A Tax by Any Other Name

There’s no shortage of significance in this year’s mid-term elections. While many are obsessed with whether or not a “Blue Wave” will wash over Congress, state elections and some ballot initiatives may actually have a more lasting impact on policy and the economy.

We’ve covered Nevada’s Question 3, which would deregulate the state’s electricity market. Current polling shows an advantage for the “No on 3” campaign. As states and the full spectrum of energy/environment advocates see continued federal gridlock ahead, complex energy policy decisions are showing up more frequently in the voting booth. Washington State deserves just as close a look as Washington, D.C. this election season.

“Initiative 1631” in Washington State would create a carbon fee starting at $15 per metric ton of CO2 in 2020. It’s the third sustained effort in three years to set a price on carbon. A 2016 ballot initiative failed, as did a piece of 2017 legislation. Despite new messaging that emphasizes “fee” rather than “tax,” make no mistake – I-1631 is a carbon tax. Like any other tax on energy, it will land at the doorstep of consumers and increase their costs.

The carbon fee is structured to rise $2 per ton every year and adjust with inflation, meaning it could reach $55 per ton by 2035. It will be assessed on the carbon content of fossil fuels sold or used and electricity generated or shipped into the state. While there are some exceptions in each category, safe to say that it’s a sweeping new tax. Even in the ramp-up, it could raise over $2 billion in the first five years, and reach a total of $30 billion by 2035.

While many taxes, once established, continue into infinity, backers of I-1631 point to provisions that would halt the addition of $2 per year in 2035, provided the state has met its carbon reduction goal. However, assuming this condition is satisfied, the inflation adjustment would continue. If you remember the early 1980s, this clause alone should give you pause.

While proponents say that industries, such as petrochemical refiners and electric utilities, will absorb the fee, costs will inevitably flow down to consumers. Fee supporters also talk up their spending plans, including: clean air and clean energy; clean water and healthy forests investments; and healthy communities. Who doesn’t support these causes? Nevertheless, it’s imperative to ask whether consumers will actually benefit in the end. A new tax of this proportion deserves close scrutiny.

A comprehensive review by NERA shows that, accounting for costs of the tax across the economy and benefits of the planned spending, the carbon tax will cost the average household $440 in 2020, rising to $990 by 2035. It’s only fair to ask why several million households should lose several thousand dollars apiece.

Another aspect of NERA’s analysis that caught my attention – the impact on workers and employment. While part of the new tax would retrain workers in industries tied to fossil fuels, the overall net effect (again, accounting for retraining and associated services) is that the state’s workers’ annual incomes will decline – mostly for workers very far removed from the energy sector.

In the business world, a plan with this much inefficiency and impact on the owners of the company (yes, I’ll stand by the proposition that Washington State voters own their government) would go straight back to the drawing board. While I can’t predict the outcome of the 2018 World Series, in less than thirty days, I’ll bet that I-1631 will swing, miss and record a major league strikeout for the idea of carbon taxes as a fair, simple, and equitable solution.


PACE Supports Vogtle 3 and 4

Partnership for Affordable Clean Energy

Statement in Support of Plant Vogtle Continued Construction

Docket 29849:

Georgia Power Company’s Seventeenth (17th) Vogtle Plant Construction Monitoring (VCM) Report

Georgia Public Service Commission

Monday, November 6, 2017

The Partnership for Affordable Clean Energy (PACE) strongly supports continued construction at Vogtle Units 3 and 4. Nuclear energy is already a critical resource in Georgia, boosting the economy and providing emission-free, base load power for 60-80 years. As a lifelong Georgian, I am proud of the efforts the co-owners have made and will continue to make to expand the state’s nuclear generation fleet.

For nearly a decade, PACE has observed and commented upon the energy policy landscape in a variety of public forums. Our rallying cry is Energy Fairness, and that’s also the web address where anyone can find hundreds of commentary pieces we’ve put our name to. I want to use PACE’s time with the Commissioners today to focus on consumers.

PACE believes consumers need and deserve a strong nuclear portfolio in Georgia. Nuclear generation provides our country with environmental, economic and national security benefits.

Consumers benefit when utilities can fulfill the obligation to serve on a least-cost basis by depending on adequate fuel supplies and with absolute confidence in having the flexibility to rotate among supply options on a daily basis and for the long haul.

Some people want utilities to shelve nuclear and coal generation in favor of only natural gas and renewables. Those advocates have a short memory, as it has been only slightly over a decade since consumers bore the brunt of natural gas commodity prices at 8, 10, 12 and even 14 dollars per MM BTU.

Others dream of a 100 percent renewables future and insist that cities, counties and consumers everywhere zoom toward their dream as fast as possible.

Unfortunately, physics and technology will not allow that dream yet. While, as is frequently said in energy policy forums, storage will be a game-changer, it is an incredibly brand-new industry. We are more than 15 years away from mature development. There are many supply chain, technology and pricing issues to work out with storage, and until then, renewables can only be a slice of the generation pie.

It would be irresponsible for Georgia to kick aside or significantly curb the nation’s most prevalent form of clean energy, nuclear.

Finally, a point that is very personal to me, first as a mother and then as an energy advocate. The world is increasingly dangerous. Over the last 15-20 years, other superpowers and emerging economies have formed alliances around economics, technology and geostrategic goals. China and Russia are building nuclear plants rapidly and taking the United States’ place in guiding other countries to do so. For example, according to a recent piece in Forbes, China has 22 nuclear reactors under construction and is breaking ground on a new nuclear power plant every month. Finishing Plant Vogtle and then allowing other U.S. plants to stay online is critical to keeping our country at the global nuclear table.

Thank you for your time today and for convening this important public hearing.


Use Nuclear Energy to Address Climate Change

Dr. David K. Gattie is an Associate Professor of Engineering at the University of Georgia. Earlier this year, he co-authored PACE’s paper on net metering. We thank him for providing a guest blog drawing our attention to a smarter way forward on climate change policy. 

I recently posted a commentary in The Hill explaining why the U.S. could do better than the Clean Power Plan (CPP). As always, I try to implore others to look at the bigger picture and see global climate change as the global issue it actually is and not just a U.S. issue only. From time to time, I share these ideas and short, digestible research and analysis at https://davidgattieblog.wordpress.com/.

In addition, I try to emphasize that without nuclear power we can’t meet future global energy demands and global carbon objectives simultaneously. While regulatory efforts to curb emissions from the U.S. electric power sector will continue over the years in forms we can’t yet predict, data trends point to the east and to emerging economies as where we must focus our attention. In order to succeed, we can’t lecture them to curb their energy consumption, but instead should engage with them in pursuing technologies that will help them meet their economic objectives.

The 4 charts below show the significant results the U.S. power sector has achieved in curbing carbon emissions and place the U.S. in context with other nations.

The International Atomic Energy Agency is in the beginning of its International Ministerial Conference entitled, “Nuclear Power in the 21st Century.” Around the world, emerging economies in need of more energy-dense resources, not less, are pleading their case for more nuclear power to meet those needs without compromising climate objectives. America can be a great ally in these efforts, but U.S. industry cannot compete with state-owned enterprises (SOEs) in countries such as China and Russia, which are stepping into these regions and providing the needed nuclear expertise and technology. We need comprehensive energy policy that will allow U.S. industry to compete with SOE’s and maintain U.S. strength and geopolitical leverage in the global nuclear supply chain. This is something we don’t want to cede to China or Russia.

The U.S. has the technology, the innovation and the industrial heft to engage with the world in civilian nuclear power technology. What we need, but seem to lack, is the political resolve to do something creative, big and impactful.