Washington’s Cap and Trade Bill: An Issue of Scale?

Last December, Governor Jay Inslee introduced his cap-and-trade plan to reduce the level of CO2 emitted by Washington State businesses. This proposal, which will work its way through the legislature during the 2015 session, is intended to place a limit on the overall amount of carbon that can be emitted in the state and establish a marketplace for businesses to purchase additional carbon permits from low emitters, if needed. While I tended to support Inslee’s market-based approach to regulating carbon emissions, the discussion of frameworks in The Carbon Efficient City caused me to question whether this type of policy is appropriate at the state level and whether it will have a real impact on carbon emissions.

The federal government, being the signatory to international climate treaties and having the authority to uniformly influence markets across the country, is in the best position to enact legislation that regulates carbon emissions. Washington businesses are likely to criticize the cap-and-trade bill for putting them at a competitive disadvantage nationally. Even though California (the largest economy in the US) has successfully implemented its own cap-and-trade program, this type of legislation would be most effective if enforced at a larger scale to avoid these issues of regional competitiveness and encourage more widespread reductions in CO2 emissions.

Additionally, cap-and-trade programs are only as good as their caps and may not affect significant influence on consumer habits. Washington State already has one of the highest sales taxes in the country. If businesses have to raise prices due to higher overhead costs, consumers may increasingly take their business to out-of-state online entities. The cap-and-trade legislation also specifically states that emissions caps would apply to “fuel distributors,” but current low fuel prices are likely to offset the effect of the carbon cap on consumer behavior.

A better solution would be for the Washington State government to push for carbon legislation at the national level and use its authority to encourage local carbon-efficient development. The state has the power to allocate transportation funding and direct the planning activities of municipalities (e.g., the Growth Management Act), which can highly influence their development patterns. This approach would allow Washington to prepare for national climate legislation and become a model for sustainable, carbon-efficient development.

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