Governor Inslee's Climate Legislation: Some Promising Signs

Yesterday, Governor Jay Inslee released one element of his climate strategy, creating a "climate and legislative work group." The legislation calls for an analysis of a range of strategies to reduce carbon emissions. That analysis would be used by legislators to develop a final strategy.

As part of creating that analysis, there is a very promising element included by Inslee. The bill requires any analysis of climate strategies include an assessment of "the effectiveness in achieving the jurisdiction's emission reduction objectives, including the cost per ton of emission reduction (emphasis mine)."  This is very positive.

Last month we wrote in Publicola that Washington's climate policy should "ensure that our state focuses its limited budget and resources on efforts that yield the greatest amount of near-term carbon emissions reductions." After Inslee's inauguration, we encouraged him to use cost per ton of emission reduction, writing:

One simple metric would help change that poor record. Comparing strategies based on the amount of CO2 reduced for each dollar would allow taxpayers to receive the maximum amount of environmental benefit for every dollar.

By prioritizing projects based on how much carbon emissions reductions we receive for every dollar we spend, the state can receive the greatest amount of emissions reductions now, rather than spending on speculative efforts we wish and hope will pay off in the future.

There are other elements of the legislation that focus on job creation rather than emissions reduction. These sections are based on the notion that politicians can effectively use economic planning to steer the economy in a particular direction. There are, however, so many factors beyond the control of politicians and the government that implementing this effectively is virtually impossible. Paul Krugman highlights the challenge in his book "Pop Internationalism" where he writes:

You can’t propose a one-size-fits-all policy for industries as different as aircraft, semiconductors, and telecommunications. Instead, you have to base interventionist proposals on detailed predictions about how firms will change their strategies in response to hypothetical policy changes, how these strategic moves will affect profits, wages, R&D, and so on, and finally, how all of these changes will spill over to the economy at large. To have any hope of doing all this you need lots of detail about the technology, history, and policy environment of an industry – and even then you may, if you admit it to yourself, be at a loss when it comes to making quantitative judgments.

We've see this at work in Washington state. When former governor Chris Gregoire supported a requirement that motor fuels include a certain percentage of biofuels, part of the goal was to help farmers by creating demand for feedstocks for those fuels. It didn't work. Today, most of the feedstocks for biofuel produced in Washington comes from Canada and other places outside the state. The experience is a prime example of Krugman's point that it is extremely difficult to know how regulations and subsidies will "spill over to the economy at large" and who will receive the benefits.

Ultimately, however, the inclusion of a metric of environmental effectiveness to identify the most fruitful ways to reduce carbon is tremendously positive and a change from how Washington state has made climate policy in the past. Such a metric allows us to separate those policies designed to create effective, near-term carbon reductions and more speculative policies that support politically favored industries. It is a promising beginning of the discussion.