At the heart of Gov. Jay Inslee’s climate-action and state budget plans is a cap-and-trade system that would charge potentially 130 major polluters for their emission of greenhouse gases.
The goal is to make heavy emitters, including fuel refineries and fuel suppliers, pay for their releases of carbon dioxide, a greenhouse gas linked by scientists to global warming.
Inslee hasn’t set a price yet, but based on a similar California plan, the state could raise almost $1 billion a year with a price of about $12 per ton of emissions, making a single permit for 1 million metric tons of carbon worth $12 million. He wants to use the money to pay for transportation projects, K-12 schools, tax rebates for low-income working families and other programs.
Inslee’s carbon emissions plan targets the big polluters for the simple reason it is the only way to ensure a cap, and it puts the incentives upstream as far as possible, said Chris Davis, the governor’s senior adviser on energy and carbon markets.
“If all you are doing is charging the consumer, the producer doesn’t have an incentive to seek more efficiency,” Davis said.
Early indications are that a number of companies that are household names — including Boeing’s Everett airplane plant, BP’s refinery in Whatcom County, and several of Puget Sound Energy’s power plants around the state — could be covered under the proposal that would in effect tax emitters of more than 25,000 metric tons of carbon dioxide a year.
The proposal is to tax firms by requiring them to buy permits or “allowances” each year if they exceed the limit. The Department of Ecology composed a list of 130 operations that emitted enough greenhouse gases in 2012-13 to have been affected under a proposed law.
Inslee has said he favors the cap as a way to ratchet down emissions over time, as the cap is reduced. Companies can decide on their own if it makes better sense to invest in cleaner operations that use less fuel or cleaner fuel or to buy permits. He has acknowledged that his plan could drive up fuel costs but says government models show the worst-case cost is 12 cents per gallon for gasoline over 12 years.
So far, Boeing, PSE, U.S. Oil & Refining Co. in Tacoma and others are reluctant to say how they believe their operations would be affected, or whether they will fight against the regulations.
“Boeing values the importance of a cleaner environment and recognizes the state of Washington’s responsibility to protect public health. Our team will carefully review all proposals in detail as they are released. We do not have any further comment at this time,” Boeing Commercial Airplanes said in a statement released by spokesman Wilson Chow.
PSE was noncommittal on Inslee’s approach. The company is expanding its renewable energy portfolio but also gets 30 percent of its power from coal-fired plants in Montana, which is not covered in Inslee’s proposals.
“PSE’s team will be diving into Gov. Inslee’s budget proposal and following it closely through the session. At this point, we need to know more about what’s being proposed,” PSE said in a statement released by spokeswoman Akiko Oda. “We hear regularly from our customers that they want both cleaner energy and affordable bills. PSE is taking a balanced approach, investing in clean energy while continuing to use a diverse supply of energy resources to ensure we can provide reliable and affordable energy to our customers.”
As outlined by Inslee, the cap-and-trade system could be linked to California’s and others with carbon markets. That would allow more trading of allowances.
There also is a possibility, under his plan, for emitters to buy “offsets” instead of carbon credits. These are investments in projects that lower emissions. For example, planting large forests or capturing methane from landfills, which are not regulated under Inslee’s plan, Davis said. He said offsets would have to be in the U.S., Mexico or Canada.
Business groups including the Association of Washington Business and the Western States Petroleum Association are gearing up to resist Inslee’s plans and to promote more voluntary improvements to reduce emissions. They formed what they are calling the Washington Climate Collaborative, urging alternatives such as research into clean technology; incentives for low emission vehicles; energy efficiency; and more use of hydro power, small nuclear generators, biomass and natural gas, which emits far less than coal.
Frank Holmes, the petroleum group’s Northwest region and marine director based in Lacey, said Inslee’s plan is similar to California’s, which is now in its third year of trading permits. But he didn’t deny climate change is happening or that fossil fuel use is a major cause.
“We think it’s with us. We’re not against doing smart, cost-effective programs to reduce emissions,” he said, mentioning several that the business collaborative outlines.
Holmes’ colleague, Sacramento-based Tupper Hull, said there are concerns with seeing Washington move ahead on transportation fuels right away, before California’s effort is vetted. Hull said there also are concerns about volatility of prices and manipulation of the carbon markets, which happened 15 years ago in California with deregulated electricity markets.
But Davis said neither problem has emerged so far. He said California’s program is working despite legal challenges.