Study estimates carbon tax costs

Study estimates carbon tax costs
A report on Initiative 1631 by an independent research firm and commissioned by the opposition estimates that the household costs of the proposed carbon tax would be $440 in 2020 and $990 by 2035. Photo: Created by Artmonkey - Freepik.com

When all’s said and done, a carbon fee proposed under Initiative 1631 would increase total costs for the average Washington household by $440 in 2020 and nearly $1,000 by 2035. That’s according to a report conducted by global firm NERA Economic Consulting (NERA) and commissioned by the No on 1631 campaign.

Much of the study’s conclusions mirrors arguments made by trucking industry members, utility providers and private sector labor unions that the carbon tax would increase energy rates and harm the state’s business climate.

If implemented, I-1631 would set up a $15-per-ton carbon “fee” on certain emitters starting in 2020, a rate which would increase by $2 every year. However, exempt from the tax are industries such as coal-fire power plants scheduled for closure in 2024, in addition to energy-intensive employers vulnerable to out-of-state competition. The NERA report concluded that because of this, the fee would only apply to 59 percent of state carbon emissions – that figure is even smaller if natural carbon emissions are included.

The state Office of Financial Management estimates the tax would bring in $2.2 billion over a five-year period. The NERA report puts the revenue collections at $30 billion by 2035; that cost is borne in the form of higher energy costs.

By 2035, those rates would include the following increases as a result:

  • $.59 per gallon of fuel
  • $.66 per gallon of diesel
  • $3.54 per MMBtu of natural gas
  • $1.7 per kWh of electricity

Fears of “pancaking” I-1631’s tax on top of existing regulations and higher costs for ratepayers prompted public utilities district commissions (PUDs) such as Benton and Franklin to pass resolutions against it. Earlier this month, the three-member Grays Harbor PUD commission voted unanimously to oppose the initiative. The resolution claims that the tax would add an estimated $1.85 million in costs by 2020, and $2.37 million in 2021.

As part of I-1631, revenue would be spent as directed by an oversight board primarily composed of appointees of the governor. That – along with the increased gas prices – is why many of Washington’s private labor unions oppose the initiative. The list includes the Washington State Building and Construction Trades Council (WSBCTC), the International Union of Operating Engineers Local 302 (IUOE 302) and the Iron Workers District Council of the Pacific Northwest.

“Here in Washington, we’ve all grown tired of excess taxes that raise the cost of living and don’t deliver results” IWDCPNW Council President Steve Pendergrass said in a statement. “Before asking the voters of this state to hand over even more money, our local leaders will have to do better than vague plans and empty promises. We are opposing I-1631 because we don’t believe the collected funds will be spent effectively.”

IUOE 302 Vice President Darek Konopaski said in a statement that “it’s irresponsible to collect money for a flawed initiative, all while our roads and bridges continue to deteriorate. Our transportation infrastructure is in desperate need of essential improvements.”

A 2012 task force headed by former governor Christine Gregoire recommended that the state invest $21 billion between 2013-2021 “to preserve the transportation system and make strategic investments in the corridors that hold the key to job creation and economic growth.” However, the report concluded that $50 billion would need to be spent to fully meet the report’s objectives.

While the I-1631 supporters are the initiative would boost the clean energy industry, NERA report estimated that even with all the positive effects accounted for and assuming “that all fees would be spent on various projects and causes, as called for in the Initiative,” the carbon tax would still reduce gross state product (GSP) by $2.2 billion in 2020 and $5.3 billion in 2035.

Despite provisions in the initiative language setting up financial aid to certain businesses, the tax would reduce state worker annual income by $800 million in 2020 and $3.2 billion in 2035, according to the study. It would also have a disproportionate impact on certain industries such as health care and hospitality which, according to the report, would compose less than five percent of emissions in 2020.

Although the NERA report concluded that the carbon tax would reduce emissions by 12 million metric tons between 2020-2035, the Grays Harbor PUD resolution notes that Washington state’s carbon emissions are some of the lowest in the United States.”

Washington state is responsible for .021 percent of total global emissions.

LEAVE A REPLY

Please enter your comment!
Please enter your name here