One state tests liberals' ability to rally around a carbon tax

A debate on whether to tax carbon emissions in Washington State is laying bare divisions on the left about how far to push climate policy.

Perhaps to the surprise of many, a ballot measure to tax carbon is getting a thumbs down from many environmental groups, communities of color, and labor unions.

This opposition comes ​despite the initiative's appeal as a green issue. Putting a price on carbon dioxide emissions is one of the most basic strategies that’s been touted for years as a way to reduce the buildup of greenhouse gases linked to climate change. The problem: There’s sizable disagreement of what to do with the revenues generated from a carbon fee.

The Washington stalemate over Initiative 732, as it’s known, is a preview for other state carbon tax battles, and possibly for what will occur on the federal level should Congress ever test the carbon tax waters.

"The complexities and tensions are a good sign that more people with different perspectives are getting serious about climate policy,” says K.C. Golden, senior policy advisor with Seattle-based Climate Solutions, which has taken a hands-off stance on the carbon tax rather than endorsing it. "The media like to play up the skirmishes, but what I see is growing and broadening momentum for real climate policy.”

Where should the revenue go?

The Washington proposal would give manufacturers a tax break, lower the state sales tax and increase a tax incentive for low-income families. But groups aligned as the Alliance for Jobs and Clean Energy want to put that money toward clean energy and public transit deployment, bolstering green jobs and energy in communities of color and other measures to directly curb greenhouse gas emissions. The alliance hasn't taken a formal position on the tax as proposed.​ [Editor's note: This paragraph and the one above have been corrected to reflect accurately the views of some groups that are not supporting the initiative, but have not formally opposed it.]

“We don’t want carbon prices to be a permanent revenue source for essential public services.  The carbon, and therefore the revenues, need to go away over time,” Mr. Golden says. “Again, the best way to make that linkage is to use the money to address the problem by facilitating a fair, affordable transition.”

Among the groups that are publicly recommending "no" votes on the initiative are Washington Conservation Voters and Washington State Labor Council, AFL-CIO.

Part of the opponents’ stance results from an emboldening of the environmental movement, coupled with a more prominent national conversation on racial equity. It’s part of a broader trend among national environmental groups to make their base more inclusive and less of the old, white, wealthy clientele that forms a bulk of the movement.

Green groups feel they increasingly have the backing of public opinion following victories in scuttling the Keystone XL oil sands pipeline, an international climate agreement inked in Paris last year, and the Democratic presidential campaign of early carbon-tax advocate Sen. Bernie Sanders.

Meanwhile, high-profile environmental pollution incidents like the Flint water crisis and a new emphasis on environmental justice – the dynamic of industrial emissions disproportionately affecting minority neighborhoods – have brought communities of color closer to the green camp.

“The creation of energy policy needs to be a unified effort and one that includes the perspectives and ideas of communities hardest hit by the fossil fuel industry,” says Cesia Kearns, deputy regional campaign director for Sierra Club's “Beyond Coal” campaign. "Could this take more time, patience, and more conversation? For sure. But it’s better to get it right than to charge ahead on something that doesn’t work.”

But proponents of I-732 contend it appeals to both Republicans and Democrats alike and could serve as a model for other states. The plan starts by taxing carbon at $15 per ton in 2017, hitting $25 per ton in 2025 and then ticking up 3.5 percent annually, adjusted for inflation. Those revenues would lower the state sales tax by 1 percentage point and refund the earned-income tax credit for low-income families up to $1,500 per family.

“It’s a great climate policy, great tax policy in terms of addressing low-income households; it’s just a great policy all around,” Yoram Bauman, an economist who helped draft the plan, told ClimateWire.

A preview of options for Congress

The Washington State proposal, in fact, mirrors the kind of carbon tax that some hope might ultimately win bipartisan approval in Washington, D.C. But, as in the Evergreen State, Democrats nationally are torn over how to design the tax – and even over its political merits.

Advisers to presidential nominee Hillary Clinton have said that backing a carbon tax would be “lethal” in the general election. The June 2015 missive from campaign manager Robby Mook to spokesman Brian Fallon, revealed last week by WikiLeaks, came after presumptive top Democratic Sen. Chuck Schumer of New York hinted Clinton could enact a carbon tax if president.

Later, in January, Clinton energy adviser Trevor Houser suggested staying away from “Bernie’s carbon tax fantasy,” referring to Sanders, demonstrating the pressure the Vermonter’s supporters on the left were bringing on climate change.

But several right-of-center organizations, such as the libertarian Niskanen Center and RepublicEN, are softening GOP lawmakers behind closed doors for the carbon tax pitch.

"We've have open lines of communication with a number of environmental NGOs and Democratic offices in both chambers,” says Jerry Taylor, president of the Niskanen Center. "Our relationships in those communities are strong and I'm confident that we can avoid a lot of what's playing out in Washington State."

A federal policy, though, would certainly carry complications.

While companies like ExxonMobil have touted a carbon tax, there’s a question of how committed they are to actually advocating for it. And, even if some fossil fuel companies are discussing what a carbon tax would look like, their ideal models are likely disparate, says Mike McKenna, a Republican lobbyist who works with energy companies and is leading Donald J. Trump’s Energy Department transition team.

“If it ever becomes a legitimate thing, companies will start to ask these questions internally and probably have some serious internal discussions about whether they support this particular tax,” McKenna says in an email. "And the answer will probably routinely be ‘no.' Because no one is in favor of making their product more expensive. Unless there is some really good regulatory swap.  Like a carbon tax for elimination of the [Environmental Protection Agency]."

The fossil fuel industry and its Republican allies would insist on axing regulation of greenhouse gas emissions – the EPA rule imposing carbon limits on power plants currently stuck in federal courts and restrictions on vehicle emissions are two options – in a carbon tax deal. But that idea is anathema to environmental groups.

One option could be to include a carbon tax in a larger overhaul of the whole federal tax code – a much-discussed, but very elusive idea on Capitol Hill. Whether as part of a mammoth bill or not, a central question would be whether to design a carbon tax to be "revenue neutral," so that overall US taxes don't go up. Finding agreement from Democrats on revenue neutrality may prove difficult, as carbon tax opponents in Washington State have demonstrated by rejecting that concept.

“Unfortunately, there is absolutely nothing unique on what to do with carbon revenues in the Washington debate. This was a key issue when the House and Senate worked on climate legislation,” says Ms. Kearns, referring to a sweeping cap-and-trade bill that passed the US House but failed in the Senate in 2010. “It continues to be a central issue in California and has been an ongoing issue as climate advocates have debated policy design everywhere they have discussed pricing carbon.”

California's cap-and-trade test case

California already offers a test case for the difficult politics behind designing a market-based carbon policy.

The state has debated how to distribute the dollars generated through a cap-and-trade auction program. Basically, emitters pay for credits to offset their emissions, and then revenues are used for various purposes.

Green groups successfully fought to send some revenue to low-income communities of color to buffer against environmental pollution that might be allowed to continue if industrial emitters buy carbon offset credits.

But that measure has put the Golden State system in legal limbo. Opponents of cap-and-trade said the revenue shift amounted to a tax, which requires a two-thirds vote in the California legislature. The law that created the cap-and-trade system fell well short of that mark.

The California and Washington State examples reflect the high-level discussions that will come to define future carbon policy debates, says Robert Stavins, an environmental economist at Harvard University, by email.

"The economist’s favorite is to cut distortionary taxes on labor and capital,” he says. “But many others want to target the funds to address the purpose of the carbon tax” – in other words, to take additional steps that hasten the rise of a low-carbon economy.

"This will be a huge issue in state legislatures when any carbon tax proposal is considered, because the stakes are huge,” Professor Stavins says.