Initiative threat has industry warming to proposed carbon tax

OLYMPIA (Jan. 19) --With environmental activists threatening a carbon tax ballot initiative, some manufacturing and energy companies are opting to work with lawmakers on Democratic Gov. Jay Inslee’s recently proposed tax rather than flat out oppose it.

On Jan. 9, Gov. Inslee rolled out a sweeping proposal to tax carbon emissions from power plants and transportation fuels at a rate of $20 per ton starting in July, 2019. The tax is estimated to raise $3.3 billion over three years, which would be reinvested in sustainable energy infrastructure, forestry, and assistance for low-income communities facing increased energy costs.

The proposal would exempt jet fuel, fossil fuels used in agriculture, and some energy-intensive manufacturing industries whose competitiveness could be undermined by increased energy costs. Gov. Inslee’s staff estimated that electricity prices will rise by 4 to 5 percent, natural gas by 9 to 11 percent, and 5 to 6 percent for gasoline.

Environmental groups including the Alliance for Jobs and Clean Energy have repeatedly threatened to push to get a carbon tax initiative on the 2018 November ballot if the legislature fails to pass Inslee’s proposal.

“If they can get it done well, great,” said Becky Kelley, president of the Washington Environmental Council and co-chair of the Alliance for Jobs and Clean Energy. “If not, it’s our job to be ready to go.”

“We have very real momentum for the simple reason that people realize that the legislative process allows for a healthy debate and dialogue,” said Sen. Reuven Carlyle, D–Seattle, who chairs the Senate Energy, Environment and Technology Committee and is the primary sponsor of Inslee’s carbon tax bill. “To govern by ballot initiative is inherently less flexible and is really a one-size-fits-all top-down approach.”

In 2016 environmental activists got a carbon initiative on the ballot, but voters ultimately rejected it by almost 20 points, with 59 percent against and 40 percent for.

At a state Senate Energy, Environment, and Technology Committee hearing on Jan. 16, representatives from the Washington business and energy communities expressed tepid support for the proposal given the threat of a ballot initiative, but argued that they want to see the tax rate reduced and the industry exemptions clarified.

“We absolutely prefer a legislative solution to this issue rather than an initiative,” said Charlie Brown, a lobbyist for Cascade Natural Gas and Northwest Natural Gas, before adding, “the tax at $20 per ton is a very steep tax.”

John Rothlin, representing the Avista Corporation—a Washington-based utility company—had a similar take. “Without legislation we know there are well-funded groups ready to pursue a ballot measure. We’re among those that believe that the best results will come from a collaborative effort here among people looking for fair and reasonable results,” he said.

“We think it’s appropriate that there be a modest tax rate and a pause at some point to ensure that it is meeting environmental objectives without making adverse economic impacts,” Rothlin added.

Steve Secrist, vice president at Puget Sound Energy, told the committee that he is “encouraged by current conversation,” and added that his company’s ultimate support must “take into account the impact to customer’s energy bills and how those customer investments translate into real carbon emission reductions.”

Representatives for Microsoft and other companies were enthusiastic about their support for Inslee’s proposal.

“It is clear that putting a price on carbon is one of the key pathways to reducing emissions and building economic, environmental, and social resilience,” said Perry England, co-chair of Washington Businesses for Climate Action. “It is not, it is not, a economy-crippling piece of legislation.”

However, several speakers were adamantly opposed to the bill, arguing that it would kill the competitive edge of their industries.

“Because we have concerns on the impact to our electrical customers, we are here today in opposition,” said Kathleen Collins of Pacific Power.

Sheri Call with the Washington Trucking Association said that the tax would place Washington-based trucking firms at at “competitive disadvantage.”

“Our initial analysis paints a stunning and painful picture about how we would be impacted,” said Bill Stauffacher of the Northwest Pulp and Paper Association. “In 2019 and 2020 this carbon tax would have a $56 million impact on our sector.”

While Sen. Carlyle said that he is “very sensitive” to the concerns listed by energy and business industry, he wouldn’t say whether the bill will be amended to lower the tax rate.

Senate Minority Leader Mark Schoesler, R–Ritzville, argued at a press conference on Jan. 16 that the companies appearing at the committee hearing on the tax aren’t representative of the entire Washington business and energy community. “I think it’s more important to talk about the companies that don’t get to come to the table,” he said. “Those that are too small and don’t have the right lobbyist are going to pay the price for not being the favored ones.”

Oil and petroleum interests were not present at the Jan. 16 hearing, but Sen. Carlyle said that there are lobbyists who are both adamantly against working with lawmakers and those who are engaged.

“There’s no question that there are some players in the oil industry who are arms crossed and feet up on the desk saying ‘hell no’,” he said. “But I can tell you that there are other players in the petroleum industry who are deeply engaged and are helping us.”

Sen. Carlyle said that he expects the carbon tax bill to get a vote in committee within the next two weeks.