Washington State’s Ambitious Carbon Tax Proposal

Source: By Editorial Board, New York Times • Posted: Tuesday, October 25, 2016

The Grand Coulee Dam in Washington produces hydroelectric power, which would not be taxed under a new proposal. Leah Nash for The New York Times 

Anybody hoping for a robust national discussion about climate change this election year has been sorely disappointed. But one state, Washington, has been having just such a debate, thanks to an ambitious ballot proposal that would impose a tax on carbon emissions.

The proposal, Initiative 732, started as a long-shot campaign by an economist and standup comedian, Yoram Bauman, but it has gained public support and become a viable effort. It would impose a tax on greenhouse gas emissions generated by fossil fuels like petroleum, gas and coal. The tax would start at $15 per metric ton next year, increase to $25 a ton in 2018 and then rise gradually over a few decades until it hits $100 a ton in 2016 dollars. (A typical passenger car emits about five metric tons of carbon dioxide in a year.) The money raised by the tax would go to lowering the state sales tax, effectively eliminating a business tax on manufacturers and giving up to $1,500 in tax credits to low-income residents.

Climate scientists and economists have long said that one of the best ways to fight climate change is to put a price on greenhouse gas emissions and raise that price over time, which would encourage the switch to cleaner energy sources, like solar and wind. The initiative’s approach is based on a carbon tax that British Columbia put in place in 2008. Ireland and Sweden also have such taxes.

The Washington proposal would be the first in the country and could well set an example for other states. California is moving down a different track with a cap-and-trade system that started in 2012. That state is projected to meet its goal of reducing emissions to 1990 levels by 2020. But recent auctions for emission permits were relatively weak, generating less money for renewable energy and high-speed rail projects than expected.

At $25 per ton, the proposed Washington tax would increase the price of gasoline by about 25 cents a gallon and increase the cost of coal-fired power by 2.5 cents per kilowatt-hour. Most of Washington’s electricity comes from hydroelectric dams and other renewable sources, which would not be taxed.

Carbon Washington, the initiative campaign, maintains that Initiative 732 would be revenue neutral and that, by reducing the state sales tax, the proposal would make taxation in Washington less regressive. (Washington does not have an income tax, so it relies heavily on state and local sales taxes, which can reach as high as 9.5 percent in some communities.) The state’s Office of Financial Management, however, says the proposal would reduce tax revenue overall.

Initiative 732 faces opposition from the usual sources, like the fossil fuel industry and manufacturers. What is more surprising is that many environmental, labor and minority groups have opposed or declined to support the proposal. The Sierra Club, the Washington Environmental Council and other groups have said that they support the aims of the initiative, but argue that it falls short because it won’t directly invest money in renewable energy, mass transit and other projects they argue are more important than cutting the sales tax. These criticisms have some merit, and a better-designed proposal would dedicate some money for programs designed to ease the adjustment to a low-carbon economy.

recent poll showed that 42 percent of voters in Washington support Initiative 732, 37 percent oppose it and 21 percent are undecided. Most state lawmakers are opposed to the ballot measure, including Gov. Jay Inslee, a Democrat who is seeking re-election and previously proposed a cap-and-trade system. The Audubon Society’s Washington chapter and many climate scientists, however, are backing the proposal. Even if voters reject this particular initiative, the idea of putting a price on carbon is still one of the most straightforward, economy-friendly ways to deal with climate change.