Reissued Carbon Cap Rule Under Fire

Re-isuued Carbon Cap Rule Under Fire
Protecting environmental quality while fostering economic growth is a priority for Washington state. Whether a pending state carbon cap rule advanced by executive order would do that or not, is the subject of a growing debate. Seen here is Mount Rainier National Park. Photo: Matt Rosenberg.

A revised Washington state carbon cap rule will smack consumers hard, offers few real compliance pathways and could export jobs and carbon out-of-state, say targeted emitters and a Senate Republican lawmaker. However, a key Washington State House Democrat says that while the proposed rule is far from perfect, it’s justified, and could prod passage of a better replacement by state legislators as soon as the 2017 session.

An earlier version of the rule this year was roundly panned by major emitters, especially so-called Energy Intensive Trade Exposed (EITE) industries. The Washington Department of Ecology, at Governor Jay Inslee’s direction, rescinded it in late February. Ecology then reissued a new version on June 1. Insee first proposed the rule last summer. It is to be finalized by this September.

According to an Ecology news release, “The rule would require businesses and organizations that are responsible for large amounts of greenhouse gases like natural gas distributors, petroleum product producers and importers, power plants, metal manufacturers, waste facilities, and others to show once every three years that they’re reducing their emissions an average of 1.7 percent annually.”

They can cut emissions on-site; buy “emission reduction units” from other emitters who are below quota; earn them from projects like methane-to-energy converters; or buy “carbon reduction allowances” from out-of-state markets approved by Ecology.

Starting next year 24 Washington state employers each emitting 100,000 metric tons of carbon or more would mandatorily enter the program, followed by dozens more in subsequent years as the ceiling is lowered. The entry date for EITEs would be pushed back several years, compared to before.

Ecology’s special assistant on climate change policy, Sarah Rees said, “Carbon pollution has reached rampant levels and we’re committed to capping and reducing it. Climate change is the most significant environmental issue of our lifetime, and governments need to act now to protect what we have today for future generations.”

Latest Data: State Emissions Trending Downward Toward 2020 Goal

Yet according to Ecology’s own reports, emissions of carbon dioxide (CO2) and CO2-equivalent greenhouse gases have been dropping annually in Washington, at least through the most recent year for which data are available. Emissions were nearing the state’s 2020 goal without a new regulatory mandate.

Ecology’s most recent greenhouse gas emissions inventory, released in December of 2014, shows that in 2011 the number of million metric tons of CO2 and equivalents (MMtCO2e) emitted in Washington totaled 91.7. That was down sharply from 101.6 just four years earlier.

The state’s 2020 goal is to reduce emissions to the 1990 level of 88.4 MMtCO2e. The target was established in a sub-section of the 2008 state law, RCW 70.235.

Estimated emissions levels for 2012 and 2013 are due from Ecology this December, and 2014 and 2015 data two years after that. It’s possible the latter figures will skew higher than previous years not because of industry, but rather, Washington wildfires.

According to a report from State Rep. Tom Dent (R-13), one million acres burned last year; and that released between 12 million and 46 million metric tons of carbon emissions. This represents 13 to 50 percent of the 2011 total for the state. There were heavy wildfires in 2014 as well.

Less Than One-Third Of One Percent Of Global CO2 Emissions

Still, the global share of emissions from the state will remain minuscule. Washington’s 91.7 million metric tons of CO2 in the most recently-reported year of 2011 is less than one third of one-percent of the most recent global total of 32.1 billion. That 2015 figure comes from the International Energy Agency.

Washington Carbon Tax Vote A Wild Card

Complicating the carbon cap rule, Washington voters in November will decide Initiative 732 to impose a carbon tax in Washington. John Rothlin, Director of Government Affairs for the natural gas utility Avista, has estimated I-732 would cost Washington households an average of $400 more year at the outset, and $1,200 annually later on.

Sen. Braun: Low-Income Households Would Be Hard Hit

State Sen. John Braun (R-20), a member of the Energy, Environment and Telecommunications Committee, said the cap rule-making will yield an added financial burden to Washington households.

“It will have a big impact on lower-income individuals and households” through the price hikes for “consumer motor fuel and home heating. There would be be a much heavier burden for people living at the lower end of the economic scale.” The price of housing, already at alarming heights in Central Puget Sound, would grow statewide as with the rule’s implementation costs increase for materials such as concrete, steel and aluminum, Braun added.

Delay The Rule, Braun Urges

There’s a better approach and it involves lawmakers, Braun said. “Ideally, let’s step back. Don’t do this rule at the same time as 732,” the carbon tax initiative. “In January a lot of folks will want to talk carbon, it’s best to wait and see what happens with 732. Either way, many different interests will be ready and willing to forge a common understanding, and approach.”

State Rep. Joe Fitzgibbon (D-34), Chair of the House Environment Committee, said the House “had come up with a much better way” to institute carbon caps via HB 1314 in 2015. Requested by Inslee and sponsored by Fitzgibbon and a host of other House majority Democrats, the bill cleared Environment, but died in Appropriations.

The rejected 2015 bill laid out a much more robust cap and trade system, and better compliance options, the lawmaker stated. “I hope that’s becoming clear to regulated entities,” Fitzgibbon said.

Fitzgibbon added that although the current draft administrative rule is “very complicated” and “an imprecise tool” for achieving greenhouse gas emission cuts, a “purely regulatory approach like this” is the last option left to Inslee after the failure of both HB 1314 and a proposed low-carbon fuel standard in the legislature last year.

Fitzgibbon said one reason HB 1314 failed to gain momentum in the House last year was because stakeholders warned that passage of the big transportation funding bill, which included a gas tax hike, could be threatened if a carbon cap bill were approve in the same session.

Another Approach: Lawmakers Could ‘Supersede’ The Approved Rule

Now the transportation bill is law, and administrative enactment of Ecology’s carbon cap rule this fall as currently planned doesn’t mean a better approach could not be adopted by the lawmakers, Fitzgibbon said. In the 2017 session, “if we had good enough legislation” on a carbon cap, “we could certainly supercede” the rule.

Natural gas, oil, pulp and paper, and steel are among industries watching the current proceedings closely.

Patrick Jablonski, environmental manager for Nucor Steel’s Seattle facility, said in a statement the company is still reviewing the new version of the draft rule, but “..we remain concerned that any rulemaking that lacks clarity and brings uncertainty to our business would put us at a significant disadvantage to our global competitors by driving up energy costs. Affordable energy is vital to our ability to compete.”

Jablonski added Nucor’s steel is made from materials that are more than 99 percent recycled and the company already operates “a highly-efficient steel plant” in West Seattle “that is essentially carbon-free.”

‘Ability To Grow’ Constrained

Chris McCabe, Executive Director of the Northwest Pulp and Paper Association, said while the rule was under revision, “we shared ideas” with Ecology in several meetings “but none of our compliance pathways were included. We think the Governor missed the mark completely on trying to protect EITEs’ ability to grow.”

Specific compliance strategies suggested by the association included:

  • credit for more use of bio-mass, which fuels boilers;
  • using site-specific energy efficiency evaluations to guide potential future improvements based on best available technologies;
  • awarding credit multipliers for “early program action” on costly carbon-reducing process improvements that have been already implemented, like combined heat and power systems.

Residential Natural Gas Customers Will Pay

Dan Kirschner, Executive Director of the Northwest Gas Association, representing natural gas and combined (electric and natural gas) utilities, said, “We’re scratching our heads. We combust very little natural gas, only deliver it…It is the broad public that is going to pay for this in higher natural gas costs. Our 1.3 million customers in Washington are the emitters and their behavior is not going to change. They need to heat their homes, and need hot water to shower, and wash dishes.”

The carbon emissions permit-buying provisions are more “problematic” than in the earlier version of the rule, as allowances now would get more constricted over time, Kirschner added. Frank Holmes, director for the Northwest region and marine issues for the Western States Petroleum Association (WSPA), warned it’s dicey to assume the availability of permits. As to their availability when needed by emitters, Holmes said, “who knows?”

If fuel marketers can buy emissions permits, they will have to pass the costs on to their customers, Holmes said. WSPA is still evaluating the rule. The Association of Washington Business (AWB) is conducting a fiscal analysis of the rule’s effects on industry.

National Approach Preferred

Holmes said the whole thing still feels rushed, despite the step back by Ecology to re-draft the rule. “Normally a rule-making this complex and impactful would take two years or three” to work out between regulators and industries, he stated. Ecology’s timeline shows the rule being adopted “on or after” this coming September 15, nine months from first issuance.

“A well-designed national cap and trade or carbon tax program could work,” Holmes said. In 2009, the U.S. House passed cap and trade legislation, the so-called Waxman-Markey bill, but it did not advance in the Senate.

More recently, President Obama’s executive push for the Clean Power Plan is stalled in court. Fitzgibbon said it had limited relevance for Washington because our electric power supply is already low in carbon, due to reliance on hydropower.

Public Hearings This Week In Spokane, Olympia

Public comment on the state carbon cap rule extends to July 22. There will be public hearings this week on July 12 in Spokane at the Davenport Grand Hotel, 333 W. Spokane Falls Blvd., and July 14 in Olympia, at the The Red Lion Hotel, 2300 Evergreen Park Dr. SW. Both start at 6 p.m.

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