by Hans D. Stroo on February 12, 2016
On February 9th, Senators from the Energy, Environment & Telecommunications Committee convened to discuss the revenue-neutral carbon tax: Initiative 732. In attendance were 79 residents who came to provide input: 51 in support, 20 in opposition, and 8 undeclared.
I-732 is on track to appear on the November 2016 ballot. It would impose a revenue neutral carbon tax on the state. The tax would begin at $15 per ton in the first year, increasing to $25 per ton in the second year, and then ratcheting up each year thereafter by 3.5% plus inflation (up to a maximum of $100 in 2016 dollars). To offset this new tax, the initiative bundles in some tax cuts — a one percent reduction in the sales tax, a $1,500 tax rebate for low-income working families, and a reduced B&O tax on manufacturing.
INITIATIVES TO THE LEGISLATURE
In Washington State there are two types of ballot measure: Initiatives to the People and Initiatives to the Legislature. Once enough valid signatures are collected, Initiatives to the People are placed directly on the next general election ballot for a vote. Initiatives to the Legislature are less common and more complex. Upon signature verification, these initiatives go before the Washington Legislature at its next regular session. The legislature may take one of three actions:
- Adopt the initiative as proposed. It becomes law without a vote of the people.
- Reject or refuse to act on the proposed initiative. If this occurs, the initiative must be placed on the next general election ballot.
- Approve an alternative to the proposed initiative. If this occurs, both the original proposal and the legislature’s alternative must be placed on the next general election ballot
The Deputy Solicitor General appeared before the hearing to explain some of the legal context for I-732 as an Initiative to the Legislature.
- If the legislature chooses to adopt 732 as written, then it becomes law without any opportunity for a gubernatorial veto.
- The legislature can approve an alternative. Let’s call this potential alternative 732-B. If this occurs, the ballot format would first ask the voter, “Do you want to 1) make a change or 2) retain the status quo?” Then the voter would be asked, “Do you prefer a) the original ballot measure circulate on petitions or b) the legislatively approved alternative?” Voting to retain the status quo on the first question will not prevent voters from expressing a preference on the second question.
Is I-732 the impetus that legislators have been needing to come together and approve their own bipartisan carbon reduction plan? Isaac Kastama, Director of Government Affairs for the Business Alliance, expressed this point of view. “One problem with initiatives is that they are written in stone,” he commented, despite all the new understandings that have been reached since the intiative was first launched. An improved 732-B is a “a serious opportunity,” Kastama testified, “to come up with a solution that works for businesses and the electric sector.”
The Business Alliance is heading a coalition of advocacy partners in the carbon reduction space this year, including Energy Northwest, Inland Power, Benton PUD, and Franklin PUD.
Professor of Atmospheric Sciences at the University of Washington
Dr. Cliff Mass testified in support of I-732. Mass has studied the weather and climate of this region for over 30 years and published over 100 papers. He also writes prolifically on his blog about the topic.
Mass described himself as “a moderate on the topic of climate change who has spoken out against the unfounded claims on both sides of this issue.”
As evidence of his evenhanded approach, he highlighted his public objections to claims that greenhouse gas increases have caused disappearing snow pack, dying oysters, or extreme weather like last year’s heat wave. At the same time, he’s spoken against claims propagated by climate change deniers. “What is true,” Mass told the senators, “is that the best science and the most sophisticated models that we possess project that increasing greenhouse gases like CO2 will greatly alter the weather and climate of our state and of our region in the second half of our century. The heaviest precipitation will become more severe. Flooding will worsen. Sea levels will rise. Temperatures will increase. And the mountain snowpack will diminish.”
“I-732 represents a powerful approach to reducing carbon emissions by taxing carbon and letting the free market decide on the best approach. Now some people say that we should not bother with mitigation here in Washington State because we are only a small part of the problem. But every locality is a small part of the problem. And only if everyone does their small part can progress be made on the global threat. We live in a technologically sophisticated state. Pressure to reduce our carbon footprint (like 732) will result in new technologies, new businesses, and enhanced economic opportunities for our state… I-732’s revenue-neutral approach will make our tax system less regressive… If both sides of the aisle succeed in doing this together, it will be an extraordinarily positive bipartisan example for the rest of the nation.”
Co-founder of Washington BusinesS Alliance
David Giuliani is a serial entrepreneur who was lead inventor and CEO for the Sonicare toothbrush and Clarisonic face brush companies. He also co-founded the Washington Business Alliance. He brought both a business and engineering perspective to the issue, stressing the need for evidence-based, technolgoy-neutral solutions.
“People in Washington want something done about climate change,” Giuliani said. “The question is: what? What we need is a comprehensive plan. One that both reduces carbon and strengthens our economy.”
Giuliani explained the characteristics of an ideal solution:
- putting predictable prices on carbon to drive innovation and also protects sensitive business;
- leveraging Washington’s clean electric system;
- motivating investments in the low cost ways available to reduce carbon;
- rewarding us when we achieve our carbon reduction goals;
- funding the very real need for environmental remediation;
- reforming existing wasteful programs;
- and reducing the regressiveness of our current system.
He urged legislators to heed Tony Blair’s advice from his 2014 visit to Seattle. Quoting Blair, Giuliani said: “Don’t try to get people to stop consuming what they want. Instead, go for breakthrough technologies. Accelerate them, provide incentives, and make business a partner. Business needs to see itself as a partner in bringing about needed change — nothing else will work.”
Director of Government Affairs at Association of Washington Business
Houskeeper was critical of I-732’s supposed revenue-neutrality. “[It’s] a concept worthy of pursuit, but it’s also worth pointing out that when we talk about revenue-neutrality, we’re [applying the concept] to the state of Washington and not the businesses or the ratepayers who will be paying the tax…. Somebody is going to win and somebody is going to lose in this proposal.”
Houskeeper emphasized the place of the proposed carbon tax within the larger structure of carbon-related programs and regulations. “We have to look at this proposal and the entire regulatory environment that we’re currently faced with,” he testified. “We aren’t just looking at 732, but we’re also looking at the Governor’s carbon rule as it’s moving forward… We’re looking at our state’s obligations under the Clean Power Plan. We’re looking at other ballot measures that may come forward. And then you all know of the ancillary policies around carbon. There are many policies that he state has adopted over many years that are cost drivers for the business community. Those are things we must consider as we look at I-732. We have regulatory uncertainty in Washington and we think that I-732 adds to that regulatory uncertainty.”
Washington Trucking Association
Call spoke on behalf of the state’s trucking industry. She testified that their “biggest concern with the introduction of a carbon tax is the additional costs that it will impose on Washington-based businesses.”
Fuel expenses make up “one-third of a truckload carriers operating costs,” Call claimed. “Truckload carriers have enough onboard fuel to travel between 1,600 and 1,800 miles before refueling. That means that if fuel in WA is more expensive. Carriers coming in from outside the state will not purchase fuel here. This puts carriers who are forced to purchase fuel here at a tremendous disadvantage in controlling their costs when they are subject to higher fuel prices compared to out out-of-state competitors.”
Call spoke in strong terms about the potential negative impact on the trucking industry. “We are fortunate to have four of the [nation’s] largest truck carriers here in Washington operating thousands of trucks and providing family wage jobs and benefits,” Call said. “A carbon tax will have a negative impact on their financial stability.”
Founder and co-chair of Carbon Washington
“Stand-up Economist” Bauman holds a Ph.D. in Economics from the University of Washington. He is the initiative’s longtime advocate and chief sponsor
“Economics teaches us that the free market system provides a strong foundation for a prosperous society,” Bauman testified. “[It] also teaches us that there are instances of market failure. The carbon pollution that contributes to climate change is one such instance. And economics teaches us that the way to deal with it is to put a price on carbon (for example, with a carbon tax) in order to promote conservation, innovation, and the dev of new technologies.”
Bauman explained the logic behind the taxes revenue-neutrality: “The best way to minimize the economic impact of such a tax is by recycling the revenue into reductions of existing taxes. The basic theory then is quite simple: we should be taxing bads rather than taxing goods.”
I-732, as Bauman explained, is inspired by a policy in British Columbia. B.C.’s right of center government created a $30/ton carbon tax in 2008 and used the revenue to reduce personal and corporate income taxes. Note that the I-732 tax would top off at a significantly higher $100/ton.
Bauman claimed that the policy had “successfully reduced emissions” in British Columbia. He said that the appeal of the policy lies in its simplicity and transparency. “It can be described in a haiku, Bauman mused.
$30 for each ton,
Supporters present represented groups including Carbon Washington (the organization behind the initiative), Carbon Thurston, the League of Women Voters of Washington, Olympia for Confronting the Climate Crisis, and Unitarian Universalist Voices for Justice.
Those present to voice criticism of I-732 represented organizations including Ash Grove Cement Company, Association of Washington Business, Avista, Benton PUD, Cascade Natural Gas, Cowlitz PUD, Franklin PUD, Industrial Customers of Northwest Utilities, Lewis PUD, Northwest Food Processors Association, Northwest Pulp & Paper Association, OneAmerica, Progreso: Latino Progress, Washington Association of Wheat Growers, Washington Education Association, Washington Food Industry Association, Washington PUD Association, Washington Rural Electric Cooperative Association, and the Washington Trucking Association.
Several who attended did not have a declared position on the initiative. They represented such groups as Chelan PUD, Kaiser Aluminum, the Saltchuk Family of Companies, Snohomish PUD, Washington Business Alliance, Washington Conservation Voters, Washington Environmental Council, and the Washington Policy Center.