Lawmakers thwart Gregoire's cap-and-trade plan on climate

Gov. Chris Gregoire's attempt to push Washington to the forefront of climate-change regulation appears dead — mortally wounded in the state Legislature by fears it could hurt the economy and be vulnerable to rip-offs.

Both the state House and Senate have balked at adopting the so-called "cap-and-trade" system that would have forced industries to cut greenhouse-gas emissions to fall below a cap or buy extra permits in something resembling a stock market.

While a climate-change bill passed in the Senate and is headed for the House, it bears little resemblance to the comprehensive legislation Gregoire unveiled at a January news conference.

Gone is the mandatory program regulating pollution from big factories, electric utilities and fuel such as gasoline. In its place, state agencies are supposed to come back to the 2011 Legislature with a menu of approaches for regulating greenhouse gases.

"I think it's safe to say that we will not be implementing, this year, a cap-and-trade program," said Rep. Dave Upthegrove, D-Des Moines, the legislation's prime sponsor in the House. "I couldn't even get the trading part out of my own committee."

It marks a win for major Washington businesses and a setback for environmentalists and Gregoire, who had made the legislation a top environmental priority. It's also the clearest sign that, amid a crumbling economy, environmentalists face a tougher audience in the Legislature this year.

"Our goal is to get out alive," said Clifford Traisman, a lobbyist for the Washington Environmental Council.

Environmentalists also are trying to fight off changes to a 2007 voter-approved initiative requiring utilities to invest in new renewable energy. A push to encourage high-density development around transit centers has failed to pass the House or Senate. A move to tax oil to pay for better stormwater protection is still uncertain.

When it comes to climate change, "absent the governor pulling a rabbit out of the hat, cap-and-trade is dead as a doornail," Traisman said.

A top Gregoire official signaled the administration isn't pushing for a state-level cap-and-trade program at this point, in the face of opposition in the Legislature and signs the Obama administration will push Congress to adopt a nationwide cap-and-trade system.

"What we are interested in is a bill that's a climate-change bill, as opposed to a cap-and-trade bill," said Jay Manning, director of the state Ecology Department.

He said he hopes lawmakers will authorize Gregoire to continue working on regional and national programs to regulate greenhouse gases such as carbon dioxide and tell Ecology to write a more detailed state cap-and-trade plan to bring back to a future Legislature.

House Speaker Frank Chopp, D-Seattle, said many fellow Democrats voiced concern about the economic toll new regulations could take on businesses already shaken by the recession. He also has heard doubts about a market for pollution permits.

"With what's happened in the last year, one would wonder about the wisdom of the markets," Chopp said. "Remember energy deregulation? Well, that didn't turn out so well."

Republicans also oppose the measure — even the watered-down Senate bill.

"This bill takes us one step closer to leveling a huge tax on Washington's employers," said Sen. Jim Honeyford, R-Sunnyside, the ranking Republican on the Senate Environment, Water and Energy Committee. "This will lead to job losses and business failures."

A cap-and-trade approach is one of the most popular ideas for tackling greenhouse gases. It's already used in Europe, is supported by both Obama and his opponent last fall, Republican Sen. John McCain of Arizona, and was earlier endorsed by a coalition of Western states, including Washington.

Proponents argue it would create more efficient regulations by tapping into market forces. Polluters that can't cut their emissions to stay under the cap could buy extra permits from other polluters who reduce their pollution more than is required.

But in Olympia, a number of energy-intensive industries, such as paper mills, have warned it would saddle them with added costs not faced in other states. They also have raised concerns the price for permits could be manipulated.

"Especially given the economic crisis that is facing Washington, the Legislature has shown leadership and understanding in moving forward this session on climate-change legislation in a more responsible manner," said Grant Nelson of the Association of Washington Business, which opposed Gregoire's legislation.

Environmentalists, however, charge hesitation risks long-term damage to the state's economy, because there would be less incentive to pursue cleaner, new energy technology.

They also warn it threatens the ability to meet targets, established by the Legislature, to cut statewide carbon emissions to 1990 levels by 2020, and 50 percent below 1990 levels by 2050.

"We're changing from a fossil-fuel dependent economy to a carbon-reduction economy. That scares people. Does anyone doubt that we have to do it?" Traisman said.

Warren Cornwall: 206-464-2311 or wcornwall@seattletimes.com