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.


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