Washington Research Council analyzes carbon fee Initiative 1631; Seattle Times recommends a “no” vote.

Initiative 1631 would make Washington the first state in the nation to impose a price on carbon. The Washington Research Council has released an objective analysis of the measure. The WRC summary of the initiative:

This November, voters are being asked to approve Initiative 1631, which would impose a fee on fossil fuels sold or used in the state. The fee would be based on the quantity of greenhouse gases released when the fuel is combusted. The initial rate for the fee would be $15 per carbon dioxide equivalent metric ton. The fee would increase annually by $2 per metric ton plus an adjustment for inflation. Proceeds from this fee would be used to fund yet-to-be-identified programs aimed at reducing carbon emissions, improving climate resilience, and mitigating the impact of climate change on disproportionately affected populations.

The Research Council concludes:

What distinguishes the problem of greenhouse gas emissions is its global nature. The damages from emissions from any particular facility are not concentrated near that facility. While the state faces significant long-run costs due to global warming, there is little that the state can do by itself to avoid these costs. Successfully attacking the global warming problem requires the coordinated action of national governments.

Thus I-1631 by itself can do little to solve the problem of a warming planet. Thegoal of the initiative’s supporters is forWashington to set an example that other states will follow.

Recently, in an editorial opposing I-1631, the Seattle Times editorial board cited the importance of a national, coordinated approach to climate change.

Climate change is a crisis needing an aggressive, coordinated response, not expensive and unaccountable spending measures like Initiative 1631.

Voters concerned about the environment, the cost of living and the sustainability of Washington’s economy should reject this dubious approach.

Instead, Washington should coordinate its response with other states, to prevent cross-border job losses. It should also seek a national carbon tax. I-1631 could set that back, because it’s so porous, lacking accountability and larded with special-interest payouts.

The Association of Washington Business, which opposes I-1631, wrote in July,

“After careful consideration, our members concluded I-1631 is not the right way to reduce emissions,” AWB President Kris Johnson said. “We share the goal of protecting the environment, but this initiative will raise the cost of energy for families and employers while offering little assurance it will result in a meaningful reduction of carbon emissions.”

See also Johnson’s op-ed in the Puget Sound Business Journal (behind a pay wall).

The ST editorial also addressed the costs imposed by the initiative,

For gasoline, it’s equivalent to another gas tax, starting around 14 cents and increasing at least 2 cents yearly. Electricity prices would rise more than 2 percent and natural gas up to 8.5 percent, per the state model.

No, “big polluters” won’t bear these costs. Look at any utility or cable bill to see how taxes and fees are passed to consumers.

I-1631 also discriminates by geography. Away from Seattle’s abundant transit and moderate climate, in the rest of Washington where most live, it’s a largely inescapable, regressive tax especially on middle income families.

Everyone would pay more for housing, food and other goods, because higher energy prices increase their cost.

And, notes the WRC,

The carbon fee would increase the prices of gasoline and other motor fuels. Because of these price increases, the quantities of fuels purchased by motorists would decline and this, in turn, would reduce receipts from the state’s gasoline and special fuels taxes. The model that the state uses to estimate the economic impact of taxes on carbon assumes that the long run elasticity of demand for motor fuel is–.06. (This implies that a 10 percent in- crease in the price of motor fuel will result in a 6 percent decrease in the quantity purchased.) The elasticity of demand is much lower in the short run. Thus the short run impact on fuel tax revenues would be small. However, by 2029, the horizon of the current Transportation Revenue Forecast, a 9 percent increase in fuel prices due to the pollution fee could reduce sales by 5.4 percent.

It’s a consequential and controversial measure. We recommend the WRC report for a more detailed understanding of its economic effects. (See also this economic analysis prepared by NERA for the No on 1631 Coalition.)