Washington Climate Collaborative Issues Cap-andTrade Economic Impact Analysis

The Washington Climate Collaborative today released an analysis of the Economic and Environmental Impacts of the Carbon Pollution Accountability Act (CPAA) in Washington State.  Or, more simply, they released a study of the costs and effects of Gov. Jay Inslee’s proposed carbon cap-and-trade plan. The research was conducted by Energy Strategies LLC and researchers from two universities in the Northwest.

Here’s the press release and one-page fact sheet. The key  employment and tax conclusions:

Over the next 20 years, implementation of CPAA will result in an average annual loss of approximately 56,000 jobs with nearly 6,000 of those annual lost jobs coming from manufacturing.

Total aggregate worker and proprietor’s income will be reduced by an annual average of $3.1 billion per year. If divided by total Washington households this is equivalent to an annual average $1,200 reduction per household. 

Washington will see an average annual net tax revenue loss of $658M from lower sales, property, and excise taxes resulting from reduced future economic growth. The average annual net revenue raised from the program will be just under 60% of the Governor’s projections.

And the impact on families:

The average Washington family is expected to see a $56 per month direct increase in their monthly gasoline, heat and electricity bill. This does not include the indirect cost increases in other goods like food. 

The price of a gallon of gas is expected to immediately increase by $0.11 per gallon and $0.39 per gallon by 2035 under CPAA.

The CPAA is a key part of the governor’s 2015 policy agenda. Analysis from the governor’s office concludes:

1. The net statewide economic effects are extremely small in relation to the state economy. Employment, output, income and inflation-adjusted income are essentially unchanged under the carbon charge policy. Most of these measures show slight improvement over 20 years. A very small decline in inflation-adjusted income is extremely sensitive to inflation assumptions over the study period…

2. Inflation-adjusted fuel and energy prices could increase due to a carbon charge, compared to a “business as usual” baseline, as follows:

Gov. CPAA impact table

As the Spokesman-Review editorializes this morning, at this stage of critical transportation negotiations, the governor’s plan adds complexity. And, according to the WCC, has significant unintended consequences. 

There’s doubtless time to debate the conflicting analysis. There’s not, however, time to delay making the necessary transportation investments now. Again, echoing the S-R, it’s time to raise the gas tax.