Washington Business Fall 2016 | Legislative Review | Page 22

2016 legislative review climate change/ energy/air quality Initiative 732 implementing a carbon tax in washington state Failed/AWB Opposed Initiative 732 (I-732) — the so-called revenue neutral carbon tax — was submitted as an initiative to the Legislature for consideration during the 2016 session. Sponsored by Carbon Washington, a self-described nonpartisan group, I-732 was attempting to bring a British Columbia-style carbon tax to Washington. As proposed, I-732 would create an economy wide carbon tax on greenhouse gas emissions from the delivery or combustion of electricity, natural gas and petroleum products, as well as manufacturing processes around the state. Similar to other proposals we’ve seen in the legislative process over the past few years, I-732 is essentially a new tax on energy that will increase the cost to consumers and businesses alike. Under the proposal, the tax rate would be as follows: • $15 per ton — July 2017 • $25 per ton — July 2018 • Increases every year thereafter by 3.5% + inflation (capped at $100 per ton) In addition, there are several taxes that would be reduced to offset the new cost of the carbon tax, including: • A reduced B&O rate for most manufacturers. Reduction = to 0.001 of current rate • Reduction in state sales tax by 1%: 0.5 in 2017; and 0.5 in 2018 Based on analysis from the state’s Office of Financial Management (OFM), the cost of the proposed ballot measure would be expensive to the state, despite the claims of tax neutrality. The OFM analysis showed the state would collect $3.4 billion in 201719 / $4.2 billion in 2019-21, but the proposed reductions in other taxes would result in a net negative to the state of $281 million in 2017-19 and $633 million in 2019-21. During public hearings before the Senate and House, AWB and our members testified in opposition to I-732, highlighting additional concerns we had identified with 20 association of washington business the energy tax proposal. These concerns included increased regulatory uncertainty, competiveness issues — especially for energy-intensive, trade-exposed industries — and lack of credit for early actions to reduce emissions or increase efficiency. In the end, proponents of the carbon tax proposal failed to persuade legislators to adopt I-732. The lack of action means I-732 qualified for the 2016 ballot, giving voters an opportunity during the general election this fall to vote on the measure. SB 6306 alternative carbon tax proposals Failed/AWB Opposed Despite most time and attention being focused on I-732, there were several other conversations and attempts to debate a carbon tax during session. Sen. Steve Hobbs, D-Lake Stevens, introduced Senate Bill 6306 in an attempt to address the concerns being voiced by stakeholders with regard to I-732. Sen. Hobbs’ proposal, which also received a public hearing in the Senate Energy Environment and Telecommunications Committee, would have implemented a carbon tax at a lower rate than I-732 and focused the tax on fossil fuels being brought into our state. SB 6306 also attempted to ensure the new tax revenues would go to programs or projects related to the issue of carbon reduction and environmental protection, unlike I-732, which would have funded general government programs. While Sen. Hobbs introduced his proposal with the purpose of generating additional debate and conversation, his proposal was met with similar opposition from many stakeholders, including the business community. Even though none of the proposals related to a carbon tax passed through the legislative process, there were many issues discussed throughout the session, including those issues that Sen. Hobbs raised in his bill. Many of the other policy discussions focused on treatment of the manufacturing industries in Washington, spending of any revenue collected from a carbon policy and what an appropriate rate should be if instituted. Although no consensus was reached on these issues, AWB and our members were at the table to ensure our interests were represented. These conversations also will help set the table for other conversations that are no doubt likely to happen in upcoming legislative sessions and regulatory debates. E2SHB 2346 providing incentives for renewable in