With time a’wastin’ to reach real and effective reductions in carbon dioxide and other greenhouse gases, it should count as a major victory that many, including environmental groups, government officials and — most recently — maybe even the oil industry agree that putting a price on carbon is necessary to reduce emissions and hold off the worst of climate change’s impacts in coming decades.
Yes, we said the oil industry. The American Petroleum Institute, the lobbying arm of the oil and gas industry, is expected to release a policy statement soon that would back a carbon tax aimed at limiting carbon emissions, favoring that over government regulation, The Washington Post recently reported.
So, if that’s settled, what’s next? In Washington state, at least, what’s next is more debate.
Understandably, that debate has centered on how best to put a price on carbon, but that discussion now has been complicated by who’s lining up behind each of two proposals being considered in the Washington state Legislature. And the split — rather than falling along party lines — has blended the typical division between those in the environmental crowd and those representing the oil industry and the broader business community, as outlined in a recent Investigate West story.
With less than six weeks remaining in the legislative session, two carbon-pricing policies are under consideration:
Cap and invest: The Washington Climate Commitment Act, Senate Bill 5126, which was requested by the governor’s office, seeks to establish a cap-and-invest program — also called cap-and-trade — that would be administered by the state Department of Ecology. The state’s major polluters, such as oil refineries, would be required to buy credits for each ton of carbon dioxide they release. The number of credits issued each year would decline over time, resulting in higher prices for the credits and more revenue and encouraging reductions in emissions. Other companies, such as forestry, could receive offset credits they could then trade on the same market.
In its first year in 2023, the program is expected to generate $511 million, increasing to $1.1 billion by 2027, with those revenues used to invest in projects for clean transportation, climate resiliency, clean energy transition and assistance and energy efficiency.
Carbon tax: The Washington STRONG proposal, Senate Bill 5373, seeks a more straight-forward path, placing a price on each ton of carbon emissions, chiefly by the fossil fuel industry. It would start with a price of $25 a ton, rising annually by the inflation rate plus 5 percent. The revenue would be used to repay $16 billion in bonds that would quickly fund environmental restoration work and economic development, particularly in lower-income communities.
It’s not that industry and the broader business community are backing one path and environmentalists the other, but that the proposals have split each into different camps.
The cap and invest bill has the support of many of the state’s leading environmental groups, as well as BP, which operates the state’s largest refinery in Cherry Point. You may recall that BP along with other oil companies, as recently as 2018, spent $31.5 million to defeat Initiative 1631, which sought a carbon tax.
Some environmental groups, however, particularly those focused on the impacts of pollution within lower-income communities have backed the carbon tax as better focused on achieving carbon reductions and delivering help to distressed communities that are most affected by pollution.
Meanwhile, BP’s support of cap-and-invest is a departure from its industry bedfellows, specifically the API and its more than 600 member companies. Joining BP in support of cap-and-invest, as well, is the Washington Roundtable, which represents the state’s broader business interests.
In a recent conversation with The Herald Editorial Board, Roundtable officials outlined their preference for the cap-and-invest program over a carbon tax.
What cap-and-invest offers, said Steve Mullin, president of the Roundtable, is more predictability for business that can achieve goals for carbon reduction. Market forces, Mullin said, rely on businesses doing things in their own self-interest.
“We just need to make sure that their interests are in doing the things you want to accomplish,” he said.
The advantage in setting a cap, said Neil Strege, Roundtable vice president, is that once the cap is set, that effectively limits the amount of carbon that can be released. While credits can offset carbon emissions, there’s still a ceiling set for carbon that won’t be breached.
A carbon tax, on the other hand, Strege said, doesn’t offer the same limits; you have to trust that the price will be high enough to encourage efforts to reduce emissions; industry could just decide to pay the tax, pass along the costs and continue spewing carbon.
“The problem with a carbon tax is that in a democracy you can’t practically set the price high enough that you’re going to incentivize changes in behavior,” Strege said. “You’d have to set the carbon tax rate high enough that I will want to give up my gas-fueled vehicle and buy an electric vehicle.”
Some will counter, however, that setting such a price on carbon — high enough to change behavior to the point of influencing decisions on what we’re driving — is exactly the point.
Yet, getting the carbon price to that point could be a difficult sales job, whether in state legislatures or Congress. Starting at $25 a ton would mean that refineries would certainly pass along that cost to consumers at the pump; it’s what BP and others spent all those millions telling voters in 2018. An estimate in the Washington Post story about the API support for a gas tax said that a price of $40 a ton would translate to about a 36-cent increase in the cost of a gallon of gas.
But cap-and-invest, too, could affect fuel and other prices, though supporters of each proposal point to the potential of rebates to consumers from the revenues raised.
The debate on which path to take — carbon tax or cap-and-invest — may be missing the larger point that there is at last real consensus on recognizing that a real price on carbon — a price that no longer subsidizes carbon, is felt by consumers and encourages changes in behavior and can fund more work to reach climate goals — cannot be delayed further. In truth, either path may work and may depend more on the details of how each would be implemented and regulated.
The onus is now on the Legislature to get something done. This year.
By the way, have you seen the new electric cars for 2021?