Taxing carbon: Making an improbable comeback in state budget discussions?

Plenty of recent press coverage suggests that some form of carbon taxation may find its way into an eventual state budget resolution. While it likely still faces heavy sledding in the Senate, House Democrats say they may have the votes

Rep. Joe Fitzgibbon, D-Des Moines and the point man on the carbon legislation, said providing 50 Democratic votes for the new plan will depend on how it eventually fits in with the final budget package that the Democratic-controlled House and Republican-dominated Senate will eventually reach. Right now, the two sides are far apart in the talks on the main state budget.

This isn’t the proposal originally proposed by the governor. But the Washington Research Council’s report on carbon taxation still provides good context for understanding the general issues.

The House Appropriations Committee will hold a hearing on the new bill, SHB 1314, Thursday at 1:00 p.m. The Seattle Times reports on parallel activity in the Senate.

We’re trying to turn this into an economic winner in rural areas, as well as something that is going to deal with our climate-change problem,” said state Sen. Jim Hargrove, D-Hoquiam, chief sponsor of the revised proposal in the Senate.

The Times summarizes key changes in the proposal.

The basic framework of the cap-and-trade system — essentially a new tax on carbon emissions — would remain the same under the revised proposal.

The state would set a cap on carbon emissions and require the biggest emitters, such as refineries and fuel distributors, to buy tradable pollution permits. Over time, the emissions cap would be reduced, forcing industries to cut their emissions or buy increasingly expensive permits.

The Democrats’ new proposal would alter how the estimated $1.2 billion raised annually from carbon fees is divvied up, according to summaries of the bill revisions provided Monday.

 

There’s plenty more in the article…and House Democrats provide this 3-page summary…but those who were skeptical of the original proposal remain skeptics.

“This is still a tax on energy,” said state Sen. Doug Ericksen, R-Ferndale, adding that the effort seems to be more about Democrats’ desire to raise taxes than climate policy…

And Brandon Housekeeper, a lobbyist on environmental issues for the Association of Washington Business, said the various subsidies and rebates in the legislation only prove the cap-and-trade plan will add costs for businesses.

See also Jerry Cornfield’s account in the Everett Herald. 

It’s unclear whether there’s much momentum behind the alternative proposal. That it’s surfacing at this time suggests how divided the Legislature remains on Day 14 of the 30-day special session.

WRC publishes new paper on cap-and-trade, carbon tax

UPDATE: After we posted this we found this post from the National Association of Manufacturers’ Shopfloor blog that discussed federal carbon tax proposals. It links to a NAM economic analysis.

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With the House budget scheduled for an Appropriations Committee hearing Friday, this new Special Report on carbon taxation from the Washington Research Council is timely.  The Council’s analysis compares and contrasts Gov. Inslee’s proposed cap-and-trade legislation, HB 1314, with Carbon Washington’s proposed carbon tax initiative.

  • SHB 1314, based on a proposal by Gov. Jay Inslee, would establish a cap and trade system to limit greenhouse gas emissions.

  • Total state carbon emissions would be capped. Emission allowances would be bought and sold.

  • Fuel suppliers, electricity importers, and large industrial plants would be among those required to pay for allowances to continue to operate.

  • Cap and trade would act as a tax increase on these industries, with additional revenues going to transportation, education, tax credits for the working poor,among other programs.

  • A second proposal comes from a group called Carbon Washington, who is planning an initiative campaign to impose a tax on carbon emissions.

  • This carbon tax, unlike the cap and trade proposal, is intended to be revenue neutral.

  • The new tax would be offset by an eventual 1 percent sales tax reduction and a reduced B&O tax on manufactured goods to be exported from the state.

The governor made his cap-and-trade system central to his proposed budget. It’s has been both controversial and only partially understood. The WRC report does good job of clarifying how the policy might work, contrasting it with the more straightforward, though also controversial, carbon tax proposal. The Council concludes:

SHB 1314 is unlikely to pass the Legislature this session. However, a very similar cap and trade system may well come before voters as an initiative in November 2016. And it could be joined on the ballot by Carbon Washington’s carbon tax initiative…

Putting a large price on carbon will raise the costs of living and doing business in this state. If we go it alone, much of the reduction we achieve here will be offsetby increases elsewhere. Pollution will be moved, but not reduced. Jobs will follow the pollution.

As these policies will likely be the focus of intense debate in coming months, the WRC report provides important information to inform that debate. RTWT