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