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Governor Jay Inslee looks to climate lessons from Europe, Asia

Gov. Jay Inslee Credit: Governor's Office

Several European and Asian nations have pioneered pathways for cap-and-trade carbon emissions programs. If and when this state tackles a cap-and-trade effort, Gov. Jay Inslee wants Washington to learn from the mistakes and successes made elsewhere.

British experts briefed a governor's climate change advisory panel Thursday in Seattle on the United Kingdom's 9-year-old cap-and-trade program, as well as discussing similar efforts elsewhere in the world.

"We're in the sweet spot in that enough people have gone before us to test drive some of these plans," Inslee said.

Thursday's briefing showed that a cap-and-trade program is an extremely complex venture. "It's complicated, and you have to think about a large number of technical details," said Alyssa Gilbert of Ecofys UK, a firm that consults for the British government on climate change issues.

However, Inslee suggested that a rudimentary cap-and-trade proposal could be mapped out this year, noting that Great Britain started out with a limited program that grew more sophisticated as the years passed.

Last month, Inslee appointed a 21-member advisory panel to give him ideas for a climate change agenda to push during the 2015 legislative session. He created the panel after a 2013 legislative panel on climate deadlocked, along Republican and Democratic lines, on different approaches to dealing with climate change issues. The Democrats wanted to explore carbon emissions limits and cap-and-trade programs. Republicans — backed by major business lobby groups such as the Association of Washington Business — opposed those measures. Instead, Republican legislators wanted to explore adding more nuclear power and revoking the state's 2008 carbon emissions reduction law.

In 2008, when Washington's Legislature set a goal of reducing the state's greenhouse emissions to 1990 levels by 2020, with further trimming of emissions to 25 percent below Washington's 1990 level by 2035 and to 50 percent below by 2050. So far, nothing has happened. If no new remedial measures are tackled and the state' population growth continues, state discharges will blast away all the goals for reductions set five years ago.

Carbon emissions have been linked to acid rain, which falls into oceans, lakes and rivers. Acid rain is increasing the acidity of the water along Washington's shores including Puget Sound, which has begun killing baby oysters and harming other shellfish harvested in the Northwest. Washington’s shellfish industry is worth about $270 million annually.

The United Kingdom's combined efforts reduced its carbon emissions by 25 percent from 1990 to 2013, according to Gilbert and Emma Wright of the United Kingdom's Department of Energy and Climate Change. British law sets a 34 percent reduction target for 2020 and an 80 percent reduction target by 2050. Nuclear power is a significant plank in the British approach. Great Britain has also created 900,000 to 1 million permanent green industry jobs in the past several years due to a wide range of climate change efforts by industry. The British experts stressed that tackling climate change is cheaper when done early as opposed to later.

In 2013, the legislative panel's technical consultant reported that the most potent proposed policy would be to install a cap-and-trade program in which Washington would have an overall annual limit on its carbon dioxide emissions. Limits would be set for specific geographic areas. Firms would obtain rights for specific amounts of emissions in those areas and could trade their rights. 

"That is how the market finds the most cost-effective solutions. … The goal of the system is to achieve an environmental target at the lowest possible cost," Gilbert said.

Great Britain installed in its cap-and-trade program in 2005 with the support of all three main political parties plus much of the business community. Cap-and-trade is a market-based system. This is important because any market-based system would have to be passed by the state Legislature, with the Senate currently controlled by Republicans hostile to the concept. Consequently, Inslee will either have to make a cap-and-trade program palatable to some Republicans, or hope that Democrats gain control of the Senate in November.

The British experts said cap-and-trade programs need to set the initial overall cap; figure out how to initially distribute "units" of sellable carbon emissions; determine whether third-party traders will be allowed; and set up monitoring and enforcement systems. Prices on the traded emissions units will vary greatly depending on other economic conditions, the experts said. Fraud by companies has been a problem in some nations, they said. Issues will emerge on how Washington companies buying and selling units of emissions will deal with other firms here, nationally and globally.

A major challenge is how to adjust for local firms competing with firms elsewhere that don't face carbon caps, the British experts said. Consequently, a government needs to study how specific industries should be addressed, including which ones should get exemptions, they said. Small business beneath certain workforce or revenue sizes can be exempted from carbon emissions limits in order to avoid saddling them with major handicaps, the visitors suggested.

Another possible approach is to copy the British government's first-of-its-kind Green Investment Bank, which is a $6 billion fund lending money to "green" business ventures that already have private investors lined up.

Gilbert and Wright noted that natural gas prices have increased 37 percent and electric prices have increased 36 percent since 2010 in Great Britain, but did not elaborate on how much of those hikes could be linked to the cap-and-trade program. However, they noted that companies facing increased costs due to emissions limits often pass those costs on to their customers.

Other nations, states and provinces that are developing cap-and-trade programs or have them in place include Quebec, California, the European Union, Ukraine, Kazakhstan, Japan, South Korea, Australia, New Zealand and China's heavily industrialized Guangdong province.

For exclusive coverage of the state government, check out Crosscut's Under the Dome page.

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