By Nichola Groom
Nov 7 (Reuters) - Washington state was heading towards rejecting a ballot initiative to create the first carbon tax in the United States, a tally of about 80 percent of votes showed early on Wednesday, after an oil industry campaign argued it would hurt the economy.
The Carbon Emissions Fee and Revenue Allocation Initiative, known as Initiative 1631, would have imposed a $15 fee on each metric ton of carbon emissions, rising $2 a year until the state's 2035 emissions target is met.
With more than two million votes counted by early Wednesday, the "no" votes were leading with 56.3 percent.
The Seattle Times and other local media outlets reported that the measure had failed, although a spokesman for the "Yes on 1631" campaign said it was not ready to concede given some 540,000 ballots remained to be counted.
The carbon fee aimed to generate $2.3 billion over five years for clean energy and air programs, according to a state analysis. The oil industry was expected to feel most pain because transport contributes 43 percent of greenhouse gas emissions in Washington state, a 2016 state report said.
The Western States Petroleum Association raised $31.2 million from oil companies and business groups to oppose the measure, the most spent in the state to defeat a ballot initiative, according to state campaign finance data.
That fueled months of television and digital ads, along with flyers and mailers in the state that argued the fee would drive up energy costs for consumers, small businesses and farms.
Top donors to the "No on 1631" campaign included BP America , Phillips 66 and Marathon Oil Corp unit Andeavor. All three own refineries in the state.
Big Oil raised double the $15.2 million spent on supporting the initiative by an alliance of green groups and billionaire activists including Bill Gates and Michael Bloomberg.
The big-ticket battle reflected the stakes of climate regulation. The oil industry worries new curbs on carbon emissions will hobble business, while environmentalists worry that a failure to act soon to halt global warming will have devastating consequences for the planet.
Washington is the nation's fifth biggest fuel-producing state with five refineries. Those facilities last year produced about 5.6 million metric tons of carbon dioxide, according to the Environmental Protection agency, an amount that would yield the state over $83 million in revenue from the tax.
(Reporting by Nichola Groom Editing by David Gregorio and Edmund Blair)
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