After Carbon Tax Fails in Washington, Focus Turns to 9 Other States

Washington state won’t be enacting the nation’s first tax on greenhouse gas emissions this year. But the idea has grown more popular in the states since President Trump pulled out of the Paris Climate Agreement.
by | March 20, 2018
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Earlier this year, Washington looked poised to become the first state in the nation to pass a tax on carbon pollution. Democratic Gov. Jay Inslee had made it one of his top priorities, and the state legislature looked ready to take the plunge. But last month, Inslee conceded that Senate Bill 6203 didn’t have the “one or two votes” needed for passage.

This wasn’t Washington’s first pass at a carbon tax, which is typically used to reduce carbon pollution by placing a tax or fee on either fossil fuels or emissions. Voters soundly rejected a ballot measure in 2016 after the state’s major environmental, labor and liberal groups came out against it -- largely because of disagreements over how the tax revenue would be spent.

But the ballot’s failure didn’t deter Inslee from trying again. “Doing so will allow us to reinvest in all the things that drive down emissions,” he said earlier this year in his State of the State address. “We can build more solar panels. We can put more electric cars on the road. We can help more Washingtonians purchase energy-saving insulation for their homes and businesses.”

Inslee had hoped this latest push would be successful because, unlike in 2016, the state legislature is now controlled by Democrats. What’s more, “the public really is understanding the critical nature of this existential threat,” Inslee told the radio program Here & Now in late January. “What used to be a graph on a chart is now our forests burning down and hurricanes and massive precipitation events, so this is something people are now experiencing in their own lives and with their own retinas, and they understand we have to act.”

While the tax may be dead for now in Washington, the state is far from alone in pursuing a carbon tax. Nine other states have introduced some two-dozen bills this year that propose studying or using financial penalties to deter the use of fossil fuels and to encourage the growth of alternative fuel sources, according to Ryan Maness, a senior policy analyst and tax counsel at the consulting firm MultiState Associates Inc. The states are Hawaii, Maryland, Massachusetts, New Hampshire, New Mexico, New York, Oregon, Rhode Island and Vermont.

The proliferation of bills comes on the heels of President Trump’s decision to withdraw the U.S. from the Paris Climate Agreement last June. Following the announcement, many states and municipalities independently pledged to adhere to the agreement’s goals. “The current administration has no interest in advancing carbon policy,” says Jordan Stutt, a policy analyst at Acadia Center, a clean energy advocacy group. “State legislators are realizing they have the opportunity to craft carbon policy.”

But enacting a carbon tax is a complex task, Maness says. Legislators first need to work out what will and won’t be taxed, at what rate fuel sources or emissions will be taxed, and what the tax revenue will be used for.

The bill in Washington, for example, would have imposed a new tax of $12 per metric ton of carbon emissions on the sale or use of fossil fuels such as gasoline and natural gas. It would have eventually increased each year until the tax hit $30 a ton, raising roughly $1 billion for the state. Half of the money raised would have gone toward energy projects that reduce greenhouse gas emissions.

Twenty percent would have addressed climate resilience through forest health, wildfire prevention and other natural resources projects. And the rest would have provided assistance for low-income families and workers in the fossil fuel industry. Inslee had acknowledged that Washington consumers would have paid more in fuel and energy costs if the carbon tax had been enacted, hurting low-income residents. It was this increase in prices that ultimately doomed the bill.

British Columbia and California already price carbon, but Washington would have been the first to impose a direct tax on carbon emissions. The other two states most likely to see movement this year are Rhode Island and Massachusetts, which has been debating various carbon tax proposals for several years. A recently proposed Senate omnibus bill in the state calls for a market-based system to reduce emissions.

The carbon tax defeat was “a setback,” says Maness, “but it wasn’t the kind of rousing defeat that I think will keep lawmakers from thinking about it in the future. It will definitely be back,” he says, at least in Democratic states. “It’s a very ‘coming soon to a theater near you’ type of thing.”