Skip to main content

Why aren’t environmentalists supporting a carbon tax in Washington state?

Lucas Davis, Professor, Haas School of Business | October 31, 2016

I used to live in Washington state. I’m no longer registered to vote there, but if I were, I would vote “Yes” on Nov. 8 for the Washington Carbon Emission Tax and Sales Tax Reduction, also known as Initiative 732, or I-732.

I-732 would make Washington the first U.S. state to have a carbon tax. The tax would be levied on refineries and utilities, who would then pass the tax on to consumers in the form of higher gasoline, electricity and natural gas prices. The tax would start at $15 per ton of carbon dioxide in July 2017, increase to $25 after one year, then rise with inflation plus 3.5 percent in each subsequent year.

Carbon Tax WashingtonStacks at the Nucor Steel plant – one of the types of manufacturing sites that would be affected by a carbon tax – in front of the Space Needle in Seattle. AP Photo/Elaine Thompson

Similar to British Columbia’s carbon tax, I-732 is designed to be revenue-neutral. That is, all of the tax revenue would be returned to households by lowering other taxes. Specifically, I-732 would decrease Washington’s sales tax by one percentage point, fund a tax credit of up to $1,500 annually for low-income households, and effectively eliminate a business tax on manufacturers.

I-732 addresses one of the major concerns of a carbon tax — that it would hurt low-income households. But it also exposes the difficult and complex politics of environmental policymaking: A number of environmental groups have failed to get behind the measure, potentially derailing an opportunity for Washington to lead on climate.

Economist’s dream

Like most economists, I’m in favor of a carbon tax. In a survey of top economists, 90 percent said they would prefer a carbon tax over alternative policies for reducing carbon dioxide emissions. “Totally basic economics!” according to Stanford economist Robert Hall. A carbon tax would discourage carbon-intensive activities like producing electricity with fossil fuels and burning gasoline in vehicles, and encourage low-carbon alternatives like renewables and energy efficiency.

Carbon tax revenue from Initiative 732, which needed some 270,000 signatures to get on the ballot in November, would be offset by tax cuts in other areas and be used to finance tax credits for low-income households. Steve Bloom/The Olympian via AP

I also like the plan to make I-732 revenue-neutral. This idea of “revenue recycling” has long been recognized by environmental economists as one of the key benefits from taxing externalities, or side effects of economic activities. Decreasing the sales tax would make Washington state consumers better off and make the Washington state economy more efficient.

Moreover, the low-income tax credits would help prevent I-732 from hurting Washington state’s neediest households. Critics of carbon taxes often argue that they are regressive, pointing to the fact that lower-income Americans spend a high fraction of their income on energy. With these tax credits, however, I-732 would be sharply progressive, making low-income households significantly better off.

This is an important point, not just for I-732, but for carbon policy more generally. In a recent paper, Maryland economist Rob Williams and coauthors examined a national carbon tax for which revenue would be returned in equal, lump-sum payments to all households. They showed that these lump-sum payments would exceed average expenditure on the tax for households earning less than $70,000 per year, so these households would be net winners. I-732 is potentially even more progressive because the tax credits would be targeted to low-income households.

Unlikely Opponents

Environmental groups enthusiastically support I-732, right? Er… no. In fact, neither the Sierra Club, nor the Washington Environmental Council, nor Washington Conservation Voters support the measure. It is baffling to me that an environmental group could stand in the way of a carbon tax. Putting a price on carbon dioxide is the single most efficient way to fight climate change, and it strikes me as irresponsible for these groups to have failed to get behind I-732.

Washington state is well-known for strong environmental groups, yet most of these groups are failing to support I-732.
U.S. Fish and Wildlife Service, CC BY

The primary concern seems to be that I-732 doesn’t raise revenue for pro-environmental causes. Washington state has no state income tax and struggles to raise government revenue, so some groups see this as the last good opportunity to raise funds for renewables subsidies, public transportation and the like. For instance, in its official position, the Sierra Club said members “expressed deep concerns that the initiative does not include all that is needed for an equitable climate policy and just transition to a clean energy economy.”

This is conflating two issues, however. I understand why a group would want to see more pro-environmental spending, but there is no economic reason why all this needs to happen in the same piece of legislation.

Critics of I-732 should also be careful what they wish for. Opponents from environmental advocacy groups are intensely concerned about potential impacts on low-income and other vulnerable populations. But in research here at the University of California Berkeley we’ve shown that pro-environmental spending tends to be regressive, benefiting high-income households disproportionately. If your goal is to help low-income households, it is hard to envision a better policy than a $1,500 tax credit.

It is notable that so much of the discussion about I-732 has been about the revenue rather than about the tax itself. This fascinating article details the myriad different points of view in Washington state on how to spend the money. We are seeing this dynamic in California as well, as environmental justice groups argue that more of the revenues from California’s carbon trading system should be used for addressing equity. These fights about revenue are likely to be a central part of carbon politics moving forward.

Bottom Line

I-732 is an opportunity for my former home state, Washington, to lead on climate. By demonstrating that this can be done at scale, Washington state can lead other states, or even the U.S. federal government, to adopt similar policies. It would be fitting that a state so rich in natural beauty would take a stand for preserving the planet for future generations.

Environmental groups are opposing the carbon tax because some feel it doesn’t do enough to promote renewable energy and environmental justice. amitp/flickr, CC BY

It won’t be easy. This is a local solution to a global problem. The costs would be borne locally, while most of the benefits – mitigating climate change – would be experienced globally. But if Washington state can spur others to action, they will have played a key step in moving climate policy forward.

“For me, supporting I-732 is the way I can look my children in the eye,” said Audubon Washington’s Gail Gatton, in a recent Seattle Times op-ed, “and tell them I have done everything possible to ensure a stable climate for their future.” Your move, Washington state.

This blog is available on The Conversation.

Comments to “Why aren’t environmentalists supporting a carbon tax in Washington state?

  1. Fossil fuel was needed in the past because technology wasn’t there but now there are other ways to make energy without hydro power, oil or coal.
    It isn’t necessary to destroy the environment anymore by polluting our planet by dumping coal ash into our drinking water or taking oil from the planetary engine so it will soon throw a rod..really there is a better way…and it doesn’t cost much…useing magnetic propulsion to generate electricity , governments from around the world know about it and don’t want to use it because it is virtually costless and it doesn’t need a tun of manpower to run and runs for a lifetime and needs no fuel. Large scale magnetic generators could power our planet. Why don’t they do it? Well it’s because large oil corporations won’t benefit anymore and with their power they can controll the media and there for controlling our minds the way we think what we do…snap out of it people

  2. If the point of the tax is to reduce consumption of carbon fuels, OK, bu if it is to reduce CO2 emissions it is pointless. Take a short course:
    “The phase relation between atmospheric carbon dioxide and global temperature” by Humlum, Stordahl and Solheim. Global and Planetary Change, Volume 107, August 2013, Pages 226-228

    “Highlights: Changes in global atmospheric CO2 are lagging 11–12 months behind changes in global sea surface temperature. ► Changes in global atmospheric CO2 are lagging 9.5–10 months behind changes in global air surface temperature. ► Changes in global atmospheric CO2 are lagging about 9 months behind changes in global lower troposphere temperature. ► Changes in ocean temperatures explain a substantial part of the observed changes in atmospheric CO2 since January 1980. ► Changes in atmospheric CO2 are not tracking changes in human emissions.”

    And for a longer term perspective you could also look at “Getting things into perspective, The Big Picture”

  3. California has essentially had a carbon tax since early 2012.

    “The legal case to deem the cap-and-trade program a tax is already in the courts. Four years ago, a business group argued that the program was unconstitutional because it hadn’t passed with a two-thirds majority. An appellate court’s review of the case amplified the uncertainty around the program’s future.” (L.A. Times)

    btw faulting environmental groups for sometimes contradicting common sense is like faulting politicians for sometimes not telling the truth.

Comments are closed.