Inslee Proposes New Version Of Carbon Tax

Washington Gov. Jay Inslee is making another push for a state carbon tax. The Democrat unveiled his latest proposal Tuesday during his State of the State address.

This story has been updated.

Under Inslee’s plan, industrial carbon emissions would be taxed at $20 per ton starting in 2019. After that the tax rate would increase by 3.5 percent, plus inflation annually. The tax would raise an estimated $3.3 billion over the first four years.

During his speech, Inslee urged lawmakers to pass the carbon tax this year.

“Doing so will allow us to reinvest in all the things that drive down emissions,” he said. “We can build more solar panels. We can put more electric cars on the road. We can help more Washingtonians purchase energy-saving insulation for their homes and businesses.” 

Under his plan, Inslee would dedicate 50 percent of the carbon tax revenues to clean energy projects, 35 percent to “resilience” projects including flood control and forest health and 15 percent to help low-income communities and displaced workers. In December, Inslee also proposed to use carbon tax revenues on a one-time basis to replenish state reserves he wants to tap to cover a nearly $1 billion shortfall in education spending for the 2018-19 school year.

Several hundred businesses operating in Washington would pay the tax, including utilities and oil companies. Energy intensive and trade-exposed industries could petition for an exemption from the tax.

Last year, executives from Kansas-based Ash Grove Cement testified against a different carbon tax proposal in the Legislature calling it the equivalent of a “death warrant” for the company’s Seattle plant.

“[It’s] putting facilities like us, heavily trade-exposed, energy-intensive industries on death row,” said Curtis Lesslie, the vice president of environmental affairs for Ash Grove.

Republicans have also criticized the idea of a carbon tax as bad for business and consumers.

“A new tax on energy in Washington state will drive jobs out of here,” said state Sen. Doug Ericksen, the ranking Republican on the Senate energy committee.

Senate Minority Leader Mark Schoesler called it a “bait and switch” and state Rep. Drew Stokesbary said Inslee is trying to pick “winners and losers.”

“He wants a $1.5 billion slush fund that he can hand out to Solyndra 2.0 based in Sequim, Washington, or wherever so that he can continue to pick winners and losers for as long as he’s governor,” Stokesbary said. “And I don’t think that’s the right approach for Washington.”

Solyndra was a solar cell company that went out of business in 2011 after getting a federal renewable energy loan.

Inslee insists a tax on carbon would create jobs by fueling a clean energy economy in the state. However, the governor's staff also acknowledged that Washington consumers would pay more in fuel and energy costs if a carbon tax is enacted. That includes a 5 percent average increase in residential electricity prices and a 10 percent increase in residential natural gas prices. The price of a gallon of gasoline could go up 18 cents, according to the governor's initial modeling.

Inslee noted that British Columbia and California already price carbon and Oregon is considering it. But passage of a carbon tax in a short, 60-day election year session appears to be a longshot in Olympia—even with Democrats in control of both the House and Senate.

But there is a wildcard factor: the potential for carbon tax ballot measures in 2018 backed by tribal, labor and environmental interests. The threat of initiatives could bring the business community to the negotiating table at the Legislature.

On Tuesday, Inslee met with leaders of Puget Sound Energy and Avista Corporation. In statements, both utility's presidents signaled support for the idea of pricing carbon and indicated a willingness to work with the governor on a policy.

Inslee also met with a representative of Microsoft. In a tweet, Microsoft president and chief legal officer Brad Smith wrote, "2018 is the year for #WA state to accelerate efforts to address climate change. We look forward to working with stakeholders to reduce emissions & advance clean energy, including putting a price on carbon." 

However, the Association of Washington Business issued a statement opposing Inslee's proposal saying it would drive up costs for companies and consumers. "Those additional costs would also further erode the state's global competitiveness, possibly moving jobs and industries to locations outside of Washington, or even the U.S., without a carbon tax and the stringent environment protections our state has in place," read the statement.  

Last year, Inslee proposed a similar carbon tax as part of his plan to fully fund schools. Under that proposal, 50 percent of the revenues would have gone to K-12 education. Instead lawmakers adopted a new state property tax levy to fund schools.

In 2014, Inslee unveiled a “cap-and-trade” proposal designed to raise about $1 billion per year with nearly half the proceeds to fund transportation projects. That proposal died in the 2015 legislature.

Since his days as a member of Congress, Inslee has made combating carbon emissions and global climate change a signature issue. He even wrote a book about it titled “Apollo’s Fire: Igniting America’s Clean Energy Economy.”

A 2008 law requires Washington to reduce greenhouse gas emissions to 25 percent below 1990 levels by 2035 and 50 percent below 1990 levels by 2050. Projections show the state is not on target to meet those reductions.  There are proposals in the Washington Legislature this year to set more ambitious goals for carbon emission reduction that align with the 2015 Paris climate agreement.