Industry members urge restraint with carbon tax

Industry members urge restraint with carbon tax
SB 6203 is Governor Jay Inslee’s proposal for a $20-per-ton tax on carbon emitted by fossil fuels and electricity. The bill garnered support at a January 16 public hearing of the Senate Committee on Energy, Environment & Technology, though industry members warned that the wrong policy could result in increased global pollution as energy-intense activity shifts from Washington to global competitors. Photo: Frank Kovalchek

Governor Jay Inslee’s efforts during recent legislative sessions to impose a statewide carbon tax have been unsuccessful, but with Democrats now controlling both chambers, this year may prove different.

A January 16 public hearing of the Senate Committee on Energy, Environment & Technology for SB 6203 drew a large crowd that included supporters who see it as a vital measure to reduce the state’s carbon emissions, already among the lowest in the nation, and energy industry members who emphasized the potential financial impact to utility and fuel prices and urged lawmakers to tailor the bill accordingly.

The question remains whether the proposal, which could add another 35 cents to every gallon of gas by 2030, will get the votes needed in both chambers. Either way, there appears already to be consensus on how such policy should be crafted: through the legislature, rather than the ballot box or agency rulemaking.

“We think that we can get it right by doing it through the legislative process,” Cascade Natural Gas lobbyist Charlie Brown told panel members at the public hearing, though he warned against having the tax rate increase in perpetuity. “We think it’s more prudent to have a set tax at one point so that the legislature can analyze the impact of these taxes as we go into the transition, and if the increase of the tax is such that it is having a direct negative impact of the economy, we might be able to adjust it accordingly.”

That view was echoed by lobbyist John Rothlin who represents Avista, a utility provider covering Eastern Washington, Northern Idaho and parts of Oregon. He told lawmakers the $20 tax is “high” and it would be “appropriate that there be a modest tax rate and a pause at some point to ensure that it’s meeting environmental objectives without creating adverse economic impacts.”

“We’re always sensitive to the price impacts that policy has on customers,” he added.

Others such as Pat Jablonski cautioned that too high a tax could actually make pollution worse. He is the environmental manager director at Nucor Steel, the state’s only steel plant.

“We believe that it is critical for any state climate policy to minimize the impact on energy-intensive and trade-exposed manufacturers,” he said. “We compete globally while providing critical jobs in Washington. In our case, creating a disadvantage would lead to an increase in global greenhouse gas emissions.”

If passed, SB 6203 in its current form would impose a $20-per-ton tax on carbon starting in July 2019. That rate would be raised annually by 3.5 percent, plus inflation as determined by the consumer price index. The tax would apply to the first sale or use of fuel or electricity in the state.

The bill would also prohibit local governments from creating their own carbon tax, while establishing a Clean Energy Investment Program for electric or gas utility providers to use credits toward investment projects that reduce their carbon footprint.

The tax would raise an estimated $3.3 billion over the next four years, with the revenue going into three accounts for carbon-reduction projects as well as financial assistance to low-income communities and fossil fuel industry workers.

Also included are roughly 10 exemptions for fuels such as aircraft fuel, biogas, biodiesel, cellulosic ethanol and renewable diesel. Also exempt is fuel used onsite for manufacturing by high-energy-use companies vulnerable to global competition.

“This is an important opportunity to the public,” Chair Reuven Carlyle (D-36) told colleagues at the public hearing. “This conversation is happening in every state and every nation on this planet, this particular planet that we live on. And it’s exciting that we’re having a genuine conversation about the impact of climate change here on our state.”

Inslee also testified on behalf of his proposal, calling it an “investment strategy as much as it is a revenue strategy” and “a bill that invests in the things we hold most critical to us individually that we can only save collectively.”

“I know we all make investments in things we treasure,” he added. “We make investments in our house. If the roof is falling off and the timbers are rotting, we invest. And Washington is our home.”

Testimony in favor of the bill also included private sector employers such as Ameresco, Puget Sound Energy and Skanska.

Rothlin and others praised the Clean Energy Investment Program as a way for their customers to derive benefit from the tax.

Although the bill’s fiscal note assumes 1,500 taxpayers would be affected by the bill, questions posed to committee staff during the public hearing by former chair Sen. Doug Ericksen (R-41) highlighted the estimated energy price increase to consumers. However, that estimate has been challenged by Democrats such as Sen. Guy Palumbo (D-1). In a tweet he wrote: “The price of gas fluctuates wildly in Washington. Also the assumption on the price increase assumes that oil refineries will pass 100% of the increase along to their end consumers.”

What remains unclear is whether the bill has enough votes in the Senate and the House. As of Wednesday, no further action is scheduled for the bill. When asked about its political odds at a Tuesday press conference, Senate Majority Leader Sharon Nelson (D-34) offered no indication. “I have a number of members who are really enthusiastic about the carbon tax. We’re going to take a look as it materializes down the road, if we can get there.”

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