Washington Business Fall 2016 | Washington Business

business backgrounder | regulatory If enacted this fall by voters, I-732 would impose a $15 per ton fee on all emissions of carbon dioxide in the state in the first year. In year two, the fee would jump to $25 and would accelerate at close to a 6 percent rate every year thereafter until it reaches a maximum $100 per ton. After that, it would continue to increase by 3.5 percent every year. This equates to a $0.25 increase in the cost of fuel, a 5 percent cost jump for electricity and 15 percent increase in the price of natural gas by 2018. Some of the state’s most energy-intensive, trade-exposed employers are sounding the alarm on the proposal. “We anticipate that the implementation of Initiative 732 will likely result in increased fuel and electrical costs and have a negative impact on our competitive position,” said Kyle England, Kaiser Aluminum senior manager, human resources and external affairs. But, I-732’s author says the flat energy tax on business and consumers is a friendly alternative to the many complex capand-trade tax policies being discussed for 2017. One “major problem” with that analogy, said AWB Government Affairs Director Brandon Houskeeper, British Columbia doesn’t have 49 other states to compete with for job retention and creation — none of which have a BC-style carbon tax. revenue neutral? not so fast I-732 is billed by Carbon Washington as “revenue neutral” because it would offset the higher energy costs it creates by giving certain employers a business and occupation tax (B&O) reduction and lower the state sales tax by 1 percent. Not so fast, say its detractors. The Sierra Club, an environmental group opposed to the initiative, in position paper posted on its website last April, outlined why it could not support the initiative, writing, “While the stated intent was to be revenue neutral, the state Department of Revenue predicts I-732 will result in $900 million of lost revenue, putting already underfunded budgets for education, social services, and the environment at risk.” The Sierra Club is ref erring to the state Office of Financial Management’s (OFM) 2015 analysis which estimated a loss of $970 million to the state if I-732 passed. Bauman, in a column published in The Olympian in February, disputes OFM’s cost calculation, writing, in part, “This conclusion comes from misuse of zeroes by OFM and their analysts, who admit that they ‘are not carbon tax experts.’ The Carbon Washington campaign does include carbon tax experts, and we estimate that more than $300 million in carbon tax revenue will come from taxes on ‘exported power’ — i.e., taxes on fossil fuels burned in-state to generate electricity that is sold out-of-state.” AWB’s Houskeeper explained that while there is disagreement on the cost of the new tax to state government, the fact remains that I-732 is not revenue neutral for employers. “The carbon tax would create a competitive disadvantage by adding fuel and operating costs that are not shared by competitors in other states, or competitors internationally,” said Chris Cary, civil and environmental engineer for Tree Top, “The State Department of Revenue predicts I-732 will result in $900 million of lost revenue, putting already underfunded budgets for education, social services, and the environment at risk.” — The Sierra Club, an environmental group opposed to the initiative, wrote in position paper last April “Initiative 732 is a policy that is both pro-environment and pro-business,” wrote Yoram Bauman, the founder of Carbon Washington, in response to AWB’s vote to oppose his carbon tax proposal. “I-732 is an important first step to reducing pollution, making our tax code more fair, protecting low- and middle-income families, and enabling our state to prosper in a low-carbon future.” Bauman, also a Ph.D. economist, points to the success of British Columbia, Canada, in implementing a carbon tax. “British Columbia’s carbon tax is only four years old, but preliminary data show that greenhouse gas emissions are down 4.5 percent even as population and gross domestic product have been growing. Sales of motor gasoline have fallen by 2 percent since 2007, compared with a 5 percent increase for Canada as a whole,” Bauman wrote in a 2012 column published in The New York Times. It’s a point he has repeated during AWB — Brandon Houskeeper, AWB director of government affairs board presentations on I-732. on climate policy “Our economic analysis is clear: Families living paycheck to paycheck and on a fixed income will see the cost to heat their homes, get to work and feed their families rise due to this initiative.” 40 association of washington business

Washington Business Fall 2016 | Washington Business | Page 40