Creating the Win-Win: Low Carbon Prosperity

Guest Post

Washington Business Alliance (WaBA)

Bolstered by growing public support for climate action, international, federal, state, and local governments are considering a suite of policies aimed at reducing greenhouse gas (GHG) emissions. Washington’s unique clean and competitive energy assets position the state to succeed in a well-designed regulatory climate encouraging the use of less carbon intense energy sources. Businesses in Washington State have a leadership opportunity to drive a policy outcome where real reductions occur and the economy thrives.

Governor Inslee’s Climate Emissions Reduction Taskforce (CERT) was the latest effort to examine carbon pricing. The taskforce was charged with answering a tactical policy question: What kind of carbon price do you prefer, Cap & Trade or Carbon Tax? For good reason, the final report fell short of making a clear recommendation. Achieving state emission reduction targets with either strategy would require adopting and sustaining a comprehensive carbon pricing program, the economic impacts of which are entirety dependent on how new revenue is spent. Further complicating the discussion is an unclear implementation pathway—could legislation pass or would it require a ballot initiative?

The organization CarbonWA is advocating for an alternative but similar, British Columbia-style revenue neutral carbon tax policy which starts low, grows incrementally, and would offset energy price increases with rebates and reductions in other taxes. The approach has strong merit as a good tax/bad tax swap, but relying on a carbon tax to reach Washington’s statutory emission goals would be challenging. Only a high carbon price, in excess of $50/tonne, will materially alter electricity generation given the dispatch order of plentiful, cheap coal and natural gas. Transportation fuels are relatively inelastic, similarly requiring a high price and long-term commitment to meaningfully impact emissions. You can view the modeled impact of several carbon tax scenarios by following this link as well as some helpful lessons learned from Australia’s experience at this link.

In search of a solution that drives emissions reductions today and appeals to the broadest coalition of stakeholders, the Washington Business Alliance (WaBA) asked a different question:

How do we reduce carbon emissions and have a vigorous economy?

Read the full article on the WaBA website here.