Recently there has been significant conversation in our state about climate change policy. Washington State residents have found need to evaluate many proposed policies aiming to price and regulate greenhouse gas emissions. A carbon tax appeared on the ballot in 2016 via I-732. It was rejected by voters, but a different carbon tax proposal will likely appear on a future ballot. Several distinct carbon tax proposals are floating around the state legislature during the 2017 session. At the direction of Governor Inslee, the state Department of Ecology enacted a Clean Air Rule (CAR) to cap emissions as of October 2017.
At the Business Alliance we began to wonder how effective these different policies are likely to be at actually reducing GHG emissions and at what price. So we developed analytical software tools to evaluate the many scenarios being proposed. In evaluating all these proposals, voters and lawmakers alike are facing a lack of basic information about the different proposals. It’s difficult to identify comparative fiscal impacts, likely changes in energy costs, and the projected effectiveness of each policy in lowering greenhouse gas (GHG) emissions. That is why the Washington Business Alliance developed the GHG Reduction Explorer, intending to project the outcomes of various policy proposals that aim to price and regulate greenhouse gas emissions.
The Business Alliance recently shared the model with the Washington Departments of Commerce and Ecology, who looked “under the hood” to review the model and determined it has merit as a tool to evaluate legislative proposals. The two state agencies jointly concluded that the model has a significant basis in CTAM with appropriately added and transparent assumptions based on sound data.
The GHG Reduction Explorer builds on the Carbon Tax Assessment Model (CTAM) maintained by staff in the Washington State Energy Office and the CAR Cost-Benefit Analysis created by the state Department of Ecology. The GHG Reduction Explorer incorporates modest modifications to CTAM, and adds functionality to gauge the fiscal and environmental impacts of dedicating revenue to carbon reduction investments. Without a reinvestment mechanism, the GHG reduction potential of a tax is limited to the deterrent effect of higher prices on fossil fuel consumption.
Results drawn from the GHG Reduction Explorer have already been introduced in two legislative hearings — a Senate Committee Hearing for Sen. Hobbs’ bill (SB 5385) and a House Committee hearing on Rep. Fitzgibbon’s HB 1646. Click here to read that analysis. It is currently being shared in briefings with lawmakers, business and environmental groups, and state agencies.
The GHG Reduction Explorer model incorporates the Department of Ecology CAR and considers overlap between emissions reductions achieved with the simultaneous implementation of CAR and a carbon price.
In its current iteration, the GHG Reduction Explorer user interface allows users to provide the inputs including (but not limited to):
- Is Ecology’s Clean Air Rule in effect (Yes or No)?
- What is the initial price charged per metric ton of CO2, and starting in what year?
- At what annual rate does the tax increase?
- What percent of revenue is reinvested in carbon reduction projects?
- Are exemptions in place for the following sectors (from either the carbon tax or the CAR):
- Petroleum producers and exporters?
- Power producers?
- Energy-intensive trade-exposed (EITE) industries?
- Other, non-EITE industries?
- Local natural gas distribution companies?
The model provides the following outputs, tightly and responsively linked to the user inputs described above:
- Cumulative and annual GHG reductions over time;
- Impact on price of gasoline, electricity, and natural gas;
- Net fiscal impact (tax revenue);
- Clean Air Rule compliance costs;
- the cost effectiveness through 2035 measured in dollars collected per emissions reduced.
Now that the Business Alliance has achieved its objective of validating the existing model with state authorities, the next step is to share the model with lawmakers, environmental groups, and business organizations. By engaging partners, the model can be fine-tuned and the quality of discourse around carbon reduction policy can be greatly improved. Going forward, the Business Alliance aims to add to the range of policies and the number of states that the tool can model.
Contact the Business Alliance today and set up a presentation of the GHG Reduction Explorer for your business or organization.