Politics & Government

Inslee’s carbon tax would raise costs for consumers, polluters to fund environmental projects

Gov. Jay Inslee speaks during his annual State of the State address before a joint session of the Legislature on Tuesday in Olympia.
Gov. Jay Inslee speaks during his annual State of the State address before a joint session of the Legislature on Tuesday in Olympia. Associated Press

Washington Gov. Jay Inslee on Tuesday unveiled details of his new plan to charge polluters, a centerpiece of the Democrat’s drive to combat climate change and address a court order to speed up a fix for the K-12 school system.

The plan would tax carbon emissions generated by transportation fuels and power plants at $20 per metric ton starting in July of 2019. After that, the tax would increase by 3.5 percent each year, plus inflation.

The governor’s office estimates the tax would raise $1.5 billion over its first two years, and $3.3 billion over four years. Much of the money from the tax would initially be used to replenish the roughly $1 billion in reserves Inslee hopes to spend on education.

The money later would be spent on a mix of clean energy, water conservation and other environmental projects.

While the tax would be paid by power plants and fuel importers, Inslee’s staff predicted some of the costs would pass on to consumers and result in a hike in the price of electricity, natural gas and gasoline for many people starting in 2020 — a fact that drew outcry from the GOP.

That year consumers could see an increase in costs of 4 to 5 percent on electricity, roughly 10 percent on natural gas used in homes and 6 to 9 percent on gasoline, Inslee adviser Lauren McCloy said.

“Yes there are going to be costs. There are going to be impacts to energy prices,” McCloy said. “At the the end of the day this is about reinvesting money into Washington.”

The governor’s tax plan includes measures aimed at helping mitigate those costs for people who have low incomes. Some industries that are energy-intensive would be exempted from the plan, and products such as aircraft fuels and fossil fuels used for agriculture would be protected from the tax.

Inslee released the details of his plan just before he delivered the annual State of the State address, where he called a carbon tax “the right thing to do” to boost education spending and then “fight against climate change and the damaging health effects of carbon pollution.”

“We have allowed the unfettered release of our carbon pollution into our air,” Inslee said. “That burden will be carried by our children, our economy, our security and our quality of life.”

Republicans called Inslee’s plan an unnecessary tax hike that is more focused on raising money than actually helping the environment. House Minority Leader Dan Kristiansen, R-Snohomish, said he has legislators working on environmental policy he believes won’t have as much of an economic impact.

“This is about new and higher taxes, not about fixing the problem,” said Senate Minority Leader Mark Schoesler, a Republican from Ritzville.

The carbon-tax proposal also drew opposition from some in the business community, including the Association of Washington Businesses.

Association president Kris Johnson said in a statement that the plan, in addition bringing higher energy prices to consumers, “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 environmental protections our state has in place.”

Under Inslee’s plan, $1.5 billion raised by the tax would initially refill the $950 million in state budget reserves used to address Washington’s final task related to the state Supreme Court’s 2012 McCleary ruling. That order said the state was not fully funding public schools are required by the state constitution.

In 2017, the state Supreme Court said lawmakers’ solution to one of the last aspects of the ruling — taking on the full cost of teacher and other staff salaries paid for in part by local levies — did not come fast enough to meet a 2018 deadline.

In order to speed up the salary reforms, lawmakers would need to put somewhere around $1 billion into the school system.

After paying for education, half of the money from Inslee’s carbon tax would pay for clean-energy projects such as investments in electric-powered mass transit.

Conservation projects, such as improvements to flood management and forest health, would see 35 percent of the carbon tax money. The other 15 percent would go to assisting low-income communities and tribes and to help workers transition to clean energy jobs, according to a news release.

Inslee’s idea to approve the policy as part of his budget proposal garnered praise from some around the Capitol, including leading Democrats on environmental committees.

Other Democrats have been more lukewarm.

House Majority Leader Pat Sullivan, D-Covington, said there is a “diversity of opinions” on the governor’s tax plan among Democrats in his chamber and that “it’s a challenge” to get everyone on board with the carbon-tax plan.

Speaker of the House Frank Chopp, a Seattle Democrat, said last week it could be difficult to muster the votes for a brand new tax in a short, 60-day session. In even-numbered years, lawmakers approve a supplemental budget, which typically makes small adjustments to the hefty two-year budget approved the year before.

Democrats currently have narrow majorities in the state House and Senate.

Still, Inslee remained optimistic his plan would pass the Legislature in 2018, despite a short session. He said in his speech, “members of the business, tribal, environmental and labor communities” are “coming to the table to talk about carbon pricing.”

Inslee even touted two companies — Microsoft and utility company Puget Sound Energy — that were in Olympia on Tuesday to talk about carbon pricing policies.

PSE President Kimberly Harris said in a statement Tuesday that Inslee’s plan is “an important step forward.”

Harris said PSE is attempting to reduce its carbon footprint 50 percent by 2040 and that “reaching our full potential will require policy changes this year at the state level to update our regulatory environment and put a price on carbon.”

Microsoft President Brad Smith tweeted support for Washington state “putting a price on carbon” in 2018.

During his address, Inslee also touched on many of his priorities for the upcoming session, including ending the death penalty, enacting a local version of Obama-era internet regulations known as net neutrality, new gun regulations and more.

He called on lawmakers to pass a construction budget that Republicans have held up over a disagreement on rural water rights. GOP leaders Tuesday noted with frustration that Inslee did not mention the water-rights debate during his speech.

But Inslee often returned to his biggest goal during the address: the carbon tax.

“The people of Washington are ready to create, invent and build the carbon-free future our children and grandchildren deserve,” Inslee said.

Walker Orenstein: 360-786-1826, @walkerorenstein