It’s easy enough to blanch at the thought of a pulp and paper mill. It’s a little harder to imagine life without the toilet paper, paper cups, laser printer paper and cardboard boxes that are made with what comes out of the mills. The industry is clearly energy intensive but in Washington state has cut overall production-related fossil fuel emissions 20 percent since 2004. Of the smokestack emissions of boilers used in making wood pulp here, 83 percent comes from low-carbon bio-mass or so-called “hog fuel” made of sawdust and tree bark.
Green business practices like biomass-powered boilers are much on the minds of top carbon-emitting Washington state employers these days. That’s because as soon as this summer, they could be forced into new regulatory commitments over the next two decades under a new state Clean Air Rule. Such business-friendly compliance pathways are emerging as a focus because aggregate regulatory costs to industry over the next two decades from the rule could reach hundreds of millions of dollars, quite possibly more.
Governor Jay Inslee mandated the controversial Clean Air Rule executive order strategy in a go-it-alone move last summer after failing to win support from the legislature in 2015 for a carbon tax of his own, and then a low-carbon fuel standard.
A Pre-Election Push For The Clean Air Rule
Inslee is pushing to have the rule in place by this summer under the current Department of Ecology timeline. That’s several months before statewide voters choose between the first-termer Inslee – who lately is under growing fire for lax management by his executive agencies of prisons, transportation, health care and social services – and Republican opponent Bill Bryant, a businessman and former Seattle Port Commissioner.
If the costs aren’t made easier to absorb, industry and labor say, there will be major leakage of carbon emissions and family-wage union jobs to other states and nations where protection of the environment and acceptance of labor unions are far less robust; and wages far lower. And if the rule isn’t made significantly more palatable to targeted industries, it’s likely legal challenges will ensue.
Ecology in a preliminary cost-benefit analysis has estimated $210 million to $510 million in aggregate costs to industry over 20 years from Washington Clean Air Rule implementation. Ecology also stated in the analysis that “for some of the covered parties, these costs are likely to be passed through and borne by their customers.”
A Major Tax Increase On Washington Citizens
Details reveal that the rule gets at 60-some percent of the CO2 and CO2-equivalent emissions in the state but of that, 80 percent is from transportation, said Brandon Housekeeper, Government Affairs Director, Climate and Energy, for the Association of Washington Business (AWB). “This is a tax on energy. The cost of the commodity will go up” and buyers of gasoline, natural gas and electricity will pay more.
In short, the Clean Air Rule would amount to a major tax increase on Washington citizens.
Skepticism On Clean Air Rule Cost Projections
Herb Krohn is the Washington State Legislative Director for the International Association of Sheet Metal, Air, Rail and Transportation Workers Union – Transportation Division (SMART-TD). He’s skeptical.
“I believe these cost estimates” from Ecology “are extremely optimistic, they don’t really know. No one does,” said Krohn.
AWB on March 1 will release an economic analysis of the rule. Although they’re saying nothing about their findings yet, expect to see an upward revision of estimated costs, perhaps significantly higher.
If you’re tempted to consider the Clean Air Rule rule in a vacuum, don’t. There’s more to consider. Washington voters will decide in November on the I-732 carbon tax initiative. That would raise about $2 billion annually from consumers and business, but includes some tax relief as well.
Under the rule, different types of industries will be affected in different ways. So-called energy-intensive, trade-exposed (EITE) industries like pulp and paper, concrete, cement, aluminum and food processing sell to customers who can turn to lower-priced competitors in less-regulated U.S. states, China and other global locales.
Chris McCabe, Executive Director of the Northwest Pulp and Paper Association, told Lens that EITE industries sought exemptions to the Clean Air Rule from Ecology and were refused, so now they’re seeking inclusion of more specially-tailored pathways to compliance, like bio-mass incentives. In a mid-Feburary meeting with Ecology, represented industries suggested eight or nine ways they’d like to be able to comply, but half were tossed out quickly. “It was a terse meeting,” said McCabe, who was in attendance.
Certain offset compliance options are already specified, including hitting specific energy conservation targets, exceeding state goals for workplace commute trip reduction, electrifying truck stops, and improving vehicle fleet efficiency. But they’re not enough for the EITEs in particular, said McCabe.
Carbon Markets: It’s Complicated
Annual emissions ceilings will start with 100 million metric tons of carbon dioxide or equivalents, and ratchet downward to 70 million by 2035. Companies will have to pay for exceeding ceilings, and develop emission reduction plans. An alternative to paying fines or pursuing current off-site pathways is to purchase credit units – essentially permits to exceed the Washington cap – from other North American carbon-trading markets in California, Quebec and nine northeastern U.S. states belonging to the Regional Greenhouse Gas Initiative (RGGI).
A business-labor coalition opposed to the rule, and formed by AWB, is the Washington Climate Collaborative. The group argues it’s bad policy to export environmental compliance spending to other states rather than spend it here to provide energy efficiency aid to consumers.
But trading on carbon markets is something that appeals to Vlad Gutman. He’s Washington Director of Climate Solutions, an environmental advocacy group. “Absolutely, we need a national policy” on carbon emissions, “but we also should not forget” that emergence of carbon rules state-by-state will gradually ratchet up pressure for a uniform national approach.
Leakage Of Jobs And Emission From Washington State Feared
Krohn, of the SMART-TD union, replied that dozens of states in the Central, Southern and Plains regions will not ever voluntarily adopt rules similar to California or Washington state on carbon emissions, so a national policy is in fact required. Without it, he said, “you’ll get no net reduction in greenhouse gas emissions, you’ll just move it around from some states to others.” Manufacturing jobs would migrate out of Washington over time as a result, to states where worker pensions are weaker or non-existent, and wages lower because of greater competition from non-union labor, Krohn added.
State Senator Doug Erickson (R-42nd), chair of the Senate Energy, Environment and Telecommunications Committee, said the combined financial impact of the Clean Air Rule and I-732 on business would be “a huge negative impact on blue collar union jobs.”
Said Housekeeper, “Facilities look at the cost of compliance and are competing within their own organizations for capital resources.” What does headquarters, in another state perhaps, say about “where to invest if onerous rules” come into play in Washington?
State Senator John McCoy (D-38th), the Ranking Minority Member of the Senate Energy, Environment and Telecommunications Committee, takes a different view. He said he doesn’t believe that that the Clean Air Rule poses risks of driving businesses from the state, and that Inslee was entirely within his authority to order its development. Businesses including Boeing, steel manufacturers and pharmaceutical companies are all engaged in working to mitigate environmental impacts and that should be recognized, according to McCoy. At the same time, businesses – particularly major carbon emitters – must do more on environmental protection, he said.
‘Work With Us To Reduce These Impacts’
“We are not interested in running any businesses into the ground,” McCoy said, but the state and its regulators do ask that companies “work with us to reduce these impacts” because air and water pollution control in the face of continued population growth and growing economic activity is a huge priority for Washington. He added, “there are times when a half step is the best you can do. I’m willing to go there. Let’s take a small step toward progress.”
The way forward, some business interests say, is to continue wringing efficiency out of industrial and business operations: something companies are highly motivated to do anyway, for economic reasons.
“Examples include Kennewick’s ConAgra Lamb Weston joining the sustainable business movement in 2010, and achieving a 99 percent waste diversion rate; Yakima’s Shields Bag & Printing Co. investing significant resources in a process that reduces the company’s carbon footprint; and Nucor Steel in Seattle, which is both Washington’s largest recycler and one of the cleanest and most efficient steel mills in the world.”
In late March Ecology will stage two webinars and two public hearings on the rule, in Seattle and Spokane. The deadline for submitting written comments is April 8.
UPDATE: The Department of Ecology on February 26 withdrew the most recent version of the Clean Air Rule and will re-issue it after continuing to review comments received from stakeholders. In an announcement Ecology said the previously scheduled March public hearings in Seattle and Spokane had been cancelled, and new ones would be set. The final issuance of the rule is now to be in August rather than June, as had been expected.