By Zach Bernstein
All eyes are on the presidential election. But it’s important to remember that, come November, Americans will be voting for far more than just who will lead the country.
Some Americans, for example, could be voting to completely alter how we tackle climate change.
That’s because voters in Washington state will decide whether their state becomes the first in the country to pass a carbon tax. The ballot initiative, Initiative 732, would create a tax on fossil fuels and electricity generated from coal and natural gas.
While Washington isn’t the only state currently considering a carbon tax, it’s the only one that’s putting the question directly to the voters. For that unique reason, it’s the carbon tax proposal to watch over the next few months.
Now, the usual caveats apply: we are talking about a city sometimes referred to as “The “People’s Republic of Boulder.” Nevertheless, Boulder’s experience offers a powerful model for other places looking to pass a carbon tax. Boulder’s plan taxes electricity consumption and puts the revenue towards energy efficiency and renewable energy programs, with the goal of bringing the city’s emissions levels in line with the Kyoto Protocol.
As of 2012, Boulder had brought in between $600,000 and $1.8 million a year from the carbon tax. While the city hasn’t been able to meet the Kyoto Protocol goals, its greenhouse gas reductions have been significant. Also important, the costs have remained manageable: In 2012, costs to businesses were about $94 each, and costs to households about $21. No wonder voters, given two chances to stop the carbon tax, voted to go ahead with it!
So what about Washington State’s carbon tax plan? Unlike Boulder’s, it would be revenue-neutral: all money the tax brought in would be used to offset other taxes or distributed back to the population. In this case, the carbon tax would be offset by lowering the sales tax and eliminating a tax on manufacturers; and distribution would be a rebate to low-income families who might be more affected.
The tax would start at $25 per metric ton of carbon emissions, then rise every year by 3.5 percent plus the rate of inflation. This annual increase is important, as a major goal of a carbon tax is to ensure that significant downward pressure on fossil fuels continues well into the future. It doesn’t do much good to put a new tax on fossil fuels if the value will decline over time -- if that were to happen, producers would eventually be able to more easily absorb the cost, and emissions would rise once again.
What also makes Washington interesting is that most of the state’s energy already comes from low- or no-carbon sources. The single biggest generation source is hydropower, comprising 68.5 percent of the state’s electricity mix. Natural gas comes next, at 15.6 percent -- but since natural gas emits far less carbon than coal, it would incur lighter taxation.
A state-based tax isn’t ideal -- some Washington businesses, especially in industries like pulp and paper manufacturing and steel production, worry about competing with other firms in states without carbon taxes. But if enough states decide to take on carbon taxes on their own, it could push Congress to act and set up a single, nationwide carbon tax to eliminate confusion.
Currently, there is no polling on how the Washington State initiative will fare, although somewhat surprisingly, some environmental groups are opposed to the plan because it does not set aside funding for environmental programs as Boulder did with its tax.
Whether to make a carbon tax revenue-positive -- devoting revenue to solutions like infrastructure or further carbon reductions -- or revenue-neutral, is a major debate point. Both sides have strongly held views. In many cases, revenue-neutrality is a nod to political reality; asking voters to grow government isn’t always a winning strategy. For groups like the American Sustainable Business Council, which backs the idea of a carbon tax, revenue-neutrality is acceptable as long as other principles are met.
Which brings us back to the importance of this election. If Initiative 732 passes, that will send a big signal to policymakers that a carbon tax might not be a political loser, and might even open the floodgates for more states to pass carbon taxes of their own. If that happens, Congress could end up getting on board faster than we think. If the initiative fails, supporters of a carbon tax will likely learn more about how to present such a vital policy more successfully to the public next time.
One thing is certain: Washington State’s initiative won’t have an easy path to victory. And there’s still vigorous debate over what the best carbon tax plan would look like. But come November, the debate over how to address climate change could look very different. Like every other decision with worldwide repercussions, it will all come down to how the people vote.
Image credit: Pixabay
Zach Bernstein is Manager of Research and Social Media for the American Sustainable Business Council.
The <a href="http://asbcouncil.org">American Sustainable Business Council (ASBC)</a> is a network of companies and business associations. Its column, Policy Points, identifies public policies where a business voice, grounded in principles of innovation, fairness and environmental stewardship, can make an essential difference in the advocacy process. The goal is to arm readers with information and specific actions to take. As business leaders, we can and must support policy change to help make the economy more green and sustainable. The column editor is Richard Eidlin, ASBC's Vice President - Public Policy and Business Engagement.