Governor Inslee’s action today is an important step forward.”

Microsoft Corp., for its part, said, “The time has come to implement carbon pricing in Washington state,” but it stopped short of endorsing the governor’s proposal.

“It is early in the discussions and we are not endorsing any specific legislative proposal, but we applaud the leadership of the governor and other legislators who have come forward to take this on,” the company said in a statement. “We stand ready to work with policymakers, community organizations and other businesses to craft a carbon pricing bill that drives a reduction in total emissions, integrates and builds on existing business investments and enhances economic opportunities.”

The state’s most powerful business group took the opposite point of view. The Association of Washington Business (AWB) lambasted the plan, saying it would result in higher energy costs for consumers.

“We should all be sensitive that the governor’s carbon tax would also hit middle-class families especially hard because manufacturing and trade sectors, which support good-paying, family wage jobs, could be impacted,” AWB President Kris Johnson said in a statement.

Inslee’s proposal comes amid a flurry of climate activity along the Pacific coast. California recently reauthorized its cap-and-trade program. Oregon greens believe they can pass a bill and join California’s program when the state Legislature convenes in Salem next month.

This is not the first time Washington has considered a carbon tax. State voters rejected a carbon tax at the ballot box in 2016. Inslee proposed a price on CO2 emissions last year as a budget fix to a shortfall in education spending. State Rep. Joe Fitzgibbon (D) also proposed a carbon tax. Both bills stalled in the Legislature.

Greens are more optimistic this time around. The 2016 ballot measure was doomed in part by infighting among environmentalists, who were divided over how the revenues should be spent.

CarbonWA, the group behind the ballot measure, said it is supportive of the governor’s proposal but pledged to raise the issue with voters again if lawmakers fail to act.

“We know there is bipartisan interest in getting this done,” said Kyle Murphy, executive director of CarbonWA. “The challenge is finding the compromise. That’s historically been the challenge. There have been elements of left and right that haven’t been willing to come together. We think we’re closer this year than we’ve ever been.”

The bill will be offered first in the Senate, where its backers predict it will receive a friendlier reception. If the bill succeeds in attracting Republican support, House leaders are more likely to take up the issue in earnest, said Fitzgibbon, the state lawmaker.

“That’s just the bar we have to clear,” he said.