Sunday, July 12, 2015

Carbon Tax Initiative in Washington State

It is rare these days for an environmental proposal to get support from both sides of the political spectrum.

And it is even rarer that such wide support deals with a new tax.

But such a proposal that may soon go to the voters of Washington State:

a carbon tax initiative.  

Let me tell you about this idea and why I support it.

A Washington State group, Carbon Washington, has drafted and is now getting signatures for an initiative (I-732)  to the legislature, so it will go to the legislature in Jan 2016 and then (if they don’t pass it) onto the ballot in Nov 2016.  An initiative to put a revenue-neutral tax of fossil fuels.

The group starts with the principle that because of the threat of global warming, the entire planet must reduce its use of CO2-emitting fuels.   Certainly true.  We must find a way to stop the rapid increase of CO2 in the atmosphere before the more severe effects become apparent later in the century.

But what is the most effective way to reduce carbon emissions?    There is a compelling argument that the best approach is to motivate the free-market system.   And how can you do that?    By taxing what you don't want: carbon emissions.
Initiative 732 would do so by putting a tax on carbon use, roughly $ 25 a ton of carbon.   But it does so in a revenue neutral way, refunding the tax revenues gathering by the carbon tax by REDUCING other taxes for an equal amount.  Thus, the overall economic impacts should be small.

For example, the state sales tax would be reduced by 1% in Washington State.

To ensure that local manufacturers are not put at a competitive disadvantage, the Business and Occupation tax (B & O tax) for manufacturers would be eliminated.

And to protect lower income folks, who spend a higher percentage of their income on fuel and heat than more well-to-do individuals, some of the carbon tax would go into a Working Families Rebate.

What comes in and out balance, making the initiative revenue neutral.

The idea of the carbon tax is not new.  In fact,  British Columbia has such a carbon tax, which seems to be working.  The same is true for Ireland.

A free market approach, such as the carbon tax, has proven to be appealing to free market and conservative think tanks, such as the Washington Policy Center (here and here are their analyses). And it has been supported on newpapeer editorial pages, such as in the Olympian.

There are other approaches to use financial incentives like cap and trade, an approach pushed unsuccessfully by Governor Inslee during the past session.  Cap and trade is a far more complex and unreliable method, setting a limit on carbon emissions and having major emitters bid on the right to do so.  Cap and trade has generally not been very successful where it has been attempted, as in Europe.

Now, there are folks that argue that since Washington State is such a small part of the global CO2 problem, we should not worry about it.  But everyone is a small part of the problem, which can only be solved by everyone doing their bit.   And we are a significant part of the problem:  what is our biggest industry, one that produces an fuel-intensive transportation system?    Aircraft from Boeing. And now we are considering building huge export terminals for coal.

We have as much responsibility as anyone to reduce our carbon footprint.  And considering our position as a leading world technological center, we have the responsibility to lead.

The carbon tax makes particular sense now because auto/track gas prices are relatively low, as is natural gas used to heat our homes. Folks will not feel the impact in the same way as when gas prices are above four dollars.

The initiative is well written and clear.  If I had drafted it, I would have made two adjustments:

  1. Have the carbon tax fade out when gas prices get about 5 dollars a gallon
  2. Use, say, 25% of the tax revenues to deal with regional traffic, perhaps by adding a fleet of commuter buses for travel into and out of our major cities (like Seattle, Tacoma, and Spokane).
But the current version is fine.

The bottom line is that I support the Carbon Tax initiative and I hope you will as well.  CarbonWashington need signatures for the initiative and financial support.  


Flame Anaconda said...

Also, Todd Meyers wrote his analysis supporting a carbon tax in 2008. Politically, that was an eternity ago, with a different set of people in office. I wonder if he still thinks it is a good idea at the moment. Might be like the Heritage Foundation supporting an individual mandate 10+ years ago, but having changed their minds since then.

Sean Stehura said...

So why build a coal export terminal in Washington State and then pass a carbon tax? I'm all for a carbon tax but also for stopping the coal export terminal which makes no sense since China's economy is in freefall.

ryamkajr said...

My first problem with this, and the only one I want to discuss, is the idea that you are already planning and wanting to give rebates/subsidies and other excuses to certain select groups. That must not be part of any program. You are trying to cut the gases. Compensating people just allows them to continue their current actions that have negative consequences, you know, the ones you are trying to minimize/eliminate. It is just the rest of us that are being 1) taxed and 2) subsidizing these other groups behaviors. NO. You start making exceptions up front, then other creep into the legislation later as specific interest groups get a hold of their representatives. These are nothing more than a means in which to make this legislation palatable to more groups.

All or nothing. Everyone equal. Carbon/gasses created by one person are just as harmful and damaging as those created by another.

cacaomonster said...

I'd harbor on the side of caution when it comes to politicians stating that they'll cut back on other taxes to balance it out for this "carbon tax". And honestly, why don't we move completely to hemp based fuels? We want to claim there's a green movement, but this plant is still illegal to grow? Anyways, I digress...I don't agree one bit with taxing humanity and claiming to be saving the environment...seems like fallacious logic...using the appeal to emotion to convince people you have their best interests in mind...thanks for you blog

CNY Roger said...

New York's experience with RGGI, which is for all intents and purposes a carbon tax, has been that two times since the inception of the program the money has not been allocated as it was supposed to be. As a result I cannot support carbon taxes because politicians are involved and they cannot be trusted.

Mark said...

I agree with the carbon tax. It makes non-carbon based energy more appealing. Whether the tax funds go to education or reduced sales tax is fine.

Eli said...

@ryamkajr, the legislation as described does not have exceptions to the carbon tax for any group. It has other transfers, but the cost of emitting carbon is the same for everybody.

It's basically "some people get a dollar; everybody paid a dollar if they emit carbon." I think you may be assuming that these people will consider the carbon free -- easy come, easy go? -- but that doesn't make economic sense. They'll do better to keep their dollar.

ducttape said...

If it is 'neutral' and won't hurt business, then how is it supposed to change anything? This sort of progressive tax scheme always has the intention of pushing one group or another into some sort of corner (pay or change). To put it another way, if it was truly of no impact then there would be no change and therefore not worth the exercise.

Let's cut the doublespeak and stop trying to sugar coat the desired policy. The progressives want a tax. Get the camel's nose under the tent. This is just like with Obamacare; a tax is a tax is a tax. If you think they are going to give up in equal measure you're kidding yourself.

Also, on the second suggestion - why spend more on buses. Don't we already pay a ton of money to multiple regional transit departments to do that already? How many billions more before they can figure it out?

Andrew Lincicome said...

There is no correlation between global temperature and CO2 Cliff. And, please explain why the global temperatures have not actually risen over the past two decades despite increasing CO2 levels. Global warming is just a myth to perpetuate ridiculous corporate and government strategies over the heads of a purposely uneducated populace. Please, please prove me wrong, on any of this.

John Nez said...

I think there is an invisible elephant in the room when it comes to climate change discussions - namely the agricultural component of global warming gasses that is rarely ever mentioned in the press.

I was amazed by this finding that in fact agriculture and specifically meat production creates more global warming gases than all the cars, planes and industrial machinery combined. So even though it's driving and flying that gets most of the discussion - there's rarely any talk in the press about the larger problem of agriculture, fertilizers and beef. So I guess in regards to global warming we need to ask 'Where's the beef?'.

And this scientific report here on the largely forgotten topic.

I wonder why there isn't at least a little talk about containing methane emissions and reducing or legislating fertilizer production that leads to increased global warming gas?

Jarv said...

Tax families according to how many kids they produce. That would solve many present and future social and environmental problems.

Kevin said...

Hi Cliff,

Not apropos to this article, I was curious if you give any credence to the report from University of Northumbria that we are soon to enter a Maunder minimum



richard583 said...

How much (?), for a brand new set a tires. ?

JewelyaZ said...

I am all for this. My family works hard to reduce our footprint and I think more people should be encouraged to do so, by multiple means. A carbon tax is one good way to start. Nobody should be exempt.

Tim Burris said...

@Andrew Lincicome: There most certainly is a correlation between global temperature and CO2. Here are some pretty graphs illustrating data from NASA. Where do you get your data?

Mal Adapted said...

Andrew Lincicome: "There is no correlation between global temperature and CO2 Cliff. And, please explain why the global temperatures have not actually risen over the past two decades despite increasing CO2 levels. Global warming is just a myth to perpetuate ridiculous corporate and government strategies over the heads of a purposely uneducated populace. Please, please prove me wrong, on any of this."

I don't know who you're getting your information from, but why do you trust them if you don't trust the consensus of working climate scientists? If you've already decided that global warming is a myth, it's doubtful anyone can "prove you wrong" to your satisfaction.

For anyone who is still undecided, the US National Academy of Sciences and the British Royal Society have jointly published a 36-page booklet titled "Climate Change: Evidence and Causes" ( It's written for educated non-scientists, and is free to download in PDF format. The Foreword, by the Presidents of the NAS and the RS, begins with this (emphasis in the original):

"CLIMATE CHANGE IS ONE OF THE DEFINING ISSUES OF OUR TIME. It is now more certain than ever, based on many lines of evidence, that humans are changing Earth’s climate."

The booklet goes on to address 20 common questions like the one Mr. Lincicome asks, with answers that distill the combined expertise of two of the world's most respected scientific societies. For example (my emphasis):

Q: "Does the recent slowdown of warming mean that climate change is no longer happening?"
[The booklet was published in 2014, before the announcement that 2014 was the warmest year ever. -Mal]
A: "No. Since the very warm year 1998 that followed the strong 1997-98 El NiƱo, the increase in average surface temperature has slowed relative to the previous decade of rapid temperature increases. Despite the slower rate of warming the 2000s were warmer than the 1990s. A short-term slowdown in the warming of Earth’s surface does not invalidate our understanding of long-term changes in global temperature arising from human-induced changes in greenhouse gases."

For each question, the brief summary is followed by a more in-depth explanation. The Q&A section is followed by an 8-page tutorial on the basics of climate change.

JeffB said...

A ridiculous idea. John Nez hits on part of it, if we were serious about CO2 reduction, we would go after the USDA and Big Food, Big Soy, Big Corn first. And then there are China and India, both using far more carbon based energy than most of the rest of the world. We are not even going to move the needle one blip here in WA, because a lot of our power comes from already renewable hydro.

Not to mention, there are many studies showing that the Sun is in a phase whereby the coming few decades will be cooler. Global Warming would be welcome, but it is not happening.

Also there is just that on the scale of human problems, climate change ranks very low. We have poverty, disease, economic issues, war and terrorism and other human unrest. Polls show that Americans rank Climate Change low on a priority list, and certainly on any near term of medium term priority list. Cliff himself admits that this might be a problem in 50-100 years. Might being the keyword. External effects such as a single major volcano eruption could easily change everything.

But I am sure that will not stop the well intentioned rich Left here in WA that always like to "feel they are doing something good" even when they are not. For example, building a Prius does more damage and requires more energy for all of the heavy metal mining, shipping of those metals to and fro to make batteries, extra monitoring and charging circuits and so on, than the car will ever save in emissions. Why not just use ULEV engine technology? And that would make environmentally friendly cars much more affordable for those who cannot afford the high price of a Hybrid and the "I Really Care" badge of honor that comes with one.

Cliff, do not shame your reputation as a great meteorological scientist by feeling the need to assert your bona fides on climate.

cacaomonster said...

@ Andrew Lincicome ...couldn't agree more...glad someone has the b***s to say it like it's what I was hinting at...I just try to provide the fact that hemp could be and could have been used for years and years...nobody wants to change the actually fuel/s were using...just continue to allow industries/government to take take take...claim where at fault, despite the fact that they've forced us into these fuels for the most part anyway...thanks again to all the others's time we stop this silliness...we get that the planet deserves love, we're not the problem....they're the issue...and they're trying to take more again instead of truly listening to the heck with them I say...we'll change this thing regardless of they're new tax legislation non sense...

Vladimir Steblina said...

Does it make sense to give Boeing ANOTHER tax break (manufacturing) when they are one of the major causes of global warming??

When the President, Governor and the Legislature are ready to tax Boeing....then I will believe that global warming is a serious issue.

There are serious economic consequences to a carbon tax particularly on the poor and middle class. There should be more discussion on the facet of the carbon tax.

MacD said...

I thought you were smarter than this. The American people correctly rate “climate change” very, very low on their list of priorities; it’s a Ruling Class political obsession, a rock upon which crony relationships between politicians and their green business partners are built, but the public is not interested in paying huge new taxes to take out “insurance policies” against a doom that isn’t coming. The climate cult is going to have to a lot better than saying, “hey, all our old models were wrong, but we’ve got some new ones that are kinda scary, so why not pay up just in case?”

Mark said...

Hottest Summers, Coldest Winters for Contiguous U.S.: A Few Years Loom Large

hottest summers, coldest winters

JewelyaZ said...

MacD, I guess you should alert the people in Kiribati that they are buying land in another nation (Fiji) foolishly, and that rising sea levels from climate change won't affect them at all. Except it already IS. Several of the villages in neighboring Vanuatu have been flooded repeatedly already and entire towns are moving to higher ground.

Deny climate change all you want from the luxury of Western Washington. It's already happening, and people of good conscience have looked at the science and are trying to do something about it even though it's probably really too late now. (n.b. source is Fox "News" not any leftist source that you might try to discredit immediately)

Cliff, the Japanese just brought a new satellite online and it's showing clear El Nino-level Pacific surface temps. Is the severe El Nino for the winter still too far out to call?

Neel Blair said...

Good. Put a price on the thing that the free market can't put a price on itself. That's called common sense regulation.

FUR said...

A carbon tax is a bad idea. Cap and Trade is better.

We have a carbon tax now. It is called the gas tax. And what is it used for? To help build roads that help us burn more gas!

Governments are no different from companies: they need to raise revenue. If you replace the B&O tax, which is our states income tax (only for companies and the self employed), with a Carbon Tax, you incentivize the government to have the people Burn More Carbon. And they will. When the federal government was funded primarily by a tax of alcohol, American's consumed more than any people before or since. This is not an exaggeration. The liquor companies knew that the death of them would be the Income Tax, because the Feds wouldn't need them as a revenue source. Sure enough, after the passage of the income tax (Amendment 16 Feb 1913) prohibition soon followed. Check out Ken Burns excellent documentary on prohibition if you are interested.

Cap and trade is a better idea. First, Cliff is wrong about it not working. As he should know it has worked great in our own life times to solve the first major global environmental catastrophe faced by mankind. The Ozone hole. Look it up: Montreal Protocol. It was based on Cap and Trade. It worked!

Cap and Trade is different because it doesn't directly put money into government budgets and thus does incentivize governments to increase carbon pollution or face budget shortfalls.

There is really no such thing as a "revenue neutral" tax. Our revenue is generated by Sales, Property and Labor (B&O) taxes , what economists call the three legs of the stool. Look at our tax receipts as the economy cycles and you will find they lag each other, tending to balance out over time. You can't just declare a tax to be revenue neutral.

If you don't believe it, consider that what I am saying is already happening: Governments in Oregon Washington and California the most progressive around on Climate, are proposing special taxes for electric vehicles because they do not pay gas tax! Nuts!

But at the end of the day Governments need to pay the bills, and if tax receipts drop because we don't have a B&O and everyone puts up solar panels and drives electric cars they will need to find the money for Schools, Roads, Water, Cops, Firemen and all the other vital functions that make up a civilization somewhere: and they will be sorely tempted to figure out ways to get us to burn more fuel to generate that revenue. It sounds crazy. But the world is a crazy place. And as I say, it is already happening right now: State Governments, even in the most progressive states are disincentivizing consumers away from electric vehicles specifically because these consumers are reducing receipts from our existing carbon tax.

Tax No. Cap and Trade: Yes.

Steve said...

"Revenue-neutral advocates also make unsupported claims about the benefits of tax cuts, especially personal income tax cuts. In particular, the claim that PIT cuts will be beneficial due to disincentives to work from taxes is just plain wrong. Even in economic theory the impact is ambiguous (there are both income and substitution effects in response to a tax change). People cannot easily alter their hours of work in response to PIT rates, and studies show that the impact of PIT on work effort is basically zero. In fact the top 1% facing the highest top marginal tax rates tend to work longer hours."

FUR said...

A couple of other thoughts.

First, here is a link to a good article about cap and trade as used to clean up the environment.

Second, should you let "best" be the enemy of "good"? Just because there is a better way to do something (cap and trade) than another (a tax) should you not support it as a voter? I think this requires more study in this particular case. I don't know how I'll vote if the issue goes to the ballot.

I'm highly skeptical of any proposal to eliminate the B&O because it is progressive Rather we should reform and expand it. And I am highly skeptical of the notion that a tax can be "revenue neutral" or "balanced". Tax systems don't work that way.

But I support the overall idea of using broad based economic incentives to push our economy towards a substantial reduction of coal, oil and natural gas burning.

Unknown said...

I will vote against it, mainly because I don't think CO2 is a problem to begin with, and secondarily because anyone who ever trusts Washington State government with taxes is, in my opinion, a gullible fool.

Unknown said...

There is something else to say on the taxation front.

The Washington State Constitution requires that all gasoline tax revenues be spent on highways. A "carbon tax" is an evasion of this requirement. That's the entire reason for it, in my opinion. Having lived here for 20 years, I've long since learned never to trust the Washington Legislature on any tax issues. They will always lie about taxes, because that's what they've always done. It will not be revenue neutral regardless of what they promise.

Also, the promise to rebate some to the poor is a back-door income tax. If voters want an income tax, put it on the ballot. Oh, but wait, we did that, and all but five senatorial districts voted "no." Thus, I will vote "no" if a carbon tax is on the ballot.

Alan Miller said...

If carbon emissions truly are a critical problem, the only rational and moral solution would be to limit by law the emissions of individuals and businesses. The fact that the "solution" always consists of increasing taxes, and that those who wish to emit can do so freely in proportion to their wealth shows that government entities do not believe that the issue is critical and that the true motivation is accruing increasing tax money, whether to increase "income redistribution" or simply increase the governmental structure. The argument that legally limiting carbon emissions for all would be unpopular is irrelevant if this is truly a crisis. We do not allow the purchase of the right to disperse other forms of life-threatening pollution!