Low carbon fuel standard’s “hidden” gas tax

Low carbon fuel standard’s “hidden” gas tax
Members of the business community are urging state lawmakers to maintain an implicit agreement made in the 2015 Connecting Washington transportation package to not implement a low carbon fuel standard until 2023. Photo: freepik.com

With Washington having the third-highest gas tax in the country, critics of a proposed low carbon fuel standard (LCFS) say it would make fuel prices even higher but without the benefits of gas tax revenue in transportation investments.

The decision could have repercussions when it comes time for another gas tax increase to pay for transportation infrastructure, a point made by Association of Washington Business Director of Government Affairs on Transportation Mike Ennis at a Feb. 13 public hearing of the House Transportation on SHB 1110, which seeks to reduce carbon intensity of transportation fuels by 10 percent below 2017 levels in 2028 and 20 percent below 2017 in 2035. The bill received a do pass recommendation during a Feb. 14 executive session in a 16-14 vote.

A substitute version of the bill originally cleared the House Committee on Environment & Energy on Jan. 24 with six members voting in favor and only Rep. Matt Shea (R-4) in opposition. Four committee members offered no recommendation.

If approved, the bill directs the state Department of Ecology to set up the LCFS program and have it running by 2021. Importers or producers of fuels above the established baseline would have to register in the program. However, fuel used in aircrafts, vessels and trains would be exempt. The Joint Legislative Audit and Review Committee would be required to do an analysis of the first five years of the program by the end of 2027.

Sponsor Rep. Joe Fitzgibbon (D-36) told the committee the bill is “technology neutral,” because it has fuel producers and importers decide which clean fuel to use. “I think we have some really exciting opportunities to recognize the value both to local air quality as well as to the reduction of greenhouse gas emissions from the suppliers of these cleaner transportation fuels.”

One ongoing debate over the proposal is the associated costs for industries such as trucking, which moves 80 percent of the manufactured freight in the state and, unlike rail or aircrafts, would be subject to the program.

Washington Trucking Association President Sheri Call told the committee that out-of-state truckers have the capacity to drive in and out of Washington without ever refueling, putting in-state truckers at a competitive disadvantage. As a low-margin business, “even a small increase in the cost of fuel is impactful to us.”

Ennis argued that it’s “wishful thinking” to believe the increased operating costs won’t be reflected in consumer prices.

Ben Buchholz with Food Northwest and the Northwest Agricultural Cooperative Council told the committee the program would be “essentially a hidden gas tax embedded in the price” of fuel” and would have a “significant financial impact” on those who rely heavily on fuel to grow, harvest and transport their produce.

Currently, California and Oregon have LCFS programs. In California, the standard is partially implemented but has already raised the price of gasoline by $.13. One estimate puts the final price increase between $.40 to $.70 by 2030.

Washington Policy Center Environmental Director Todd Myers told Lens that the feasibility of these programs will become even more challenging if more states such as Washington implement their own LCFS, because they rely on the same limited supply of biofuel. It was for that reason among others a 2013 University of California Davis study on California’s LCFS concluded there was “significant uncertainty” whether it could work. In its 2014 report, Washington’s Climate Legislative and Executive Workgroup did not include LCFS as one of its recommended ways the state could meet greenhouse emission standards set by the legislature in 2008.

“If we blindly enforce it, we can meet the goals,” Myers said. “But typically, what we see is blind enforcement destroys the system, because the costs get so high there’s political change.”

However, Jessica Spiegel with Western States Petroleum Association told the committee that the program would constitute a “transfer from low income people to those who can afford electric cars.”

Another price of the LCFS could be greater difficulty recreating the same political consensus necessary to increase the gas tax by $.12 in 2015 as part of the $16 billion Connecting Washington transportation package. The package included an implicit prohibition on a LCFS until 2023, which Ennis said contributed to getting many stakeholders to agree on the package.

“It’s hard to say what the impacts would be if the legislature…breaks the deal by passing this bill,” he said. “But it would be hard I think for the business community to support a package in the future…knowing that the legislature did not maintain the commitment to the original package in 2015.”

He added that “I’m not challenging your authority to change it. The agreement was a compromise among this broad coalition, and it included a lot of things we didn’t support, lots of things we did support. Our primary objective at AWB for the transportation policy is to maintain those commitments.”

However, that viewpoint was challenged at the public hearing by Bryce Yadon with Transportation Choices Coalition. Working parts of the 2015 transportation package on behalf of Futurewise, he told committee members the prohibition applied to the governor, not the legislature.

Jerry VanderWood with Associated General Contractors told the committee that increasing the gas prices through a LCFS “will make it harder for us to raise the gas tax, which is still our main funding source of highway infrastructure projects.”

SHB 1110 has not yet been referred to a committee.

1 COMMENT

  1. Nice article, but it leaves out a even a hint of what are low carbon fuels… 15% cornahol, unicorn poo, or what?

    FYI, the fertilizer for growing cornahol is a big contributor to the growing dead zone in the Carribean outflow from the Midwest… So the idea that cornahol is good for the environment may have some flaws… Any WA state low carbon fuel standard will be contributing to the Dead Zone…

    https://www.sfgate.com/politics/article/Dead-zone-in-gulf-linked-to-ethanol-production-3183032.php

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