The Policy Junkie takes a closer look at Ericksen’s climate change legislation. You can read his previous articles here.
Senate Republicans have been adept at attacking Governor Jay Inslee’s climate proposal in ways that put them in a good light.
In February, the Senate Republicans proposed a gas tax and transportation budget that generated some positive vibes from all over the state, given their general reluctance for tax increases. But as usual, the devil is in the details. The transportation proposal would take away funding for transit and pedestrian and bike paths if the Governor proceeded with state rules on low-carbon fuel standards.
Not one to be outdone, Sen. Doug Ericksen has used the “cap and trade” concept in the Governor’s climate proposal as window dressing in his effort to subvert the state’s alternative energy mandate.
“Cap and trade” is where a limit (or cap) is set on a form of pollution and the regulated polluting entities are allowed to sell (trade) the unused portion of their limits to others who have not yet complied. By inserting a market element into a regulatory scheme, the idea is to unleash creativity and innovation. This concept was successfully applied in the 1990 Clean Air act to reduce sulfur dioxide (acid rain) emissions.
The Governor’s climate proposal included a “cap and trade” program (SB 5283 / HB 1314) that would install a carbon emission cap, decreasing over time. The state’s largest polluters would be required to buy or trade for emission allowances and carbon offset credits based on the metric tons of carbon they emit over that cap. The House version is now in the House Appropriations Committee awaiting a decision on how the $1 billion in annual revenue it would raise would fit into the next state budget. The Senate version of the bill, introduced by Senator Kevin Ranker, never received a hearing.
Instead, the Senate Energy, Environment and Telecommunications Committee, chaired by Senator Ericksen, took up SB 5735 which amends the state’s Energy Independence Act — a law that has been in Sen. Ericksen sights ever since it was approved by 52 percent of the electorate in 2006. I-937, as it is most commonly called, requires that energy utilities ramp up their participation in conservation and alternative energy by setting specific targets. Though these targets are not “caps” in the sense of a pollution limit, they do provide a mandate for environmentally friendly investment.
I-937’s alternative energy mandate requires that power utilities serving more than 25,000 customers must obtain at least 15 percent of their electrical power from renewable sources such as wind and solar by 2020. Hydropower, with some exception, does not count toward the goal. Utilities, such as Puget Sound Energy, have had to meet a 3 percent target by 2012 and will need to hit a 9 percent target by 2016.
There is an escape valve. Utilities do not need to spend more than 4 percent of their annual retail sales per year in meeting this goal. If the utility is in a no-growth situation with no need to acquire power, a 1 percent spending limit is set. This proviso ensures that rates don’t increase significantly as a result of the requirement.
Sen. Ericksen’s proposal would give credit toward the alternative energy mandate if utilities invest in other, non-power generating carbon reduction activities, such as electric vehicle charging stations and converting fleets to alternative fuels. If these investments can be verified by a third-party to reduce carbon emissions, then that reduction would be converted into a credit towards meeting the 15 percent alternative energy mandate. This is the “sizzle” part of the bill that captures the idea of the carbon trading concept, without really using a cap.
I-937 advocates argue that the Senator is mixing apples and oranges by pirating a program that was intended to diversify the state’s energy portfolio and using it as cynical response to the Governor’s more genuine cap and trade proposal.
Sen. Ericksen argues that Energy Independence Act drives up rates, hasn’t produced enough jobs in Washington and still requires that fossil-fuel generation be created to firm up the variability of alternative energy sources.
Still, Puget Sound Energy, which delivers electricity to Skagit and Whatcom Counties, has easily met the mandate and did not participate in the hearing on SB 5735. One of the loudest whiners on I-937 (and loudest supporters of the Senator’s bill) is Benton PUD, which gets most of its power from hydro and nuclear and will likely spend close to the 4 percent retail sales cap to meet the 2020 goal.
What undercuts Sen. Ericksen’s grandstanding on being cap-and-trade friendly is the escape valve mentioned earlier. His bill would extend the 1 percent of retail sales spending limit to all utilities, not just those who are in a no-growth position. The lower spending threshold negates the “sizzle” part of the bill since it’s a relatively easy threshold to meet compared to the more difficult task of proving carbon reduction.
At its best, SB 5735 will not reduce carbon emissions any more than the current Energy Independence Act. More likely, it will be a step backwards.