As we’ve catalogued here repeatedly, Washington is one of the lowest-carbon states in the nation when it comes to emissions from road vehicles, electricity generation, manufacturing, or commercial and residential buildings. A combination of forward-thinking policies and innovation has reduced our carbon emissions below what they were in 1990 and created a clear and downward trend into the future. We fully expect the state to meet its emissions goals for 2020, which is to have Greenhouse Gas emissions reduced to 1990 levels. All of us – families, farmers, workers and employers – are invested in protecting our environment, and it shows in the many ways this success has been achieved.
The reality of this makes Gov. Jay Inslee’s proposed carbon cap all the more puzzling. A year ago, he submitted a cap and trade proposal to the Washington State Legislature that would have created a $1.3 billion energy tax on Washington consumers. His most ardent supporters in the Capitol saw the problems with implementing this policy, and his proposal failed to even get a vote.
Undeterred by the lack of support for his idea of increasing energy prices, Gov. Inslee announced yesterday that he’ll implement a similar policy through a regulatory action instead. But, let’s be clear: like his cap and trade proposal, his new carbon cap will increase the price of gasoline, electricity and heat for every Washingtonian. And, in a head-scratching twist, the penalties paid by consumers who use energy will be transferred to state governments, wealthy investors and utilities outside the state of Washington.
Let’s start with the cost to consumers. During the cap and trade debate, the Governor famously alleged that his proposal would only target the “big polluters.” But, his own economists undercut this message. They made clear through their analysis that his proposal would immediately increase the price of a gallon of gasoline by $.12 and by $.49 per gallon over time. Natural gas would see a price increase as well.
His new carbon cap rule would have a similar impact. How? Because every distributor of fuel – whether it be gasoline or natural gas – will have to pay a penalty on their consumers’ use of their product. In other words, he counts every Washingtonian who drives or heats their home among the polluters and makes them pay a higher price. This is simple economics – when you add to the cost of distributing a product, the consumer price of that product will increase. That is the conclusion the Governor’s economists came to in their analysis of his cap and trade proposal and the same will be true with his carbon cap rule.
But who does the money go to when a Washington consumer pays the penalty? Under the rule, companies are required to buy “allowances” when customers use energy and cause emissions to exceed the carbon cap. That’s the penalty. The eligible allowances under the cap include those sold by the Regional Greenhouse Gas Initiative (RGGI is a collection of Northeastern U.S. states), the State of California, or Quebec. But, companies can also purchase them from businesses or utilities in these other states that have credits to sell. Either way, the additional money Washington drivers spend on gas is going to wind up in the coffers of other state governments or their utilities.
It’s not just other state government and entities, however. Carbon allowances are bought and sold just like any other financial instrument, which means it’s a market served by institutional investors, hedge funds, and other financial speculators. So, if the money paid by Washington drivers doesn’t wind up paying for California teachers, then it will wind up in the pocket of Wall Street investors. While we strongly opposed the Governor’s cap and trade proposal, at least it had the courtesy of directing the energy tax to government services in Washington.
The Washington State Legislature saw the flaws in the Governor’s cap and trade proposal and rejected it. Now, he’s developed a regulatory alternative that will transfer money from Washington consumers to other states and investors with no benefit accruing to the state.
There are so many opportunities for collaboration between the Governor and Washington families, farmers, workers and employers, that his obsession with top-down regulatory and financial schemes is disappointing. We’ve demonstrated that we can reduce carbon effectively, and there is much more we can do if we work together to develop one clean air policy that makes sense for Washington.