The direct costs would start to hit in 2020, with fees assessed on petroleum, natural gas and coal fuels.
How much would a carbon fee proposed by Initiative 1631 cost your household?
For many Washington voters, that’s a key question when considering the Nov. 6 statewide ballot measure that would place a fee on the greenhouse-gas emissions from fossil fuels. It’s not easy to answer.
The initiative would take effect in 2020, with fees assessed on petroleum, natural gas and coal fuels. By 2023, those fees are expected to raise more than $1 billion for state and utility spending intended to cut greenhouse-gas emissions and help Washington adapt to a changing climate.
For households, the direct costs of the carbon fee would vary substantially, depending on whether you have a car or two, and the amount of fossil fuels burned to provide heat and electricity for your residence.
In 2020, for a Bellevue family with two cars and a home that relies on Puget Sound Energy (PSE) electricity and natural gas, these costs could total more than $240, according to information from the Federal Highway Administration and a PSE forecast on rate impacts.
But if you live in Seattle, had only one car, and relied on Seattle City Light for power and heat, your first-year carbon fee likely would fall below $100.
Todd Myers, a Washington Policy Center staffer who has been highly critical of the measure, included in his initiative analysis a look at costs outside the Puget Sound area. He estimates they could run as high as $305 for the first year in Spokane, where heating costs are higher.
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The carbon fees would rise each year, but the intent of the initiative is for households to use less and less fossil fuels, and thus ease the bite of the carbon fees.
How much households cut back on these fuels would depend, in part, on individual decisions, such as switching to an electric car or installing solar panels on a roof. The carbon-fee costs also would be influenced by public and utility investments, and how effective they are in helping reduce the state’s reliance on fossil fuels.
“It is a tricky analysis, ” said Rob Williams, a senior fellow at Resources for the Future who analyzes the economic impacts of carbon pricing. “The most important piece is the spending, and that’s harder to model. Just what it would be for is not nailed down.”
The state and utility spending also will be needed to counteract the regressive nature of the fee, which could be expected to take more money from low-wage workers who may have to drive farther to their jobs, and less from more-affluent tech workers who may live in Seattle apartments close to their jobs.
“It’s clear the burden of paying for this fee will disproportionately affect working people,” said Steve Pendergrass, president of the Iron Workers District Council of the Pacific Northwest, which has come out against the measure.
The state spending plan will be developed by a 15-person board that will be directed to come up with programs to protect low-income residents. One possible option for the low-wage workers with long drives, for example, would be state financial assistance to buy electric vehicles, according to Michael Mann, a former director of Seattle’s Office of Sustainability and Environment who helped draft the initiative. Utilities could offer new kinds of financial assistance to boost home-energy efficiency or replace natural gas with electric heating.
The struggle to address climate change without creating too big of a financial hit for workers has long been a central challenge of carbon pricing. Some proponents champion coupling carbon pricing with cuts in other taxes. That was the approach taken by a failed 2016 ballot measure, Initiative 732, which in addition to imposing a carbon tax would have reduced the sales-tax rate.
The challenge increases over time if carbon pricing keeps pushing up fossil-fuel prices. This can send broader ripples through the economy, which could further increase household costs. If trash-removal services, for example, have to pay more for their trucks’ fuel, then the owners could seek to raise rates.
The No on 1631 campaign, which has largely been funded by the oil industry, hired NERA Economic Consulting to study the carbon fee’s economic impacts. The consulting company, which often does work for oil and gas companies, offered a bleak forecast of higher fossil-fuel costs dragging down the broader economy.
The consulting group projected the total costs of the carbon fee for the average Washington household would start at $440 in 2020 and rise to $990 by 2035.
If households end up paying a lot more for fossil-fuel energy, they would have less to spend on other things, such as eating out or shopping. The study also projects a net reduction in work income, mostly in commercial businesses such as retailers, health care, hospitality and personal care services.
These projections are rejected by proponents as grossly inflated costs intended to scare voters. They say that expanding solar and other renewable-energy sources and increasing building efficiency would stimulate the economy.
“It’s a positive economic impact,” said Perry England, a vice president of building performance for Seattle-based MacDonald-Miller who reviewed state economic models of carbon pricing while serving on a task force created by Gov. Jay Inslee.
Williams, the Resources for the Future analyst, said that it is hard to know whether the assumptions the consulting firm makes are reasonable. He said the carbon-fee impacts on the broader economy would push average household costs higher, and estimates the annual total at about $300 in 2020.
“I don’t want to oversell this,” Williams said. “I kind of view it as a sanity check on other estimates.”
Others say that some — but not all — of the business costs will be passed on.
Yoram Bauman, an economist who helped to draft the 2016 Washington carbon-tax initiative, estimates that I-1631 would initially cost the average Washington household $200 annually.
“I think that’s reasonable,” Bauman said.