It could be the nation’s first carbon tax. And environmentalists are fighting over it

Source: By Chelsea Harvey, Washington Post • Posted: Wednesday, October 19, 2016

A Tesoro refinery, including a gas flare flame that is part normal plant operations, in Anacortes, Wash.  (AP Photo/Ted S. Warren, File)

A new initiative slated for the ballot in Washington state next month would create the first-ever carbon tax to be implemented in the United States. But while the initiative promises to fight climate change by making it more expensive to emit greenhouse gases, it’s caused an unexpected controversy among environmentalists.

Despite the endorsement of dozens of climate scientists and economists, many environmental groups have refused to support it at all, citing concerns about the proposal’s revenue projections, its approach to the involvement of disadvantaged communities, and a lack of true investment in clean energy.

Initiative 732 began as a grassroots campaign known as Carbon Washington, founded by environmental economist and stand-up comedian Yoram Bauman. If successful, it would become one of just a few ever to be implemented in North America and the first in the United States.

The idea of a carbon tax is to place a tax on the carbon that people or industries emit or on the fossil fuels they purchase, thus providing an incentive to reduce greenhouse gas emissions. I-732 proposes a starting fee of $15 per ton of carbon, increasing to $25 in the second year, and then gradually growing over the next few decades to a maximum of $100 per ton.

The scheme is designed to be “revenue-neutral,” meaning it won’t produce any additional income for the state. Instead, the proposal calls for a reduction in other taxes, including the state sales tax, which many activists consider one of the most regressive taxes in the nation. Because Washington has no income tax, the sales tax currently provides a major portion of the state’s revenue, thereby forcing lower income households to pay a greater percentage of their total income in taxes.

“Our approach has been to directly put money back into the pockets of low-income people,” Bauman told The Washington Post.

While support from individual politicians has come largely from Democrats in the legislature, the initiative has garnered endorsements from a few key Republican state senators as well. It’s also gained substantial support from the scientific community. Last week, more than 50 climate scientists from the University of Washington published an open letter expressing their support for Initiative 732.

Environmentalists versus environmentalists

Nonetheless, the proposal has caused an unexpected controversy among local social and environmental groups. Many have expressed concerns about the initiative’s revenue projections, which they fear may actually end up costing the state money. Washington’s State Department of Revenue has estimated the proposal could reduce state income by about nearly $800 million in its first six years. The initiative’s organizers, on the other hand, predict a slightly revenue-positive effect.

An independent analysis by the Sightline Institute, a Northwest think tank focusing on environmental health and social justice issues, suggested the proposal would result in an annual shortfall of about $80 million, but it has also cautioned that this number comes to less than half a percent of the state’s overall tax revenue. Taking this into consideration, and keeping in mind the uncertainties associated with budget forecasting, the institute concluded that “I-732 is revenue neutral, to the best of anyone’s ability to forecast it” and added that “as an argument against I-732, therefore, the ‘revenue hole’ case is a red herring.”

Yet the issue remains a concern for some.

“Despite the initiative’s intent to be revenue neutral, the state Office of Financial Management has analyzed the policy and found that enacting it would create a $797 million hole over the next three biennia in the already insufficient state budget,” the Washington Environmental Council said in a statement affirming its decision not to support Initative 732.

The state chapter of the Sierra Club acknowledged the Sightline Institute’s projections, but has still decided not to support I-732, noting in a statement, “At a time when our state needs additional revenue to fund education, parks, environmental programs, and social services, we are concerned about any projected revenue cuts.”

Some groups have also expressed dissatisfaction with what they see as the initiative’s failure to adequately consult with disadvantaged communities about how the measure might best serve their needs. Bauman insists the proposal is designed to benefit disadvantaged communities by reforming a regressive state tax system and putting money directly back into the pockets of low-income communities.

“We think we have an incredibly strong case to be made that our policy is not only great climate policy, but great tax policy and great social justice policy,” he said.

Finally, one of the biggest complaints revolves around claims that the revenue-neutral proposal, by its very nature, doesn’t specifically funnel revenue back into investments in clean energy and other climate friendly policies. Because a carbon tax, by definition, uses the market to drive change, some groups have argued that its success at reducing fossil fuel consumption is uncertain unless it’s combined with additional green investment strategies. But the revenue couldn’t be used to offset other taxes if it was instead going to be spent on energy investments.

Carbon tax advocates fight back

Bauman, for his part, pointed out that a few environmental groups who have declined to support I-732 are currently involved in an agreement with the TransAlta Corp., which operates a coal-fired power plant in Centralia, Wash. The agreement, signed in 2012 and in force through 2025, calls for the plant to eventually transition away from coal burning and, during that process, for all participants to “accept and not oppose the sale of coal transition power from the facility to potential buyers.” Signers included Sierra Club, the Washington Environmental Council, Climate Solutions and the NW Energy Coalition.

Sierra Club’s senior campaign representative in Washington, Doug Howell, has said in a statement that “there is absolutely no connection between the historic Transalta transition agreement or the Memorandum of Understanding, which put Washington state’s only coal-fired power plant on a legally enforceable retirement schedule, and our stance on I-732. We took a ‘Do Not Support’ position because I-732 does not guarantee investments in clean energy, climate resiliency and green jobs creation are made — particularly in communities most vulnerable to climate change.”

Initiative 732 has still maintained the support of other environmental groups, notably the National Audubon Society’s Washington office. According to Gail Gatton, executive director of Audubon Washington, surveys suggested tabout 70 percent of the state’s membership supported the initiative.

“The message that we heard over and over from people was one of urgency,” she said. “People felt like they did not have time to wait for another solution. This is the only initiative on our ballot. It does what we need it to do, which is reduce the carbon emissions that are causing climate change. …I think for Audubon, climate policy isn’t really about money. It really is about what will reduce the carbon emissions.”

Other reports have also suggested that the Sierra Club’s official “Do Not Support” stance was contested by its Washington membership.

Advocates remain upbeat

For now, the future of the initiative remains uncertain as the vote approaches. But Bauman is optimistic. A recent poll suggested that 42 percent of voters were in favor, 37 percent opposed and 21 remain undecided. These numbers are slightly up from a separate August poll that suggested 34 percent in favor and 37 percent opposed.

As crunch time nears, a group of millennials from the I-732 campaign have published an open letter to the leaders of some of the national groups that have failed to support the initiative, calling on them to change their stance. Should the initiative pass, Bauman hopes that it will lead to similar measures on a national scale.

“We think we have a great shot at winning a policy that’s not only going to make a big difference in Washington State, but that can potentially set the stage for bipartisan action nationally,” he said.