With proposals this legislative session to create a cap-and-trade program, a low carbon fuel standard (LCFS) and a possible carbon fee in a new transportation package, industry members are warning against overlapping environmental policies. The latest proposal via SB 5373 sponsored by Sen. Liz Lovelett (D-40) would create a $25-per-metric-ton tax on most of the sales or uses of fossil fuels within Washington.
Testimony favored the bill, with 1,000 signed in supporting the legislation and more than 200 signed in opposed. However, even those signed in as “other,” such as Jessica Spiegel with the Western States Petroleum Association (WSPA), told the Senate Committee on Environment, Energy & Technology at the bill’s March 4 public hearing that “to be a serious response (to climate change), we need a single path,” adding that the numerous approaches would constitute a “scattershot” approach.
Washington currently composes roughly 1.4 percent of total U.S. emissions and .0021 percent of total global emissions. Last year the state legislature voted to adjust the state’s legally nonbinding 2008 GHG emission goals, with the ultimate objective of zero carbon emission by 2050.
With the variety of proposals seeking to reduce greenhouse gas emissions in the state, particularly within the transportation sector, Spiegel said “we recommend there be one primary policy.”
If enacted, the tax would begin in 2022, with the rate increasing annually with inflation. The tax would not apply to certain types of fuel including those used for vessels, trains, or aircraft, as well as diesel and biodiesel used for agricultural purposes. Also exempt from the tax would be energy-intensive, trade-exposed (EITE) businesses as defined by the state Departments of Commerce and Ecology.
The tax would raise an estimated $1.6 billion for the 2021-23 biennium, then increase to $4.2 billion in 2023-25. More than 80 percent of that money would go into a Climate Finance Account to be used primarily for paying off special bonds the bill authorizes the Finance Committee to issue. Those bonds would be for a period no longer than 10 years or more than $4.93 billion. The debt service obligations would have to be finished by the end of 2050.
The bill specifies how the bond revenue must be invested, including 25 percent of total investments required within rural areas and 25 percent for projects within “vulnerable and overburdened” communities. SB 5373 would also create a 10-member Environmental Justice and Economic Equity Panel that would provide recommendations on investments.
Association of Washington Business (AWB) Government Affairs Director for Energy Peter Godlewski told the committee that “this bill does not have the traditional benefit of a carbon tax,” noting that with other similar bills moving through the legislature there’s a “risk of expensive administrative duplication.”
Food Northwest Director of Government Affairs Craig Smith said that while the bill includes “significant improvements” following stakeholder input, it still needs “clear protections” for industries that are more likely to move out of state.
Others testifying noted that a carbon tax has proved unpopular with Washington voters, with initiatives defeated in 2016 and 2018 with solid majorities. Business owner Mike Nykreim told the committee that it should “exhaust all nontax increase options before you raise our gas taxes. Vote for progress, vote for no-tax solutions.”
SB 5373 has not yet been scheduled for further committee action.