The West
Coast of North America is home to two globally significant models for carbon
pollution limits. California has the continent’s first carbon
cap-and-trade covering the entire economy. British Columbia charges a
carbon tax, and fully recycles the revenues back to citizens via tax reductions and low income credits.
Washington
Gov. Jay Inslee on Dec. 17 made a cap-and-trade
proposal to the 2015 Legislature. This is part of an effort to close
the gap between California and BC, creating a unified West Coast climate policy
block along with Oregon. A carbon policy might be sent to the Oregon
Legislature in 2016. The effort stems from a commitment by the Pacific Coast
Collaborative made up of West Coast states and province. In 2013 the four
leaders of those jurisdictions re-commited to enacting
climate policies coastwide. One idea behind this "West Coast
Agenda" is that solidifying the world’s fifth largest economy around
carbon policy will kickstart action at a national level. The governor's
proposal notwitstanding, any policy design adopted in Washington is
ultimately more likely to look north to BC than south to California. More on that below.
Overall,
it strains belief to imagine anything will spur the U.S. Congress to place
limits on carbon pollution soon, let alone action in two of the greenest states
in the Union. Congressional passage would require both houses solidly
returned to the Democrats or a policy revolution in the Republican Party
(perhaps a “grand bargain” achieved by a President Jeb Bush to cut the deficit
using carbon revenues).
The more
likely scenario is that passage of carbon policy by the Northwest states will
spur continued bottom-up action in states, provinces and cities across North
America. This is an independently valid rationale for acting here in
Cascadia. Any policy we adopt here will have ramifications beyond the
bioregion. Regional politics is tilting the outcome toward a
revenue-neutral carbon tax.
To
understand why, begin with the attitude of most climate-concerned people in Washington
and Oregon. It can be summed up easily – Give me a climate policy,
anything that makes a dent. People understand any climate policy that can
be enacted now will fall short of the radical carbon pollution reductions
needed to ensure climate stability. They know that a full response to
climate disruption will require a massive national and global agenda to advance
clean energy technologies. What they are seeking at the state level
is a stake in the ground to begin the process, something that begins to
significantly reduce our own carbon emissions.
While there
is a vociferous debate over cap-and-trade vs. carbon tax among policy wonks,
people will set aside their differences and support either if there is a solid
chance for enactment. The sense of urgency to limit carbon
pollution trumps arguments over the best way to set those limits.
At this
point two proposals are on the table in Washington state –
Gov.
Inslee’s cap-and-trade and a BC-style revenue-neutral carbon tax forwarded by Carbon Washington. Revenue
neutral means all carbon revenues are recycled back to citizens rather than
being spent by government.
The
governor prefers the certainly of an emissions-based goal, and would like to
line up with the California system. Only a fixed amount of carbon
pollution would be permitted each year. That amount would decline
over time to meet binding state carbon limits. Polluters would have to
secure permits to emit carbon by buying them in an auction. Polluters who
reduce carbon emissions more deeply than required would be able to gain credit
for those reductions in a trading market.
Economists
tend to advocate outright taxes on carbon, a price-based policy. Prices
set by law rather than auction send a more predictable signal, thus providing
greater certainty for carbon-reducing investments including energy efficiency
and renewable energy. The climate grassroots also tends to support carbon taxes
because of the vulnerability of carbon trading markets to manipulation much as housing and energy
markets have been. This potential for financial shenanigans is
acknowledged by the governor’s own Carbon Emissions Reduction Taskforce, though
cap-and-trade advocates maintain that gaming can be prevented with a properly
designed market.
Whatever
qualms people might have about cap-and-trade, the governor’s plan is drawing
broad support from climate-concerned Washingtonians. They want to see
something enacted. Give me a climate policy, they say, anything that
makes a dent.
That is
true even though the Inslee proposal feeds another criticism made by advocates
for revenue-neutral systems, that given a new source of revenues politicians
will spend it however they please. Anyone who reads my climate policy
commentaries knows that I disagree with revenue-neutral schemes, and believe
revenues should be spent largely on carbon-reducing investments.
The governor’s plan, though not revenue neutral, does not do this.
The
governor would leverage the carbon market to solve long-term deficits in
transportation and education funding. The Washington carbon permits
auction is expected to yield around $1 billion annually. The governor
proposes to spend much of this to catch up on a transportation maintenance
backlog and a court-mandated improvement in education spending.
Here is the pie chart from Sightline, which has done a good job
lining out the proposal.
This
shows that the lion’s share of carbon revenues would go to activities that do
not directly reduce carbon pollution. While the transportation piece
includes money for low-carbon options such as transit and electric vehicles,
most goes for highway upkeep. The plan bars spending on expanded road
capacity but frees up gas tax revenues to do exactly that. The low-income
portion includes $100 million to fund a working families tax credit for the
poorest 450,000 families in the state, and affordable housing assistance.
This is meant to balance the impact of higher fuel and utility bills on the
bottom end of the income spectrum. (Though it leaves out many working and
middle class families that are also suffering economic stress from long-term
income stagnation, creating potential for opponents to wedge off traditional
progressive constituencies that might otherwise support climate policy.
The CarbonWA proposal is less vulnerable in this regard. It offers
a similar tax credit plus shaving one-percent off the sales tax.)
Inslee faces
a tough uphill slog moving his package through the Legislature. He can
likely secure passage in the Democratic-controlled House even with a diminished
majority after the November election. But failure to flip the Senate back
from Republican control, despite major campaign funding by California billionaire Tom Steyer and other high-net worth
contributors, guarantees a stony reception in that chamber. Early
reactions from key Senate Republicans have been unfavorable. Inslee
appears to be betting that the urgent need to solve education and transportation
funding challenges will move enough Republicans to support his proposal.
But Republicans are even less likely to approve carbon fees on major industries
than tax increases on individuals. Major industries are their campaign
contributors.
Despite
any concerns over cap-and-trade policy design or spending revenues on roads and
general fund obligations, the climate and environmental community has greeted
the governor’s plan with enthusiastic support. This demonstrates a deep
hunger for carbon limits of any sort. However, if the governor cannot pull one
out of a hat and his package stalls, that same hunger will attach to CarbonWA’s
proposal. The momentum created by the campaign for the governor’s cap-and-trade
will transmit to CarbonWA’s BC-style carbon tax.
Give me a
climate policy. Anything that makes a dent.
In March
CarbonWA plans to introduce an initiative to the Legislature to enact its
proposal. That sets off a process of signature gathering. CarbonWA
intends to put funds into this. It will not be a total volunteer
effort. So between funding and citizen enthusiasm, there is a realistic
possibility that the 250,000-signature target will be reached. If CarbonWA is
successful the Legislature in January 2016 will have three options. Enact
the proposal. Send it to the November ballot. Or send it to the
November ballot with a proposal of its own.
That
could be a cap-and-trade, though the general reaction is that putting such a
complex measure before voters is daft. It could be a carbon tax to fund
education much as Rep. Joe Fitzgibbon has proposed. The prospect of
competing initiatives raises concerns, but it would make an interesting
debate.
While I
am not as in touch with Oregon politics, safe to say if there is major momentum
for a carbon tax north of the river it will resonate south. As in
Washington the Oregon grassroots tilts toward carbon tax over cap-and-trade. Oregon Climate is already building support
for a revenue-neutral carbon fee in the Beaver State.
What is
clear is that if the Inslee climate package bogs down in the Washington Senate
the climate grassroots will not wait for legislative action in some future
session (such as 2017 with a more favorable Senate line-up). The
political system has repeatedly failed to deliver meaningful climate policy,
whether it was the Washington state carbon cap enacted without teeth in 2008 or
a federal climate bill that didn’t make it at all in 2010. In 2015 people are
out of patience. If the system fails to deliver this time citizens will
take climate leadership into their own hands. Grassroots activists will go to
the streets, gather signatures and seek a 2016 ballot spot.
As the
only climate policy game in town this will represent a fait accompli forcing
the hand of political leaders, major funders and professional advocacy groups.
They will have to decide whether to support the measure or risk letting a major
climate policy initiative fail, either by not gathering enough signatures in
2015 or votes in 2016. Have no doubt that fossil fuel interests will
weigh in heavily against the measure. They spent a mind-boggling $721 million
in the 2014 election cycle.
Gov.
Inslee is making a bet that the need to fund education and transportation is so
compelling that he can swing Republican support to a carbon pollution cap. He
may be able to do this, and more power to him if he can. But if he can’t,
leadership and momentum move from Olympia to the grassroots, to CarbonWA’s
BC-style carbon tax. If it does I’ll be right there, any quibbles over
revenue-neutral notwithstanding.
Give me a
climate policy. Anything that makes a dent.
This comment has been removed by the author.
ReplyDeleteThanks for your analysis Patrick. It is much appreciated by those of us who are generally allergic to the "sausage factory." I only wish the Governor was more bold and creative. I'm afraid that his incrementalist approach is uninspiring not just to me, but to the citizens of Washington State who desire clear, inspiring solutions.
ReplyDeleteBill
DeleteInslee's plan is a good one. The only way it will pass is if we advocate for it to our state Senators and to our newspapers. I'm doing that as much as possible.
Inslee’s cap and trade:
http://daily.sightline.org/2014/12/18/why-the-carbon-pollution-accountability-act-is-a-big-awesome-deal/
http://www.governor.wa.gov/issues/climate/documents/CarbonPolutionAccountabilityAct2015_Z-0307.2.pdf
Thanks Patrick.
ReplyDeleteAre you sure the BC carbon tax is rebated to the people? I thought it went into the general fund.
Thanks. Now clarified.
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