Rather than funding government programs, I-732 would shift economic incentives away from carbon-based energy.
WITH climate change ranking as the most divisive issue in national politics, it is not surprising that Initiative 732, which seeks to cut carbon emissions, is contentious. The battle lines aren’t typical, with individuals and groups on each side of the aisle supporting and opposing the initiative.
One reason is that I-732 takes a unique approach to achieving carbon reductions.
Typically, climate policy is defined by imposing mandates — like requirements for renewable energy or biofuels — and providing subsidies like tax breaks for electric vehicles. The beneficiaries of these subsidies are determined by politics. Those policies have not been successful. Washington state and the city of Seattle report they have repeatedly missed their carbon-reduction goals and are not on track to meet the next goals.
That approach has also been contentious: Gov. Jay Inslee’s proposed cap-and-trade tax increase was rejected by House Democrats before it could even reach skeptical Republicans.
The revenue-neutral carbon price proposed by I-732 takes a different approach. It would apply a tax to carbon-based energy, both electricity and motor fuel, and would cut other taxes. Rather than funding government programs, it would shift economic incentives away from carbon-based energy.
Any person who has watched people line up at Costco to pay a lower gas price understands how this would cut carbon emissions. By raising the price of gas, people have a clear incentive to be more energy efficient by carpooling, buying a more fuel-efficient car or telecommuting. This approach is effective in British Columbia, which is cutting carbon emissions faster than the rest of that country.
In particular, I-732 raises taxes on carbon-based energy, like gasoline or natural gas, by $15 per metric ton of CO2 initially, moving up to $25 the next year and then gradually to $100 per metric ton by 2060. In simple terms, a $10 per metric ton tax on CO2 leads to about 10 cents added per gallon and increases the cost of coal-based electricity by one cent per kilowatt hour and natural gas by 0.5 cents per kilowatt hour.
To offset that increase, I-732 would cut the state sales tax from 6.5 percent to 5.5 percent. A number of business taxes would also be cut, including those on manufacturing, food processing and other industries.
Finally, some of the revenue would go to the Working Families Tax Credit, which helps low-income working families pay for energy price increases.
How that would affect businesses and families varies. The University of Washington’s online calculator shows that a married couple in Bellevue with two children and an income of $75,000 would see their taxes cut by $95 a year. A single person living in Seattle earning $35,000 would come out about even.
I-732 also cuts business taxes to prevent energy-intensive industries from leaving the state, taking their jobs and carbon emissions with them.
The tax cuts may not offset the carbon tax enough for some energy-intensive industries — like pulp and paper mills or aluminum plants. The industries opposing I-732 clearly believe this poses a threat to their ability to survive in Washington state.
Finally, the Association of Washington Business and the Sierra Club have expressed concern that I-732 cuts taxes. According to the state’s budget agency, that reduction would reduce state revenue by $800 million over four years. The Sierra Club worries it would harm social services. It is hypocritical of the Sierra Club, which calls climate change the most important issue, to oppose this policy while supporting subsidies for electric vehicles that go primarily to the wealthy.
The initiative does have supporters among environmental activists and on the right. Republican lawmakers, including State Sens. Mark Miloscia and Joe Fain, have endorsed it. Some local Sierra Club members also support the initiative, although they have been overruled by leadership.
How people decide on I-732 will depend on a combination of the personal tax impacts, the impact on Washington’s overall economy and whether you think climate change is important enough to address.
No matter how people decide, after more than a decade of failure in state climate policy, an incentive-based approach to reducing environmental harm is a welcome change from the costly, top-down, ineffective political policies that have been the disappointing standard in Washington.