Washington State Rejects What Would Have Been Nation's First Carbon Tax

The ballot measure, which was meant to curb pollution, had even divided environmentalists.
by | November 9, 2016
An oil refinery in Washington state. (Flickr CC/24hourmoon)

Read all of our coverage on 2016 ballot measures at governing.com/ballotmeasures.

In Washington state, officials have wrestled with plans to curb pollution for years. But when an effort came before voters to impose a carbon tax this November, voters overwhelmingly rejected it.

The measure garnered only 41 percent of the vote, compared with 59 percent against.

In an effort to give companies financial incentives to reduce their carbon footprint, the initiative would have taxed them for the pollution that their products generate. If it had passed, Washington would have been the first state in the country with a carbon tax.

Supporters of the measure said it would have been easier to set up than a cap-and-trade system like the one used in California.

Still, the issue split environmentalists and created unlikely alliances on both sides.

Audubon Washington supported the measure, while the Washington Environmental Council did not. The Sierra Club’s decision not to back the measure caused a backlash among its members -- many of whom had circulated petitions to get it on the ballot.

In opposition of the measure were business groups -- which are typically environmentalists' adversaries -- along with organized labor and racial justice advocates. The state Democratic Party fought the carbon tax, too.

The biggest flashpoint in the campaign wasn't whether to impose a tax but what to do with the money that the tax would have raised.

What to Do With the Revenue?

The carbon tax would have brought in about $2.2 billion a year, according to supporters. The tax rate would have started at $15 per metric ton of CO2, jumped to $25 a year later and then kept up with inflation. (One car produces about 4.8 metric tons of CO2 a year; heating a home for a year yields, on average, 9.5 metric tons.)

The ballot measure would have used that new revenue to pay for several new tax cuts, including a reduction of the state’s sales tax, tax credits for low-income workers and tax breaks for companies likely to be hit hard by increased energy prices.

That approach would have mitigated some of the effects of the carbon tax, but it also made the whole package more attractive to conservatives, said Yoram Bauman, an economist and the founder of the Yes on 732 campaign.

“We wanted to try to do something that would attract bipartisan support,” he said.

But all those tax breaks would have meant there would be no new money for the state treasury. In fact, one state analysis predicted the new tax would have decreased state revenues by $800 million over six years. Proponents and some outside observers said the methodology for that analysis was flawed, and that the amendment would have actually been revenue neutral. But even if it would have broken even, as it was designed to do, it would have done nothing to help the state’s ongoing budget problems at a time when the state is being fined $100,000 a day for not adequately funding schools.

Many of the measure's opponents -- including environmentalists and Democrats -- wanted that money to be spent, instead, on workers (not just the companies) hard-hit by the new taxes and on investments in clean energy and transit.

Transportation is the biggest source of carbon pollution in Washington state, and without any additional spending in those areas, “we’re basically trapping people in cars that are being more and more expensive without providing them alternative options for transportation," said Rich Stolz, the executive director of One America, a statewide organization of immigrant and refugee communities.

Stolz also noted that the ballot measure seemed to have been created without input from minority and immigrant groups -- two communities that are often hardest-hit by CO2 pollution. That's because major sources of pollution, like refineries and highways, tend to be located in minority communities, causing the children who live there to suffer from asthma, high blood pressure and other health problems.

One of the ways to help those communities is to provide cleaner transportation options -- something this ballot measure wouldn't have done, said Stolz.

If the measure had passed, companies were expected to raise the price of gas by 25 cents a gallon.

'The Relief Pitcher for the Governor’s Efforts'

In many ways, though, this year’s carbon tax measure was the result of the legislature’s failed attempts to address carbon pollution on its own.

Gov. Jay Inslee, a Democrat, proposed California-style cap-and-trade legislation in early 2015, but the plan failed to get traction. So instead, the governor decided to cap CO2 emissions using his executive authority.

His administration had to scrap its first set of proposed rules, which were criticized for, among other things, being too onerous on industries that faced stiff competition from overseas. The administration released a second draft this summer that initially applies to two dozen of the state’s biggest polluters but eventually will cover many more.

The rules, if they take effect next year as planned, would require polluters to cut their CO2 emissions by 1.7 percent a year through 2035. Even the revised rules, though, have been attacked by some businesses as too tough and by some environmentalists as too weak.

That's why the ballot measure came into play.

“We call ourselves the relief pitcher for the governor’s efforts,” said Bauman, the advocate for Initiative 732. “We weren’t trying to steal the thunder from the governor, we just recognized the fact that 90 percent of starting pitchers don’t get all the way through the game.”

Stolz from One America said before the elections that he anticipated that this year’s ballot measure would fail. But he saw reasons for hope in curbing carbon emissions.

“We want to make sure the failure of 732, if it fails, doesn’t poison the possibility of a better policy,” he said. “I do think there’s a lot of political will to do something, and what’s been very positive about the public debate around 732 is people are debating how to do it, as opposed to whether we should do it."

Read all of our coverage on 2016 ballot measures at governing.com/ballotmeasures.

*CORRECTION: A previous version of this story misstated the amount of revenue that supporters say the carbon tax is expected to bring in. It also incorrectly listed the position of the Washington Environmental Council on Initiative 732 and listed the Audubon Society as a supporter. It is not, but Audubon Washington is a supporter of Initiative 732.