Washington Voters Contemplate a Carbon Tax

This November, Washington voters will decide whether to become the first state to adopt a carbon tax. Initiative 732’s proposed tax would begin at $15 per metric ton of carbon emissions, rising to an inflation-adjusted $100 per metric ton, after which increases would be tied solely to the rate of inflation.

The carbon tax base would be limited to fossil fuel combustion, which accounts for about 75 percent of greenhouse gas emissions. The tax would be levied using calculations of associated emissions for each fuel type. According to research, the average household would pay $225 more per year for gasoline under the proposal, and $64 more for electricity. They would also experience a rise in the cost of consumer goods.

There are several concerns about this new carbon tax. Firstly, a state-specific carbon tax has the potential to induce “leakage” of manufacturing from Washington to other states which do not impose such taxes. Additionally, the fuel mix for imported electricity may frequently be unknown or unclassified, which would lead to increased tax burdens for some homeowners.

Ultimately, Initiative 732 is an ambitious proposal, and in many respects a balanced one, but it also carries significant risks, both in terms of revenue certainty and broader economic effects.

Click here to read the full publication →