Thoughts on Governor Inslee's climate proposal… and UW forum on Jan 14

The past week has been dominated by Governor Inslee’s climate proposal (and by the Seattle Times editorial board arguing for a revenue-neutral alternative!), so here are some thoughts, with a preface that Divest UW and Green Evans are organizing a climate policy forum for Wednesday night Jan 14 featuring KC Golden from Climate Solutions, yours truly, and hopefully others. Details TBD!

Carbon Washington’s position in brief: As we noted in our open letter to the environmental community, we think a bipartisan approach is a more promising path to climate action than pursuing what we called the Progressive Take-Over of the World. Consequently, while Carbon Washington is certainly not opposed to the Governor’s proposal, we agree with the Seattle Times editorial board when they write that “A revenue-neutral approach — one that would mitigate consumer’s costs of a carbon tax — would be both less financially risky and more politically viable in the divided Legislature.”

Additional thoughts:

Some policy details and analysis. The governor’s climate policy covers a lot of ground, but the focal point is carbon pricing, and his carbon pricing proposal is essentially a California-style cap-and-trade system, with auctioned permit revenue mostly going to education, transportation, and social justice. (It will also almost certainly include linking with California, although I’m not sure if that’s explicitly mentioned.) For all the details see this info from the Governor’s office; in particular scroll down to the policy briefs for the Carbon Pollution Accountability Act, which is the proposal relating to carbon pricing. For an enthusiastic analysis see Kristin Eberhard’s Sightline blog post, which includes this terrific revenue graphic. For a not-enthusiastic analysis see the blog posts from Todd Myers at the Washington Policy Center.

Think of it as a clever “Christmas tree”. It’s a Christmas tree because it’s got lots of ornaments: there’s a California-style cap-and-trade bil, there’s money for education, there’s money for transportation, there’s money for social justice… and that’s just one part of the Governor’s proposal. (See the links above for details about electric vehicles, clean fuels, etc.) And it’s clever because it makes for a compelling legislative strategy given the challengs that lie ahead: having different ornaments allows the governor to reach out to a variety of different interest groups for support and to claim (even if the bills don’t pass) that he tried to make progress on their priorities.

The expert consensus is that the governor’s proposal is unlikely to pass in the legislature. This is not intended to be a downer (and, for the record, unlikely doesn’t mean impossible, so if you want to contact your legislator then read this from Washington Environmental Council) but it is intended to be a reality check. There was an election last month, and as the Seattle Times wrote the day after the election, “The results mean it will be harder for Gov. Jay Inslee to act on an aggressive plan to reduce carbon emissions in the state, or to pass legislation that’s been a priority for Democrats including education and transportation funding.” And the story in last week’s paper was similar: “A tougher crowd waits in Olympia.” The truth is that the governor has introduced a bold plan that faces a very steep uphill battle in the legislature, especially the Republican-controlled state Senate.

Comparison with the latest iteration of our Carbon Washington proposal. The governor’s proposal is a California-style cap-and-trade system, with permit prices estimated to start at about $12 per ton CO2 and then grow over time at a rate determined by supply and demand and by minimum bid requirements for the permit auctions; our Carbon Washington proposal is a BC-style carbon tax with a tax rate of $15 per ton CO2 in the first year and $25 in the second year, increasing thereafter at about 5.5% per year in order to maintain revenue neutrality. The governor’s carbon price covers about 90% of greenhouse gas emissions in the state, with the major exceptions being agriculture and waste managment; our Carbon Washington proposal covers about 84% of the greenhouse gas emissions in the state, with the major exceptions being agriculture, public transportation, and emissions of non-fossil-fuel GHGs. The bulk of the revenue from the governor’s proposal goes to fund education and transportation (see Sightline’s terrific revenue graphic
How Washington will spend the carbon revenue in 2017, in millions of dollars

The bulk of the revenue from the Carbon Washington proposal goes to fund a one-percentage-point reduction in the state sales tax. The governor’s proposal includes funding for the Working Families Tax Exemption (a state-level bump-up of the federal Earned Income Tax Credit) sufficient to provide a 10% bump-up of the federal EITC for low-income working families; our Carbon Washington proposal includes funding for a 25% bump-up of the federal EITC. The governor’s proposal includes a small chunk of money ($20m a year) to address impacts on manufacturers; our Carbon Washington proposal allocates a much larger chunk of money (closer to $200m a year) to effectively eliminate the B&O tax for manufacturers.

“Tax” versus “Fee” versus “Revenue”. Discussion of the governor’s proposal will be a good test-case for looking at the kind of language that gets used in public discussion. The governor is steering away from calling his proposal a tax (or even a cap-and-trade system) but the public discussion may go elsewhere; for an extreme example see the San Juan Islander, which flat-out calls it a “carbon tax”. Polling suggests that language differences may not matter all that much anyway—the recent G-Squared poll has carbon tax outpolling cap-and-trade—but in any case the weeks ahead will be instructive for learning about who gets to determine what language gets used and how much it matters.

As always comments welcome on the blog or via Facebook and Twitter.

Activists Confront Keystone XL Threat

May17AuburnWA03I recently joined hundreds of other activists on a video chat hosted by to discuss recent developments in the saga of the hotly debated and much delayed construction of the Keystone XL pipeline. As you probably know by now, TransCanada wants to build the KXL pipeline to transport diluted bitumen (dilbit) from the tar sands of northern Alberta across the US Midwest heartland to the Gulf Coast for sale on the global oil market. TransCanada needs approval from the US State Department and President Obama to construct a pipeline across the US/Canada border. The approval process has been stalled for years due to persistent grassroots opposition and in recent months held up due to a lawsuit brought by landowners in Nebraska who successfully argued in lower courts that the planned route of the pipeline was illegally drawn and granted the builders improper use of eminent domain. While waiting for the Nebraska Supreme Court to decide whether to uphold the lower court’s decision, the permit for the pipeline’s path through South Dakota expired leaving the oil giant facing the dilemma of having no legal route for the pipeline while oil prices on the global market are plummeting cutting into their profit margin for a product that is the most expensive (and filthiest) fossil fuel to extract, transport and refine.

The most recent bit of political drama in this ongoing saga was played out in the lame duck Congress when Mary Landrieu, the embattled Democratic Senator from Louisiana, bet the catfish farm on a Hail Mary attempt to pass a bill that would have approved construction of the Keystone pipeline. The bill was defeated by a razor-thin margin of one vote, and Landrieu lost her seat in a December run-off to Republican challenger Bill Cassidy. credits this victory to citizen activists who made phone calls to fence-sitting senators as well as Occupy-style sit-ins at the offices of Senators Tom Carper of Delaware and Michael Bennet of Colorado at which 350 DC activists were arrested.

KleebOrganizer for Duncan Meisel introduced Jane Kleeb, Executive Director of Bold Nebraska. Kleeb informed listeners that the Nebraska Supreme Court decision could come soon, and expressed the belief that whatever the Court decides, the outcome will be bad for TransCanada. If the lower court decision is upheld, there is no legal route for the pipeline through Nebraska, but even if they strike down the lower court, the lawsuit has shone a light on risks to the environment that reveal shortcomings and omissions in the State Department’s Environmental Impact Statement which could solidify grassroots opposition and give Obama some political cover for a decision to reject the pipeline. One other possibility is that the Supreme Court could decide that the landowners do not have standing as plaintiffs and that could cause more delays and uncertainly in a legal process that has already held up the pipeline for several months. Kleeb is encouraged that President Obama has recently stated that building the pipeline poses catastrophic environmental risks while offering few jobs or other economic benefit and takes these statements as an indication that the President is poised to reject the pipeline outright if it lands on his desk, as seems likely to happen in the near future.

GoodtoothNext to speak was Dallas Goldtooth, Keystone XL Campaigner at the Indigenous Environmental Network. He described the situation in South Dakota where indigenous Lakota, Dakota and Sioux have strong legal and moral standing in opposing the re-permitting of the pipeline route through their lands. A hearing on January 6, 2015 could see TransCanada’s appeal to extend the permit dismissed on the grounds that the tribes were not properly consulted in the permitting process, a right that is established in federal law and the importance of which was recently cited in a speech by Interior Secretary Sally Jewell. If the permit is not extended, a lengthy new feasibility study would be required, giving both native and non-native landowners the opportunity to make their voices and opposition to the tar sands projects heard. Goldtooth and Meisel stressed that tar sands extraction is a vicious process that lays waste to pristine boreal wilderness, endangers wildlife, and is also destructive to human health and society as well. The increase in violence against women near the “man camps” similar projects have already created is a serious problem that bears consideration in the approval process.

Sara Shor, Keystone XL Campaign Manager, pointed out that Mitch McConnell, who will be Senate Majority Leader in 2015, has pledged to bring up another vote to approve the Keystone XL. We can expect such a bill to be tied to must-pass legislation in the manner seen with partisan give-away riders that were attached to the so-called CRomnibus bill in early December. Any such action, in addition to events unfolding in Nebraska and South Dakota, could trigger calls for activists to participate in anti-KXL actions all across the country and at very short notice. The NoKXL Pledge of Resistance, for instance, is prepared to engage in broadly distributed acts of civil disobedience as soon as the decision lands on the President’s desk. Asked what would happen if, despite all the efforts to oppose the Keystone XL, President Obama does approve the pipeline, Shor replied, “All hell will break loose. This pipeline is not getting built.”

Emboldened by the success of efforts to defeat Mary Landrieu’s last minute legislative maneuvers, opponents of the Keystone XL pipeline such as and their allies are confident that they have the know-how to handle whatever is thrown at them in the next 2 to 3 months, and they are calling on like-minded folks to join them and build their capacity for effective grassroots action. Visit any of the following websites for more information and to offer your support. – Stop Keystone XL Team:


Bold Nebraska:


Indigenous Environmental Network:


NoKXL Pledge of Resistance:

Al Gore Praises Inslee's Climate Plan

At the Seattle Westin today, Al Gore spoke to a full banquet room at a fundraiser for Jay Inslee. Gore offered praise for the Washington Governor’s much vaunted plan to combat global warming. Inslee has proposed putting a price on carbon, improving public transportation, encouraging energy efficiency, and increasing use of solar power and electric cars. It remains to be seen how much of this agenda can come to fruition with Republicans still in control of the State Senate.

Nonetheless, it is worth noting that taking a strong stand on addressing the climate crisis has now become an effective campaign fundraising technique. Not so long ago, such a topic would have earned barely a mention from an elected official with such a high profile as Inslee. Gore, author of An Inconvenient Truth, Earth in the Balance, and other books calling for action to address climate change as well as founder of The Climate Reality Project, called Washington’s Governor the best of all U.S. governors on this critically important issue.

While giving a nod to the importance of fully funding education as mandated by the McCleary decision, Inslee spoke at length about his plans to find “market-driven” solutions to the problem of reducing carbon emissions, telling the crowd of likely Democratic donors the importance of seeing the current crisis as not just a danger to be averted but as an opportunity for Washington State to lead the nation and the world in 21st Century green energy technologies, drawing on our State’s history as a leader in the aerospace and software industries. Gore recited a familiar litany of dire predictions of climate chaos, but he also pivoted to a more hopeful message: the cost of clean energy technologies is dropping at rates much faster than predicted just five years ago. When the former Vice President spoke of the lower cost and higher efficiency of solar panels, a couple at my table who had recently installed solar panels on their home gave each other a quiet high-five. (They also told me that homeowners buying solar panels from a Washington State based company can look to having the cost recouped in the form of lower power bills in no more than five years.)

p4pBut while Gore and Inslee were inspirational, the star of the day was 9 year-old Abby Snodgrass, a member of Plant for the Planet, who has taken it upon herself to help in the effort to plant “a thousand billion trees”. She believes children planting one million trees in every country on earth could offset CO2 emissions all on their own, while adults are still talking about doing it. Each tree binds a CO2 intake of 10 kg per year. Abby called on all the adults to follow her example and choose not to be a bystander just because the climate problem seems too big to solve. Abby is right. The message of the day is that we will never solve the problem of global warming by doing nothing. The scope of the problem requires all of us to work together. The plan put forward by Governor Inslee won’t solve the problem by itself, but like Abby planting dozens of trees, it’s a meaningful step in the right direction.

Readings about carbon taxes

* Our endorsement in September from Seattle Business magazine prompted a half-dozen Letters to the Editor in the latest issue, including pro-carbon-pricing letters from Rogers Weed, former director of the state Department of Commerce; from real-estate heavyweight Craig Kinzer; and from Gwen Hanson of the Bellevue chapter of Citizens Climate Lobby.

* Forbes magazine is featuring a new voice from the Tri-Cities: geologist Jim Conca. I especially recommend “So You Think We’re Reducing The Use Of Coal? — Think Again” and (for something more positive!) “Can A Carbon Tax Create Jobs, Jobs, Jobs?” Jim is also the co-author of the 2007 book The GeoPolitics of Energy: Achieving a Just and Sustainable Energy Distribution by 2040. Another essay from Forbes is from the CEO of Royal Dutch Shell: Why This ‘Big Oil’ CEO Believes In Applying A Price To Carbon.

* For another truly inspiring read, try “The Sudden Rise of Carbon Taxes, 2010–2030” by Lawrence MacDonald and Jing Cao. The authors note that “this essay is what might be called a future history, a work of imagination set in 2030 that looks back at one possible scenario for global climate policy. We are tempted to call it “policy fiction” or perhaps “political science fiction”—a tribute to science fiction—except that such terms seem to suggest that the scenario we have sketched could never come true. Our intention to persuade the reader that some rough approximation of the events we have described is indeed possible, and thus to increase the likelihood that something like it will come to pass.” A key excerpt:

Before long, British Columbia’s success attracted attention south of the border, in the US states of Washington and Oregon, where the large share of voters in favor of climate action had ringside seats to watch the British Columbia experiment with carbon taxes to their north and California’s experiment with cap-and-trade to the south… [A] lively debate ensued in Washington and Oregon about which path to follow. California’s cap-and-trade system seemed to be off to a good start, and the idea that reductions in emissions could be obtained at lower cost and without politically difficult “tax” increases appealed to significant numbers of voters and politicians… It wasn’t long, however, before California’s cap-and-trade system began to lose its luster [and for a variety of reasons described in the full piece] both Washington and Oregon followed British Columbia’s lead and adopted revenue-neutral carbon taxes… As in British Columbia, revenue was rebated through a combination of cuts in business taxes, personal tax breaks, and low-income tax credits. And, as in Canada, other subnational jurisdictions took notice when the US Pacific Northwest managed to combine increased economic growth and falling emissions with tax reductions.

Note that this was written before the authors knew about our CarbonWA campaign!

* I’ve got two articles on the Sightline blog: “The #1 Question from Conservatives about Revenue-Neutral Carbon Taxes” and “The #1 Question from Progressives about Revenue-Neutral Carbon Taxes”. (Hint: They’re the same question!) Another reading along the same lines is “Do Carbon Taxes Just Feed the Beast?” from Bloomberg View.

* The latest hint from Governor Inslee (who’s CERT taskforce recommendations are due in a few weeks) is “Inslee: Carbon regulation could fund education, flood control“.

* Finally, the New York Times has “Environment Is Grabbing Big Role in Ads for Campaigns” and (on a somewhat lighter note) “Why Republicans Keep Telling Everyone They’re Not Scientists”. Excerpts:

Mr. Krosnick of Stanford analyzed polls in 46 states conducted between 2006 and 2013 and found that in every state surveyed, at least 75 percent of the population acknowledged the existence of climate change, and at least 67 percent said the government should limit greenhouse gas emissions.

One result is that a cadre of Republican staffers and advisers, most under the age of 40, have started pushing their bosses to find a way to address the issue.

The general dialogue has been, ‘We have to do something about this,’” said one Republican adviser who asked to remain anonymous in order to speak candidly. “We have to be less head-in-the-sand and acknowledge we are losing public opinion on this issue.

Now that you’ve read all this, what can you do? Well, check out our winter deliverables and see how you can help out! Can you set up a Carbon Washington chapter in your area to help spread the word? Can you make a signature gathering pledge for yourself or your group? Can you complete and comment on the carbon tax swap calculator? Can you help us connect with organizations, businesses, economists, or members of the media? Can you forward our email newsletter (this newsletter!!) to your friends and encourage them to sign on at Can you make a donation? Can you connect with us on Facebook and Twitter? Everybody can do something!

PS. For those of you in the Seattle area, I’m giving a book talk on T Nov 4 at 7pm at University Bookstore on The Cartoon Introduction to Climate Change. Note that I’ve pledged all of my royalties for the year to Carbon Washington and that I’m still happy to send a signed copy to you if you make a donation to Carbon Washington of at least $100… or a monthly contribution of just $20!

Inspire Seattle: The Political Mind, Climate Crisis, and A New Science of Social Change

Inspire Seattle

InspireSeattle invites YOU to join us at our Social Forum: Saturday, October 4th at 6:30PM.

Main discussion topic for this evening: The Political Mind, Climate Crisis, and A New Science of Social Change

Have you ever wondered how popular support for sensible gun laws, universal health care, and financial reforms that serve the majority of people continually fails to deliver policy outcomes in America? Yes, there is systemic corruption in the U.S. Congress. But this doesn’t explain why the people are unable to reclaim our democracy.

Answers that work will require that we look within ourselves — at the workings of the political mind and the power of language for shaping the debate. The great linguist, George Lakoff, has brought attention to the vital role that cognitive science plays in this effort. Together we will look at the findings from this cross-cutting synthesis of studies in psychology, neuroscience, anthropology, and related fields to see how our political minds work.

We will then apply these findings to one of the most “wicked problems” facing humanity — the climate crisis brought on by human activities that threaten the future of our global civilization. We explore the moral beliefs, social values, and broad perceptions that have hindered collective action in the past. And we will explore a new science of social change that may be the vital missing piece that has kept our democracies here and around the world from functioning up till now.

Please join us for this important discussion!

Guest Speaker:

Joe Brewer, Culture Designer:

Joe is the Founder of Cognitive Policy Works and a protégé of linguist, George Lakoff. He has three bachelors degrees in physics, mathematics, and interdisciplinary studies and a masters in atmospheric sciences. He is a complexity researcher, innovation strategist, experience designer, and serial social entrepreneur who brings a wealth of expertise to the adoption of sustainable solutions at the cultural scale. Among his notable achievements are the creation of an undergraduate degree program in Earth Systems, Environment and Society at the University of Illinois and design of new collaboration protocols for strategic communications among European NGO’s with WWF-UK and Oxfam, Great Britain. He was an active member of the Center for Complex Systems Research from 2001 to 2005, where he studied pattern formation in self-organizing systems. He was a research fellow at the Rockridge Institute in 2007-08 analyzing political discourse in the United States. He contracted with the International Centre for Earth Simulation in Geneva in 2010-11 to help build a globally-focused high performance computing facility dedicated to holistic simulations of the dynamic Earth. His experiences as a social entrepreneur and cross-disciplinary scholar weave together a combination of skills dedicated to open collaboration, interactive design, and empowered civic action for catalyzing change toward greater resilience in our turbulent world.

Learn more at one of his websites: and

Follow him on Twitter at @cognitivepolicy

See minutes and photos from our last gathering (Obamacare, May 31st) at]

About InspireSeattle:

InspireSeattle is a progressive network of Seattle-area people sharing ideas and supporting action. InspireSeattle’s vision is to create connection throughout our community and better community through activism. InspireSeattle’s mission is to provide a fun, supportive gathering for people who care deeply about our community, our country and our planet. We embrace progressive policies that improve our society and protect our environment. We discuss current issues, share ideas and activism efforts while striving to inspire additional action. Subscribe (or unsubscribe) to InspireSeattle by visiting

When: Saturday, October 4th at 6:30PM. Please try to be on time!!!

Where: Bill and Emily’s place, 1640 S. Lane St., Seattle WA 98144, 206-324-3232.

Google map:


1640 S Lane Street


(one block north of Dearborn, one block east of Rainier)

Entrance to 1640 S Lane StreetPark on 18th Ave S, between Lane and Weller Streets.Access to the house is down the alley between Lane and Weller Streets, walking west towards Rainier Ave S. The alley dead ends at the house. Blue and steel siding. Metal steps to door…


It’s a potluck: so please help out and bring something to eat and to drink!

6:30 to 7:45: Social time! Eat, drink, relax, and catch up with some other local progressives

Formal discussion and guest speakers, 7:45 to 9:30

Other Announcements – got any?

Rules of Engagement!

1. So that everyone has a chance to participate, please keep your comments short

2. Raise one’s hand to ask a question in lieu of shouting out

3. Respect the points of views of others

4. No arguing of politics during the formal discussion – save that for afterwards!


A Challenge to Warren Buffet: End BNSF railroad's dependence on hauling and burning fossil fuels!

The Buffett Legacy Project is our moral appeal to multi-billionaire Warren Buffett, owner of BNSF. We launched a petition on Sunday and released a series of video letters asking that Buffett: (full letter below)

“End BNSF railroad’s dependence on hauling and burning fossil fuels. Partner with Gov. Inslee to electrify BNSF, increase track speeds, and run your trains on 100% renewable energy from Seattle to Chicago.”

This “Ask” is backed up with our companion Solutionary Rail project, our policy proposal to shift the economics of rail to make it an engine for sustainable transport and renewable energy rather than an accelerator for climate and environmental catastrophe. The Solutionary Rail proposal is being created by a dedicated team from around the country which has been meeting since last October. Patrick Mazza and I outlined the Solutionary Rail proposal on Diane Horn’s Sustainability Segment on KEXP last Saturday. (Listen here).

Feeling adventurous? If you create your own respectful-yet-strong moral appeal to Mr. Buffett, we’ll add it to the campaign.

Sign onto this letter to Warren Buffett via petition:

Dear Mr. Buffett,

Please, stop “hedging your bets” with investments in further use offossil fuels that are guaranteed to harm the climate and the well beingof future generations. Your railroad, BNSF’s reliance on shipping coaland oil is not sustainable for your company, your workers, or theplanet. These fuels are causing climate disruption, oceanacidification, damaging public health, and endangering the environmentsand cultural inheritance of the communities they move through.

As the owner, you have the capacity to break the BNSF’s and the railroadindustry’s addiction to the consumption and transport of fossil fuels. You alone have the power to transform the role and impact of railroadsfrom being part of the problem to being a pivotal component of thesolution.

As you have pointed out, transportation by rail is 3-4 times more energyefficient than by truck. Electrification of the railroad would multiplythat efficiency again by 3. Investment in modernization of rail lineswill deliver higher speeds, which will draw high value freight off oftrucks on our overburdened highways and make intercity passenger servicemore attractive. Electrified rail can run on zero emissions energy fromwind, sun and other renewable sources. It is even possible for yourrailroad’s right-of-way to serve as a highly efficient HVDC transmissioncorridor for clean, renewable energy.

We call this vision Solutionary Rail. We urge you to work with Governor Jay Inslee and other regional leadersmake the Northern Transcon part of the solution for future generations. Implement the Solutionary Rail model to create a backbone forsustainable transport and renewable energy infrastructure in the regionthrough which BNSF roles. Establish your legacy as the benevolentbillionaire who had the wisdom to invest in the pivot to a sustainablefuture.


Signer… (YOU!)

For more on this topic, visit, a project of Backbone Campaign.

Backbone Campaign marked this historic weekend by being out in the streets in Seattle and New York City as well as at the Protect the Sacred rally at the US/Canada border. We used this pivotal moment to launch two new fronts in our campaign to save our beautiful Pacific NW home-bioregion Cascadia and the Salish Sea from becoming a fossil fuel corridor to Asia. I was honored to be able to address the crowd about these projects at the Seattle rally Sunday.

Carbon Pricing and Northwest Businesses

This post is 14 in the series: Cashing In Our Carbon, from SightLine Daily.

Many business owners and workers worry that carbon pricing will hurt local economies. They need to know: How would carbon pricing affect businesses and job creation in Washington and Oregon? In particular, how would it affect energy-intensive businesses that compete in national and international markets with companies not yet covered by carbon pricing? Will these energy-intensive, trade-exposed (EITE) businesses, like steel and aluminum manufacturing, still be able to compete with businesses outside the state or will carbon pricing send their sales plummeting? Will pricing carbon in the Northwest just send production and carbon pollution elsewhere? In other words, will carbon emissions “leak” to out-of-state firms?

The answer? Most businesses are not energy-intensive and consequently would be essentially unaffected; they might even benefit from carbon pricing if they receive offsetting reductions in existing taxes. However, a small group of energy-intensive businesses, only some of them trade-exposed, would be substantially affected by a price on carbon. Fortunately, there may be ways to partially and perhaps fully address those impacts, for example by reducing existing taxes on manufacturers.

In this article, I will spell out that answer, industry by industry, for Oregon and Washington. I assume a carbon price of $25 per ton of CO2. That figure is based on the proposal for Washington State that I’m working on with, and it’s close to the $30 carbon tax in BC. If you’re more interested in a California-style system, divide most of the carbon pricing financial impacts by two because permit prices there are roughly $12 per ton at the moment. For simplicity, I concentrate on CO2 from fossil fuels, which account for more than 75 percent of the total. A more-complete review would need to study more thoroughly the handful of industries with significant emissions of other greenhouse gases (GHGs) or of CO2 from other sources.

Who pays a price on carbon?

There are three ways to see that direct impacts of a carbon price on most businesses would be modest. The first approach is anecdotal: let’s consider a hypothetical energy-intensive business that spends 50 percent of its revenue on petroleum fuels. (That’s very roughly in the ballpark for an airline or a trucking company.) A carbon price of $25 per ton of CO2 works out to about 25 cents a gallon, so to keep the math simple let’s call that an extra 10 percent in fuel costs. Overall costs, then, increase by 5 percent. And since our hypothetical energy-intensive business sees a carbon pricing impact of only 5 percent, the vast majority of businesses—retailers, software companies, etc.—are going to see an impact that is much, much smaller.

The second approach is to look at actual data from an energy-intensive sector of the economy—manufactured goods—and notice how stable prices have been despite the wild price changes in oil and natural gas over the past 15 years. The impacts of a $25 carbon price would be much less than these natural price swings, and if these natural price swings haven’t had a strong impact on the selling price of manufactured goods then it’s clear that the vast majority of businesses will not be greatly affected by a carbon price.

Data sources: Prices for crude oil (U.S. first purchase price) and natural gas (industrial price) from EIA; Producer Price Index (for total manufacturing industries) from BLS. Original Sightline Institute graphic, available under our free use policy.

The third and final approach is to consider the data from the Carnegie Mellon Economic Input-Output Life Cycle Assessment (EIO-LCA) model, which breaks down the economy into 428 sectors and tracks the direct and indirect carbon emissions associated with each one. (The sectors are not of equal size: “retail trade” is one sector, and so is “power generation and supply,” and so is “tortilla manufacturing.”) The exact numbers from this model need to be treated with caution. For one thing, the model uses 2002 data and fossil fuel prices have changed since then. For another, national models like EIO-LCA don’t reflect the electricity mix in the Pacific Northwest. Still, the general results are informative.

Using the model, I estimate the impact of a $25 carbon price on each economic sector. Of the 428 sectors, only 2 (power generation and cement manufacturing) would see costs go up by an amount equal to more than 10 percent of revenue. Another 14 sectors would see a carbon price impact of 5-10 percent of revenue; examples include carbon black manufacturing, fertilizer manufacturing, and industrial gas manufacturing. The next 60 or so sectors—including pulp and paper mills, glass manufacturing, fishing, and air and truck transportation—would see a carbon price impact of 2.5-5 percent. The next 200 or so sectors would see a price impact of 1-2.5 percent; manufacturing still dominates this group, including most types of food and beverage manufacturing, but the group also includes various sectors of agriculture, forestry, mining, construction, and even a few unexpected sectors like colleges and universities. The final 150 or so sectors, with a price impact of less than 1 percent, include retail trade, software publishing, and high-value-added manufacturing such as aerospace.

A good summation comes from quoting “Who Pays a Price on Carbon?” a 2010 study of household and business impacts by economists Corbett Grainger and Charles Kolstad that uses an earlier version of the EOI-LCA model: “There are remarkably few sectors [of the economy] that see substantial cost increases.” They add that “what constitutes substantial is a subjective judgment” and I would add that whether businesses are trade-exposed matters here as well. A cost increase of (say) 3 percent is unlikely to significantly affect a business that will be able to raise its prices to compensate; the same cannot be said for a business that competes nationally or internationally, and consequently cannot raise prices, because that 3 percent will have to come out of the firm’s profit margin. (Typical profit margins for non-financial companies range from 5-10 percent according to investment advisor Jon Shayne. As another point of comparison, business and occupation [B&O] taxes in Washington State are 1.5 percent for most businesses and about 0.5 percent for manufacturing.)

Focusing on the Pacific Northwest

To bring these numbers down to the level of Washington and Oregon, consider EPA data on direct GHG emissions (not including electricity consumption) from large facilities, including all facilities that generate more than 25,000 tons of such emissions per year. For context, that level of emissions roughly equals the combined emissions of 1,000 households. In 2012, only 90 entities in Washington and 63 entities in Oregon made the cut for the EPA database.

Data source: EPA. Original Sightline Institute graphic, available under our free use policy.

Data source: EPA. Original Sightline Institute graphic, available under our free use policy.

Power plants and refineries

The dominant carbon polluters are power plants in Washington and Oregon and oil refineries in Washington. Each of those 3 sectors generates emissions of more than 6 million metric tons of CO2. At $25 per metric ton, pricing carbon would cost each sector more than $150 million.

That’s a lot of money, but remember that these are huge industries. For example, the Washington Research Council reports that the five oil refineries in Washington produced about 3.7 billion gallons of motor gasoline in 2011, plus a roughly equal amount of other products such as diesel and jet fuel. About half of their products are consumed in-state, including about 2.6 billion gallons of motor gasoline. Some $150 million in carbon pricing revenue divvied up among approximately 7.5 billion gallons of petroleum products is only about two pennies a gallon.

You might think that big industries like this would generate a lot of tax revenue for the state under the existing tax system. And you’d be right: the Washington Research Council estimates that the petroleum industry paid about $105 million in business and occupation (B&O) taxes and $163 million in other taxes, mostly the hazardous substance tax.

These existing taxes create an opportunity for a swap. Eliminate the B&O tax for refineries, and those $105 million in tax savings would be in the ballpark of the $150 million cost of a $25 carbon price. (Of course, the impact on individual companies would depend on their specific business practices and B&O tax liabilities, and since those are proprietary all we can do is express an interest in doing case studies on this topic. Also note that the Multiple Activities Tax Credit—under which refinery products sold in-state are subject to the B&O tax for selling rather than for manufacturing—may limit the tax savings to only about $60 million [figure 10.2])

A tax swap would give refineries a strong incentive to reduce emissions (every ton of reduced emissions would be $25 in savings) without greatly increasing their overall tax bill—or encouraging them to move production out of state. Besides, refineries may not be terribly exposed to trade competition anyway. No one has built a large refinery in the United States since 1977, and the two refineries in British Columbia—the Chevron refinery in Burnaby and the Husky refinery in Prince George—have not reduced their output since the province implemented its revenue-neutral $30 carbon tax. Likewise, Washington refineries have not cut output, even though the dollar value of B&O taxes paid by refineries has more than tripled since 2003 (Appendix A). The B&O tax is a tax on gross receipts, not profits, so if the price of crude oil goes way up then refineries pay much higher taxes, even if they’re not seeing any increase in profits.

Refineries in Washington or British Columbia may deserve tax reductions to offset the cost of a carbon price, but the purely economic case is tenuous.

Similar and additional questions about trade exposure arise with electric utilities. These businesses are regulated monopolies. They are subject to different types of economic pressures than most businesses. In any case, as with refineries, the $150 million carbon pricing bills for electric utilities in Washington and in Oregon should be seen in the context. For example, Washington’s largest electric utility, Puget Sound Energy (PSE), provided more than 22 million megawatt-hours of electricity in 2012 and had revenues of $2.2 billion. Based on PSE’s fuel mix disclosure reports, a $25 carbon price would cost the company about 1 cent per kilowatt-hour. That’s about a 10 percent increase of its retail prices.

If Washington chose to provide tax reductions to address the impact on electric utilities, it could trim the public utility tax, which utilities pay in lieu of B&O tax. The state’s Tax Reference Manual estimates that electricity providers pay about $225 million a year. Washington is roughly divided between public utilities like Seattle City Light that get a lot of hydropower and private utilities that are more carbon-intensive, so focusing just on the private utilities (because they are the ones that would be hit hard by a carbon price) would correspond to a public utility tax of about $100 million a year. As with refineries, that’s in the ballpark of that sector’s carbon pricing liabilities in Washington.

Opportunities for an electric utility tax swap in Oregon may be more limited. The relevant existing taxes in Oregon appear to be the corporate income tax and perhaps the electric cooperative tax, and according to the state’s Legislative Review Office (pages A7 and C21), utility tax payments totaled only about $3 million and $7 million, respectively, in 2010.

In any event, utilities are closely regulated by state utility commissions, and commissions will presumably allow utilities to pass carbon costs through to power consumers. Utilities, therefore, may not suffer in the least from a carbon price. (Consumers, for their part, could be compensated for power price increases with reductions in sales taxes, per-capita rebates, or other ideas discussed in two of the previous posts in this series.)

Other manufacturers

What about large emitters other than power plants and refineries? The EPA data show that emissions excluding these two industries totaled 7 million tons in Washington and 4.1 million tons in Oregon. At $25 per ton, that’s $175 million for Washington and $103 million for Oregon.

Data source: EPA. Original Sightline Institute graphic, available under our free use policy.

Data source: EPA. Original Sightline Institute graphic, available under our free use policy.

Carbon pricing liabilities in these sectors of the economy depend on the coverage details of the carbon price itself. The figures above reflect what might happen in a California-style system that covers most if not all GHG emissions. A BC-style system that just targets fossil fuels—or, to be more accurate, a large subset of fossil fuels—would not include the red (non- CO2) gases. And even the blue (CO2) bars in the figures overstate the actual impacts of a BC-style carbon tax because, for example, about half of the CO2 from cement production is from non-fossil-fuel-related chemical processes. For the sake of approximation, though, the blue bars shown in the figures above—only CO2 emissions, excluding power plants and refineries—total 4.6 million tons in Washington and 2.5 million tons in Oregon. At $25 per ton, that’s equal to a carbon pricing bill of $115 million in Washington and $63 million in Oregon.

How do these potential carbon pricing liabilities—on the order of $75-175 million in Washington and $40-100 million in Oregon, depending on the details of the policy—compare with existing taxes on manufacturers? In Oregon, the state Department of Revenue collected $49 million (page C21) in taxes from mining and manufacturing businesses in 2010. In Washington, the Department of Revenue estimates that manufacturing B&O taxes totaled $160 million in 2011. As noted, about $60 million of this came from refineries, leaving $100 million in B&O taxes for manufacturers other than power plants and refineries. In both states, then, existing taxes on large manufacturers are (in aggregate) in the ballpark of the additional direct cost of a $25 carbon price.

Beyond manufacturing

Moving beyond manufacturing entirely, the EIO-LCA model suggests that most other businesses would see a cost increase of less than 1 percent as a result of a $25 carbon price.

Moreover, in Washington State there’s a way to address carbon pricing impacts on many non-manufacturing businesses. I’ve argued previously that reducing the state sales tax by a penny (from 6.5 percent to 5.5 percent) is an excellent way to “recycle” carbon tax revenue, and that would benefit businesses as well as households. In fact, the state Department of Revenue estimates (table 9-3) that business purchases account for 36 percent of state sales tax revenue. The state sales tax generates more than $7 billion a year, so a 1-cent reduction would be $1.2 billion. More than $400 million of those tax reductions would accrue to businesses.

Let’s look at a specific example. Information from trucking companies is proprietary, but there’s a fairly similar entity that opens its books to the world: King County Metro. (You could argue that public transit systems should get an exemption from a carbon price, but never mind that for now.) According to its 2012 Annual Management Report (page 11), Metro uses about 10.6 million gallons of diesel fuel a year, so a $25 carbon price would work out to about $2.7 million a year. But Metro also spent $110 million on “transit fleet procurement” (that is, buses). And it pays state sales tax on those buses, so a 1 percentage point reduction in the sales tax would save it about $1 million, trimming Metro’s hypothetical carbon-pricing hit by 37 percent. That doesn’t entirely eliminate the impact of a hypothetical carbon tax, but it provides a substantial reduction. And most businesses are much less carbon-intensive than King County Metro.

The bottom line

When it comes to carbon pricing, the business world divides into three groups: businesses that are not energy-intensive, businesses that are energy-intensive but not trade-exposed, and businesses that are both energy-intensive and trade-exposed.

The first group includes the vast majority of businesses in Washington and Oregon. These businesses would pay relatively little in carbon pricing costs, and a reduction in sales taxes in Washington State would almost certainly offset costs for most of them. (If you’re especially concerned about small businesses, you could triple the small business B&O tax credit; that would save small businesses about $100 million a year.) Opportunities for a tax swap are less obvious in Oregon, but remember that the impacts of carbon pricing on businesses in Group One is quite small.

The second group consists of businesses that are energy-intensive but not trade-exposed. Refineries and power plants might fit this description, but let’s consider two less-energy-intensive examples that provide more clarity: local trucking and construction. Any company that wants to truck something around the Pacific Northwest or build something in the Pacific Northwest needs to conduct those business activities in the Pacific Northwest. All such companies would consequently pay the carbon prices associated with those business activities, and the laws of economics suggest that the market price of those business activities would increase accordingly. That’s all well and good because those business activities generate a lot of CO2: true-cost accounting means that those activities should be more expensive.

The third group consists of businesses that are both energy-intensive and trade-exposed, and the fact that they get an acronym (EITE) speaks to their importance. In an ideal world, there would be no businesses in this group: an ideal world would have an international carbon price instead of a state carbon price, and with an international carbon price all energy-intensive businesses would end up in Group Two. In the real world, however, states are leading the way on carbon pricing, and that obligates us to pay special attention to energy-intensive businesses that face out-of-state competition.

Fortunately, Washington and Oregon can reduce or eliminate impacts on EITE businesses by using about 10 percent of the revenue from carbon pricing to reduce or eliminate existing taxes on manufacturers. The relevant numbers may or may not balance for individual firms but in the aggregate they’re pretty close for a $25 carbon price. (And I’m looking for businesses that are willing to open their books and do a case study—anonymously if desired—-so if your business is interested please contact me!) That suggests that properly designed carbon pricing policies in the Pacific Northwest can pencil out for the business community and can help point the way forward for the nation and the world.

Research assistance by Summer Hanson. Thanks to Mia Reback and Jon Shayne for research guidance and to Quintin Barnes for feedback on a draft of this article.


We're All Responsible for Climate Change

Every one of us in the Western world has contributed to climate change. – Bill McKibben, American environmentalist, author, and journalist

Recently, I organized a couple of events with the goal of showing people how their choices and actions can make a real difference in the effort to end our dependence on fossil fuels like coal, oil and gas. I hosted a movie about the Koch brothers at the Auburn library. Less than a week later, I went to Les Gove Park with a petition to the CEO of our regional power company urging them to stop using coal and to move us decisively in the direction of clean energy.

Charles and David Koch are heavily invested in fossil fuels. They own 1.1 million acres of land in Alberta, land that could be exploited for the extraction of tar sands bitumen, the dirtiest fossil fuel known. The Koch brothers would profit enormously from the construction of the Keystone XL pipeline, and through such front groups as Americans for Prosperity, they spread lies and propaganda across the American heartland, promising lower gasoline prices and more jobs from this environmentally destructive project. The truth is, of course, that the jobs created would be few and temporary and the pipeline would pump more foreign oil onto the world market with the possibility of an upward effect on Midwestern gasoline prices where there is already a glut of domestic Bakken crude.

I am involved with the NoKXL Pledge of Resistance, a group dedicated to opposing the construction of the Keystone XL Pipeline. The pipeline has been delayed again and again over the last 5 years by the concerted efforts of groups like ours employing tactics ranging from email petitions to civil disobedience. Today the KXL pipeline has no legal route through either Nebraska (where the route has been challenged in a lawsuit) or South Dakota (where the permit has expired due to delays). These successful efforts show how regular people working together can oppose and win against extremes of wealth and entrenched political power.

Here in the Northwest, we face increasing train traffic as fossil fuel companies try to get land-locked deposits of coal and oil to markets in Asia. Burning coal anywhere in the world releases carbon into the atmosphere, carbon that was captured and placed into long-term storage millennia ago by natural processes. Rapidly undoing the work that took nature millions of years in just a few decades has resulted in a completely unprecedented and unnatural spike in global atmospheric concentrations of carbon dioxide. NOAA_DataCO2 is a greenhouse gas that traps the energy of the sun, warming the oceans, and changing the pattern of our climate so that now sudden and violent storms are becoming the norm. Storms and floods in one part of the world translate to intense heat and drought in others. Both extremes threaten agriculture, putting the global food supply at risk, at the same time human population is growing at an unsustainable rate.

Some of the damage and suffering caused by anthropogenic climate change cannot be prevented. But we can make changes in our daily lives that will make a difference and turn us as a society onto more sustainable paths. It’s that sense of urgency that got me out of my house to host these gatherings. I must have spoken to a couple of hundred people in just the past couple of weeks. Many are not ready for the change, but others are, and I take hope from that willingness to see that up to now, we in the Northwest have been lucky to escape the worst depredations of the climate crisis, but that does not lessen our responsibility to be a part of the solution, and to begin making our voices heard in the global effort to bring about an end to the era of unlimited burning of fossil fuels.

So what can we do? First, stop buying products made by Koch Industries. Vote with your dollars and your feet. If your bank funds mountain-top removal coal mining, take your money to a local credit union. If your investment company sells funds including stocks from companies like Exxon and Monsanto, find another broker who sells a greener, socially responsible fund. If your university or church has investments, urge them to divest from fossil fuels. Buy a more fuel efficient car, insulate and weatherize your home, plant a tree (plant ten trees!) and above all, when you have the opportunity to make a public comment on civic projects to build infrastructure for fossil fuel exports, make your voice heard loud and clear: No Coal Trains and No Exploding Oil Trains should be allowed passage through the Great Northwest.

While at the park on the 4th of July, gathering signatures for the Sierra Club petition, I saw older, uninterested passersby, parents with teens or young adult kids, move past our booth as quickly as possible. But it was the young people with them who hung back, saying, “Sure, I’ll sign” or “Tell me more.” That young people get this, more than anything else, gives me hope for the future. Sometimes the older folks would look at me askance and say, “I don’t buy all this liberal crap. I’m a conservative.” Well, I’d say, “SO AM I. I think we have a really great planet here, and since there aren’t any other nice planets in this general vicinity, I’d really like to keep THIS ONE in good operating order, thank you very much. Now that’s what I call conserving your resources!”

I did meet a smart young man who took issue with our petition to get Puget Sound Energy to stop buying power from coal-fired plants in Montana. He denied that climate change was even happening, much less that it is caused by humans. He claimed that solar and wind are not able to supply our power needs, and that we have to keep using fossil fuels because the industry employs so many people. We showed him evidence that investing money in building solar arrays or wind farms creates more jobs than investing similar amounts of money into extracting fossil fuels. We talked about the fact that companies externalize the costs of cleaning up pollution and treating human illnesses directly caused by the extraction and burning of fossil fuels. I explained to him that the US has a policy of underselling coal leases on public lands, creating a hidden subsidy to coal companies, paid for by the American taxpayer, without their knowledge or consent, and that when the cost of coal includes fair prices for leasing public lands AND the cost to repair damage to the environment and public health, coal won’t be economically competitive with renewable forms of energy. On top of that, wind and solar ARE ready and able to supply the planet’s needs. Germany has seen days where as much as 75% of its power comes from solar generation. We can, too.

I don’t think I convinced the young man; but maybe I opened a crack of light into the dark bubble he’s living in. For the sake of his kids, I hope so.


–Originally published in the Auburn Reporter, July 25, 2014