The Northwest enjoys a reputation for leadership in clean energy and environmental policy. Yet the new fossil fuel infrastructure planned for the region transform the Northwest into a carbon export hub of global consequence.

Care to comment? The report is also featured on our blog.

Read the factsheet here: WA Extracted Fuel Tax Loophole Factsheet, Apr 2013 (PDF).

Compiled here are the coal industry’s leading thinkers explaining why the industry wants new coal ports in the Pacific Northwest.

The decline of US coal demand has sparked renewed  interest in exporting American coal to Asia. One of the highest-profile players in the coal export arena is an Australian firm called Ambre Energy, which is planning two controversial export terminal projects on the Columbia River in Washington and Oregon.

But the coal export debate has largely overlooked a  curious fact: Ambre Energy barely qualifies as a coal company. The company’s annual reports reveal that the Australian-based venture has never made a profit, and has virtually no successful track record in coal mining or coal exports, either in the US or abroad. Worse, an in-depth look at the company’s financial statements, as well as public records of other companies that have done business with Ambre, reveals a firm with deeply troubled finances, including:

• Minuscule revenues: the firm has collected only $6.6 million in worldwide revenues over the past 7 years.
• Massive losses: Ambre has accumulated $124 million in losses on its balance sheets.
• Failed Australian venture: The firm recently admitted that it lost $10.9 million on a failed coal project in Australia.
• Huge liabilities: The company is on the hook for hundreds of millions of dollars for mine reclamation and site cleanup, retiree medical and pension benefits, and costs arising from a recent legal settlement.
• Troubled assets: Ambre may see little value from some of its assets, including a $65 million bond cash holding dedicated for mine reclamation, and $19 million in shale oil development costs.
• High borrowing costs: The company has taken out multi-million dollar loans with annual interest rates of at least 10 percent, and a “balloon” loan charging 12 percent interest.
• Massive capital needs: Ambre needs to raise about $1 billion to bring its coal export plans to fruition.

Potential investors in Ambre, as well as the communities and businesses hoping to benefit from the firm’s business, would be wise to consider Ambre’s finances and troubled history before committing money or other resources to the company’s export ventures.

How Does a Carbon Tax Work?

A carbon tax would levy a charge on the CO2 emissions from fossil fuels purchased for combustion in the state, as well as on the carbon content of electricity imported from other states. In Washington, a carbon tax of $30 per ton of CO2 would net an estimated $2.3 billion each year. The proceeds could be used to reduce taxes on families and businesses, or to provide funding for transportation, clean energy technology, or public education.

What Other Jurisdictions Have a Carbon Tax and What Have Been the Results?

Washington’s next door neighbor, British Columbia, is home to the world’s most complete and effective carbon tax. BC’s policy is structured as a “revenue neutral” tax swap that taxes carbon in order to reduce personal and corporate income taxes. Since BC’s carbon tax was introduced in 2008, the province has reduced greenhouse gases, undercutting Canadian emissions in virtually every sector – including natural gas, diesel, motor gasoline, and coal – even while the province is outpacing the rest of Canada in GDP growth.

Starting on January 1, California will also begin applying a price on carbon emissions when it begins its cap-and-trade program. A range of other jurisdictions – from Boulder, Colorado to European countries – have some form of carbon pricing on the books. The most recent entrant to the carbon tax club, Australia, rolled out a nationwide tax on July 1, 2012.

Why Should Washington Move to a Carbon Tax?

It reduces greenhouse gas emissions. A tax rate of $30 per ton is big enough to modestly curtail fossil fuel consumption by state residents. More importantly, it is likely to yield sizeable benefits by affecting large-scale investment decisions. For example, a single utility like Puget Sound Energy that imports coal-fired electricity into Washington could reduce statewide emissions by perhaps as much as 10 percent simply by factoring a carbon tax into its long-term energy supply planning.

It benefits our economy. Why tax good things when you can tax bad things, like emissions? Substituting a carbon tax for some of our current taxes — on property, on businesses, and on workers — should be a no-brainer and, in fact, the idea has support nationally from economists across the political spectrum.

A carbon tax could support economic competitiveness and boost job growth by replacing some elements in Washington’s existing tax regime that penalize business revenue and property ownership.

Alternatively, we could invest carbon tax revenue in state priorities that lack adequate funding, such as transportation or education or clean energy development.

How Would a Carbon Tax Impact State Residents?

A tax of $30 per ton would translate into some price increases: about 30 cents per gallon of gasoline and diesel, about 3 cents per kilowatt-hour of electricity from coal, and about half that for power from natural gas. Energy from hydropower, solar, and wind would pay nothing, and reductions in existing taxes could offset price increases.

A carbon tax works by encouraging residents to switch to cleaner sources of energy. That’s a smart move for the state’s economy given that Washington produces no oil, gas, or coal and typically spends roughly $16 billion annually to import fossil fuels from elsewhere.

A Washington carbon tax could avoid regressive impacts on low-income families by rebating a portion of the revenue directly to state residents, just as BC does. For example, the currently unfunded Working Families Tax Rebate could directly mitigate impacts on low income families, while modest property tax reductions could ease the transition for the middle class.

How do carbon taxes compare to other pricing mechanisms like cap and trade?

Carbon taxes and cap-and-trade programs are fundamentally similar: both put a price on carbon pollution. Either policy can be well designed or poorly designed, but both begin the transition toward a clean energy economy.

Right now, the political climate seems to favor carbon taxes. The Washington legislature considered a cap-and-trade proposal in 2009, but declined to advance the bill out of committee. Congress nearly passed a cap-and-trade measure the same year, but the policy stalled in the Senate. In 2012, however, a surprisingly diverse range of advocates and analysts are making the case for carbon taxes.

More resources

Yoram Bauman and Shi-Ling Hsu, “The Most Sensible Tax of All,” New York Times, July 4, 2012.

Eric de Place and Yoram Bauman, “Washington, Oregon Should Take Cue from B.C.’s Carbon Tax,” Vancouver Sun, July 9, 2012.

Brad Plumer, “How Would a Carbon Tax Work? Let’s Ask British Columbia,” Washington Post Wonkblog, September 19, 2012.

Sustainable Prosperity, “British Columbia’s Carbon Tax Shift: The First Four Years,” University of Ottawa, June 2012.

British Columbia, “Making Progress on B.C.’s Climate Action Plan,” 2012.

The coal industry claims that Asia offers lucrative coal markets. Yet much of the available evidence is cautionary at best. Sightline’s memo, “US Coal Exports and Uncertainty in Asian Markets,” explores reasons why Asia’s major coal markets have high uncertainty, and US exporters will face stiff competition from other nations.