Pay To Pollute? Carbon Taxes Explained
In an effort to raise revenue for public schools and transportation projects, Washington Gov. Jay Inslee wants to charge polluters for their carbon emissions.
The plan, known as a cap-and-trade system, would set limited carbon pollution "shares" that then could be bought and sold. If a company pollutes less, it can sell shares. If it needs to pollute more, it must first purchase shares.
Meanwhile, some environmentalists are working on a ballot measure with an alternative plan to create a flat tax on carbon emissions similar to a plan in British Columbia.
So how might each scenario actually play out? We brought in an expert, Ken Kimmel, the President of the Union of Concerned Scientists, to explain the alternatives.
What Is A Pound Of Pollution Worth?
“The biggest problem we face, the biggest hurdle is the fact that right now, there’s no price on carbon pollution," said Kimmel.
Kimmel was the head of the Massachusetts Department of Environmental Protection when that state began a cap-and-trade system for carbon emissions similar to Inslee’s proposal.
The Regional Greenhouse Gas Initiative is a cooperative effort among nine east coast states aimed at reducing CO2 emissions from the power sector, where polluters have to purchase allowances, “which give them the right to emit” carbon, Kimmel said.
The allowances are auctioned off and the states have already earned $2 billion n revenue, Kimmel said.
“And I guess the thing I’m most proud of is, if you look at the carbon pollution in 2005 and compare it to where it’s going to be in 2020, it will be half,” he said.
To Cap Or Flat Tax?
Still, he said, a flat tax modeled after British Columbia’s example, and for which some people have begun collecting signatures is also a good approach. A group called Carbon Washington is behind that campaign, which if successful would put Initiative 732 on this year’s November ballot.
Unlike the cap-and-trade system, the flat tax would simply be a pay-to-pollute system. It would not be share-limited. The incentive comes from the level of the tax, which in British Columbia is set at $25 Canadian per ton, approximately the same level that's on the agenda for Carbon Washington's initiative campaign.
“They’re both great,” Kimmel said. “They both put prices on carbon and it works in British Columbia, the way that’s set up. It also works in the eastern states and California.”
“Putting the price on carbon is the key thing, whatever that is,” he said.
Raise Money Or Curb Pollution?
A key difference between the approaches: cap and trade allows policy-makers to set a certain goal for the amount of emissions allowed, while flat taxes involve setting the amount of revenue generated, based on the amount of tax levied.
“What you don’t know (with a flat tax)is how much carbon reduction you’ll get, that will be up to the market,” Kimmel said.
Either way, from his point of view as President of the Union of Concerned Scientists, Kimmel said it’s commendable that Washington state is having the conversation , about how to reduce carbon emissions at all.
“That’s way ahead of most states and a lot of countries,” he said.
His group has published a paper about harm likely on the west coast, if nothing is done.