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Split in Washington State Climate Workgroup Recommendations Shows Challenges in Moving Climate Policy Forward

January 27, 2014

Washington’s Climate Legislative and Executive Workgroup issued majority and minority reports on January 21, 2014, with a party line split on the direction the State should take to reduce its greenhouse gas emissions. The Workgroup, which consists of a majority and a minority member from each house of the state legislature, plus the Governor as a non-voting chair, was created in 2013.[1] It was tasked with developing recommendations for achieving the State’s long-term greenhouse gas emission reduction targets, set back in 2008.

The Workgroup’s majority report indicates that the Governor and the two Democratic members are ready to move forward with a state-wide cap and trade program similar to the one adopted by California, and several other initiatives. The minority report, from the two Republican members, calls for more study of the cost of these programs to the state economy, prior to enactment. The minority also suggests that the State revisit its long-term emission reduction goals, in light of Washington’s relatively low greenhouse gas emissions compared to other states, particularly in the electric power generation sector. The competing reports suggest sharpening differences on climate policy, but also signal that climate policy will be a hot topic in Washington State in 2014.

Previous Greenhouse Gas Policy Efforts in Washington

In 2003, Washington, California and Oregon created the West Coast Global Warming Initiative. Discussions continued and expanded to include more states. In February 2007, the Governors of Washington, Arizona, California, New Mexico and Oregon signed an agreement creating the Western Climate Initiative (WCI), directing their respective states to develop a regional target for reducing greenhouse gas emissions, participate in a multi-state registry to track and manage greenhouse gas emissions in the region, and develop a market-based program to reach the regional target.[2]

Following up on the WCI commitment, Washington’s governor signed an executive order in February 2007 setting targets for reducing greenhouse gas emission in the State to:

  • 1990 levels by 2020;
  • 35 percent below 1990 levels By 2035; and
  • 50 percent below 1990 levels by 2050.[3]

In 2008, those emission reduction targets were enacted into law.[4] The legislature also endorsed Washington’s participation in WCI, directing the Department of Ecology to work with WCI to develop a regional, multi-sector cap-and-trade program to reduce emissions consistent with these targets, and to draft proposed legislation by December 2008 for Washington to participate in the regional program.[5]

WCI completed a framework for a regional cap-and-trade program and Ecology developed proposed legislation for Washington to participate in that regional program. However, the cap-and-trade bill was rejected by the Washington Legislature during its 2009 session.

After the state cap-and-trade legislation failed, Washington’s Governor signed another executive order directing Ecology to continue participating in the WCI planning effort and directing state agencies to take various steps to encourage greenhouse gas reductions.[6] Ecology issued a report in December 2010 (“Path to a Low-Carbon Economy“) in accordance with that executive order, identifying various efforts the state government could make in the absence of a cap-and-trade program to move the state toward its 2020 emissions target.

The 2008 legislation also directed Ecology to develop rules requiring sources emitting at least 10,000 metric tons of greenhouse gases per year and certain fuel suppliers to report those emissions to the state.[7] In 2010, this state reporting requirement was revised[8] to more closely track federal reporting rules that had been finalized the prior year.[9] While the state reporting program was initially scheduled to start with 2010 emissions, the rules finally adopted by Ecology required reporting to begin with 2012 emissions. This emission reporting program is now in place and operational.

Washington’s Climate Legislative and Executive Workgroup

Governor Inslee was elected in November 2012 on a platform that included a commitment to reduce the State’s greenhouse gas emissions and address climate change. During the 2013 Washington legislative session, at Governor Inslee’s request, the state legislature passed a bill authorizing formation of the Climate Legislative and Executive Workgroup.[10] The Workgroup consists of four members of the legislature (representing the majority and minority in each chamber) and the Governor, who serves as the non-voting chair. According to the legislation, the Workgroup’s purpose is “to recommend a state program of actions and policies to reduce greenhouse gas emissions, that if implemented would ensure achievement of the state’s emissions targets” noted above.[11] The statute provides that a majority of the legislator members of the Workgroup must vote for a recommended action for it to be included in the Workgroup’s report to the Legislature.[12]

The legislation also provided for retention of a consultant to review and evaluate greenhouse gas emission reduction programs being implemented in other states and countries, with a report to be provided to the Governor by October 15, 2013.[13]

The Workgroup held eight public meetings and three public hearings between May and December, 2013. In June 2013, a consultant was retained (SAIC, which has since changed its name to Leidos) to analyze greenhouse gas emissions in Washington State and the State’s existing emission reduction policies, and to prepare an evaluation of programs being implemented outside Washington state. The Workgroup released several interim work products from Leidos and the consultant’s final report was delivered in October 2013.[14]

The Leidos Report

The final report from Leidos noted that Washington’s greenhouse gas emissions are dominated by three sectors. Transportation contributes 44 percent of the State’s greenhouse gas emissions, electricity generation contributes 22 percent, and the residential, commercial and industrial sectors account for 21 percent of emissions.[15] Leidos concluded that actions already taken by the state and federal governments are likely to prevent growth in Washington’s greenhouse gas emissions, resulting in relatively constant levels through 2050. But to achieve the State’s emission reduction targets, the report concluded that policy changes would be needed that could reduce emissions an additional 10 percent by 2020, 30 percent by 2035, and more than 50 percent by 2050 (compared to an “existing policies” baseline).

It was part of the consultant’s charge to evaluate emission reduction programs that are being implemented in other states and countries, as candidates for achieving additional emission reductions in Washington. In its report, Leidos estimated the potential emission reductions achievable if Washington were to implement nine different policies in use elsewhere, including California’s cap-and-trade program and British Columbia’s carbon tax. It then developed two emission reduction scenarios combining the various measures, one built around a cap-and-trade program and the other around a carbon tax.

According to Leidos’ projections, neither of the scenarios would reduce Washington greenhouse gas emissions all the way to its 2050 goal. Leidos concluded that by 2050, the cap-and-trade scenario would achieve the goal set for 2035 while the carbon tax scenario would achieve the 2020 goal by 2035, then level off. These outcomes appear to result from a key assumption – that, except for a cap and trade program, all of the measures would be no more stringent than as they have been implemented in other jurisdictions. For example, in modeling the effect of a carbon tax, Liedos assumed an initial tax rate similar to British Columbia’s that would be escalated through 2035. However, it did not attempt to estimate the impact of a higher tax thereafter, nor how high a tax would be required to achieve the State’s targeted emission reduction levels. But in modeling the emissions impact of cap and trade, Leidos assumed that the emissions cap would continue shrinking through 2050.

Leidos also was asked to estimate the cost effectiveness of the various policies it analyzed (expressed as dollars per ton of emission reductions). It estimated a range of values for most of the policies analyzed. However, Leidos made no estimate of the cost effectiveness of a State cap and trade program. It said that the cost of compliance with an emissions cap is difficult to predict because the program does not prescribe the methods to be used to achieve the cap. Leidos also did not estimate the overall cost effectiveness of its two scenarios for combining emission reduction measures – the cap and trade scenario and the carbon tax scenario.

Workgroup Reports

In mid-December 2013, the Workgroup members released draft reports, with Governor Inslee and the two Democrats, Senator Ranker and Representative Fitzgibbon, issuing a draft majority report and the two Republican legislators, Senator Ericksen and Representative Short, issuing a draft minority report. Both groups finalized their reports, and the majority and minority reports were released January 21, 2014.

Since the legislative members of the Workgroup split along party lines, there could be no formal recommendations for action from the Workgroup. The Workgroup’s authorizing statute requires that any recommendations for legislative action be supported by at least three of the legislators.[16] This did not, however, stop the members from offering proposals in their respective majority and minority reports.

Majority Report

The majority report[17] summarizes the information presented by the Leidos report, emphasizes the need for additional measures if the State is to meet its emission reduction goals, and offers a set of five proposed actions for reducing Washington emissions:

  • Establish a cap and trade program with limits that reduce emissions over time from the major emitting sectors – transportation, buildings and electricity;
  • Reduce the use in Washington of electricity that is generated by coal-powered facilities in other states;
  • Encourage energy efficiency retrofits to existing buildings and construction of new buildings that are as energy-neutral as possible;
  • Provide assistance for clean energy, including funding for development, demonstration and deployment of new renewable energy and energy-efficiency technologies; and
  • Reduce transportation emissions by providing incentives for the purchase of clean cars, accelerating the use of clean fuels, supporting transit, and changing transportation and land use planning to incorporate climate change considerations.

 

The majority report acknowledges that details of these proposals must still be fleshed out. It calls on the State’s executive branch to develop “policy designs” to implement these proposals, and for an economic analysis of the specific proposals as they are developed. It also calls for ongoing dialogue between the executive branch and the legislature.

Minority Report

The minority report[18] emphasizes the need for additional information about the cost and cost-effectiveness of potential emission reduction strategies, and a better understanding of the impact those costs could have on the Washington economy. It suggests that, if the costs of these strategies were better known, it would become apparent that most of them are prohibitively expensive and would put businesses in the State at a competitive disadvantage. It also argues that, because Washington emissions are a small fraction of worldwide greenhouse gas emissions, reducing the State’s emissions is unlikely to alter the climate change impacts felt in Washington.

Despite the minority report’s apparent skepticism about the Workgroup’s mission, it calls for continuation of the Workgroup process through 2014. The minority report suggests that the Workgroup focus its further study on the five policies identified in the majority report, but also consider the benefits of using advanced nuclear generation technology for electricity generation. The minority also appears to agree with the majority on the importance of research and development for new energy technologies, although their preferred methods for supporting R&D may differ.

The minority report recommends that the Workgroup’s continuing efforts include a comprehensive analysis of the costs associated with emission reduction policies and a revisiting the emission reduction targets set in 2008, in light of Washington’s clean energy profile compared to other states.

The minority report also recommends several specific changes to Washington’s renewable portfolio standard (requiring utilities to provide a specific percentage of their retail power sales from renewable energy sources) that would lower the cost of compliance for some utilities:

  • That utilities obtaining electricity from Bonneville Power be able to claim credit toward their renewable power obligations for any improvements Bonneville makes in generation efficiency (utilities that own their own hydroelectric facilities may claim this credit under existing law);
  • That conservation credits generated by a utility in excess of their biennial acquisition targets be carried forward and credited toward subsequent reporting periods; and
  • Allow Renewable Energy Credits (RECs) to be “banked” by a utility (currently they must be used within a year).

Conclusion

While the Workgroup failed to reach consensus on any new greenhouse gas emission reduction measures, they do appear to have agreed to keep talking. It is unclear, however, what those discussions will achieve. Climate-related legislation is unlikely to advance during Washington’s short 2014 legislative session, but the stage is set for a continuing debate. Governor Inslee and the Democratic members of the Workgroup can be expected to moving forward with development of specific legislative proposals to reduce future greenhouse gas emissions, with a state-wide cap and trade program as the centerpiece. The Republican Workgroup members however, want a better understanding of the cost of any new measures to the people of Washington and the State’s economy, and they continue to question key underpinnings of the State’s greenhouse gas policies. These differences are likely to sharpen as the Inslee administration continues its efforts to formulate additional measures to reduce greenhouse gas emissions in Washington.

For more information regarding climate change policy and other air quality issues, please contact any member of Marten Law’s Air Quality practice.

[1] E2SSB 5802, 2013 Wn. Session Laws, Ch. 6.

[2] Western Climate Initiative Governors’ Agreement

[3] State of Washington Executive Order 07-02 (February 7, 2007).

[4] RCW 70.235.020(1)(a).

[5] RCW 70.235.030(1).

[6] State of Washington Executive Order 09-05 (May 21, 2009).

[7] 2008 Session Laws, Ch. 14 § 5.

[8] 2010 Session Laws, Ch. 146 § 2.

[9] 40 C.F.R. Part 98.

[10] E2SSB 5802.

[11] Id., Sec. 2(4).

[12] Id.

[13] Id., Sec. 1.

[14] Leidos, Evaluation of Approaches to Reducing GHG Emissions in Washington State – Final Report (October 14, 2013).

[15] Based on the State’s 2010 greenhouse gas inventory.

[16] E2SSB 5802, Sec. 2(4).

[17] Governor Jay Inslee, Senator Kevin Ranker and Representative Joe Fitzgibbon, A Report to the Legislature on the Work of the Climate Legislative and Executive Workgroup (January 2014).

[18] Recommendations of Senator Erickson and Representative Short (January 2014).

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