The costs of Initiative 1631, which would make Washington the first state in the nation to impose a carbon tax, er, fee, continue to be examined ahead of next week’s election. It’s already established that the fee will be passed on to energy consumers, that is, all of us. As with all taxes on consumption, the more you consume, the more you pay.
For households, the direct costs of the carbon fee would vary substantially, depending on whether you have a car or two, and the amount of fossil fuels burned to provide heat and electricity for your residence.
In 2020, for a Bellevue family with two cars and a home that relies on Puget Sound Energy (PSE) electricity and natural gas, these costs could total more than $240, according to information from the Federal Highway Administration and a PSE forecast on rate impacts.
But if you live in Seattle, had only one car, and relied on Seattle City Light for power and heat, your first-year carbon fee likely would fall below $100.
There’s more.
Todd Myers, a Washington Policy Center staffer who has been highly critical of the measure, included in his initiative analysis a look at costs outside the Puget Sound area. He estimates they could run as high as $305 for the first year in Spokane, where heating costs are higher.
As ST reporter Hal Bernton writes, the goal is to drive down use of fossil fuels, which would, presumably, reduce costs. But it’s unclear how that would work, including the costs of transitioning to alternative fuels.
“It is a tricky analysis, ” said Rob Williams, a senior fellow at Resources for the Futurewho analyzes the economic impacts of carbon pricing. “The most important piece is the spending, and that’s harder to model. Just what it would be for is not nailed down.”
A prominent union opponent of the measure cites the impact on low and middle income households.
“It’s clear the burden of paying for this fee will disproportionately affect working people,” said Steve Pendergrass, president of the Iron Workers District Council of the Pacific Northwest, which has come out against the measure.
Washington state’s main labor organization lives by a proud motto: “Working people standing together.” But as voters cast their ballots in the midterm elections, they will have to decide on a carbon fee initiative that has divided the state’s labor movement, causing disunion among scores of unions…Several of the state’s top labor leaders, including the president of the Washington State Labor Council, helped write the initiative, ensuring that it included provisions favored by organized labor…But unions that represent the building trades and refinery workers have come out against the carbon fee, fearing it could cost them jobs. Lee Newgent, former executive director of the Washington State Building & Construction Trades Council, says the initiative’s supporters exaggerate the clean-energy jobs that might result and downplay the jobs threatened.
“This whole idea of green jobs is bunk,” said Newgent, a paid consultant to the “No on 1631” campaign. “The supporters can’t tell what green jobs will be created, just that they will. That is not enough for me.”
And it’s taken as a given that the measure would have negligible impact on climate change in and of itself. The goal of proponents is to serve as an example for other states to follow. (For a skeptical take on what the nation can do without a strong international commitment, see this commentary.)
The Association of Washington Business writes,
AWB opposes I-1631 because of its costs to employers and families in the form of higher fuel, energy and natural gas costs. There are also concerns about a major new unelected bureaucracy that would be created by the initiative and would be tasked with allocating billions of dollars in tax money raised from the new carbon fee.
The ST story discusses some of the economic impacts of the higher fuel costs.
The No on 1631 campaign, which has largely been funded by the oil industry, hired NERA Economic Consulting to study the carbon fee’s economic impacts. The consulting company, which often does work for oil and gas companies, offered a bleak forecast of higher fossil-fuel costs dragging down the broader economy.
The consulting group projected the total costs of the carbon fee for the average Washington household would start at $440 in 2020 and rise to $990 by 2035.
If households end up paying a lot more for fossil-fuel energy, they would have less to spend on other things, such as eating out or shopping. The study also projects a net reduction in work income, mostly in commercial businesses such as retailers, health care, hospitality and personal care services.
As the ST points out, I-1631 backers dispute the estimates as being “grossly inflated.” As mentioned above, it’s complicated.
Williams, the Resources for the Future analyst, said that it is hard to know whether the assumptions the consulting firm makes are reasonable. He said the carbon-fee impacts on the broader economy would push average household costs higher, and estimates the annual total at about $300 in 2020.
What we know for sure, though, is that the costs will be passed on, with consequences.
