US: Washington’s revised cap-and-trade proposal would give fuel suppliers rebate

Author: Dan X. Mcgraw

2015/05/12

Washington legislators introduced a revised cap-and-trade bill during the state’s special session in an effort to get the measure passed this year.

Washington Governor Jay Inslee announced last year that he hoped to create a cap-and-trade programme similar to California’s by July 2016. The bill, however, failed to win support among state legislators who were concerned about the programme’s impact on consumers and businesses inside the state.

The revised House of Representatives bill introduces a carbon pollution competitiveness tax programme that would allow compliance entities to recoup up to 50% of their compliance costs through tax credits. The total amount of tax credits cannot exceed $20m in any calendar year, according to the bill.

A senate version of the bill would give fuel suppliers, who would have the largest compliance obligations, a rebate of 75% of their compliance obligations. Industrials, such as metal manufacturers and paper mills, would receive rebates for all of their compliance costs for the first five years.

The rebates would be based on the state’s floor price and would not be calculated based on the current price of a carbon allowances. Rebates could not outstrip carbon costs.

Those rebate would present the biggest clash with California’s cap-and-trade programme. California does not give fuel suppliers any free allocation or tax rebate, potentially making it difficult for the two programmes to link in the future. Inslee had hoped to eventually link with California’s programme.

Along with the rebates, state legislators would also divert the auction revenues from transportation projects to education programmes and programmes to help low-income families. Inslee had proposed the programme as a way to fund state infrastructure projects.

Inslee’s aides have been pushing the state legislature to link the carbon proposal to the ongoing discussions about the state budget.

Washington’s special session can last up to 30 days, giving politicians a short window to reach a compromise. The House’s appropriations committee will hear the substitute bill on Thursday. dan.mcgraw@icis.com