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Inslee Signs New Pact With West-Coast States, B.C., Promising to Enact Cap-and-Trade Plan – Catches Lawmakers Off-Guard

Gov. Jay Inslee says he wants the state to consider enacting its own cap-and-trade policy.

Gov. Jay Inslee signs an agreement with California, Oregon and British Columbia committing the state to a cap and trade policy — without consulting the Legislature.

OLYMPIA, Oct. 29.—Washington Gov. Jay Inslee Monday signed a new agreement with leaders of California, Oregon and British Columbia that among other things promises to enact a cap-and-trade plan in this state to reduce carbon-dioxide emissions – and it left at least some Washington lawmakers gasping for oxygen.

Inslee traveled to San Francisco Monday to participate in a ceremony that included California Gov. Jerry Brown, Oregon Gov. John Kitzhaber and the environmental minister of British Columbia. The representatives of the four Pacific-Coast governments signed an agreement that, at least on paper, promises to enact specific greenhouse-gas policies. In addition to cap-and-trade plans or carbon taxes, they promised to impose low-carbon fuel standards and promote zero-emission vehicles, and battle the burning of fossil fuels.

“Today we are pledging our executive commitment and our executive policies and our energy to defeat climate change,” Inslee declared.

Washington Gov. Jay Inslee.

Washington Gov. Jay Inslee.

Although the agreement is not legally binding and appears to be more of a statement of philosophy than anything else, it left some lawmakers aghast. The agreement came with no advance notice – the terms were announced publicly just before it was signed – and in it Gov. Inslee appears to be making promises to other states even before this state formally decides what to do. Right now lawmakers in this state are meeting with the governor in a task force that aims to determine which greenhouse-gas policies might do the most good. Not only does the multi-state agreement appear to ignore the state decision-making process and the recommendations of its consultants, it might also scare the dickens out of Boeing at the very moment that the aircraft manufacturer is trying to decide where it might build the assembly line for the new 777X airliner, complained state Sen. Doug Ericksen, R-Ferndale. “I think the problem is that Gov. Inslee is going to cap carbon and trade Boeing to South Carolina,” he said.

Shades of Western Climate Initiative

California Gov. Jerry Brown.

California Gov. Jerry Brown.

The multi-state agreement represents a revival of another multi-state greenhouse-gas effort that died not long after it was announced six years ago. The Western Climate Initiative was an agreement between seven western states and four Canadian provinces to enact cap-and-trade laws. The scheme sets pollution limits on businesses that produce CO2 emissions and allows them to sell credits to other businesses when they exceed their goals. But the plan to establish a west-coast marketplace fizzled amid political opposition, particularly from industries dependent on transportation, and ultimately it failed during the recession. Although the Western Climate Initative remains on the books for purposes of planning a national permit-auctioning scheme, only California and British Columbia moved forward with significant efforts – cap and trade in California, a carbon tax in B.C.

Shortly before the cataclysm on Wall Street gave state and provincial governments bigger things to worry about, lawmakers in Washington state passed a bill that imposed a non-binding goal of reducing carbon emissions to 1990 levels by 2020. Gov. Christine Gregoire was rebuffed by the Washington Legislature in her effort to pass a cap-and-trade bill, but she issued an executive order directing state agencies to do everything in their power to reduce carbon consumption, both in the public and private sectors.

Oregon Gov. John Kitzhaber.

Oregon Gov. John Kitzhaber.

The desire to do something grander remained latent during the years of economic crisis. And this year, as the economy started sputtering back to life, newly elected Gov. Jay Inslee convinced lawmakers to create the Climate Legislative and Executive Workgroup to decide which climate-change policies might be the most cost-effective way of achieving the old goal. The irony of the multi-state agreement announced Monday is that it at least technically commits the state of Washington to policies that the state’s consulting firm says offer little comparative benefit.

Consulting firm SAIC, which is advising the workgroup, has concluded the state might get the biggest bang for the buck with either a carbon tax or cap-and-trade. The two least cost-effective policies among those currently being considered are low-carbon fuel standards and the promotion of zero-emission vehicles.

Yet the agreement declares that the states of Oregon and Washington will adopt low-carbon fuel standards while California and B.C. promise to retain theirs. The four state and provincial governments declare their intent to develop a regional market for low-carbon fuels over time. And they promise policies aimed at convincing public and private vehicle-fleet managers to purchase zero-emission vehicles, setting a goal of 10 percent of new-vehicle purchases by 2016.

Todd Myers, environmental director of the Washington Policy Center and a faithful skeptic of government environmental policy, called the agreement baffling. “Either it is meaningful and they are doing the worst policies possible, or it is meaningless and they have signed a secret deal behind the back of the bipartisan workgroup and undermined their relationship with those folks for no reason. I mean, that is the choice. It is either meaningful and dumb or meaningless and duplicitous. That is why this doesn’t make sense. I can’t figure out a scenario where this makes any sense at all.”

Setting an Example for the World

Down in San Francisco, of course, the representatives of the three states and British Columbia put a decidedly different spin on the agreement. They said it was the most significant climate-change effort to emerge from North American quarters, and called it a model for the world to follow.

California Gov. Brown said the agreement is just the start. “If we only do it ourselves, it doesn’t do much because we are only 1 percent of the problem, so we have to do this right. We have got to cooperate with who will cooperate and we have got to get more people joining in a collaboration, and this is what it is today. This is an initiation of a very important agreement on the west coast. It has to spread and start with us.”

Oregon Gov. Kitzhaber said the recession gave state and federal governments an excuse to avoid dealing with climate change. “The good news is that British Columbia, California, Washington and Oregon have defied that trend for the last few years, retaining progressive political leadership that is committed to clean energy and maintains the belief that creating jobs and economic activity is not incompatible with long-term environmental stewardship,” he said.

And Mary Polak, environmental minister for British Columbia, argued that strict new environmental rules are good for the economy because they encourage investment in new technologies. Back when the Western Climate Initiative spurred B.C. to take action, the province wound up adopting a carbon tax – a tax that hit smokestack industries, fossil-fuel-based energy production, motorists and shippers. “Of course the critics recoiled in horror,” she said. “Most people said not only will it not work, it will kill your economy and on top of that you will not get elected again. How do you like those odds for a politician? Add to that the fact that we implemented it in 2008 – what a great time to implement a tax?”

But Polak said the GDP of British Columbia has climbed since 2008, while consumption of fossil fuels has declined in every form. California’s cap and trade program, meanwhile, is relatively new – the first public auction of permits took place in November of last year.

Ambitious Goals But No Teeth

The agreement clearly states that it has no teeth. The final provision states that “this action plan shall have no legal effect; impose no legally binding obligation enforceable in any court of law or other tribunal of any sort, nor create any funding expectation, nor shall our jurisdictions be responsible for the actions of third parties nor associates.”

Nevertheless, it sets out an ambitious set of goals. Oregon and Washington appear to promise to enact cap and trade programs. In the agreement, Oregon promises to “build on existing programs to set a price on carbon emissions.” Washington “will set binding limits on carbon emissions and deploy market mechanisms to meet those limits.”

The four western governments agree to adopt goals for greenhouse gas reductions by 2050 and to establish shorter-term goals to be met in the meantime. They pledge support for an international agreement on climate change, and support efforts by the U.S. Environmental Protection Agency to reduce greenhouse gas emissions at electrical power plants. It endorses high-speed rail, supports alternative-fuel development, and embraces energy conservation rules for new construction.

One thing it doesn’t do is call for a ban on American coal exports to China and other Far Eastern markets, a policy that has been urged by Inslee and Kitzhaber. That may be a bit too hot to handle: While the Inslee administration appears to be trying to block development of proposed coal shipping terminals in the state of Washington with an unusually far-reaching environmental impact statement process, British Columbia port officials are gung-ho about the business and are making plans to expand their shipping facilities if Washington says no to foreign trade.

Lawmaker Unimpressed

Ericksen, chairman of the Senate Energy, Environment and Telecommunications Committee, said the agreement appears to undermine the Climate Legislative and Executive Workgroup process, and he called Inslee’s initiative disturbing. Cap and trade went nowhere in the state of Washington for good reason, he said. “We’ve been down this road before,” he said. “We found that the economics don’t work. The governor is now leaning way in front of his skis in trying to circumvent the legislative process. I’m not sure what Gov. Inslee believes he can do with an executive order without any legislative action, but the frustrating part is that we have created a process to provide the Legislature with a cost-benefit analysis on a series of items so that we can make an informed decision. And now the governor, the chair of that committee, is acting out on his own way, which questions his commitment to the process in general.”

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