Legal Briefs: Carbon Emission Limits

Once upon a time, not so very long ago, Washington was among the leaders adopting policy and statutes to address climate change and greenhouse gas emissions (GHGs). In the heady, booming economy of the early 2000s, our Legislature adopted targets for reducing GHGs. Then the Great Recession hit hard, and governments and businesses alike struggled just to stay afloat. The state made some progress on the goals, but economic recovery may result in higher emissions as the deadlines draw closer. Consequently, Governor Jay Inslee directed additional action to meet the targets, which will lead to tough discussions over the coming months about how to achieve the goals.

In 2008, the Washington Legislature codified emission reduction goals reducing GHGs to 1990 levels by 2020, then 25 percent below 1990 by 2035, and 50 percent below 1990 by 2050. Even in the best years, the targets were highly ambitious, but at the time, the goals seemed potentially achievable because Washington was participating on a regional basis with California, Oregon, Arizona and New Mexico to adopt market-based emission controls. Some studies concluded that a market-based carbon regulation system designed to reach the goals could result in a net increase in jobs and economic output for the state. The Great Recession, however, put an end to Washingtons participation, as the idea of regulating GHGs took a back seat to homeowners losing their houses, businesses shutting down and governments scrambling to provide basic services.

California, however, soldiered on and, after much debate and litigation, adopted a cap-and-trade program on its own, which Quebec has now joined. Under the system, gradually reducing caps are set on GHGs, and auctions are held to sell allowances for those emissions. The program is extremely complex and still new enough that its real effects are unclear. But in January 2015, the program will expand to cover transportation and other fuel distributors, resulting in coverage of about three-fourths of Californias emissions.

Meanwhile, British Columbia adopted a carbon tax on fuels, which started at $10 Canadian per ton and increased to $30 Canadian per ton in 2012. Although the cost of gasoline went up, B.C. taxpayers got rebates. The province has reduced its carbon emissions even as the economy has grown.

Governor Inslees Carbon Emissions Reduction Taskforce (CERT) is wrestling now with designing and implementing ways for our state to reach the carbon emissions goals. CERTs recommendations are due in mid-November, and whether the task force recommends a California-linked cap-and-trade system or a separate carbon tax system similar to B.C.s depends on a number of factors. These include: ensuring the program will help the state reach its emission reduction targets; establishing a price for carbon that stimulates investment opportunities to reduce emissions; minimizing costs and impacts to businesses, industries and consumers; maximizing economic development and job growth opportunities; reducing public health risks associated with carbon pollution; allowing for effective administration; and influencing national and international action.

Harmonizing all of these factors will be a significant challenge, and more so because this will be happening in the context of other pressing issues. Even as the governor hopes to use CERTs advice and recommendations to propose carbon legislation for the 2015 session, legislators are girding themselves for tough debates over a Washington State Supreme Court mandate to fund schools fully, as well as a transportation budget that no clear majority has been able to agree upon in two previous years. The fate of any emissions regulation is uncertain, but it is an issue that will not go away. Prudent businesses will need to keep an eye on what happens in the next few months.

MICHAEL A. NESTEROFF is a shareholder at Lane Powell, where he is a member of the Construction and Environmental Litigation Practice Group. His practice focuses on environmental due diligence and litigation, including climate change issues, hazardous site assessments, cleanups and contribution, and stormwater and regulatory compliance. Reach him at 206.223.6242, [email protected] or on Twitter @MikeNesteroff.