Analysis of I-1631 Finds High Consumer Costs, Damaging Economic Impacts and No Significant Impact on Greenhouse Gas Emissions

$30 Billion collected over 15 years, household costs of $440 per year to start

SEATTLE — A new studyby internationally recognized NERA Economic Consulting estimates that Initiative 1631, the carbon fee initiative on November’s statewide ballot, would impose approximately $30 billion in new fees on Washington consumers over the first 15 years, having significant negative impacts on family pocketbooks, small businesses and the state’s economy, while leaving 93% of Washington state’s greenhouse gas emissions unaffected.

The NERA authors found that combined impacts of increased prices for gasoline, electricity and natural gas, as well as higher costs for other goods and services under I-1631, would increase total net costs of the average Washington household by $440 in 2020, increasing to $990 by 2035.

I-1631 would impose an escalating carbon tax of $15 per metric ton of carbon dioxide from fossil fuels starting in 2020, and would automatically increase by $2 per year, plus inflation, with no set cap.

To conduct the analysis, NERA relied on an in-house, state-of-the-art energy-economic model that has been used to assess other major energy and environmental programs and policies.

“Our macroeconomic analysis of the implementation of I-1631 finds Washington state’s Gross State Product is projected to be reduced by $2.2 billion in 2020 and by $5.3 billion in 2035,” said Dr. Anne Smith, Managing Director and Co-Chair of NERA’s Global Environment Practice.

“Reductions in labor income to workers would be equivalent to the income from approximately 9,000 jobs in 2020 and about 21,000 jobs in 2035,” Dr. Smith said. “Most of the projected labor income losses are in the portions of the state’s economy that are not associated with most of the large emitters. For example, 80% of the projected losses are in the modeled sector that contains services/commercial businesses such as retailers, health care, hospitality and personal care services, even though this sector accounts for less than 5% of the emissions.”

The analysis also found that under the Initiative’s carbon tax, which exempts 41% of Washington greenhouse gas emissions, the state’s 2035 greenhouse gas emission reduction goal would not be attained, and I-1631 would not achieve significant reductions.

“After 15 years and a cost of approximately $30 billion, I-1631’s costly, unfair and ineffective energy tax would leave 93% of the state’s greenhouse gas emissions unaffected, and would have no impact on climate change,” said Dana Bieber of the NO on 1631 Coalition.

The NERA study, which modeled the impacts of the Initiative from when the carbon tax would take effect in 2020 through 2035, found that I-1631 would raise the price of gasoline at the pump by 13 cents a gallon initially, increasing to 59 cents more per gallon by 2035. Diesel pump prices would increase by 15 cents per gallon to start, rising to 66 cents more per gallon by 2035. The delivered price of natural gas to households would increase 6% to start, rising to about 18% by 2035. Electricity rates would also increase.

The billions in revenues collected from the tax would be spent by a board of political appointees on a variety of programs that are yet to be defined, making it impossible to know how funds would actually be spent. In its analysis, the NERA authors assumed the revenues would be spent on environmentally beneficial programs promoted by the initiative’s proponents, including solar installations, energy efficiency programs and transportation initiatives that would reduce greenhouse gas emissions.

“NERA’s study simply reinforces what many Washington voters already know – the proponents’ numbers just don’t add up,” said Bieber. “I-1631 is a deeply flawed, costly and unfair energy tax that would hurt consumers, businesses and our state’s economy. It fails to meet its stated goals, and would cost consumers billions in higher costs for gasoline, electricity, natural gas, transportation and other goods and services. It would unfairly exempt 41% of greenhouse gas emissions, and it would hand over billions of taxpayer dollars to an unaccountable, unelected board of political appointees with no plan for how the money would be spent.”

“As this analysis shows, I-1631 would not achieve any meaningful reductions in greenhouse gas emissions. That’s why our coalition representing over 160,000 Washington families, small businesses, farmers and consumers are urging a NO vote on I-1631,” she added.

The NERA Economic Consulting study, “Analysis of Economic and CO2Emissions Impacts of Washington Initiative 1631,” is the only comprehensive analysis of the measure to date. A full copy of the report is available at www.FactsAbout1631.com.

About the Lead Authors

Dr. Anne E. Smith is Managing Director and co-chair of NERA’s global environmental economics practice. She is an economist and decision analyst specializing in economic and financial impact analysis, benefit-cost analysis, environmental risk analysis, and integrated policy assessment. Dr. Smith has conducted major analyses of sectoral and macroeconomic impacts of a wide variety of important environmental and energy issues, with a particular focus since 1990 on global climate change policy design.  She has performed such analyses for governmental agencies internationally as well as for the U.S. Environmental Protection Agency, state environmental agencies, private sector research groups, and companies developing financial risk management strategies.  Dr. Smith holds a Ph.D. in Economics from Stanford University with a Ph.D. minor from Stanford’s Engineering School, an M.A. in Economics also from Stanford, and a B.A. in Economics from Duke University.

Dr. David Harrison is Managing Director and co-chair of NERA’s global environmental economics practice. He has been active in the development and assessment of climate change policies around the world as a consultant to numerous private and public groups. Dr. Harrison assisted the European Commission and the UK government in the design and implementation of the European Union Emissions Trading Scheme and was an advisor to government officials developing the Regional Greenhouse Gas Initiative. He has evaluated the economic effects of numerous other major environmental programs and policies. Before joining NERA, Dr. Harrison was an Associate Professor at Harvard’s Kennedy School of Government, where he taught economics and energy and environmental policy, and he was on the senior staff of the President’s Council of Economic Advisors, where he had responsibility for energy and environmental policy issues. He received a Ph.D. in Economics from Harvard University, a M.Sc. in Economics from the London School of Economics, and a B.A. in Economics from Harvard College.

About the NO on 1631 Coalition
NO on 1631 represents over 160,000 Washington working families, small businesses, family farmers, and consumers who have come together to oppose I-1631. This costly, unfair and ineffective energy tax would force Washington families and consumers to pay billions in increased energy costs while exempting many of the state’s largest polluters, without providing any specific spending plan or accountability, and no guarantee of reducing greenhouse gases.

About NERA
NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA’s economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. NERA brings academic rigor, objectivity, and real-world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.