Legislature Sets Stage for Ambitious 2021
During the short 60 day session, the Washington State Legislature made critical strides to reboot a conversation on the value of comprehensive carbon policy. As the session ended last week, in the midst of the COVID-19 outbreak, legislators laid the necessary groundwork and left with a shared bicameral commitment to ambitious action in 2021.
Following the defeat of I-1631 at the ballot two-years ago, much of the climate agenda had shifted to sector-based policies as the Governor and Legislature sought to meet voters closer to where they were. The approach bore fruit with the enactment of a 100% Clean Electricity standard, and new clean buildings regulations. However, the anticipated reductions from these efforts are not enough to hit the goals science tells us we must reach.
This left a gaping hole, and Senator Carlyle (D-Seattle), Chair of the Senate Environment, Energy and Technology Committee launched a concerted effort to renew focus on a comprehensive strategy to manage GHG emissions. Building on previous work on legislative proposals such as SB 6203, the first carbon tax bill to make it to the floor of the Senate, Senator Carlyle drew attention to a solution that is gaining steam across the country and world: Cap & Invest.
Cap & Invest is a system that combines the best aspects of market-based carbon pricing while generating resources to be smartly invested in community needs. Last fall, the Clean & Prosperous Institute (CaPI) hosted an educational webinar series attracting hundreds of stakeholders, culminating in the 2nd Annual Future of Carbon Policy Forum in December. CaPI research focused heavily on what can be learned from the California experience. A very recent study from Climate XChange found that the health and climate benefits from California’s 
Cap program are five times greater than the program’s costs, and most of its investments are designed to cut emissions from transportation, the state’s largest emitting sector.
Going into the 2020 Session, a much anticipated Supreme Court ruling restricting the Department of Ecology’s authority to regulate certain greenhouse gas emissions came down. The court affirmed that the Legislature must act to create comprehensive carbon policy, and cannot rely on agency action alone. Over a dozen companies, including Microsoft, penned a letter to legislators in Oregon and Washington in support of Cap & Invest. BP, the owner and operator of the largest refinery in the state and the largest contributor to the campaign in opposition to Initiative 1631, embraced the effort, publishing full page ads in major state newspapers, and launching digital and radio ads in support of the policy.
After first introducing SB 5981 with Senators Lovelett and now former Senator Palumbo in 2019, Senator Carlyle published a new bill version (committee striker) integrating feedback from his own stakeholder process and contributions sourced from the CaPI and its outreach. In particular, Senator Carlyle sought to address mechanical concerns to avoid some of the pitfalls that California encountered in its early years of implementation; specifically rules about banking allowances, thoughtfully addressing the concerns of Energy Intensive and Trade Exposed Businesses, mitigating costs to low income households, and strong provisions governing the use of offsets.
CaPI principals David Giuliani, Kevin Tempest, and Isaac Kastama were first up to testify at an hour-long public hearing on SB 5981 of the Senate Environment, Energy, and Technology Committee. The trio explained the rationale for Cap & Invest and the compelling nexus with transportation sector greenhouse gas reduction. Other stakeholders highlighted a mix of optimism that a solution could be reached, and traditional objections concerning the potential cost impacts.
Senator Carlyle highlighted an ongoing collaboration with Senator Steve Hobbs (D-Lake Stevens), Chairman of the Senate Transportation Committee to elevate Cap & Invest as a component of his Forward Washington transportation package. As demonstrated by California, and the emerging Transportation and Climate Initiative among NE States, Cap & Invest can be a powerful tool to meet the dual aim of reducing carbon and expanding transportation choices. A recent poll commissioned by the Clean & Prosperous Institute found that 64% of voters (+6% net support from rural voters) indicated they would support establishing a fee on large emitters and using the funds to invest in carbon reduction projects and transportation options.
The growing momentum behind Cap & Invest led Senator Hobbs to host a second public hearing in the Transportation Committee presenting his plan for investing in transportation infrastructure, and using revenue from a carbon pricing program such as Cap & Invest to cover a portion of the costs. The alignment of objectives showcased a path forward among unlikely constituencies which could be supportive of carbon pricing if it was designed to meet the needs of their communities. With passage of Initiative 976 placing new pressure on the transportation budget, carbon pricing was heralded as a viable alternative.
Meanwhile in the House, Representative Fitzgibbon (D-West Seattle), Chair of the House Environment Committee charged ahead with his Low Carbon Fuel Standard (LCFS), also known as a Clean Fuels Standard. The House had passed the bill the previous year only to watch it languish in the Senate Transportation Committee. Procedurally, the House had to vote on it once more to return to the Senate. Proponents of a LCFS have embraced the policy as a modest yet potentially transformational tool to reduce transportation sector emissions. An LCFS would obligate oil companies to reduce the carbon intensity of their products by onboarding increasingly advanced biofuels, sourcing more selective feedstocks, and purchasing credits to electrify fleets. While a discrete sector policy, much like 100% Clean, the cost of compliance would be born at the pump, adding complexity to the challenges of sustainable transportation funding.
To address this concern, more than 30 House Democrats (soon followed by about a dozen Senate Democrats) wrote a letter to the Chairs of the House and Senate Transportation Committees embracing the idea of passing an LCFS now, but hinging its enactment contingent on passage of a transportation package next year, which could also include an economy-wide Cap & Invest program. Historically, the LCFS was used as a political football in negotiations over the last transportation package “Connecting Washington” which specifically prohibited agency enactment of a LCFS without prior legislative approval. Ultimately, the Senate did not share the urgency to advance a LCFS over these other needs – including a comprehensive economy wide pricing program – and therefore the bill did not move despite significant lobbying pressure from environmental groups.
While the Senate had progressed further in its deliberations on Cap & Invest, the conversation was less developed in the House. Representative Fitzgibbon, who in the past introduced variations of Cap & Invest policies, looked to thread a needle with a slimmed down bill to expand the Department of Ecology’s authority to implement limited market based mechanisms (such as Cap and Trade) to regulate GHGs. CaPI engaged in these discussions, but ultimately argued that the value of achieving a broader consensus with greater definition prior to engaging in rulemaking was in the best interest of the state.
In the final days of session, several proposals were floated to embrace a hybrid approach of limited rulemaking combined with specific information requests of agencies and subsequent legislative approvals. Senator Mullet (D-Issaquah), Senator Cleveland (D-Vancouver), joined by Senator Hobbs representing the moderate and swing district wing of Senate Democrats offered SB 6700, requiring an impact analysis during the interim of a combined strategy for managing GHG emissions and transportation. This would facilitate a robust legislative engagement to support enactment of a fully developed policy in 2021.
The legislature adjourned without committing to a formal interim process, as it became clear that responding to COVID-19 required immediate attention.
Complementary Action
By design, a Cap system provides a full scope, economically balanced, least cost solution to the desired reductions. Complementary policies may be economically beneficial when they target market failures, or when they target sources that are otherwise not covered. The legislature passed three pieces of legislation aligned with further development of Cap & Invest:
- SB 5811 — Zero Emission Vehicles (ZEV), Prime Sponsored by Senator Nguyen (D-White Center): Washington will join 11 other states in adopting the motor vehicle emissions standards of California, including the ZEV program. The program requires auto manufacturers to supply a stipulated minimum percentage of ZEVs on the lot. This has proven to increase customer choice when shopping for electric vehicles, and reduce time spent on the waitlist for new models. The bill corrects for a market challenge where other state’s receive preference over Washington.
- HB 2311 — GHG Emission Limits, Prime sponsored by Representative Slatter (D-Bellevue): Sets steeper statewide goals for emissions originating from human activity, including net-zero by 2050. On a proportional basis, these targets can be used in design of a Cap & Invest system. The bill also requires all state agencies to seek all practicable opportunities to cost-effectively maximize carbon sequestration and carbon storage in their nonland management, agency operations, contracting, and grant-making activities. This should help clarify the state’s approach to dealing with carbon negative solutions.
- SB 5947 — Sustainable Farm and Fields, Prime Sponsored by Senator McCoy (D-Tulalip): Spearheaded by CarbonWA, the bill creates a voluntary grant program to support farmers in the implementation of practices that increase the quantity of carbon stored in their land through efficient carbon-reduction and sequestration practices. This program can become the basis for a funded market, such as that which would be established by a Cap & Invest program.
Reflection on Covid-19 and the Future of Cap & Invest
The global response to Covid-19 is demonstrating the enormous resources which can be marshalled when society chooses to respond to what scientists tell us is an existential threat. The good news is that making an impact on climate change doesn’t have to be as disruptive as the virus. While we await a vaccine for the pathogen, solutions to climate change are all around us – it’s the choices we make, from the cars we buy, to how we grow our food. Unlike the virus, acting on climate is also beneficial to public health.
Our experience working with the legislature and with ballot campaigns to enact climate change policies has taught us that even with passionate and strong grassroots support, change is hard fought and details matter. We remain committed to our method of consistent and focused leadership; and building a business and utility coalition based on reliable research. Our voice continues to represent a unique perspective on climate action among organizations seeking change in Olympia and in our State.
We have witnessed and been awed by the intrepid leadership of legislators who share our long-term commitment to implementing a comprehensive and strategic framework for managing carbon emissions in our state. We’d specifically like to thank Senator Carlyle, Senator Hobbs, and Representative Fitzgibbon for actively seeking resolution, each in their own ways.
As we consider the current COVID-19 crisis and the profound economic shift underway, some may be wondering what place climate action holds in the distant future. Minds are rightly focused on the emerging health crisis. Our hope for when we get through this is a collective appreciation for science and commitment to head warnings across a broader range of issues.
We’re learning that doing proactive work and making investments is key to avoiding catastrophe. Done thoughtfully, climate policy can help our state stimulate economic activity and create resilient jobs and boost public health and disaster preparedness. It’s the lens with which we will be approaching Cap & Invest over the interim. We continue to see 2021 as an unprecedented moment for our state to enact a comprehensive and economically beneficial strategy to manage its GHG emissions.
Thank you for your continued support and engagement as part of the CaPI community as we move this important work forward. As always, we’d love to hear your thoughts and perspective.
– CaPI Team