Oops. It appears that a possible Washington carbon emissions tax won't have a major impact on the state's economic growth through 2035. That's a reversal from what the state said less than two weeks ago, when it predicted significantly less long-term growth if a tax were enacted.
Instead, the revised predictions show that potential carbon emissions taxes would have slight effects on the state's economic growth through 2035, said Chris Davis, Gov. Jay Inslee's senior policy advisor for energy and carbon markets. That is in line with what the state has said all along about negligible economic effects over the next decade.
In essence, economic data from an apples box was mixed with information from an oranges box during the creation of computer simulations that went to a Sept. 9 briefing of an advisory task force on how carbon emissions should be trimmed. Davis said that data designed for one type of computer simulation was mixed in with data designed for another type of computer simulation to produce the Sept. 9 economic growth predictions. The Sept. 9 figures showed Washington's gross domestic production — essentially the level of government spending, investments and consumer money churning around the state in a given year — growing much less in the long run if a carbon tax were imposed.
In the Sept. 9 report, an economic scenario with no carbon emissions tax predicted a GDP growth increase from $400 billion today to about $900 billion in 2035. But with a carbon tax, Washington's ultimate GDP growth would be reduced anywhere from $284 billion to $350 billion by 2035, the figures then indicated. With a small tax, the simulation predicted GDP growth to roughly $616 billion in 2035. Modeling the effects of a higher carbon emissions tax saw the GDP increasing from $400 billion today to only $550 billion in 2035.
The same Sept. 9 simulations showed carbon taxes having little or no impacts on the state's GDP growths over their first decade.
The new results indicate a carbon emissions tax would have little effect on GDP growth through 2035, he said. The corrected computer simulations' predictions will be posted on the governor's advisory task force Web site sometime Monday, Davis said.
The computer simulation predictions came with several caveats. They do not account for economic forces other than the carbon emissions tax. They do not account for any innovations in reducing carbon emissions. And, as the economists warned, every computer simulation comes with strengths and weaknesses.
The simulations did take account of the fact that almost all of the collected carbon tax revenue would be returned to taxpayers — as either working family tax credits or as rebates on business-and-operations taxes. When Inslee called for exploring taxes on carbon emissions, he wanted all proposals to be "revenue-neutral," meaning ways would be found to trim a corresponding amount of taxes elsewhere.
Inslee is expected to introduce legislation on carbon emissions taxes or a cap-and-trade system in the 2015 legislative session against stiff GOP opposition. The climate change task force is supposed to provide feedback for the governor as he designs his legislative package. That feedback will be nailed down in November and formally presented to the governor in December.
Inslee has asked the task force to identify the best ways to use market forces to reduce carbon emissions. He wants the committee to consider the economic consequences of any plan and to ensure that no region suffers disproportionate impacts. He has asked that its advice include how to boost job creation while addressing climate change issues.
This panel is Inslee's second attempt at using a committee to design a plan that tackles carbon emissions. In 2013, the governor presided over a climate change panel of two Republican legislators and two Democratic legislators, who deadlocked along party lines. 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.
The mistaken prediction of a significant long-term loss of growth would have been a major political tool for opponents of climate change action, who have long suggested that jobs could be at risk.