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US carbon fight moves to Washington state

The lack of political enthusiasm for a federal-level US carbon tax contrasts with more positive undercurrents in Washington state’s heated carbon referendum

US oil majors are pouring funds into a fierce referendum scrap in Washington state over a proposed carbon "fee", though the prospect of a nationwide US environmental levy on fossil fuel consumption has grown more distant under the Trump administration.

As the clock ticks down on the Evergreen state's 6 November ballot on "Initiative 1631", BP, Chevron and refiner Phillips 66 are building a war chest which had swollen to $22.45m at time of press. The measure would set a fee of $15 per metric ton of carbon dioxide fee for greenhouse gas emitters from 2020, rising by $2/t CO2 annually until the state's greenhouse gas reduction goals are met.

The oil firms' no campaign says the planned fee will hit everyone in the pocket, particularly low-income residents, while leading to job losses and increased energy costs.

"While we are strong proponents of responsible environmental policy, this costly and flawed initiative would create damaging policies for our state and unfairly hurt Washington's families, small businesses and our economy", Marathon spokesperson Jamal Kheiry said in an emailed statement.

Proponents - including Seattle-born Bill Gates - say that, beyond the environmental benefits, around $1bn a year in revenues will help the state become a global leader in clean-energy infrastructure.

Analysts say that if Initiative 1631 is passed, that it would not likely have an immediate economic impact on oil firms active in the state, but that this could change should it set a precedent.

"If the main effect of the Washington state carbon tax is that refining capacity is moved outside of the state, then the impact on firms will not be that significant" Robert Stavins, head of the environmental economics program at Harvard University, told Petroleum Economist. "But this is the kind of potential leakage in economic activity … that could arise if [similar] state-level climate policies [are enacted elsewhere]."

A similar initiative was defeated in 2016 , but Initiative 1631 has been classed a "fee" rather than a "tax" - meaning revenues can be used only for environmental causes rather than government expenses. This aims to pre-empt the political wrangling and disunity among environmentalists over revenues that likely contributed to the 2016 result.

So far, the "yes" lobby is faring well. According to a poll conducted by research firm Elway and online news provider Crosscut, 50% of registered voters support the measure, with 36% opposed, and 14% undecided.

The acrimonious referendum battle comes against a backdrop of an increasingly heated national discourse over climate change, particularly in the wake of this year's severe hurricane and wildfire seasons.

In a rare case of a company advocating a tax on its own product, Exxon Mobil last week donated US$1mn towards a group advocating a nationwide tax on oil, gas and coal companies for the carbon they emit. Devised by Republican statesmen James Baker III and George Shultz, that plan would see revenues redistributed as a "carbon dividend" to all Americans.

In July, Republican house member Carlos Curbelo also launched a bill calling for a new emissions tax at a rate of $24/t CO2, tied to inflation, which would hit refineries, gas processing plants, certain factories and coal mines. As a Florida representative, Curbelo is particularly sensitive to projected sea-level rises.

Curbelo, Baker III and Shultz are all Republicans, but there is little chance of a US carbon pricing initiative being implemented any time soon. Curbelo's bill was killed pre-emptively when the House voted 229-180 a week before its introduction to approve a resolution expressing "the sense of Congress that a carbon tax would be detrimental to the United States economy".

The fate of a carbon tax in neighbouring Canada emboldens the critics. In late August, Alberta joined Ontario and Saskatchewan in pulling out of a collapsing and unpopular national carbon tax scheme developed by Justin Trudeau, potentially sealing its fate.

But the climate change narrative in Washington DC - exemplified by Trump's dismissive withdrawal from the Paris agreement - may change with the political winds.

"In my judgment, it is very likely that there will be a national carbon-pricing regime before 2030," says Stavins, adding that it may take the form either of a carbon tax or a carbon cap-and-trade program. "Indeed, depending on the political makeup of the Congress and the White House, it could happen shortly after 2020."

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